Sitting of 1 July 1958

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  MINISTRY OF WORKS

    High Commissioner's Residence, Lagos (Design)
    Mr. Goughasked the Minister of Works what process of selection was adopted before Mr. Lionel Brett was commissioned to prepare the design for Her Majesty's United Kingdom High Commissioner's residence in Lagos; and what fees are being paid for this work.
    The Minister of Works (Mr. Hugh Molson): I decided to commission Mr. Lionel Brett after consultation with my advisers. Mr. Brett will receive a fee based on the normal R.I.B.A. scales for this type of commission.
    Mr. Gough: Does not my right hon. Friend consider that, in a project of such importance as this, some form of competition would have been better? Is he aware that at this moment an inquiry is being held in connection with buildings at Hatfield, in which this gentleman's name may be mentioned? Would not it have been wiser perhaps to have awaited the outcome of that inquiry before making this announcement?
    Mr. Molson: Mr. Brett has my full confidence. The urgency of this scheme would not have allowed the time necessary for a competition, even if I had been satisfied that one was desirable. I am not in favour of competitions as a method of appointing architects for schemes of this type. In the course of the last hundred years my Department has organised competitions of this kind on a number of occasions, and in not a single case has the winning design in a competition
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    for a major government building been carried out.
    Lord Balniel: While not wishing to comment in any way upon this architect's professional ability, does not my right hon. Friend think it a rather odd procedure, when his professional ability is at least indirectly the subject of a Governmental inquiry, that he should be awarded this contract before the report of the inquiry has been published and made available?
    Mr. Molson: No, Sir. This architect has an established reputation as one of the best architects of the younger school. He is a Fellow of the Royal Institute of British Architects and a member of the Royal Fine Art Commission. As I have said, I am satisfied that he is a most suitable person to be entrusted with this responsible and important job.

    Sir John Strangeways (Portrait)
    Sir W. Anstruther-Grayasked the Minister of Works whether he has considered the offer from the Town Council of the Royal Borough of North Berwick of a portrait of the late Sir John Strange-ways, M.P.; and whether he will make a statement.
    Mr. Molson: Yes, Sir. On the recommendation of the Advisory Committee on Works of Art in the House of Commons I have gratefully accepted this offer.
    I should like to take this opportunity of expressing my appreciation of the generosity of the Council of the Royal Burgh of North Berwick in offering this picture to the House.
    Sir W. Anstruther-Gray: May I ask my right hon. Friend where it is proposed to hang this picture? Secondly, may I ask him whether a suitable inscription will be placed on it to show its origin?
    Mr. Molson: I intend to consult the Advisory Committee on Works of Art as to the most suitable place for hanging it. I have seen a photograph. It is a most attractive seventeenth century portrait of an old Member of this House, whose son and grandson sat in the Convention Parliament with him, and I hope to find a suitable place for it during the long Recess.

  SCIENTIFIC AND INDUSTRIAL RESEARCH

    Electric Power (Transmission)
    Mr. Kershawasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, what research is being conducted by the Department of Scientific and Industrial Research into the possibility of distributing electric power without the aid of power lines, whether under or over ground.
    The Parliamentary Secretary to the Ministry of Works (Mr. Harmar Nicholls): None, Sir. The only economically practicable method of transmitting electric power is by some form of cable either above or below ground. Radio is not technically a feasible means of transmitting electric power.
    Mr. Kershaw: Is my hon. Friend satisfied that everything possible is being done? Does not he realise that before long a lot of the country will be an absolute bird cage because of these wires, that it will look disgusting, and cause difficulty for the farming community? If it is the fact that no economic alternative is available at the moment, what is being done to make existing methods cheaper?
    Mr. Nicholls: The research has disclosed that the existing cables can carry a bigger load than they have been carrying so far, and this will have the effect of reducing the amount that will have to be expended on new cables.

    Spray Taps
    Mr. G. Wilsonasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, what research the Building Research Station of the Department of Scientific and Industrial Research has done on the use of spray taps in offices and similar buildings.
    Mr. H. Nicholls: The Building Research Station has shown that the use of spray taps can effect a 50 per cent. saving in both water and fuel consumption in a properly designed installation.
    Mr. Wilson: Are these taps in commercial production, and if so, to what
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    extent are they being used? Would they be suitable on British Railways, for instance?
    Mr. Nicholls: Three firms are now manufacturing them, which shows that there must be a market, otherwise they would not do it. One would have thought that these spray taps lend themselves for use on transport, and I understand that British Railways has shown some interest in them.

    High Water Pressure Sprays
    Mr. Tileyasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, what research has been carried out in the efficiency of high water pressure sprays such as are now extensively used in fire-fighting in the United States and in many European countries.
    Mr. H. Nicholls: The Joint Fire Research Organisation has carried out a number of investigations during the last twelve months and has shown that high pressure water sprays are not more efficient in fighting fires than those produced by equipment in normal use here and using lower pressures.
    Mr. Tiley: That is a little discouraging. Can my hon. Friend tell the House what kinds of tests have been carried out?
    Mr. Nicholls: Trials have been carried out in test fires in an ordinary room, and I gather that that sort of fire represents 90 per cent. of those to which fire brigades are called. High pressure sprays have been issued to some fire-fighting services and have been used in actual fires.

    Engineering Research (Application to Industry)
    Mr. R. W. Elliottasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, what steps have been taken by the Government's Production Engineering Research Association to ensure that its research results are being applied in industry.
    Mr. H. Nicholls: The Production Engineering Research Association is an autonomous body controlled by representatives of member firms and supported by the Department of Scientific and Industrial Research. To get research

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    results across to industry, particularly at the shop floor level, the Association has developed an effective liaison and advisory service for its member firms; it is spending one third of its resources on this service. Short instructional courses on new production techniques are held in the Associations' Melton Mowbray laboratories for foremen and works executives. A mobile unit provides practical demonstrations and instruction in members' works; and about 3,000 technical inquiries are answered each year.
    Mr. Elliott: I am grateful to my hon. Friend for that information. Can he say how widely these services are being utilised?
    Mr. Nicholls: Yes, Sir. During the past year about 1,650 persons have attended the training course in the laboratories and 150 visits were made by the mobile unit. It should be emphasised that the service is available only to member firms of the association.
    Mr. Woodburn: Is the hon. Gentleman aware that engineers in Scotland do not always consult East Kilbride, but sometimes go to the universities? Is he satisfied that the connection between East Kilbride, engineering firms and universities in Scotland is sufficiently close so that if problems arise East Kilbride will not be ignored in the search for their solution?
    Mr. Nicholls: I should have thought that they were well aware of the help that they could be to each other, but, in view of the right hon. Gentleman's comment, I will have the matter looked into.

    Condensers
    Mr. Braineasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, in what way the Department of Scientific and Industrial Research is helping to improve the efficiency of condensers for power stations and other heat-exchange equipment.
    Mr. H. Nicholls: For some years, the Mechanical Engineering Research Laboratory has sponsored at universities, and itself carried out, research on heat transfer under various conditions of steam condensation. It has been demonstrated that the condensation of steam on cooling
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    surfaces as separate drops has great advantages in speed over the normal film condensation.
    Mr. Braine: That is all very technical and very interesting. Can my hon. Friend say whether there is as yet any practical application of this knowledge?
    Mr. Nicholls: Chemicals have been developed which when applied to brass or copper surfaces will produce what I call "drop" condensation. This method has been tried out in the laboratory and to some extent in industry. The practical consideration which I think will interest my hon. Friend is that if the method proves to be really successful it will mean that condensers need be only half the size they are at present.

    Private Industry (Research and Development)
    Mr. Willeyasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, whether, in view of the wide margin of error to which the estimate of the amount spent by private industry on research and development made in surveys held in 1955 was subject, he will revise the methods followed to obtain this information.
    Mr. H. Nicholls: Any estimate of the amount spent annually by industry on research and development is inherently difficult statistically. The 1955 survey was the first conducted by Government in this field. If the survey is repeated, naturally the methods used would be improved in the light of the experience gained.
    Mr. Willey: Will the Parliamentary Secretary ensure that this will be repeated? Does he realise that in a highly competitive world we have to pay adequate attention to research? When he looks at the matter again, will he consider calling in aid the social survey of the Central Office of Information and see whether that organisation can help?
    Mr. Nicholls: Certainly, Sir, but I am not as pessimistic, having looked at the matter, as the hon. Gentleman appears to be from the terms of his Question. It is very hard indeed to decide what information to seek from private firms but, as I have said, if any future survey is carried out, something will have been learnt from this attempt.
    Mr. Gresham Cooke: Can my hon. Friend say whether there is a possibility of this very important survey, which is very useful, being repeated in the near future?
    Mr. Nicholls: No plans have as yet been made for it to be repeated. The lessons to be learnt from the first survey are still being looked into.

    Advisory Council on Scientific Policy (Statistics)
    Mr. Willeyasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, to what extent the present methods of collecting statistics referred to in paragraph 42 of the Annual Report of the Advisory Council on Scientific Policy have been improved.
    Mr. H. Nicholls: As foreshadowed in this Report, arrangements have now been made whereby new standard forms for collecting and reporting statistics on employment first taken up by all university graduates will be used by university appointment boards for the academic year 1957–58. These forms are designed to provide more information than in the past, including the number who take up employment abroad.
    Mr. Willey: While I appreciate the steps which have been taken, will the hon. Gentleman ensure that the information is made available as soon as possible? It is urgent and important to ensure that our graduates, who are in short supply, go to the proper places.
    Mr. Nicholls: Yes, Sir; I see the point of that. I think the hon. Gentleman will agree that there has not been any delay. The Annual Report was published in October, 1957, and instructions for the new form were approved in March, 1958.

    Scientific Attaché, Moscow
    Mr. Robensasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, whether, in view of the importance of scientific developments in the Union of Soviet Socialist Republics, he will now regrade the post of British Scientific Attaché in Moscow to the level of Deputy Chief Scientific Officer, which is the grading of the similar post in
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    Washington, instead of advertising it at the level of Principal Scientific Officer, which is two classes lower than in the scientific class hierarchy.
    Mr. H. Nicholls: As I said on 24th June, this is not simply a question of grading. As I said in my reply to the hon. Member's Question on this subject on 17th June, an appointment to the post of Scientific Attaché in Moscow is being considered in the first instance in the grade of Principal Scientific Officer, but if a suitable candidate cannot be found, the best way to fill the post will be reconsidered.
    Mr. Robens: Will the Parliamentary Secretary take it from me that this Question and the other Questions to which he referred are designed to be constructive and helpful? Does not he agree that the U.S.A. and the U.S.S.R. are the biggest users of scientific manpower in the world today and that unless the Scientific Attaché at the Moscow Embassy is of sufficiently high standing he will not have the ear of the leading scientists of Russia? Would not it be useful if the Scientific Attaché at Moscow were of equal rank to the Scientific Attaché at Washington?
    Mr. Nicholls: Yes, Sir. My noble Friend appreciates the very real interest the right hon. Gentleman is showing in this matter and the way he has presented his Questions. There is no question at all of wanting to have a higher grade officer in the U.S.A. than in Moscow. The position is that in America we have a terrific interchange of knowledge, which over the fifteen years that it has been in operation has justified the team of men with the higher grade man there. When it can be seen that we are likely to get the same co-operation in Moscow which will justify a higher grade, the matter will be looked into. Indeed, even in the case of this first appointment, if those who apply do not, in our view, reach the standards which we think are required, there is no question of our having made up our mind on that matter. We appreciate the right hon. Gentleman's interest.
    Mr. Ede: Would not it be sound to say that the more difficult it is to get the information the higher should be the grade of the officer appointed?
    Mr. Nicholls: That is how it would seem at first sight, but it is not really so. If one has a higher grade scientist, he is more likely to be a specialist in a certain branch. If one has a scientist of a slightly lower grade, he may be more in the nature of a general practioner and at the beginning could open up liaison and interchange much better. We have not ruled out the possibility that a higher grade scientist will have to be appointed.
    Mr. Ede: Is the hon. Gentleman aware that what he has just said is the greatest indictment that has been made against scientific training in this country?
    Mr. Nicholls: There is a schoolboy howler to the effect that the expert is one who learns more and more about less and less until he finally knows all about nothing. At this stage in opening up a new service we need someone whose approach may be more important than his actual scientific qualifications.

  SCOTLAND

    Franks Committee
    Mr. Hector Hughesasked the Secretary of State for Scotland if he will now give more details of his proposals in relation to the Franks Committee in the form of a White Paper; and if he will indicate the rights of objectors and appellants with regard to their being professionally represented by solicitor and counsel and as to procedure generally.
    The Joint Under-Secretary of State for Scotland (Mr. J. Nixon Browne): The administrative arrangements are fully set out in the Memorandum and Circulars to which my right hon. Friend referred in reply to my hon. Friend the Member for Edinburgh, West (Sir I. Clark Hutchison) on 13th May. Copies of these papers have been placed in the Library, and are on sale in the ordinary way. Nothing in them affects any existing rights of objectors and appellants to appear in person at inquiries or hearings, or to be represented in such manner as they may choose.
    Mr. Hughes: While thanking the hon. Gentleman for that reply, may I ask if it means that persons making complaints against doctors under the National Health
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    Service may be legally represented at all hearings?
    Mr. Browne: No, Sir. The Franks Committee did not recommend such a change. All matters relating to National Health Service procedures of this kind are under consideration, in consultation with the professions concerned.

    Hydro-Electric Project, Strathfarrar and Kilmorack
    Mr. Nabarroasked the Secretary of State for Scotland the anticipated load factor of the hydro-electric works embodied in the Strathfarrar and Kilmorack project No. 30 Constructional Scheme, capacity installed 102,000 kilowatts, referred to in the North of Scotland Hydro-Electric Board (Constructional Scheme No. 30) Confirmation Order, 1958; the anticipated coal economy in tons per annum based on the performance of recently completed Central Electricity Generating Board power stations and their average coal conversion rate; and what consideration has been given to providing equivalent generation facilities by nuclear methods as an alternative to the hydro-electric scheme proposed.
    The Joint Under-Secretary of State for Scotland (Mr. Niall Macpherson): The Strathfarrar scheme is designed for an average annual load factor of 29 per cent., and is expected to save 130,000 tons of coal each year, on the basis of a conversion rate of 1·12 lbs. per unit. The Explanatory Memorandum laid before the House explains why this scheme is a more economical method of providing electricity at the load factor required by the Board than a nuclear station.
    Mr. Nabarro: Is my hon. Friend aware that the public inquiry held in connection with this very expensive scheme specifically excluded reference to any financial, economic and scientific considerations? As the information given in the Explanatory Memorandum to which he has referred is sketchy, to say the least, and highly inconclusive, would he state in the OFFICIAL REPORT exactly what were the considerations that led the Secretary of State to prefer the water power scheme to the nuclear power alternatives?
    Mr. Macpherson: It is not true that the inquiry specifically excluded anything.

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    The evidence was adduced by the Board, and it was not challenged on the economic aspects. My hon. Friend will find the arguments in the Explanatory Memorandum.
    Mr. Nabarroasked the Secretary of State for Scotland the cost £/kilowatts installed, respectively including and excluding capital costs, in respect of distribution facilities to the South of Scotland and elsewhere, for the 102,000 kilowatts installed capacity of the hydro-electric works embodied in the Strathfarrar and Kilmorack project, referred to in the North of Scotland Hydro-Electric Board (Constructional Scheme No. 30) Confirmation Order, 1958; when the estimate of cost £14,250,000 was made; and the projected commencement and completion dates for the scheme.
    Mr. N. Macpherson: I am informed that the capital cost of connecting this scheme to the Board's grid is estimated to be £600,000, that is, almost £6 per kilowatt installed at the scheme. In 1957 the annual cost of the grid per kilowatt installed in all the Board's stations connected to it was £1·1, including capital charges, and £0·17, excluding capital charges, and no material change in these figures is expected when the Strathfarrar scheme comes into operation. The estimate of the cost of the scheme was made when it was published in March, 1957, and was confirmed before the public inquiry in December, 1957. If the scheme becomes operative, work will start this year, and stations will be commissioned progressively from 1961 to 1963.
    Mr. Nabarro: And by that date, is not it the fact that there will be substantial numbers of standard nuclear power stations in operation in the United Kingdom, including the Hunterston station in the South of Scotland? In the circumstances, is it really wise to continue with pre-nuclear means of generating electricity when we already have at our disposal scientifically more advanced nuclear means that can be implemented at far lower capital cost, and with better prospect of success in the longer-term future?
    Mr. Macpherson: The Board is convinced that this is the most economical way of meeting the expected expansion of demand over the next few years.
    Mr. Nabarroasked the Secretary of State for Scotland, having regard to the
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    estimate of the North of Scotland Hydro-Electric Board that pumped storage stations in the North of Scotland area, worked in conjunction with nuclear stations, would be highly economic, and that the capital cost might be of the order of £40 per kilowatt installed, whether he will state the capital cost per kilowatt installed of the Strathfarrar and Kilmorack proposals, Statutory Instrument No. 885, S. 40, and supporting explanatory memorandum, Constructional Scheme No. 30; and why pumped storage is not being proposed in this instance and having regard to the Hunterston nuclear power installations.
    Mr. N. Macpherson: The capital cost of this scheme is estimated to be £140 per kilowatt installed. I am informed that a pumped storage scheme was not proposed in this instance because the site was not suitable. As my hon. Friend is aware, my right hon. Friend is at present examining the North of Scotland Hydro-Electric Board's proposal for a pumped storage scheme at Loch Awe which is intended to operate in conjunction with base load power stations in the South of Scotland, including the Hunterston Station.
    Mr. Nabarro: Is my hon. Friend aware that his Answer seems to suggest that he has not read with his customary avidity the evidence given by the North of Scotland Hydro-Electric Board chiefs themselves, to the Select Committee on Nationalised Industries, which made it perfectly clear, in the words of those chiefs of the Hydro-Electricity Board, that pumped storage schemes worked in conjunction with base load nuclear power stations were by far the most economic means, both in capital cost and in terms of the cost of operation, for future electricity generation in Scotland? Will he, therefore, read that evidence, and place no limitation upon pumped storage in the future, instead of bringing forward outmoded and outdated means of hydroelectricity generation?
    Mr. Macpherson: First of all, I would say again that my right hon. Friend is considering the Loch Awe scheme, which will be a pumped storage scheme. What the hon. Gentleman has said is not true, without qualification. A pumped storage scheme requires, in the first place, a high local storage reservoir in close proximity to a larger reservoir at a lower level into

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    which the water from the upper reservoir can discharge each day without undesirably wide fluctuations in water level; and, secondly, a reasonably close supply of base load power for pumping the water back to the upper reservoir each night. That second qualification is supplied at Loch Awe, and not at Strathfarrar.
    Mr. Woodburn: Is not the Under-Secretary aware that this is probably the finest justification for hydro-electric scheme—that it should be used in conjunction with pumped storage and the use of that atomic electricity that is produced during the night but which would otherwise be useless? Would not it be wise to publish a White Paper, or something of that nature, that would give a complete picture? The public are very interested in this matter, and I think that the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) has raised a very important question.
    Mr. Macpherson: I shall convey to my right hon. Friend what the right hon. Gentleman has said, and we shall, of course, consider it. I would point out that the House has its opportunities of considering these schemes as they come along. That applies to the Strathfarrar scheme, and to the Loch Awe scheme, should it be approved.
    Mr. Woodburn: But the hon. Gentleman does not seem to have grasped the point. A particular scheme is one thing, but the hon. Member for Kidderminster (Mr. Nabarro) has raised the principle of whether or not the Government's new hydro-electric schemes should be developed in conjunction with nuclear power? It would seem that some explanation ought to be given to the House, apart from what hon. Members can find out for themselves when a particular scheme comes along.
    Mr. Nabarro: On a point of order, Mr. Speaker. In view of the unsatisfactory Answers that I have received to these three Questions, I beg leave to give notice that I shall pray against the Order.

    Betting Shops
    Mrs. Mannasked the Secretary of State for Scotland if he is aware that betting shops are being set up where planning consent has been refused by local authorities; and if, in the light of
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    his further discussions, he will speed up the procedure to deal with these offences.
    Mr. N. Macpherson: Planning consent cannot authorise betting shops, or any other illegal activity. Persons engaged in ready-money betting off the course are always liable to prosecution. My right hon. Friend has no power to give instructions to the criminal authorities, but within the limits of their resources the police take action as expeditiously as possible whenever it comes to notice that an offence is being committed.
    Mrs. Mann: Is the Under-Secretary aware that I have had a two-hour interview with the Chief Constable of Coatbridge who tells me that he is powerless to do anything here. He complains of the system under which the men operating the "bookie" shops know that under the Town and Country Planning Act it takes at least six months before a prosecution can be laid at their door, and that during that six months the "wide boys" nominate someone else as the owner and tenant of the premises? Cannot he speed up legislation?
    Mr. Macpherson: It is not true, of course, to say that the police are powerless in this matter. They have not been inactive and, as I have said, as far as their resources permit, and as soon as the necessary preliminary work for obtaining a warrant can be carried through, they do prosecute.
    Mrs. Mannasked the Secretary of State for Scotland, in view of the increasing number of prosecutions against betting shops in Scotland, if he will reconsider the decision not to introduce legislation dealing with these shops this Session.
    Mr. Macpherson: It would be quite impracticable to make progress this Session with a Bill of this nature.
    Mrs. Mann: Is the hon. Gentleman aware that I do not want legislation that will legalise them and neither do my constituents? Is he aware that we have had thousands of prosecutions this year in Coatbridge? Does he appreciate that we want the Government to be firm and to be firm quickly; either to do one thing or the other? When can we look forward to definite action?
    Mr. Macpherson: I have nothing to add to what my right hon. Friend told the hon. Member for Maryhill (Mr. Hannan) on 25th February.

    Strontium 90 (Fall-Out)
    Mr. Hector Hughesasked the Secretary of State for Scotland, as representing the Lord President of the Council, what official scientific observations have been made recently as to the level of strontium 90 from fall-out in the north-east of Scotland or carried by winds or otherwise to the north-east of Scotland; and if he will tabulate the results of these observations, stating by whom, when, and where they were made.
    The Joint Under-Secretary of State for Scotland (Lord John Hope): Regular samples are now being taken of various biological materials, including foodstuffs, over the whole of the United Kingdom and including north-eastern Scotland. The results of this survey will be published periodically, and will, as at present intended, include references to places and dates.

    Eyemouth Harbour (Improvement)
    Sir W. Anstruther-Grayasked the Secretary of State for Scotland if he will make a statement regarding his plans for the improvement of Eyemouth Harbour.
    Lord John Hope: My right hon. Friend hopes that a report on the investigation made by the Hydraulics Research Station of the Department of Scientific and Industrial Research will shortly be available. It will then be for the harbour trustees to consider, in the light of the report, what proposals to make to my right hon. Friend.
    Sir W. Anstruther-Gray: While thanking my hon. Friend for that reply, may I ask if he will give an assurance that he will do all that he can to speed up the improvements to this harbour which are being cried out for by the fishermen who use it? Much more use could be made of Eyemouth Harbour if it were improved.
    Lord John Hope: I think that we shall be much further on when we get this Report, which will come out very soon.

    Teachers (Training Authorities) Regulations
    Mr. G. M. Thomsonasked the Secretary of State for Scotland what representations he has received regarding the draft Teachers (Training Authorities) (Scotland) Regulations, 1958; what steps he is taking to meet these representations; and when he expects to lay the regulations before Parliament.
    Mr. N. Macpherson: With permission, I shall circulate a list of the bodies and organisations from whom my right hon. Friend has received representations. In general the Regulations have been well received although particular provisions which have commended themselves to some have been criticised by others. Those bodies which asked to be heard have been interviewed either by the Minister of State, or by myself or by officials. All the representations are being carefully considered. My right hon. Friend hopes to lay the Regulations before the end of August.
    Mr. Thomson: Is the Joint Under-Secretary aware that there has been a good deal of anxiety about the implications of some of the proposals in these draft Regulations and particularly about the fact that while they arise from a report of the Advisory Council, they carry out few of the Council's recommendations? Will he give some consideration to that aspect before coming to a final conclusion?
    Mr. Macpherson: Yes, Sir.
    The following is the list:

    The Association of County Councils and the County Councils of Midlothian, Aberdeenshire, Argyll, East Lothian, Inverness, Peebles and Perth and Kinross.

    The four Counties of Cities.

    The training authorities.

    The Educational Institute of Scotland and four other associations of teachers.

    The universities.

    The Church of Scotland.

    The Roman Catholic Church.

    Some of the central institutions.

    The Association of Directors of Education.

    Several individuals and groups of individuals.

    Committee on Diligence (Report)
    Mr. G. M. Thomsonasked the Secretary of State for Scotland whether the Committee on Diligence has yet reported to him; and if he will make a statement.
    Mr. N. Macpherson: Yes, Sir. My right hon. Friend has received the Report and it is being published today as a Command Paper. My right hon. Friend takes this opportunity of thanking the Chairman and members of the Committee for their thorough review of this complex branch of Scots law and procedure.

    Scottish Special Housing Association (Rents)
    Mrs. Mannasked the Secretary of State for Scotland how many local authorities have sent him protests since 4th March against the Scottish Special Housing Association's proposals to raise rents and introduce a differential rent scheme; and what reply he has sent to these complaints.
    Mr. J. N. Browne: Two local authorities—the Councils of Airdrie and Midlothian. My right hon. Friend informed Airdrie Town Council that the point about which it was mainly concerned—the possibility of hardship to tenants—was fully considered before he approved the Association's proposals, and that the rebate scheme, which forms part of the proposals, was designed specifically to meet cases of hardship. The representations from Midlothian County Council have only recently been received and are still under consideration.
    Mrs. Mann: Can the hon. Gentleman say how many councils did so before 4th March, and from 4th March until now? Is not it the case that a standardised reply, based on a doctrinaire policy, can be sent to any local authority?
    Mr. Browne: Subject to correction, the figure is thirteen local authorities before 4th March and two afterwards. I should like to investigate the hon. Lady's supplementary question about a standardised reply.

    Police (Resignations and New Entrants)
    Mr. Rankinasked the Secretary of State for Scotland the total numbers of resignations of constables from police forces in Scotland in 1956 and 1957; and what were the total number of new entrants.
    Mr. N. Macpherson: In 1956, the number of male recruits to the Scottish police
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    forces was 747: the total wastage, including retirements, during the year was 359, of whom 162 resigned. The corresponding figures for 1957 were 581, 492 and 251 respectively.
    Mr. Rankin: Do not these figures alarm the Joint Under-Secretary, in view of the fact that there has been a startling increase in the number of crimes and offences over the last ten years? What steps is he now taking to increase the strength of the police forces in Scotland?
    Mr. Macpherson: Recruitment for this year has not been discouraging; in fact, so far, it is up on last year. We should keep this matter in proportion. At the end of May of this year 24 out of the 33 Scottish forces were only five or less under strength.

    Independent Schools
    Mr. Rankinasked the Secretary of State for Scotland how many independent schools are now registered in Scotland.
    Mr. N. Macpherson: The number is 158.
    Mr. Rankin: Can the Joint Under-Secretary say how many independent schools have still to be registered; and, when these independent schools are registered, what steps are taken regarding their supervision?
    Mr. Macpherson: All known schools have applied for registration. The figures I have given are those provisionally registered; 107 of those have been inspected since provisional registration, and we are getting through the whole number as quickly as we can.

    Road Improvements
    Sir W. Anstruther-Grayasked the Secretary of State for Scotland whether he will give figures to indicate what progress is being made towards eliminating from Scottish roads black spots where accidents are continually taking place.
    Mr. N. Macpherson: On 18th June, 108 smaller road schemes to improve dangerous or inadequate local conditions, each costing under £100,000, were in progress on trunk and classified roads in Scotland. The total estimated cost of these schemes is £3,163,000. They do not include schemes on classified roads costing less than £10,000 each, which

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    do not require my right hon. Friend's specific approval, or schemes on unclassified roads.

    Education (Standards)
    Mr. Woodburnasked the Secretary of State for Scotland how the standard of education in free education authority schools compares with that provided by the same authorities in schools where they charge fees; and what steps he is taking to eliminate double standards in public education.
    Mr. N. Macpherson: As indicated in my right hon. Friend's Answer to the right hon. Gentleman on 17th December last, there are in general no marked differences between free and fee-paying schools conducted by education authorities as regards curricula, quality of staff and size of classes.
    Mr. Woodburn: Does that mean that the public is being charged fees under false pretences; that it is being sold something which it does not get? What is the purpose of having this kind of distinction in the schools if the education is the same and people get nothing extra for the extra money they are paying?
    Mr. Macpherson: There is a demand for fee-paying places which exceeds the available places.
    Mr. Woodburn: If this be a form of voluntary taxation, would not it be wiser if it were done generally, so that all schools could be improved?

    Road Works, Ross and Cromarty (Grants)
    Mr. John MacLeodasked the Secretary of State for Scotland what grants are being offered to the County Council of Ross and Cromarty; and what work is being carried out under the Congested Districts (Scotland) Act, 1897, for the year 1958–59.
    Lord John Hope: No new offers of grant have so far been made this year, but schemes already approved for this County are likely to involve payment of some £25,000 grant in the current year.
    Mr. MacLeod: Does the Joint Under-Secretary appreciate that this is a very unsatisfactory state of affairs, and that I propose to raise the matter on Thursday,
    1062
    when I hope I shall have a much more satisfactory reply?
    Lord John Hope: I have the engagement noted in my diary.

    Fire Cover (Standards)
    Mr. Hannanasked the Secretary of State for Scotland if he has now given consideration to the report of the Central Fire Brigades Advisory Council on standards of fire cover; and what are his decisions.
    Mr. N. Macpherson: No decision has yet been reached on the Report of the Joint Committee on Standards of Fire Cover. My right hon. Friends, the Home Secretary and the Secretary of State, are continuing their consideration of this Report.
    Mr. Hannan: With the increased risk of fire in rural areas, due to the vast increase in the use of mechanically-propelled vehicles, should not the standard of fire cover be at least equal to that of twenty years ago, according to the recommendations of the Riverdale Committee?
    Mr. Macpherson: I will convey to my right hon. Friends what the hon. Gentleman has said.

    Licensing Laws
    Mr. Hannanasked the Secretary of State for Scotland if he has given consideration to the representations made to him by the Presbytery of Lanark of the Church of Scotland that the licensing laws in respect of Sundays should be amended; and what was the nature of his reply.
    Mr. N. Macpherson: I have nothing to add to the Answer my right hon. Friend gave to my hon. Friend the Member for Lanark (Mr. Patrick Maitland) on 14th March.
    Mr. Hannan: Is the hon. Gentleman aware that in that reply it was stated that there was not sufficient evidence that such legislation was necessary? Is the hon. Gentleman aware that these representations are supported by over seventy town and county councils throughout Scotland? What further evidence is necessary to induce legislation on this topic? Is he aware of the disgraceful scenes which take place in quiet communities throughout Scotland?
    Mr. Macpherson: The trouble is that while everyone recognises that a problem exists, there is no unanimity about what is the right solution. When my right hon. Friend has asked for suggestions, he has been told that it is a matter for him to decide, but any decision he may come to would certainly not find favour with everyone who wants action in this matter.
    Mr. Woodburn: Is the hon. Gentleman aware that there is a tremendous waste of petrol on Sunday by this "pub-crawling" on wheels? Would not it be better if arrangements were made so that people could do this at home rather than disturb other villages?
    Mr. Macpherson: There are many uses to which spirits are put in this regard, but I do not think that this can necessarily be considered as entirely a question of wasting petrol in going about the country.

    Central Institutions (Salary Negotiations)
    Mr. G. M. Thomsonasked the Secretary of State for Scotland what changes he proposes in the arrangements for negotiating salary changes in central institutions.
    Mr. N. Macpherson: At the request of the governing bodies and the staff associations concerned, my right hon. Friend has agreed to the introduction in four of the institutions of a revised procedure, details of which have been sent to the hon. Member. The governing bodies and staffs of the remaining institutions have been told that my right hon. Friend is prepared to consider proposals for similar arrangements for them.
    Mr. Thomson: Is the hon. Gentleman aware that there will be general satisfaction among those who care about the future of technical education in Scotland that some progress has been made in this matter? Will he do everything possible to encourage governing bodies of other associations and central institutions to come together so that proper national negotiating machinery can be set up?
    Mr. Macpherson: Yes, Sir; we are doing everything we can to do so.

    East Kilbride Development Corporation (Four-apartment Houses)
    Mr. T. Fraserasked the Secretary of State for Scotland the weekly amount in rent and rates which will be payable by tenants of four-apartment houses owned by East Kilbride Development Corporation under the new rents scheme where the maximum rebate is granted; and what proportion that amount bears to the tenant's income.
    Mr. J. N. Browne: The rent payable in such a case will be 5s. a week, which is just over 3 per cent. of the income qualifying for maximum rebate. The rate payable, within the full amount of 22s. 6d.—which is 14 per cent. of that income—will depend on the extent to which the County Council as rating authority exercise its statutory power to grant relief on the ground of inability to pay.
    Mr. Fraser: Does not this mean, however, that a person with a very low income, of say £7 or £8 per week, will have to pay 27s. or 28s. a week in rent and rates, since they cannot get a house to rent without paying rates any more than one can buy a packet of cigarettes without paying the duty on those cigarettes? Does not it mean that these tenants will be left with precious little for food, clothing and other essential supplies?
    Mr. Browne: The tenants will be left in precisely the same position after the rents have been raised as they are now.

    Planning Appeal, Mollinsburn
    Miss Herbisonasked the Secretary of State for Scotland if he will reconsider his decision on the case of the planning appeal in respect of the Mill Garage and Café, Mollinsburn.
    Mr. J. N. Browne: The Statute does not enable my right hon. Friend to reconsider a decision of this kind.
    Miss Herbison: Is the Minister aware that my constituent feels very strongly that an unjust decision has been made, particularly when he compares it with those taken in other cases on the same stretch of road? Surely, the Secretary of State can do something to have the whole matter of these premises on this important road investigated?
    Mr. Browne: This matter has been most carefully investigated, and my right hon. Friend is not enabled to reconsider the decision. Of course, a new application for planning permission can be lodged, but I am advised that where there has been no change in the circumstances it is rather doubtful whether any different decision would be arrived at.
    Miss Herbison: If my constituent does put forward a new application, can the hon. Gentleman say whether it will be considered in line with other decisions that have been taken which seem to be much more just?
    Mr. Browne: I could not possibly bind my right hon. Friend or anyone else. Each case will be considered on its merits.

    Mr. William Watt (Detention)
    Mr. Emrys Hughesasked the Lord Advocate how long William Watt was detained in Barlinnie Prison recently; what were the reasons for his detention; and if he will make a statement.
    The Lord Advocate (Mr. W. R. Milligan): William Watt was detained in prison from 27th September, 1956, to 3rd December, 1956. He was arrested on the first-mentioned date as there was, in the opinion of the Procurator Fiscal, Glasgow, sufficient evidence to warrant this step being taken. On the following day he was charged on Petition in the Sheriff Court, Glasgow, with the murder of three persons.
    After further exhaustive inquiry, Crown Counsel decided that the evidence was insufficient to warrant his being put on trial, and, accordingly, he was liberated on 3rd December, 1956.
    Mr. Emrys Hughes: In view of the fact that it has now been proved that Mr. Watt was completely innocent, will the Lord Advocate look at the procedure by which he was kept in prison for 67 days, during which time he endured great suffering and loss of business, while an atmosphere of suspicion was created against him? Will the right hon. and learned Gentleman look at the procedure to see whether some action can be taken to prevent a repetition of this case?
    The Lord Advocate: As the House knows, this case was one of great difficulty, and very extensive inquiries had to be made. I fully appreciate that, as the hon. Member has said, the period of
    1066
    detention was unusually long. In reply to the latter part of the hon. Gentleman's supplementary question, I would say that I am always prepared to consider any question of procedure if I think there is any possibility of injustice.
    Mr. Hector Hughes: Is not it contrary to British ideas of justice to keep a man a long time in prison and not to bring him to trial and give him the satisfaction of the chance of an acquittal? Is not that entirely wrong and why was it done in this case?
    The Lord Advocate: The hon. and learned Gentleman may or may not know that, under the law of Scotland, a man may be, but practically never is, detained for 110 days.

  TRADE AND COMMERCE

    Trade with Canada
    Mr. Wadeasked the President of the Board of Trade if he will make proposals to the Commonwealth Economic Conference for promoting increased trade between the United Kingdom and Canada, and in particular for a reduction of tariffs on imports of wool cloth from the United Kingdom into Canada.
    The Minister of State, Board of Trade (Mr. J. K. Vaughan-Morgan): Yes, Sir; we shall all be very much concerned at the Commonwealth Economic Conference to promote increased trade between all Commonwealth countries. As regards the second part of the Question, I would refer the hon. Member to the Answer given to the right hon. Member for Battersea, North (Mr. Jay) on 26th June.
    Mr. Wade: If one of the purposes of the Commonwealth Economic Conference is to discuss ways and means of increasing international trade, would not this be an appropriate occasion for making further strong representations with a view to the removal of the Canadian tariff on British wool cloth, which is bound to impede trade between Britain and Canada?
    Mr. Vaughan-Morgan: I am afraid that I cannot anticipate the conference by saying what our proposals will be.

    Radio Isotopes (Industrial Use)
    Mr. Masonasked the President of the Board of Trade to what extent British industry is aware of the school at Harwell for the training of

    1067
    industrialists in the use of radio isotopes; whether his Department is giving sufficient publicity to this school; and whether he is satisfied that full use is being made of these new aids to British industry.
    The Parliamentary Secretary to the Board of Trade (Mr. F. J. Erroll): Since its inception in 1951, more than 800 students from British industry have attended the Isotope School at Harwell. The courses at the school, and other facilities offered to industry by the Atomic Energy Authority, are publicised by releases to the national and technical Press, as well as in the Authority's own publications, and I am satisfied that industry is well aware of these facilities and is taking full advantage of them.
    Mr. Mason: Does the hon. Gentleman appreciate that I am not convinced that British industry is aware of the advantages to be gained by the use of radio isotopes, and of the money to be saved by industry by their use? Will

    RATES OF INTEREST ON LOANS ADVANCED FROM THE LOCAL LOANS FUND TO LOCAL AUTHORITIES ON THE SECURITY OF LOCAL RATES

    —

    From 16th February, 1957

    From 13th July, 1957

    From 28th September, 1957

    From 25th February, 1958

    Per cent.

    Per cent.

    Per cent.

    Per cent.

    On loans for not more than five years

    5¼

    5¾

    7¼

    6½

    On loans for more than five years but not more than fifteen years

    5½

    6

    6¾

    6½

    On loans for more than fifteen years

    5½

    5¾

    6¾

    6¼

    he consider some provincial exhibition of various uses of radio isotopes to further this cause, and to bring home their advantages to British industrialists?
    Mr. Erroll: I will be very glad to consider any suggestions which the hon. Gentleman may make.

  NATIONAL FINANCE

    Public Works Loan Board
    Mr. Beswickasked the Chancellor of the Exchequer if he will give the last four dates on which the interest rate on loans from the Public Works Loan Board was adjusted, and the respective rates at which loans were then fixed.
    The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): The dates were 16th February, 1957, 13th July, 1957, 28th September, 1957, and 25th February, 1958. I am circulating a statement of the respective rates in the OFFICIAL REPORT.
    Following is the statement:
    Mr. Beswickasked the Chancellor of the Exchequer what adjustment he proposes to make of the interest rate on loans made by the Public Works Loan Board.
    Mr. Cooperasked the Chancellor of the Exchequer if, in view of the further reduction in the Bank Rate, he is able to announce a lower rate of interest for loans to local authorities from the Public Works Loan Board.
    Mr. Hunterasked the Chancellor of the Exchequer, in view of the reduction in the Bank Rate to five per cent., if he will take the necessary measures to reduce the rates of interest for loans to local authorities from the Public Works Loan Board.
    Mr. Amory: The rates of interest on loans from the Public Works Loan Board are not linked to Bank Rate but are fixed to reflect the rates prevailing in the market for loans to local authorities which are kept constantly under review.
    Mr. Beswick: Is the Chancellor aware that many local authorities feel very bitter about the extravagant cost of raising money today? Since the volume of their essential work is closely controlled by Government Departments, is not there now an urgent case for revising downwards the rates for loans from the Public Works Loan Board?
    Mr. Amory: As the hon. Gentleman knows, it is Government policy to encourage local authorities to borrow in the market where that is practicable. I think that is a healthy system, as against borrowing from the Public Works Loan Board, and that being so, in equity to those who do borrow in the market, I think it is right that the rates of interest charged by the Board should be on an equivalent basis to those available to authorities borrowing on the market.
    Mr. Cooper: Is my right hon. Friend aware that the present rates of interest charged by the Public Works Loan Board are in many instances substantially higher than the rates available on the market? Has not it always been the practice that the interest rates on loans from the Board should bear some relationship to the Bank Rate? Will my right hon. Friend please look into this matter again?
    Mr. Amory: I think the rates available to local authorities on the market bear some relation to the Bank Rate, though not necessarily a day-to-day connection. I do not think my hon. Friend is right in saying that the rates charged by the Public Works Loan Board are higher than the rates available, on the whole, to local authorities in the market. If he has any evidence of that, I should be interested to have it.
    Mr. Mitchison: Is the Chancellor aware that the real competition with the Public Works Loan Board's loans, which are mostly for smaller authorities, is with mortgage loans; that there is a wide diversity at present between the rates paid for mortgage loans, and that the indications are that if the Board's rate is to conform with the mortgage loans rate, and if the rates generally are to be kept as reasonably low as possible, the Board's rate ought to be lowered?
    Mr. Amory: This matter is kept under continuous review, but I agree with what the hon. and learned Gentleman says about the object in general. I will look into the point he has raised about mortgage rates.
    Mr. Hunter: Is the Chancellor aware that the local authorities are very disappointed that, though the Bank Rate has been reduced to 5 per cent., interest on the Public Works Loan Board's loans has not been reduced as well?
    Mr. Amory: As I have said, this matter is kept under continuous review, and changes will be made whenever they are justified.
    Mr. H. Morrison: Can the Chancellor say whether the Public Works Loan Board's rate of interest was increased when the Bank Rate was increased? If it has not fallen since the Bank Rate has fallen, why does he pursue a contradictory policy between two operations?
    Mr. Amory: I can assure the right hon. Gentleman that there is no contradictory policy. As he knows, of course, it is very common for changes in the Bank Rate to be anticipated and discounted by the market.
    Mr. Cooper: In view of the nature of my right hon. Friend's reply, I beg to give notice that I shall raise this matter at the earliest opportunity on the Motion for the Adjournment.
    Mr. Hunterasked the Chancellor of the Exchequer the total amounts of loans by local authorities from the Public Works Loan Board for 1957, and for 1958 to the latest convenient date.
    Mr. Amory: The total amount advanced in the calendar year 1957 was £130,790,690, and that from 1st January to 30th May, 1958, was £23,614,690.
    Mr. Hunter: Do not these figures show that the high rates of interest charged by the Public Works Loan Board have forced local authorities to borrow at high rates from other sources?
    Mr. Amory: The hon. Member will realise that the Question refers only to borrowing through the Public Works Loan Board. Since the higher interest rates came into force last autumn there has been a general falling off in applications, and, on the other hand, there has been a greater availability of money in the open market. That is the reason for these figures.

    National Gallery (Adjacent Site)
    Mr. Parkerasked the Chancellor of the Exchequer whether he has yet been able to acquire the Hampton site for the extension of the National Gallery.
    Mr. Amory: I have at present nothing to add to the Answer given to the hon. Member by my hon. and learned Friend the Financial Secretary on 12th June.
    Mr. Parker: Can the Chancellor ensure that the site is not lost, and that steps will be taken to prevent an unfavourable decision being taken?
    Mr. Amory: As far as I know, the Canadian authorities have taken no formal steps to divest themselves of the lease of this site.
    Sir G. Nicholson: Is my right hon. Friend aware that he has a great responsibility to posterity in this matter, and that this is a chance which certainly will not recur? Will he think very carefully before rejecting this opportunity?
    Mr. Amory: My hon. Friend will agree that it is sometimes extraordinarily difficult to balance up one's responsibilities to posterity with one's responsibilities to one's contemporaries.
    Mr. Gaitskell: Is the right hon. Gentleman aware of the very widespread feeling,
    1072
    in the House and in the country, that this opportunity of acquiring the site for the National Gallery should not be missed?
    Mr. Amory: I understand that fully.

    Inter-Parliamentary Union Conference, Rio de Janeiro
    Mr. Lewisasked the Chancellor of the Exchequer what recent grants he has made to Members of Parliament to pay the cost of their fares to Rio de Janeiro for the purpose of attending the annual Conference of the Inter-Parliamentary Union; whether he will publish in HANSARD a list of the names of the hon. Members receiving these grants and the amounts, respectively; and what action he took to see that these delegates were democratically elected or selected from the membership of the British section of the Inter-Parliamentary Union before making Treasury money available for this purpose.
    Mr. Amory: The answer to the first part of the Question is "None, Sir"; the rest of the Question does not, therefore, arise. As the hon. Member is aware, the British Group of the Inter-Parliamentary Union receives a grant-in-aid from public funds.
    Mr. Lewis: In view of the fact that the Chancellor knows that he will shortly be granting this money, is he aware that the Members on the executive have once again selected themselves to go? Does he think that it is right that for the past 10 or 13 years the same Members have been going consistently? Does not he think that it would be better to carry out the promise and the pledge that was made, that they would put it in the Whip so as to allow any Member the opportunity of being considered at least once in his lifetime as a Member of this House?
    Mr. Amory: The hon. Member's comments are not for me. My responsibility is only for the grant-in-aid. The way in which the British Group of the Inter-Parliamentary Union allocates that expenditure in detail is not for me.
    Mr. Woodburn: Is the right hon. Gentleman aware that because of the paucity of money the British delegates in some of these delegations travel in

    1073
    such a way as to give foreigners the impression that the British are poor relations in these international organisations? Will the right hon. Gentleman take steps to see that this delegation travels in conditions equal to those in which the delegates of smaller countries travel?
    Mr. Amory: I have no reason to suppose that the grant-in-aid is not adequate to ensure the purposes to which the right hon. Gentleman has referred.
    Mr. Woodburn: Is the right hon. Gentleman aware that on some occasions, instead of travelling as V.I.Ps., British delegates from the House of Commons have received the sympathy of their fellow-passengers because of their having to travel steerage, when the ordinary commercial travellers travel in proper conditions?
    Mr. Amory: I think that we are entitled to sympathy from almost everybody in this country and outside as Members of this institution.
    Sir P. Agnew: Is it not a fact that you yourself, Mr. Speaker, occupy a high honorific post in this organisation, and that by attending its annual general meetings you hear about its methods and the conduct of its proceedings from year to year, and can satisfy yourself that they are conducted with propriety?
    Mr. Speaker: It is true that I occupy many honorific positions, but I am not responsible for everything that is done by the various bodies which have been kind enough so to honour me. I have nothing whatever to do with the selection of this delegation.
    Mr. Lewis: In view of the obvious interest in this matter, and with a view to trying to get some further information, I beg to give notice that I shall raise the matter on the Adjournment.

  NUCLEAR TESTS
  Mr. Brockwayasked the Prime Minister if, in view of the report of the United Nations Scientific Committee on the effects of atomic radiation, he will give instructions that British tests of atomic and hydrogen bombs cease forthwith and take immediate action to secure
  1074
  international agreement to stop such tests by any and every Government.
  The Prime Minister (Mr. Harold Macmillan): The report of the United Nations Scientific Committee has not yet been published.
  The general position of Her Majesty's Government with regard to the suspension of tests and disarmament was explained to the House by my right hon. Friends in the course of the debate on 10th June.
  Mr. Brockway: Is the Prime Minister aware that it was announced that the report was to be published today? Is he further aware that references have been made to it in the proceedings of the United Nations, and that, after two years' discussion with thirty Governments, these references show that there is already evidence of a very serious increase in the number of cases of leukaemia; that it is estimated that this number may rise to 30,000 yearly and that 120,000 major genetic defects may result yearly from these tests? In view of these facts—[HON. MEMBERS: "Facts?"]—these statements by this authoritative committee, will the Prime Minister stop this inhuman practice?
  The Prime Minister: The publication of the report is a matter for the United Nations. I understand that the report will not be published for some weeks. [HON. MEMBERS: "Why not?"] I was so informed; it is not in my hands. I am told that it is 600 pages long, with a very large number of appendices. It is entirely a matter for the United Nations, which is the responsible authority. With regard to policy, I can only add that that was fully discussed and I have nothing to add to it. Meanwhile, I think that it would be right to welcome the announcement by the leader of the Soviet delegation to the Geneva talks of scientists, as reported in the Press, that they are prepared to take part in the talks, which I believe begin either tomorrow or the next day.
  Mr. Gaitskell: Can the Prime Minister tell us how he envisages the talks developing, following the Geneva Conference? Is the report of the scientists gathered there to be submitted to the two or four Governments concerned? How does the

  1075
  Prime Minister envisage the matter being followed up? Is it to be taken only at the Summit Conference, or beforehand?
  The Prime Minister: We had better see how the report goes, and then we will try, by diplomatic means, to see how we can proceed further. I think that I had better be fairly careful about saying anything. A unilateral statement of mine might tend to hinder rather than forward these negotiations.

  NUCLEAR POWER PLANT (EXPORT)
  Mr. A. Robertsasked the Prime Minister what approach has been made by the European Atomic Energy Community to Her Majesty's Government on the possibilities of the United Kingdom supplying atomic power plants.
  The Prime Minister: I understand that nuclear power plants are unlikely to be bought by the European Atomic Energy Community itself, but rather by individual undertakings in member countries. United Kingdom manufacturers have received a number of inquiries from such undertakings, and a letter of intent has been signed between an Italian undertaking and a United Kingdom group. Her Majesty's Government hope to conclude agreements with the Community and, as appropriate, with member Governments, which will provide the necessary framework within which such exports can take place. An agreement of this nature with the Italian Government is already in force.
  Mr. Roberts: Does not the Prime Minister agree that a close relationship between Euratom and the United States of America without the United Kingdom could be disastrous? Is not it high time that the United Kingdom Government's policy were more clearly defined?
  The Prime Minister: I think there is confusion as to the character of the pro-
  1076
  jects. The supply of United Kingdom reactors would be governed by circumstances very different from those which have led to the recently announced United States-Euratom agreement. The American agreement provides the framework for joint construction of prototype reactors of American design which are still in the development stage and which will, of course, be partly American-financed. The United Kingdom offers a fully developed power reactor system which is already available for use in this country and for export on ordinary commercial terms.

  SCOTTISH ESTIMATES
  Committee of Supply discharged from considering the Estimates set out hereunder and the said Estimates referred to the Scottish Grand Committee:—
  Class I, Vote 23, Scottish Home Department.
  Class IX, Vote 9, Roads, &c., Scotland,—[Mr. Oakshott.]

WAYS AND MEANS [24th June]
MOTOR VEHICLE LICENCES (USE OF TRADE LICENCES FOR COLLECTION AND DELIVERY OF VEHICLES)
Resolution reported,
That it is expedient to limit the cases in which trade licences under section ten of the Vehicles (Excise) Act, 1949, may be used for the collection or delivery of mechanically propelled vehicles.
Resolution read a Second time.
Question, That this House doth agree with the Committee in the said Resolution, put forthwith, pursuant to Standing Order No. 86(Ways and Means Motions and Resolutions), and agreed to.
Instruction to the Committee on the Finance Bill that they have power to make provision therein pursuant to the said Resolution.

ORDERS OF THE DAY

  FINANCE BILL
  Considered in Committee [Progress, 18th June.]
  [Sir CHARLES MACANDREW in the Chair]

Clause 20.—(CHANGE OF RATE, AND BASIS OF CHARGE.)
3.33 p.m.
Mr. Glenvil Hall: I beg to move, in page 14, line 27, after "applies", to insert:
"other than a business carried on by a building society".
The Chairman: This Amendment may be discussed with the third Amendment on page 3062 of the Notice Paper, in page 14, line 31, at the end to insert:
Provided that, in relation to any trade or business carried on by a building society (being a society regulated by any of the Acts regulating building societies including Acts of the Parliament of Northern Ireland), this subsection shall have effect with the substitution of the words three per cent. for the words ten per cent.,
and with the second Amendment on page 3064, in page 14, line 40, at the end to insert:
(4) For the purpose of this section "building society" means a society regulated by any of the Acts regulating building societies including Acts of the Parliament of Northern Ireland.
Mr. Glenvil Hall: This is an all-party Amendment, supported not only by those who have put their names to it but by a substantial number of hon. Members in all parts of the Committee. The object of the Amendment is to relieve building societies entirely from the incidence of Profits Tax. I would like to begin by reminding the Committee of the position as it was before the Budget was introduced.
Ordinary companies then paid 30 per cent. Profits Tax on profits which they distributed and only 3 per cent. on undistributed profits. The building societies paid Profits Tax at the rate of 2 per cent. As they do not distribute profits and, in fact, do not make any, it would appear, on the face of it, that they had the advantage of paying 1 per cent. less than ordinary companies.
The position has not been quite as good as that. In fact, building societies have laboured under the disability that, when
1078
they calculated what they had to base their Profits Tax payments upon, they have not been allowed to take into account the interest which they necessarily have to pay to their investors. The result has been catastrophic for building societies, in spite of the fact that they appear to have been paying 1 per cent. less than ordinary companies.
Perhaps I might be permitted to remind the Committee how building societies function. A building society borrows its money from investors, and, in turn, lends it to people who desire to buy their homes or other property. The money that building societies thus borrow is their raw material. Just as an ordinary company obtains materials on which it operates and afterwards sells at a profit, so, out of the loans which building societies receive, they not only lend to those who desire to purchase their houses, but have to lend it at a higher rate to provide a margin for costs of management, Income Tax and Profits Tax. They also have to provide for reserves. I need say very little about the costs of management, because it is common knowledge that the great majority of building societies are well run. They have to find money for staff, buildings, rent, rates and other incidentals and they provide for these things in a most economical and efficient way.
There is a feeling on the part of many people that buildings societies do not pay Income Tax. The idea arises because those who put money into the societies receive interest without deduction of tax. Except for Surtax, they are not accountable to the Revenue for what they receive as interest. This does not mean that Income Tax is not paid. What has been happening for some years is that the building societies compound with the Inland Revenue for a special rate of tax. This is of advantage to the building societies, and most certainly to the Inland Revenue.
It is well recognised that a substantial number of the people who put money into building societies are small savers, people who either are not liable to Income Tax or liable only at a reduced rate. As a result, every year someone on behalf of the Building Societies Association has a discussion with the Inland Revenue and an special rate of tax is arranged, taking all factors into account. I believe that the special rate recently has been 5s. 6d.

1079
A year or two earlier it was 5s. 4d. This arrangement is probably of more advantage to the Inland Revenue than to the building societies.
With other hon. Members, I have been going into the figures relating to these societies. I am informed by those capable of judging that the amount paid by them in Income Tax last year was, in round figures, £28 million. In addition to that, the societies had to pay Income Tax, of course, on their undistributed surpluses. During the same period, this has meant about an additional £6 million, making £34 million in all. Also, during the past year—as some of us think, quite unjustly—they have had to pay £2,300,000 in Profits Tax, making, in round figures, about £36 million.
As I have already reminded the Committee, Profits Tax up to now has not been levied on the net surplus—if hon. Members prefer to use the word "profits "I have no objection—but on the gross. In assessing themselves to Profits Tax, they have not been allowed to deduct the interest on what they have had to pay to those who invest moneys in them. I was startled to find, on looking at the figures, that if building societies had been assessed in the ordinary way and allowed to deduct the interest they had to pay to investors and if, in addition, they had been assessed at the 3 per cent. ordinary company rate instead of 2 per cent., they would have been many millions of pounds in pocket during the last few years.
If the Committee will bear with me, I will give the figures. In 1953–54, they paid £1,100,000, but if they had been assessed as ordinary companies they would have paid only £288,000. In 1954–55, they paid £1,290,000 instead of £317,000. In the following year they paid £1½ million instead of £322,000. In 1956–57, the figures were £1,900,000 instead of £350,000 and, in the year which has just been completed, they paid no less than £2,300,000 instead of £413,000. If these figures are added we find that in the last five years building societies have had to pay more than £8 million in Profits Tax, whereas, if they had been assessed as ordinary companies, they would have paid £1,690,000. The excess sum is over £6 million.
1080
Last year, some of us raised this matter and were then informed by the Chancellor of the Exchequer of that time that it would be considered. The Treasury has considered it and, when he opened his Budget, the Chancellor made suggestions for a change. He has indicated, first, that in future building societies are to be permitted to deduct the interest they have paid on moneys borrowed from investors before liability for Profits Tax is computed. That, of course, is a long delayed act of justice and we accept it wholeheartedly.
This afternoon we have no intention whatever of asking the Chancellor to go back on that. But he has also changed the rate from 2 per cent. to 10 per cent., bringing it into line with the change he proposes for ordinary companies. Ordinary companies which have been paying 30 per cent. on distributed profits are now to pay only 10 per cent., whereas building societies, which perform a very real function in the State, have also to pay 10 per cent., an increase of 8 per cent. or, as someone said, a rise of 500 per cent. in all in one year.
3.45 p.m.
I imagine that the Chancellor has made a change so as to comply, as he thinks, with the recommendation of the Royal Commission on Taxation of Profits and Income. Reading what the Commission had to say about those societies, it is possible that he may have had ground for that contention, but I ask him to consider that when the Commission sat it took no evidence from building societies. They were not asked to express their point of view. It is my belief that if they had been so allowed they would have been able to convince the members of the Commission that to charge building societies the same rate as ordinary companies, when the flat rate to be charged is as much as 10 per cent., would be grossly unfair and unjust.
If the Chancellor had been so minded, he could have refused to accept the recommendation of the Commission so far as these societies are concerned when it advocated a flat rate for all, and we hope that before the debate is over we shall be able to convince the Chancellor that it is quite wrong to charge the full 10 per cent. Although we may have no objection to a flat rate for ordinary companies, it ought not to apply to building

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societies. We rest our case for not applying Profits Tax to them quite simply on the fact—it is a fact—that they do not make profits. Profits Tax should apply to profits, and in our view building societies do not make profits.
Building societies do not pay dividends, have no shareholders, and never give a bonus to those who invest money with them. In every way, they are a class apart, as the late Sir John Simon, as he then was, said more than twenty years ago. What he said then has been quoted many times and I will not weary the Committee now by repeating it. It has, however, been accepted all through this time that they were in a class apart and should not be confused with ordinary trading companies in any way. For more than sixty years building societies paid no Income Tax, much less Profits Tax, which did not then exist. It is only in relatively recent times that they have had to pay Income Tax and, more recently still, Profits Tax.
The most serious aspect of the matter, and one to which I would direct attention, is the effect which having to pay Profits Tax has on their reserves. Those reserves have gone down at a very time when, owing to the increase in total assets, they should have been increasing. In 1954, for example, building societies placed £6·8 million to reserve. In 1956, that amount had dropped to £6 million and in 1957 it had been reduced to £5·8 million. There was a continual drop.
Over the last five years the amount transferred to reserve has gone down from 7s. 2d. per cent. to 4s. 10d. per cent.; and this takes no account of the drop in gilt-edged securities, which has hit building societies very hard. The gilt-edged securities held by them have dropped in value by an amount equal to five-sixths of their net surplus in the last four years. There has been, in other words, a drop of £20 million in value during the last four years, which is only a little short of their whole net surplus for that period. It is a truly startling set of figures, and one which, I hope, will give the Chancellor thought.
The Financial Secretary to the Treasury, during the Second Reading debate on the Bill, said that the Treasury took the view that even at 10 per cent. building societies would in future, under the altered basis of
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computation, be £1 million better off. I say straight away that the societies do not accept that for one moment. Their computation, which is equally valid and, in some respects, probably a better one because they have complete access to all the necessary figures, is that the amount is nothing like that sum. Even if it were, the injustice still remains and they will still have to find, under the 10 per cent., £1,700,000 a year in addition to Income Tax and Profits Tax payments.
May I, quite shortly, sum up what I have been trying to say? This is not an easy case to put over, because it involves so many figures, but that there is a case, I can assure the Chancellor, and it is one at which, in all seriousness, he should look.
As we see it, building societies, by common consent, are in a category apart. They perform a useful and essential service to the community. They do not make profits. They do not pay dividends. They do pay their proper share of Income Tax—some might say, more than their proper share. Last year, they paid between them £34 million plus the £2,300,000, to which I have referred, by way of Profits Tax. I hope, too, that I have demonstrated quite clearly that the building societies in past years have paid many millions more than ordinary companies.
In Profits Tax alone, they paid over £6 million more than an ordinary company would have done during the last five years. They have, because of that, had great difficulties in building up their reserves. Their reserves are, quite frankly, not adequate to their assets. For every £1 retained by the societies, the Government took £6 in 1957–58. They have suffered as much as anybody from the depreciation of gilt-edged securities.
As I have already said—and I should like to remind the Committee of it again before I sit down—their securities of this kind have depreciated in value by five-sixths over the last four years, by no less a sum than £20 million in actual money. We are the only country in the world which taxes building societies in this way. The only other country which taxes them is the United States, and they do not attempt to tax a society until it has built up its reserves to at least 12 per cent.

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I therefore hope that for all these reasons, which I think are sound, the Chancellor will be willing to view what I have said and by what will be said with more facility and force by other hon. Members who follow me, and will, before the debate is over, state his willingness to do something to meet us.
Mr. I. J. Pitman: I have no interest at all in any building society; in fact, I have, if anything, a negative interest in this matter, so I feel fully justified in supporting someone who would be in competition with my other interests, because I believe this to be a fundamental and just cause. I think that the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) has made out a very convincing case. I would like to fill in one or two of the gaps in support of his Amendment.
I think that we should get into perspective the size and importance to the community of building societies. They are lending, and therefore borrowing from other sources, as much as £370 million at any one time, to about 300,000 borrowers—a very worthwhile section of the community and one which, I am sure, this Committee and the nation would wish to support.
Undoubtedly, savings of all kinds are specially treated. We have the gamble which "Ernie" operates. There is no suggestion that savings got through that less reputable form of saving should pay Profits Tax. National Savings Certificates and some other forms of national savings do not pay Profits Tax in the process of discouraging savings. In other words, I think that we may claim that the building societies should be treated at any rate not worse than those other means of obtaining thrift in the country.
In essence, Profits Tax itself is bad because it taxes the enterprising owner. The people who supply the money, the landlords and others get their interest or rent without any Profits Tax being paid. The whole of the Profits Tax is paid by those people who are enterprising, so it is bad. It is bad particularly in the case of a building society where it falls on, as it were, a parent company, which has provided all the enterprise from which the 300,000 borrowers, who are building their own houses, benefit by that central enterprise and activity. I say that it is a
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thoroughly bad thing to discourage enterprise in that way.
The right hon. Gentleman drew attention to the astonishing way in which the surpluses in reserve have fallen. They have fallen progressively as the Profits Tax has taken bigger and bigger slices of the available surpluses. The other side of the picture, which the right hon. Gentleman painted, is that the ratio of the surpluses to the total assets of building societies was, in 1932, rather more than 100 per cent. better than it is today. In other words, as the result of this high rate of taxation which has come through Profits Tax, the building societies are operating on a more and more slender reserve of their capital which is tucked away.
4.0 p.m.
It is easy for a building society not to pay any tax at all under the provisions of the Bill, because it is easy not to have a surplus. If ever there were a proposal encouraging the profligate management of a building society it is a proposal which taxes only that part of the enterprise which forms the surplus put away into reserve. Is this not a definite encouragement to have no surplus by distributing all the money? What would be the outcry by hon. Members opposite if, in company taxation, the Chancellor said, "You will not pay any Profits Tax on what you have paid in dividend, but every penny which you retain in the business will be taxed at a penal rate?" The effect would be to encourage the maximum distribution and to ensure that not a single penny from the surplus was put to reserve.
Let us face it; if we are not allowed to build up reserves, because they are being taxed in this way, we shall not expand. Does not the Chancellor wish to encourage house purchase? Does he not wish to see more borrowers from the building societies building their own houses? If he does, how can there be more of them unless that borrowing is based on an increase in the reserves from the surpluses? Surely hon. Members on this side of the Committee would urge the Chancellor very strongly to make house purchase through these building societies more and more an expanding operation and not to penalise it and abolish it.

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I deny that a surplus is the same thing as a profit. The other day my family bought a large case of Jaffa oranges. There was a surplus by reason of the quantity we bought. I do not regard that surplus as an addition to my income. I regard it as a reduction in my spending power. The hon. Member for Gloucester (Mr. Diamond) is a chartered accountant, and I am sure that he will agree with me that that is the correct way of looking at it and is the basis of our treatment of the dividends of co-operative societies. The same thing happens when the gas man calls to collect the money from the penny-in-the-slot or shilling-in-the-slot meter.
Mr. John Diamond: Technically, I would regard any Jaffa orange as just as sweet under any other name.
Mr. Pitman: The principle is the same with the collections from a gas meter. If the meter is set so that one is charged more for the gas, then when the collector makes his calculations there is a "divi" of the amount which one has been overcharged. It is not an increase in income but a reduction in that which one would otherwise have spent, and it ought not to be taxed. On all these counts I strongly commend the Amendment to the Committee, because it would exempt building societies from Profits Tax.
Mr. Donald Wade: I want to support the Amendment moved by the right hon. Member for Colne Valley (Mr. Glenvil Hall). In the debates on this subject last year the Committee was faced with two issues—the proper method of assessing Profits Tax on building societies and the question whether building societies should be subject to this tax at all. No one attempted to justify the peculiar method of calculating the building societies' liability to tax at that time, and a large body of opinion from all parties took the view that building societies should be exempt from Profits Tax altogether.
The first issue no longer arises, because the anomaly has been removed by Clauses 20 and 21, but the more fundamental question, whether building societies should be subject to Profits Tax, remains. It is all the more serious in consequence of the raising of the rate from 2 per cent. for building societies to a flat rate of 10 per cent.
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Before discussing the merits of the case I want to spend a few moments pointing out the distinctive character of building societies. We must face the fact that this is the first Amendment to the Clause and it may be—I put it no higher—that the Chancellor has considered the possible effect of granting exemptions to building societies upon his attitude to other claims which may be made on the subject of Profits Tax.
If, by granting exemption, the Government were opening the door to many other concessions, I could understand the Chancellor feeling some reluctance in granting the relief which is being asked, although I should not admit that the reluctance was justified. In fact, however, it is clear that the decision on this Amendment has no bearing on other claims which may or may not be made, because the circumstances are quite distinct.
I am aware that there are times when a powerful plea is made for relief and the Chancellor feels deterred from granting it because he fears that he may be setting a precedent which it will be difficult not to follow in some other cases. I believe that that problem does not arise today. The more one looks at the structure and functions of building societies the clearer it becomes that they stand in a class by themselves. That is important, in view of some of the other Amendments to the Clause.
For example, owing to the distinctive characteristics of building societies I think they must be regarded not only separately from commercial concerns and companies but also separately from the co-operative societies. If that were not the case, the Chancellor might find himself in some difficulty in granting relief to the building societies and perhaps not doing so to the same extent for the co-operative societies. Obviously, it would be inappropriate at this stage to go into the merits and demerits of the co-operative societies' claim for a concessional rate, and I do not wish to say anything which would in any way prejudice their case, but I think it is clear that the building societies and the co-operative societies must be regarded as belonging to different categories.
If one studies former debates it is clearly shown that Parliament recognised this distinction and that once or twice it was stated from the Treasury Bench.

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I have here several volumes of HANSARD, which I will not quote. It was set out very well by Sir John Simon on 7th July, 1937, and the HANSARD reference is column 466. The right hon. Member for Colne Valley may also remember making this distinction between building societies and other organisations, including the co-operative societies, on 16th July, 1947. The HANSARD reference is column 401. Other speakers in that debate emphasised the point, and I do not wish to elaborate it because I think it unnecessary to do so.
Building societies differ in a number of respects. For example, they are debarred by statute from trading and they are, therefore, not in competition with commercial concerns which are subject to Profits Tax. If I had to find an organisation with which they could be properly compared, I would suggest the Trustee Savings Banks. The fairest way of dealing with the problem is not to attempt to make comparisons, but to deal with the building societies' case on its own merits.
In doing so, there are several relevant factors. First, there are no equity shareholders in building societies. It is curious that when the right hon. Member for Bishop Auckland (Mr. Dalton) introduced the Profits Tax in 1947, he gave as one of his reasons the need for adding to the burden of equity shareholders, as opposed to the rentier class—this is from HANSARD of 15th April, 1947, column 85.
Mr. Hugh Dalton: Rough justice.
Mr. Wade: If that was the right hon. Gentleman's reason for introducing Profits Tax, it was somewhat illogical to impose the tax on building societies which have no equity shareholders. Perhaps he overlooked that point at that time.
Secondly, building societies do not make any profits and there are no persons to whom such profits could be paid if they were made. Perhaps it would be more appropriate to call this an appropriation of reserves tax.
Mr. Raymond Gower: Could it not be argued that many of those points could be extended to mutual insurance offices?
Mr. Wade: I would rather study that before answering, but it may be that that is so.
Thirdly, although building societies pay an important part in encouraging thrift, they enjoy none of the concessions which other organisations in the savings movement enjoy. For example, there is no exemption from Income Tax on the first £15 of interest, as there is in the case of the Post Office Savings Bank, and building societies do not have the advantages enjoyed by life insurance offices.
Building societies are the one form of organisation in the savings movement which does not enjoy special concessions. It may be contended that although their main concern is to encourage thrift, building societies should make their contribution towards taxation; in other words, that they should not be altogether exempt from taxation. It is clear that they are not asking for that. They provide a considerable amount of revenue.
I do not wish to repeat the figures given by the right hon. Gentleman the Member for Colne Valley, but I will emphasise one or two. As hon. Members are aware, building societies account for the tax on the investors' interest and then they pay Income Tax on the undistributed surplus. Before 1932, they did not do that. In addition, they pay Profits Tax and what is left is added to the reserves.
In 1957–58, the amount of Income Tax which they paid on account of investors' interest was £28 million. The Income Tax on the undistributed surplus was £5,855,000 and the amounts of Profits Tax was £2,300,000, a total tax of £36,155,000. The amount added to reserves was £5,622,000. If Profits Tax had been calculated on the new basis and had applied to 1957–58, for the whole year, it would have been £1,400,000 and, added to the Income Tax on the undistributed surplus, that is a total of £7,255,000 as compared with reserves increased by £6,522,000.
Even under the new 10 per cent. arrangements, the amount provided in tax is substantially more than the amount available for reserves. In the current year, 1958–59, assuming that the 10 per cent. tax applied for the whole year, that would amount to £1,700,000 compared with the Profits Tax in 1956–57 of £1,900,000. It is clear that there is not

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much difference between the two amounts of Profits Tax, whether under the old or the new arrangement.
4.15 p.m.
If that were the only point and if the only complaint were that building societies were not gaining very much, I should be inclined to say that we should be thankful for small mercies and that we should leave it at that. However, that is not the most serious matter. The most serious conclusion to be drawn from the figures is that the ratio of reserves to total assets has been falling and will continue to fall. It has already fallen below 5 per cent., a very serious matter in view of the surplus put to reserves being offset in recent years by the depreciation of investments, a depreciation for which allowance cannot be given in calculating liability to tax.
Even if there had not been a depreciation, it would still be a matter for concern that the ratio should be falling. It is most important that building societies should have adequate reserves and that there should be a proper ratio of reserves to total assets. It is clear that the continued imposition of Profits Tax will make it more difficult to maintain adequate reserves.
It may be argued, if the tax is maintained, that it is up to the building societies to find some way of maintaining adequate reserves; in other words that they should put their own house in order. That is a fair argument at least worth examination, but the answer to it illuminating. What are the societies to do if the tax is maintained at the new flat rate of 10 per cent.? There are three possible courses. One is that the interest paid to depositors—those who invest their money either in shares or on deposit account—could be lowered. That is not practicable, because competition for savings is very keen.
In that respect, I call in aid the Paymaster-General himself. When I was speaking in the Finance Bill debate on 2nd July last year, I was pointing out that the rate offered by building societies was dependent upon factors over which they had no control. I said:
"On 17th May, when addressing the Building Societies' Association, the Paymaster General, after stating that savings are now derived from a large number of people who save in small quantities said:
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'What must be the rôle of the building societies in all this? Clearly, one of your first and most important functions must be to continue to attract the savings of the people, and, to do that, you will have to pay the market rate'."—[OFFICIAL REPORT, 2nd July, 1957; Vol. 572, c. 937.]
That is obviously correct, and we must, therefore, dismiss the idea of a reduction of interest to below the ruling rate. There can be no solution that way.
Another possible solution might be for building societies to increase mortgage rates, or to refrain from reducing them when prevailing rates fall. That is feasible, but it would hit all those who are buying or wish to buy their own houses through building societies. The question which arises is whether that is desirable, and I would say that it is certainly not.
There is a third possibility, and that is that the development of the building society movement should be curtailed. In this way it might be possible to prevent the ratio of reserves from falling. But that raises a very important question, namely, what is the Government's policy? Is it the policy of the Government to make it more difficult for people to buy their own houses? Is it Government policy to curtail the development of the building society movement? If it is, the retention of Profits Tax on building society services is logical, but if the policy of the Government is to facilitate home ownership and to allow the building society movement to grow, it seems difficult to justify the retention of this tax. That is the major issue before the Committee, and I hope that the Chancellor will see that it is resolved. It is relevant to observe that the removal of this tax would not be in any way inflationary.
The immediately practical issue facing the building societies is this: how much of the surplus which would otherwise be put to reserve will they be allowed to retain and invest in Government securities, and how much will be taken by the Exchequer? It is a curious anomaly that by imposing this tax the Exchequer is taking away from an important savings movement part of the money which would otherwise be invested in Government securities and is using it as expendable Government income. To refrain from doing that and to allow the building societies to maintain adequate reserves could not by any possible stretch of the

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imagination be regarded as inflationary. For those reasons, I hope that the Amendment will be accepted.
Mr. Cyril W. Black: I have on former occasions declared an interest in building societies, as a director of and a shareholder in one of the societies, but perhaps to put myself in order I should do so again.
When we had a discussion last year on the question of Profits Tax and building societies I was extremely critical of the system that then existed and had existed for some years past for the levying of Profits Tax on the surpluses of building societies. I took the occasion then to say some strong things about the attitude of the then Chancellor of the Exchequer. I think that whether Members of the Committee are wholly satisfied or not with what has been done, there should be a little more recognition than there has been so far of the very substantial degree to which the Government have met the point put forward a year ago.
I understand that there is some difference of opinion as to what the concession made by the Chancellor is worth in terms of money. I understand that the Financial Secretary has estimated that the concession made is worth in a full year £1 million to the building societies, whereas I am told that the Building Societies' Association estimates the figure at not more than £600,000. Be that as it may, whether the figure be £1 million or £600,000, this represents a very big step forward towards the meeting of the points that were put forward in the debate a year ago, and I think it would not be incorrect to say that this is probably the largest tax concession to the building societies ever made by any Chancellor of the Exchequer in any single year. It therefore seems right and fair that some credit should be given to the Government for the very considerable concession that they have already made.
I should also like to point out that the new method of charging Profits Tax is in line with what a great many of us asked for a year ago. I see that in our debate a year ago I said:
"If the Chancellor is not prepared to go the whole way"—
that is to say, if he was not prepared to exempt the building societies completely from Profits Tax—
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"he should at least concede the principle of allowing interest paid to investors to be brought in as a charge before arriving at a sum on which Profits Tax is based."
That is precisely what the Chancellor of the Exchequer has done on this occasion.
It should also be said, in fairness to the Government, that what has been done is exactly in line with what the Chancellor of the Exchequer envisaged a year ago, because I find that in replying to the debate a year ago the then Chancellor of the Exchequer said:
"The Clause"—
that is to say, the Clause to exempt building societies from Profits Tax—
"goes considerably wider than the recommendation of the Royal Commission and I am bound to say that in that wider form it could not in any circumstances be accepted. Nevertheless, there remains the narrower point whether the Profits Tax is charged on distribution as dealt with in the Commission's recommendation."—[OFFICIAL REPORT, 2nd July, 1957; Vol. 572, c. 946, 968.]
What the present Chancellor of the Exchequer has done is exactly in line with what the then Chancellor of the Exchequer envisaged last year. What has been done also, as I understand it—
Mr. Donald Chapman: That is not quite the case, is it, in the sense that at that time we were not envisaging that this 2 per cent. rate would suddenly be raised to 10 per cent.? After all, when the Chancellor spoke last year we had no hint of that. The sort of concession that we were talking about was on the 2 per cent basis.
Mr. Black: The hon. Gentleman is not quite correct in saying that we had no hint of that, because I have a very distinct recollection that in the Profits Tax discussions last year a good deal was said about the possibility of amalgamating the two rates in accordance with the recommendation of the Royal Commission. That, I think, was very much in the minds of hon. Members.
It is a fact that the Royal Commission said:
"Accordingly, we recommend that only the retained profit should be taxed: at the flat rate if our proposals are accepted, or at the undistributed rate if Profits Tax continues in its present form."
Mr. Glenvil Hall: I understand that the hon. Gentleman is in favour of the same flat rate being charged both for trading concerns and building societies. Suppose, as is likely, that the flat rate should go up. How far up would the hon. Gentleman let it go before realising that it would bankrupt building societies?
Mr. Black: That is a hypothetical question. I think that it would be better to deal with the circumstances existing at the time rather than try to anticipate what one's attitude would be in completely unforeseeable circumstances. I am only saying that my own impression is that the Government are entitled to a good deal more credit for what they have done than they have so far received in the course of this discussion. In fact, what they have done is in accordance both with what was envisaged a year ago and with the recommendation of the Royal Commission.
What are the arguments in favour of complete exemption? I think that the main argument is that which is advanced in the Building Societies Association's circular which has been touched upon this afternoon, in which the statement is made
"… that building societies should not be treated as trading companies, but that account should be taken of the service they perform and of the slender margins on which their economical administration is based."
That is rather in line with the argument, that has been developed both today and on other occasions, that building societies are not profit-earning organisations in the ordinary sense of the term.
4.30 p.m.
The difficulty about that argument is this. First, notwithstanding what has been said by previous speakers, if that contention were accepted, it would be very difficult to withhold a similar concession from other bodies, public utilities, and so on, which could, with some measure of justification, I think, make a claim similar to the claim being made on behalf of building societies.
Secondly, it seems to me that the argument either goes too far or does not go far enough. If it should be argued that because, so it is alleged, building societies are not profit-earning bodies and ought not, therefore, to be charged Profits Tax on what is sometimes called their surplus—if hon. Gentlemen prefer not to use the word "profits"—it is illogical that
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they should be required to pay the full standard rate of Income Tax on their undistributed surplus. If the surplus is of such a character that it ought not to be taxable, then it ought not to carry Income Tax either at the standard rate or at any rate.
Alternatively, if it is the kind of profit or surplus which ought to be liable to Income Tax, it seems to me that there is no case against applying Profits Tax to that surplus in exactly the same way as the standard rate of Income Tax has been applied to it for a great many years. Therefore, that particular argument either goes too far or it does not go far enough, and it cannot really be logically advanced unless, at the same time, one is prepared to deal with the application of the standard rate of Income Tax to the surplus.
I reach the conclusion that, on fiscal grounds, there is very little to be said in favour of the Amendment. What can be said in favour of it can be put on the broader grounds of national policy. If the Chancellor of the Exchequer feels, for instance, that he can spare the not large amount of money which would be involved by acceptance of the Amendment, on the ground that building societies, in the light of national policy, ought to be encouraged so that they can to the fullest possible extent encourage home ownership—it being an object of the Government to encourage home ownership—or, again on broader grounds, if the Chancellor feels that, to enable the building societies to strengthen their reserves, an exceptional concession of this kind can and should be made, those are wider matters which might possibly appeal to him.
On the more narrow fiscal issue, however, it seems to me that the case for the Amendment has not been and cannot be made out. Notwithstanding that I at once assure my right hon. Friend that, if on the broader grounds to which I have referred, he feels able to make a further concession, such a concession will commend itself to the building societies and, no doubt, to many hon. Members of this Committee.
Mr. Diamond: You were good enough to say, Sir Charles, that it would be in order to discuss the Amendment in page 14, line 31, which stands in the name of my hon. Friends and myself, to substitute 3 per cent. for 10 per cent. in relation to

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building societies. I rise, therefore, to address certain arguments relevant to that proposal. I want to make it perfectly clear that I am here to help the building societies by putting forward a proposal which conceivably the Government would accept as opposed to one which it is inconceivable for the Government to accept, namely, the one which has been discussed hitherto to exempt building societies from Profits Tax completely on what, if I may say so, are somewhat illogical and uncertain grounds.
There is only one limited problem involved here. Building societies differ from other similar organisations in that they do not distribute an amount varying with the profit or surplus which they make. That is the only difficulty which arises, and it arises in this first year because of the Government's decision to make a single rate of Profits Tax. Had it not been for that decision, there would have been no problem. Indeed, it is clear from the fact that, for the last twenty years, Parliament has decided that building societies should be taxed not as if they were ordinary businesses free to distribute sums varying according to their surplus or profits, whatever name is used. I make no distinction whether the term be "surplus", "profit" or any other name.
Whatever one says about the merit of the various proposals now being discussed, I think the whole Committee will agree that the proposal of the Government in the Bill as it now stands is quite untenable. All Governments have in the past made a distinction for building societies, acknowledging from the word "Go" that they did not distribute profits. A further distinction was made, having regard to the fact that the calculation of the profit or surplus of a building society was difficult, since its capital, if I may use that term, was derived in two ways, from deposits and members' shares, in varying proportions in different building societies. Because it would not be fair to all building societies to treat one or other of those factors as a deduction from profits, the decision was made to deduct neither in the calculation of profit but to allow instead a smaller rate of charge. One started off with a rate of, I think, 1½ per cent. as compared with a larger rate for other businesses.
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Broadly—it is impossible to put it other than broadly—this arrangement has continued until the present day when, at this point at any rate, there is a 2 per cent. rate as compared with an undistributed profits charge of 3 per cent. for other businesses. This is really all we have to consider. Should the building societies which, for the last twenty years, have been recognised as carrying on a business which does not make a distribution to shareholders in the ordinary sense, varying with profits or surplus, now pay the same as every other business?
To say that building societies shall pay the same as every other business would be a complete denial of all the arguments of all Governments from 1937 up to date. I hope, therefore, the Government will realise that and appreciate that there are building societies and, indeed, other organisations in regard to which it would be appropriate—notwithstanding that we are bound to accept a flat rate of tax, because of the majorities at present ruling—to consider whether there should be a rate of tax similar to an undistributed profits rate had there still continued two rates. The only rate to which one can look at the moment is the last undistributed rate, namely, 3 per cent. It seems very reasonable, therefore, that the building societies should be called upon to pay 3 per cent. on their surplus, taking into account that they never distribute in the ordinary sense, this rate being in place of the 2 per cent., and they having had the corresponding advantage, which is referred to in the next Clause, of having their profits calculated on the more normal basis, the reason for the differentiation between 3 per cent. and 2 per cent. no longer being there.
If that were done, I should have thought that the building societies would have no complaint at all. It so happens that this year, even at 10 per cent., they will at any event be better off than under the previous Finance Act. In a simple case like this, I always prefer to split the difference and say that it is £800,000, and probably that is not very far wrong—that is to say, the building societies will be approximately £800,000 better off if the provisions in the Bill continue.
Mr. Glenvil Hall: The building societies' calculation makes it less than £500,000. Speaking from memory, I think their calculation is about £425,000.
Mr. Diamond: I am not speaking from memory and I hope, therefore, that my right hon. Friend will allow me to correct him. I have the document in front of me and, as the hon. Member for Wimbledon (Mr. Black) has said, it refers to £600,000 as opposed to the Government figure of £1 million. I prefer to split the difference and call it £800,000. However, I do not think this is a very important point. It just so happens that, even as the provisions in the Bill are at present drafted, building societies will have an advantage.
I think that that is a sufficient answer to the negligible case put forward time and time again about building societies and their reserves. One has often heard in this House arguments about various organisations not being able to afford a certain rate of Profits Tax or Income Tax because their reserves will not stand it. There are other ways of building up reserves than by reducing Profits Tax or Income Tax, and that is a matter which is left to the building societies. I should have thought that no building society director would be unwilling to say that he is prepared to stand on his own two feet and pay his fair share of Profits Tax in the same way as any other organisation.
Mr. Wade: I am very interested in the hon. Gentleman's remarks, but I should like to know by which method he thinks the reserve should be increased. Should it be by allowing less interest to those who lend, by charging more to those who borrow, or by reducing the amount of business carried on by the society?
Mr. Diamond: I hope that the Committee will not think me presumptuous when I say that usually when I am called upon to answer a question like that I precede it by considerable investigation at a considerable fee. In short, one does not talk out of one's hat. One does not make a suggestion in a matter of this kind without going into it fully.
We are talking about increasing the borrowing rate from 6 per cent. to 6·18 per cent. That is the difference between what the hon. Member for Huddersfield, West (Mr. Wade) and I are talking about—a difference of 3 per cent. which, if applied to a borrowing rate of 6 per cent., brings it to 6·18 per cent. It is proportionately so small as not to be arguable.
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It amounts to 7d. in the £, and no hon. Member who is not in daily control of a building society can hope to say how to save 7d. in the £, whether on overheads or managing director's salary. [Laughter.] I said salary, not travelling expense allowance. I have not doubt that it could be done without invading the principle of a fair rate of Profits Tax having regard to the nature of the organisation.
As will be seen from the Notice Paper, there are other similar organisations which it is hoped will also be dealt with at an appropriate rate of 3 per cent., and there is nothing fundamental to distinguish building societies from other organisations. Therefore, I hope that the Government will give sympathetic consideration to the needs of building societies in terms of paying a fair rate of Profits Tax. It would have been perfectly all right if we had not decided to have it combined.
If the Paymaster-General proposes to rely, as I hope he is not, on the Report of the Royal Commission, I hope he will consider that it dealt very shortly with the evidence on which it arrived at its conclusion. It dealt fairly fully with the history but has not given a single reason for coming to its conclusion that there being one rate a building society should pay that rate. The majority of the Royal Commission had blinkers on and were determined to have one rate of Profits Tax and paid no attention to the individual needs of organisations such as building societies.
I hope my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) and others who have spoken on a slightly wider point will not misunderstand my motive in putting forward a proposal which I hope will be acceptable to the Government.
4.45 p.m.
Mr. Nigel Fisher: Like my hon. Friend the Member for Wimbledon (Mr. Black), as a director of a building society I declare an interest, but, like him, I oppose the Amendment.
There are many arguments which can be, and, indeed, have been, advanced in support of the Amendment. I think that hon. Members on both sides who supported the Amendment have done so with moderation and ample justification. It is perfectly legitimate to say that building societies should not be treated as ordinary trading companies, because

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they are not trading companies. They are barred by statute from trade and commerce. They do not make profits in the ordinary sense, and we all know that. The whole purpose of their existence is to encourage thrift and to make possible home ownership for those who do not possess capital.
In doing that, building societies perform a public service of great social value, and I think that they perform it with a great sense of responsibility. It is a most remarkable thing that when they have been short of funds over the last few years, and especially during the last few months, the majority of them have refrained from increasing their interest rates to borrowers and have thus made a real contribution to stabilising the cost of living.
All these arguments in support of building societies and in support of the Amendment are fair and valid and make a very strong case for the consideration of my right hon. Friend the Paymaster-General. However, I cannot urge him to accept the Amendment this year. Last year, my hon. Friends and I appealed for one thing. Some of us, including myself, appealed forcefully—I expect my right hon. Friend the Patronage Secretary thought too forcefully—for the implementation of the Royal Commission on the Taxation of Profits and Income's recommendation that the interest paid to investors should be deducted before assessing Profits Tax. That was a perfectly logical principle.
Mr. Chapman: The hon. Member is still retreating from the first position that he established last year on Report, when I had to criticise him. If I may remind him of his own words, he said:
"In equity there is the strongest possible case for removing this tax from the building societies altogether."—[OFFICIAL REPORT, 2nd July, 1957; Vol. 572, c. 968.]
In other words, it was not only for the half-way house that he was pleading.
Mr. Fisher: It was principally for the half-way house; but, in equity, I do not deny what I said last year.
As I have already said, I think that there is a great deal of justification for the Amendments, and I support them in principle, as I did last year. I shall explain why I do not support them in
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practice on this occasion. Those of us who wanted the Royal Commission's recommendations implemented last year raised a logical point. Due to our pressure on that occasion, the point has been conceded this year and I am grateful for that. If it had not been conceded, I could not have supported my right hon. Friend on this occasion.
If we ask for further concessions this year we must do so on a different basis and a different principle; the principle presumably being that building societies should have special treatment because of the special social value of their work. I am not fully persuaded that we ought to take that line this year. I should like briefly to explain why, and in doing so I shall try to answer the objection of the hon. Member for Birmingham, Northfield (Mr. Chapman).
Within the context of the limited amount of money there is for distribution, this Finance Bill has given some help to many people and to quite a lot of interests. Among others, it has given help to the wine trade, in respect of heavy wines; to the cinema industry, in respect of Entertainments Duty, and to many industries in respect of reductions in Purchase Tax. In no case, however, has the help been 100 per cent.
The interests concerned have not been given all that they asked for or wanted—it has been partial only—but, so far as I know, those interests that have benefited in some measure this year are not screaming for more. They are quite grateful for what they have got. The wine merchants appreciate, I think, the concessions made to them. I know that the refrigeration industry and countless other beneficiaries under the Purchase Tax reductions are grateful for what they have had this year, in the context of the present economic and financial climate.
The building societies have had help, too, and it may be thought a little ungracious to look a gift horse in the mouth. I do not want this great building society movement to lose public sympathy by seeming to be unreasonable or greedy. Of course, I understand why these Amendments have been put down, but I am inclined to accept the help we have had this year, to thank my right hon. Friend for it, and, next year, when, perhaps, there may be more money about, to try for a little more.

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I therefore suggest that my right hon. Friend should reject this demand this year, but should look at the arguments more favourably again next year—[Interruption.] Well, he has done exactly that this year, following the representations we made last year. My right hon. Friend did not gainsay what my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) promised on that occasion. If we ask him to look at it again next year, then, if there is more money about, if he has a little more room to manoeuvre, I am sure that, with the best will in the world, he will give us more help then, but I do not think that he should be asked to do so on this occasion.
Mr. Chapman: The Paymaster-General must think that he has a very easy job today, with his hon. Friend the Member for Wimbledon (Mr. Black), a pillar of the building society movement, damning all these Amendments with faint praise where he did not criticise them outright, and his hon. Friend the Member for Surbiton (Mr. Fisher) step by step retreating from the courageous position he took on 2nd July last year. He must feel that there is nothing left to buy off on his own side.
But if it is easy for the right hon. Gentleman to deal with those two of his hon. Friends who have taken up that attitude, it is extremely disappointing to us, and in very great contrast to the stand taken by his hon. Friend the Member for Bath (Mr. Pitman). The hon. Member for Surbiton has now reached the stage where, in the House of Commons, he is telling everyone not to ask for jam today, but to keep on asking for it tomorrow. I wonder whether he realises that people outside have that criticism of his own party; that it is never "jam today" but always "jam tomorrow"?
Mr. Fisher: But we have had jam today. We have had £600,000 worth of jam. It may not be so thickly spread as we would like, but I am grateful for the jam I have had today.
Mr. Chapman: The hon. Gentleman knows where he stood last year, and he knows how far he has now retreated.
Whether the argument now is for total abolition, or for the 3 per cent. as opposed to the 10 per cent. rate, there is one thing that has not been said today,
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and it is worth saying. If the right hon. Gentleman the Paymaster-General intends to use the argument of the Royal Commission, that argument being that these, after all, are profits, and that equity demands that all profits be taxed—which, I think, is a rough paraphrase of what the Royal Commission said—I would seek to show him how dangerous for him the use of that argument will be.
Paragraph 586 of the Royal Commission's Report says:
"The main principle that we would wish to see adopted is that the tax on the profits of corporations should apply to all profits without distinction between corporations."
There was also the evidence of the Inland Revenue Department on this matter. The Inland Revenue Department said—and I should not be surprised if the right hon. Gentleman quotes it:
"Equity and efficient administration alike require that profits should be taxed simply as profits, without regard to extraneous considerations."
Last year, however, the Government made a complete breach in the equity case when they proceeded to exempt from both Profits and Income Tax the overseas' trade corporations. They then said that the arguments about equity can be breached where national considerations make it appropriate. That, in fact, was what happened last year. This principle of equity, which many of us rehearsed in the debates on the overseas trade corporations, was firmly breached, and, time and time again, the Government's justification for it was that this principle could not be held as a matter of sanctity. They said, "Where it should be breached in the national interest, let us breach it," and then proceeded to do so.
Moreover, if the Paymaster-General is to quote the Royal Commission today in favour of this non-exemption of anybody from Profits Tax, equally, I can quote back at him paragraph 691 of the Commission's Report, which strongly criticised the exemption of overseas trade corporations from Profits Tax. When it suits the right hon. Gentleman, he follows the words of the Royal Commission; when it does not suit him then, of course, he proceeds to disagree with it. That is the dangerous position that he will be in today. The case was given away last year, when it was said that where it was appropriate to break this rule of equity the Chancellor should break it.

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If that is so, the arguments advanced by my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) and by other hon. Members in support of either of these Amendments are very appropriate indeed. Here, surely, is a case where there must be some breach with equity, whether it be total abolition or a reduction to 3 per cent. The reasons have been given. There is the fact that the building societies are not traders; that there are no distributed or undistributed profits in the accepted sense of the term; that they are analogous to trustee savings banks in that they lend roughly half of their surplus to local authorities and half to the Government. In that sense, they are very analogous indeed to trustee savings banks.
There was said to be a case last year for saying that our export needs demanded that we should exempt overseas trade corporations from Profits Tax, and the Government went so far as to include Income Tax as well. Well, there is certainly the need to encourage the solution of this other great problem in our community: savings—and the resultant investment—are needed just as badly as exports. Therefore, however we look at it, there is a case for doing at least something for the building society movement.
The disappointing thing today has been that the position of people like my right hon. Friend the Member for Colne Valley and others of my hon. Friends, and the position of the hon. Member for Bath has been greatly prejudiced today by the hon. Members for Wimbledon and for Surbiton. It is most disappointing. There is a strong case here; and I hope that it will be noted in the building society movement that those two Members at least have come here and have quite simply said that their own building society case does not exist.
As the hon. Member for Wimbledon was not here when I first said it, but is now present, I will repeat that when he was not outrightly criticising he was damning with faint praise the case for the building societies. It is the more disappointing because those two hon. Members have thus given the right hon. Gentleman exactly the assurance he needs that this year there will be no revolt from behind him.
5.0 p.m.
The Paymaster-General (Mr. Reginald Maudling): In this debate on the Amendment moved by the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall), supported by Members on both sides of the Committee, much has been said quite unanimously about the great benefit which building societies are to our society. Just in passing I would observe that it has not always been thus. I remember at least one distinguished right hon. Gentleman on the Opposition Front Bench who used to talk about them as money lenders. Be that as it may, we accept within the context of this discussion today that every one is agreed that the building societies do perform a great service in our community.
Where I would depart from the argument of the hon. Member for Huddersfield, West (Mr. Wade) is that I do not think one can proceed from that to say, as I think he said, that if we want to see the building society movement grow we cannot possibly retain this Tax. It does not seem to me to be a logical argument that because we approve of something and want to see it grow we should not tax it, because there would be precious few industrial activities in this country which would be taxed if we went upon that principle. I thought there was a slight lacuna in the argument, though I recognise the spirit in which it was advanced.
Mr. Wade: Will the right hon. Gentleman accept this, which I think is a fact, that as the building society movement expands the problem of the ratio of reserves to total assets becomes more serious? It may be set right in one of three ways, by removal of Profits Tax, or by paying less to those who lend, or by charging more to those who borrow. There are no other ways, and I would rather see it done by removal of Profits Tax.
Mr. Maudling: I may be a poor mathematician, but I cannot see how internal expansion can alter the ratio.
The history of this tax and how it has developed was referred to by several hon. Members, by the right hon. Member for Colne Valley and by the hon. Member for Gloucester (Mr. Diamond) and others. I think it is worth pointing out that the

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Royal Commission on the Taxation of Profits and Income in paragraph 576 said:
"We have been unable to extract any firm principle from these varying arrangements or from the final result. As a method of imposing tax they seem to us to be somewhat lacking in dignity."
I think that is, perhaps, an unusual phrase, but I think we would all agree that there is a lot to be said against the arrangements which have been made in the past. What is being proposed, what was recommended by the Royal Commission and what this Finance Bill would enact, is a complete and radical change in the whole basis of Profits Tax.
I think I might stress this because it is, I am afraid, in one form or another a principle which will underlie the answer one will be giving to other Amendments of a similar character. Up to now Profits Tax has really been a dividends tax, a tax on distributions, with a non-distribution relief provision. The purpose now is to change that and to make it a tax on profits, which is what it is called and which in future it is intended to be.
This is really what was argued in paragraph 562 of the Royal Commission's Report, to which reference has been made and which I will read to the Committee, because it is a paragraph which the Government accept and which seems to us to be the basis upon which all these matters can be accepted. The Royal Commission said:
"The main principle that we wish to see adopted is that a tax on the profits of corporations should apply to all profits without distinction between corporations the ownership of which is vested in the State and other corporations, or between corporations formed to serve public purposes and those formed to serve private purposes. It seems to us that only by an impartial distribution of the tax whenever and wherever profits are found can there be a fair balancing of costs and prices between the public and private sectors of industry and commerce."
We feel that with Profits Tax there is a good close analogy with the Income Tax, a point made by my hon. Friend the Member for Wimbledon (Mr. Black). A lot of the arguments which have been advanced today for exempting these building societies from Profits Tax could equally well be advanced for exempting them from Income Tax.
That is the answer to the ingenious point made by the hon. Member for
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Birmingham, Northfield (Mr. Chapman) about oversea trading corporations. It is quite clear that there is a distinction between treating differently companies operating outside the country and companies operating inside the country, and it is that which is involved in overseas trading corporations, and treating on a different basis two companies both operating inside the country. Therefore I cannot accept the hon. Member's argument, ingenious as it was.
The other thing that the Royal Commission said is in paragraph 577. The Commission was impressed
"by the general resemblance of the interest on building societies' shares to the 'dividend' of industrial and provident societies."
Not, of course, the rebate on purchase—there was a confusion here in the mind of the building societies in their letter—but the dividend of co-operative societies. The Royal Commission says:
"In truth, both are more akin to interest on deposit account and as such should be deducted in arriving at the balance to be taxed. Accordingly we recommend that only the retained profit should be taxed: at the flat rate if our proposals are accepted, or at the undistributed rate if profits tax continues in its present form."
Echoing what my hon. Friend the Member for Wimbledon said, it was clearly envisaged last year in the course of the discussion on the unification of Profits Tax that that was likely to take place. [HON. MEMBERS: "Oh."] That was what the Royal Commission recommended.
Mr. Harold Wilson: Would the right hon. Gentleman give chapter and verse for that assertion? We debated building societies twice, in Committee and on Report, and I remember that many aspects of industrial taxation were discussed, but I do not recall any Minister making any statement last year to suggest that in this year's Budget there was a likelihood of amalgamating the two rates. Indeed, the whole practice of the Chancellor's predecessors was to widen the gap between the distributed and the undistributed rates, not to suggest moving towards the elimination of the gap.
Mr. Maudling: I think that if the Chancellor last year had suggested what would be in this year's Budget he might have been open to a certain amount of criticism from the other side.

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What I was saying was that there was a proposal made by this Royal Commission, of which the Committee was perfectly well aware, that Profits Tax should be unified, and everyone who has read the financial Press, or public comment at the time and since then, has known that this was a possibility which the Government were considering. Of course everyone was. [Interruption.] I think it undeniable. If the right hon. Gentleman will study HANSARD, I think he will have difficulty in discovering any discrepancy.
We have, I think, therefore carried out faithfully the recommendation of the Royal Commission, and we do recognise that building societies are different from trading companies. This, I think, is the point made by the hon. Member for Gloucester, who said they were different from trading companies in that they did not distribute their varying returns to their shareholders. Exactly for that reason payment on share holdings will be deducted before Profits Tax is computed, as the Royal Commission recommended. In this way we are recognising the special nature of building societies, and in the way which the Royal Commission recommended, and in the way which is the only logical way.
Mr. Diamond: The figure of 10 per cent. is suggested, which the Government are putting forward, and it is suggested that that is doing rough justice or is a fair average between 3 per cent. on undistributed and 30 per cent. on distributed. How can that average apply to an organisation like a building society which never distributes?
Mr. Maudling: That is not the point I am making. The point I am making is that we have recognised the special nature of the interest of building societies' share holdings and the difference between that interest and the dividends paid on equity share holdings.
We cannot go further and accept the argument that all their profits are not profits. We may call them profits, or we may prefer to call them a surplus on their business activity, but these societies are in the business of lending money on security and the surplus which accrues to them must surely be regarded as profit.
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If it is not profit I cannot imagine what it is.
With respect to my hon. Friend the Member for Bath (Mr. Pitman), I think there is a complete difference between a surplus left in one's pocket after a trading operation in which one has engaged and the discount one may get for quantity if one is buying oranges. I cannot accept any substantial argument there, with deep respect to my hon. Friend.
Equally, I cannot accept fully my hon. Friend's argument about the importance of giving special treatment to savings. It is perfectly true that building societies perform an immense service by collecting savings and employing them in building houses, but all equity investment is the result of savings. All investment in British industry is the result of savings. It is very difficult to argue strongly for giving better treatment to savings invested in houses than to those invested in machinery or exports. Therefore, I find it difficult to carry my hon Friend's argument to the conclusion which he desires.
It is also not wise to draw an analogy between the building societies and the National Savings movement of which they are not part. The purpose of the National Savings movement is to accumulate funds and then lend them to the Government. A much better analogy is between building societies and investment trusts which borrow money and lend it again. The purpose of the building societies is to borrow money—an admirable thing—and to lend money, which is equally admirable. If in the process of doing that they retain a surplus, I cannot see how it can be described as other than profits. It should be taxed for Profits Tax just as it is already taxed for Income Tax purposes.
The argument about the effect on the reserves of the building societies is a serious one which we must consider, but I feel that it was largely answered by the arguments of my hon. Friend the Member for Wimbledon and the hon. Member for Gloucester. In last year's debate, my hon. Friend the Member for Wimbledon gave an analysis of what happened to every £6 of mortgage interest received, that figure being convenient at the time because of the then 6 per cent. rate of interest. Of that sum £3 10s. went in interest to depositors,

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£1 14s. went in tax (of which only 2s. was Profits Tax) and 11s. in management expenses, and 5s. were available for reserves. The Chancellor's proposals this year will reduce the Profits Tax liability to slightly more than 1s. On the basis of these figures it is difficult to argue that the retention of Profits Tax, even at 10 per cent., taking into account the effect on building society finances, is preventing the building societies from building reserves of the type which they want and which they certainly ought to build up.
The hon. Member for Huddersfield, West gave certain reasons why building societies were different from other corporations. I have dealt with the analogy with the National Savings movement. The hon. Member also said that there were no equity shareholders, but that point is completely covered by the fact that we treat interest upon shares in building societies as loan interest and not equity interest. Therefore, the analogy is right because loan interest paid by companies is offset for Profits Tax purposes, and it will be in the future in the case of building societies. The Government, therefore, feel that they have done something this year which helps the building societies.
I am glad that it is recognised as such, although I have seen reports of the societies saying, no doubt with great justice, that they were entitled to this in equity and therefore it is not a concession. Indeed, it is a great mistake for Governments to talk about a tax relief as a concession, as though the money returned to the taxpayer was not the taxpayer's money in the first place. We feel that we have given considerable help to building societies and, in following faithfully the recommendations of the Royal Commission, have placed the taxation of the societies on a logical basis.
The arguments which I have advanced against exempting them entirely seems to me equally strong against taxing them 3 per cent. rather than 10 per cent. I see no strong argument why they should be taxed 3 per cent. rather than 10 per cent. These moneys are or are not profits. If they are profits, they should be taxed. If they are not profits, they should be exempted.
Mr. Diamond: But the right hon. Gentleman is proposing 10 per cent.,
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which is an average between 3 per cent. on undistributed profits and 30 per cent. on distributed profits. He has fixed that sum because it is an average, but in the building societies there is no distribution and no non-distribution and no average. It is all one. Therefore, we say that the tax should be 3 per cent.
Mr. Maudling: The logic of that argument would be to take a different average in each industry, because of the difference in the ratio between distribution and non-distribution of profits. We have fixed a level of Profits Tax, based on what existed before, and a level which I hope will come down in the future and not go up as has been suggested by some hon. Members opposite. Having decided on the level, the question is whether we apply that level generally or give exemption to some people. Without in any way disagreeing with what has been said about the importance of the building societies and the contribution which they make to the national life, the Government feel that to accept the Amendments would be contrary to good taxation policy and to the general interest.
5.15 p.m.
Mr. H. Wilson: The Paymaster-General seemed very confident when he spoke to that part of his brief which dealt with the building societies, but when he came to the wider subjects he seemed to be "all over the shop". The burden of the right hon. Gentleman's argument was that the 10 per cent. flat rate for Profits Tax is a good thing, that everyone must realise that it is a good thing, that it always has been a good thing, and obviously has been good ever since the Royal Commission reported on the matter in June, 1955. It followed from that, according to the right hon. Gentleman, that it was wise and right for the Government to do what they proposed to do in relation to the building societies.
The right hon. Gentleman will find as the evening wears on that a large proportion of hon. Members do not agree at all that the Government have taken the right decision by unifying the two rates of Profits Tax. So far from there having been, as he suggested quite clearly, a movement on the part of recent Chancellors towards this unification, the right hon. Gentleman will find that the movement has been in the opposite direction. I do not want to anticipate future debates

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today. Much as the Paymaster-General seems to have been allowed to do so, Mr. Blackburn, I do not think it would be convenient for me to follow him, but he will find that when we come to debate these questions he will be reminded of statements made by previous Conservative Chancellors in the past three or four years who have widened the disparity between the rates and have rejected the proposal for unification. That was clearly the view of the Lord Privy Seal in the autumn Budget of 1955, and there are many others on record.
The right hon. Gentleman is therefore quite wrong to base his argument on the unification of the rates. He was also quite wrong, in his quotation from the Royal Commission's Report to suggest that the change in taxing building societies could be done only when we had unification.
Mr. Maudling: The right hon. Gentleman asked where reference was made to this matter last year. On 2nd July, 1957, the then Financial Secretary to the Treasury said of this recommendation:
"… that recommendation is one of a whole important complex relating to Profits Tax generally on which my right hon. Friend the Chancellor of the Exchequer has not reached his conclusions as a whole and from which he believes it would be wrong to separate a single change in Profits Tax to be made in isolation and separately from any conclusions which may be reached on the whole of those recommendations."—[OFFICIAL REPORT, 2nd July, 1957; Vol. 572, c. 955.]
Therefore, it is quite clear that it was said at the time that this matter was under consideration.
Mr. Wilson: It was clearly said that he would not look at the building societies apart from the co-operatives and others subject to Profits Tax, but there was no hint given at all that the Chancellor was likely to move towards unification of the rates.
I said a moment ago that the Paymaster-General was wrong to suggest that it was impossible or difficult or anomalous for the Government to alter the basis of assessment of the building societies until there was this unification of the rates, because it was quite clear from the quotation which the right hon. Gentleman actually made from the Royal Commission's Report that the Commission said that it should be based on what might be called the true surplus, after
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allowance for the money borrowed, but the Commission went on to say that the rate should be the lower rate if a dual rate was imposed or a flat rate if a single rate was imposed. Therefore, it is no answer to link these two together. If the Government had decided not to unify and yet alter the basis of assessment a year ago, it would have been quite appropriate.
Today's debate has been an interesting one, though I think it has been rather less packed with drama than the two we had a year ago. A year ago there was the debate during the Committee stage, initiated by the hon. Member for Huddersfield, West (Mr. Wade), on which there was no Division. Then there was a further debate, initiated by hon. Members on this side of the Chamber on Report, on which there was a Division. On those two occasions we heard many of the arguments which have been put forward forcefully this afternoon strongly supported by the hon. Member for Wimbledon (Mr. Black) and the hon. Member for Surbiton (Mr. Fisher), who seemed to be singing a rather different tune this afternoon.
Since those two hon. Members are the only ones in any part of the Committee who declared an interest because, apparently, they are connected with building society management, I am bound to say that some of us seem to have been wasting our time reading the memoranda circulated by the Building Societies Association on this point, because when the matter came to debate the only two hon. Members who took a view different from the Building Societies Association were those who earn their bread, and perhaps other things too, by serving the building societies. Whether their societies are members of the Building Societies Association, or whether, perhaps by mischance, the association assumed that these two hon. Members knew the case and did not circulate the document to them, I do not know.
I remember many years ago when a prominent building society director, Sir Eugene Ramsden, stood as a Conservative candidate in Huddersfield or Colne Valley—I am not sure which. I remember hearing a very loyal Tory voter in that area say that he was not going to vote for Sir Eugene because he, the voter, had some money in the building society and he wanted Sir, Eugene to look after it for him and not be in Parliament.
Mr. Black: Is the right hon. Gentleman's contention that hon. Members should act as spokesmen for vested interests rather than do what they believe to be right in the interests of the nation as a whole?
Mr. Wilson: No, Sir. I welcome this independence of vested interest, but I would be a little happier and prepared to tolerate the hon. Gentleman speaking right along the building societies' line if he had shown his independence by voting for us on the Rent Act last year. I agree with the hon. Gentleman that any hon. Member who has an interest to declare should not necessarily support that interest. I entirely welcome independence of that kind, and I hope that the hon. Gentleman will go much further in that direction on much more important subjects
As for declaring an interest myself, I suppose that I should say to the Committee that I am buying a house through a building society which in God's good time and that of my grandchildren will, no doubt, belong to my family. I do not know.
Mr. F. M. Bennett: It will be municipalised by then.
Mr. Wilson: I never expect any intelligence from the hon. Member for Torquay (Mr. Bennett). Indeed, he has got worse since he left Reading. If he wants to refer to that policy document he will see that it does not apply to the owner occupier, a point which he would never begin to understand.
The arguments used by my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) were extremely cogent, and, of course, the debate has been narrowed by the fact that there is now no longer any contention about the question of the assessment of the true surplus for tax purposes. We welcome what the Government have done in that respect. We pressed them to do it a year ago, but they did not do so. It is quite clear now that they could have accepted a year ago the Amendment dealing with the matter at that time because by doing so no anomaly would have been created.
As between the two Amendments which have been put forward, I think that my hon. Friend the Member for Gloucester (Mr. Diamond) put forward an extremely
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good argument for saying that there is a very strong case for a 3 per cent. tax. I very much regret that the Paymaster-General should have brought into the argument the whole question of the unification of rates. As a result of his doing so, I must very strongly support what my hon. Friend the Member for Gloucester said and say that where there are these organisations, be they building societies or not, or others which we shall be debating later this evening, which have not been distributing dividends either because they are statutorily prevented from doing so or are prevented by the nature of their constitution from doing so, there is a very strong case for limiting the Profits Tax rate to the 3 per cent. which they always paid before the Government came along with this proposal for 10 per cent.
In last year's debate on building societies some of us made an additional point. We said that the argument for more favourable treatment rested not only on the argument for thrift, for home ownership, the problem about the surplus and the problem about who would have to build up the surplus, whether it be the borrowers, the lenders or whoever it might be. We also said that there was a great deal to be said for the fact that here we have part of the economy where there can be no trading in shares or in the equity, where there is no buying and selling, but where anyone who wants to participate in a building society can do so by buying shares direct from the society itself, and where there is no speculation, no trading in shares, no gambling and no capital gain.
Since a great part of the argument about the distinction between undistributed and distributed profits tax relates to the question of capital gain, as will be seen by reading the minority Report of the Royal Commission, there is a strong case for giving encouragement to the trading and financial part of the economy where there is no dealing in shares or any possibility of capital gain.
I said last year that I hoped the Government would not merely accept the arguments put forward on building societies, but would extend them and provide for a wider range of the economy where the shares could only be sold back to the company or bought from the company at par to be subject to a differential

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Profits Tax. I am sorry that the Government, far from accepting that proposal, have come forward with the proposal for the unification of Profits Tax which we shall be debating on the subsequent Amendment.
Question put, That those words be there inserted:—
The Committee proceeded to a Division: but no Member being willing to act as Teller for the Ayes, The CHAIRMAN declared that the Noes had it.
5.30 p.m.
Mr. G. R. Mitchison: I beg to move, in page 14, line 31, at the end to insert:
Provided that, in relation to any trade or business carried on by a local or public authority, being a trade or business to which subsection (1) of section twenty-nine of the Finance Act, 1951 (public utility undertakers to be liable to the profits tax) applies, this subsection shall not have effect and accordingly the profits tax shall continue to be charged at the rate of three per cent.
The Temporary Chairman (Mr. F. Blackburn): It will be for the convenience of the Committee if we discuss with this Amendment the last Amendment on page 3062 of the Notice Paper, also in page 14, line 31.
Mr. Mitchison: If I understand you rightly, Mr. Blackburn, we are also referring to the Amendment in the names of two of my hon. Friends who represent Liverpool Divisions, the hon. Member for Edge Hill (Mr. A. J. Irvine) and Exchange (Mrs. Braddock), which relates to the Mersey Tunnel Joint Committee.
The history of the matter is that in 1937 statutory undertakers were exempt. In 1947 for the first time there was a distinction made between distributed and non-distributed profits, and the statutory undertakers still remained exempt. In 1951, for the first time the statutory undertakers, described this time in the head note to Clause 29 of the Finance Act of that year as "Public Utility Undertakers", were made liable to Profits Tax. Of course, having regard to the nature of what they were doing, there had to be some provision as to whether they should be charged at the distributed or the non-distributed rate, if I may use a slightly inaccurate phrase for the distinction between getting non-distribution relief and not getting it.
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Let us see for a minute who the statutory undertakers were; that is to say, the people who had been originally exempted under the 1937 Act and who were brought in in 1951. They were people carrying on any trade or business which consisted wholly or mainly in rendering certain services. I will not read out the whole list, but the first one was the supply of water, gas, electricity or hydraulic power. Then there were other services with reference to canals and docks, rivers and the carriage of goods or passengers by rail, by road or, in certain circumstances, by canal. The expression "statutory undertakers" was to mean any local or public authority authorised to provide these services and also, if I may put the matter quite generally, any other person whose profit making powers were either non-existent by reason of a Statute or at any rate limited by reason of a Statute.
There were, therefore, two classes of statutory undertakers. There were, on the one hand, the local or public authorities and, on the other, there were companies such as, at that time, gas companies, whose profits were limited. Now gas and electricity have gone, but water remains, and I will take water as an instance in what I have to say today.
The present position is that under the 1951 Act, since there can be no relevant distributions to proprietors, as the phrase goes, the Profits Tax payable in respect of this type of business is to be computed as if no net relevant distributions to proprietors have been made, and consequently from that day to this the local authorities carrying on undertakings of this kind, and rendering public services in so doing, have been charged at the lower rate—that is to say, at tax with full non-distribution relief, if it be looked at that way, or, more accurately, at a rate which was put in specially by the 1951 Act as applicable to this type of case.
It goes without saying that a local authority supplying water cannot possibly make any relevant distributions to proprietors because there are not any proprietors, and, of course, it does not distribute any surplus it may have from year to year. It may use that surplus in one way or another but, by and large, it will go sooner of later into its general account or reserve. So far as there is any surplus it will mean that there is a

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smaller call on the charges on the water rate or, if you like, there will be a smaller charge for the water services than otherwise there would have been.
The question is, why should a body of that kind be made to pay a rate which is, after all, more than three times the rate which it has hitherto been paying? And is there any real reason why an undertaking of this kind should have this considerable imposition put on it just because the Government have, for the moment, decided to unify the two rates of Profits Tax? If we turn to the passage in the Report of the Royal Commission on the Taxation of Profits and Income, which the right hon. Gentleman was quoting in connection with the previous Amendment, we find this statement of the main principle in paragraph 562:
"The main principle . . is that a tax on the profits of corporations should apply to all profits without distinction between corporations the ownership of which is vested in the State and other corporations, or between corporations formed to serve public purposes and others formed to serve private purposes."
In paragraph 564, after another statement of the principle on which profits should be arrived at, there is this statement:
"We applied these two principles to the main groups of special corporations and we discuss each in turn … Nationalised industries … Public utility undertakings … Industrial and provident societies … Building societies."
When we come to the public utility undertakings, which are really the only case, I think, that could possibly include what I am talking about today, we find nothing about the position of the local authorities in this respect. These public utility undertakings are treated as something quite separate. As far as I can see, they are regarded as profit-making corporations, exactly comparable for that purpose with, for instance, nationalised industries. What we seek to do is to keep the existing rate for local or public authorities carrying on any trade or business.
I have been talking specially about local authorities, and specially for the moment of the one instance of water supply. I will take it one stage further. If a local authority or a water board is engaged at the moment in supplying water, it may be said to have a surplus at the end of the year, through its receipts by way of charges for the water, over its expenses. One recognises that. However, having got that far, in what other
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sense can it possibly be said to be having a surplus which is in any sense a distributable surplus or anything even faintly resembling it?
It was only in relation to undistributed and undistributable profits that in 1951 undertakings of this type were brought into the Profits Tax at all. I am still at a complete loss to see why they should have an increase put upon them. They have always been a very special case indeed. That goes not merely for the particular instance I have taken but for the other public utility bodies. When the Royal Commission was discussing this matter, it seems to have given very little consideration indeed to the other side of the medal, the character of the functions that these bodies were carrying out.
If one applies Profits Tax to a water undertaking, it can have only one of two results. One will be an increase in the water charges. Do the Government want that? The other will be to cramp in some form or another the extension of water supply in this country.
It may be said that the Amendment relates only to local authorities and that there are also water companies, and it may be asked why the water companies should not be treated in the same way. It seems to me that there is a distinction which can be drawn, but if the Government think, to take this specific case, that water companies should be treated similarly, I should not object to their being included. They supply only about one-fifth of the consumers in the country; about four-fifths of this public service is rendered by local authorities as such. That is the present position as regards these bodies.
I do not know what reply we shall receive. It may be said, logically, that we ought either to ask for complete disappearance of the Profits Tax or we ought to accept that these services and any so-called profits arising out of them should be treated in exactly the same way as other profits or surpluses. In aid of that, no doubt the Report of the Royal Commission can be produced. All I can say is that when one is dealing with essential public services, such as water supply, one is really dealing with an entirely different matter. If we are to start taxing that on the basis that there is a surplus, I should like to know where we are to stop.

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Let us suppose that the housing revenue account of a local authority shows in one year a surplus and that there is an excess of rents over the actual charges in the year. Are we to treat that as something which should also be subject to Profits Tax? Let us take something even more intimately connected with the work of local authorities, a comparatively simple matter such as the registration of electors. If the functions of the local authority in that year result for some reason or another—perhaps the sale of papers or pamphlets—in some minimal surplus, is that to be subject to Profits Tax?
Surely the real distinction to draw is, on the one hand, between the services which are necessarily rendered by a local authority—while it may have a surplus, it cannot have profits in any real sense, and obviously they could never be distributed to anyone because there is no one to whom to distribute them—and, on the other hand, profits in the ordinary sense of the word.
5.45 p.m.
There is another injustice to which I would draw attention. Income Tax is a tax on income. The income of local authorities is taxed, and they carry on many varied activities. As a result, a local authority may find itself in the position that it is losing money in one year on graveyards and making money on crematoria, if I may take a gloomy but not uncommon instance. Whether it happens to be its activities as a burial body or its activities as a local authority, wherever it is dealing with services which involve charges on the one hand and expenses on the other it will find either a surplus or a deficit. In relation to Income Tax, the local authority is entitled to set off one of those against another. If it makes a loss in one respect and a profit in another, there is, in general, the usual right to set off.
But that is not a right which always attaches to Profits Tax, and in the result a local authority, which cannot in the nature of the case merely carry on one activity—there are all the activities which it is its duty to carry on—is in a peculiar position. It is not a case of a local authority taking, for instance, to farming because that is a very useful way of making some improvements at the expense
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of other taxable income. No such attractive possibilities are open to local authorities. They are bound to carry out the majority of their services, and they are bound in respect of them to have surpluses and deficits. In respect of Income Tax, they are dealt with in what is in that respect a fair footing since what is looked at at the end of the year, broadly speaking, is the net result, profit or loss, surplus or deficit, on the various trading and similar activities of a local authority.
Profits Tax allows nothing of the sort. One local authority may be carrying on a number of trades or businesses, and may be bound to do so since it has taken powers to that end or is otherwise obliged to do so. Water supply is an instance. In that case, the multiplicity of its activities is from its point of view a grave disadvantage. The result is that a large, enterprising local authority—Sheffield is a clear instance—suffers considerably from the distinction in that one respect between Profits Tax and Income Tax.
It does not seem right that bodies which are carrying out public services, and have to, should be taxed on a footing which was intended to apply to persons corporate or individual who were not carrying on services at all but were making profits to which the tax was originally directed.
I have put forward two grounds. First, it has always been recognised that these statutory undertakers were in a peculiar position, first being left out and then being brought in on a very special footing. My second ground relates to the treatment of gains and losses for the purposes of Income Tax and Profits Tax. It is wrong and unfair that statutory undertakers of this type, local and public authorities carrying on services of the kind to which I have referred, should now find their Profits Tax increased three times or more for a reason which has nothing whatever to do with the character of the services which they are rendering. So far as I can see, it has nothing whatever to do with the purposes of the tax in the proper sense, and is really a hindrance to necessary public activity which will result either in the cramping of the development of that activity or in additional charges to the public for services rendered.
Captain Richard Pilkington: I am concerned with the effect which this

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part of the Bill, as at present drafted, is likely to have on a very important service rendered to the public by the ferry at Sandbanks, Poole. This ferry joins my constituency and that of my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke). I know that my noble Friend wished to be present and would have argued this case powerfully, but, unfortunately, he has been prevented from being here.
The ferry is run very efficiently by the Bournemouth-Swanage Motor Road and Ferry Company. It has benefited as a statutory undertaking ever since 1951 and has only paid 3 per cent. tax. As at present drafted, the Bill will increase this tax from 3 per cent. to 10 per cent. I wish to point out these facts to my right hon. Friend.
First, there are no distributive profits in this company. All the incomes goes either in salaries or is ploughed back into the concern. It fulfils a very useful public service benefiting many thousands of people. And it relieves some of the congestion on the more northerly roads. If the aim of the Chancellor is generally to decrease the level of Profits Tax it seems very unfair that in such a case as this the effect would, in fact, be to raise it from 3 per cent. to 10 per cent. I know that my right hon. Friend has already been informed of all the particulars of the position, and I very much hope that he will reconsider it and have second thoughts about it.
Mr. A. J. Irvine: The way in which this Clause would work unfairly is well illustrated by the effect that it has on the undertaking of the Mersey Tunnel Joint Committee. My hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) and myself have put down an Amendment in that connection. The introduction of a standard rate of tax at 10 per cent. would increase the liabilities of the Joint Committee more than threefold, from £10,200 to, approximately, £34,000. This is in addition to a present Income Tax liability of about £56,000.
This is an undertaking which does not in any ordinary and reasonable sense have a distributable surplus. It is providing a valuable public service and is not run for profit. It is really outside the ambit of the original purposes of
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Profits Tax altogether. We suggest that it is quite oppressive and arbitrary that an undertaking of this kind, of this great importance to the country and with these characteristics should suddenly find itself faced with a threefold increase in its tax liability, from £10,200 to, approximately, £34,000 a year, as I have just indicated.
There is nothing in the economic condition of the country; there is nothing in the economic context of the undertaking of the Mersey Tunnel Joint Committee; there is nothing to which anyone could point in our economic affairs at the moment which could possibly justify such an arbitrary and oppressive increase being imposed upon an undertaking which is performing a public service and which is not, in the true sense of the term, operating for profit.
I support the proposition, indicated by my hon. and learned Friend, that the reasons which led the Royal Commission to recommend the cessation of the differential between rates of Profits Tax appear to have been reasons concerning administration and inequities which can arise in the administration and treatment of company profits. From its Report it would appear that the Royal Commission, with great respect to it, paid comparatively little regard to the position of statutory undertakings which, of course, are faced with problems of an entirely different character from an ordinary profit-making company.
I suggest to the Committee that it is quite inequitable that a tax which has operated in the past mainly as a tax on the distributed profits of companies should be changed in such a way that it would treble the charge for a statutory undertaking such as that of the Mersey Tunnel Joint Committee, whose capital structure and public obligations are very different from those of companies the tax on whose profits was the concern of the Royal Commission. The main object of these concerns is to make profits. The object of the undertaking of the Mersey Tunnel Joint Committee is not to make profits but to provide a public service.
In this connection it is to be remembered that the toll revenues of the Mersey Tunnel Joint Committee are limited as to time by statute. They expire in 1974. Moreover, its income must be applied to purposes specified by Parliament. In all

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these respects the activity of an undertaking of this character is, in my submission, different from the activities of companies for which the Profits Tax was designed and developed.
Because for a large part of the country this is a matter of considerable importance and significance, may I mention further that the cost of the operation and maintenance of this undertaking is met from precepts levied on the ratepayers of Liverpool and Birkenhead. The toll income, after meeting costs, must first be applied in making minimum contributions to the statutory reserve, renewals, and Loan equalisation funds of the undertaking. The position is that if sufficient income is then available, payments must be made to the two constituent authorities proportional to and up to the amounts of their precepts. Any balance of toll income thereafter remaining may either be paid to the rate funds of the two authorities in proportion to their respective rate products or paid as additional contributions to the statutory funds.
In other words, by the effect of local and private Acts which govern this matter, the use to which revenue out of the undertaking is to be put is set out and determined mandatorily and in detail, and in that respect there is, in my submission, no surplus distributable in the sense that that term is ordinarily applied in consideration of Profits Tax. Although there is a residual right, after all statutory requirements have been satisfied, to apply surplus toll revenues to the rate funds of the two authorities, the Mersey Tunnel Joint Committee has, in fact, never exercised this right. On the contrary, in past years the cost of operating and maintaining the tunnel has been subsidised by the ratepayers of Liverpool and Birkenhead to the extent of over £1½ million. In view of the need to build the reserves of the undertaking in anticipation of the time when the right to levy tolls will expire, surplus income has been ploughed back into the undertaking.
6.0 p.m.
Here is an undertaking of great importance looking ahead to a time in which there will be a cessation of revenue from tolls, which is, therefore, ploughing back into its reserves what surplus is available from its activities. We have an
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undertaking of this character in that situation and with that prospect, suddenly and for no reason whatever, burdened with a threefold increase in the rate of tax.
The proposed change appears to operate particularly hardly when it is remembered that from 1927 to 1951, a long period of time, the undertaking of the Mersey Tunnel Joint Committee was completely exempt from the tax and when it is remembered, further, that the real effect of the change is to increase the effective rate of tax borne by the Joint Committee from 9s. 1d. in the £, representing 8s. 6d. Income Tax and 7d. Profits Tax, to 10s. 6d. in the £, representing 8s. 6d. Income Tax and 2s. Profits Tax. It is doubtful whether the change will impose such a startling increase in the burden on any other class of taxpayer since, in the great majority of cases, concerns would previously be paying at least some part of their Profits Tax at the higher rate, unlike the undertaking to which I refer.
For these reasons, we on this side strongly believe that if this proposed change is imposed on the Mersey Tunnel Joint Committee, it will be a case of the imposition of additional taxation in a highly arbitrary and oppressive manner and in disregard of what are widely recognised to be the sound and fair principles which should govern taxation.
Mr. R. Gresham Cooke: I should like to detain the Committee for a few moments to point out the special position of the bus operators under the Clause in connection with the Amendment. The bus operators have always been regarded as statutory undertakers because their fares were controlled by the Traffic Commissioners. In fact, they are not truly commercial concerns. That is why the Finance Acts have made these statutory undertakers, the bus companies, liable to the lower rates of Profits Tax of 2½ per cent. or 3 per cent. Under the Clause, they are now to be taxed on the same basis as commercial concerns, as if they suffered no statutory control. These undertakers not only do not receive an advantage, but they receive a great disadvantage. I am informed that in one case the Profits Tax which is payable will be increased from £157,000 to £525,000 per annum.

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The disadvantages under which the bus companies are labouring are only too well known. I refer, of course, to the time lag from which they suffer before they can raise fares following an application to the Traffic Commissioners. The difficulties of public transport in the rural areas particularly are well known, in addition to the 200 per cent. tax which they have to suffer on fuel oil and the competition from the bicycle, the moped and the motor car. The things apply both in town and in country for all types of bus undertakings.
It seems illogical, therefore, that at this time their Profits Tax should be increased from 3 to 10 per cent. I shall be particularly grateful if my right hon. Friend the Paymaster-General will explain the reasons for this apparent illogicality.
Mrs. E. M. Braddock: My hon. and learned Friend the Member for Liverpool, Edge Hill (Mr. A. J. Irvine) has clearly and fully stated the reasons why the Mersey Tunnel Joint Committee has asked for the question of the increased Profits Tax to be looked at again and, if possible, to be withdrawn from the scope of the Clause. My hon. and learned Friend has given details of the additional amount in which the Joint Committee will be involved under its proposals.
No individual receives any profit from the undertaking. It is a public undertaking under a special committee set up when the tunnel was decided to be built. It has been of considerable expense to the ratepayers on both sides of the Mersey, who are included in the Mersey Tunnel Joint Committee. They were very disturbed indeed at a recent meeting when they discovered that the amount which they must in future pay would be over three times their present payment. Because they are under an obligation for some years ahead to ensure that the Tunnel is kept up to standard and to ensure that the amounts additional to requirements are paid into the funds of both the Birkenhead and Liverpool Corporations to meet the amounts that have been paid out by the ratepayers over a number of years, they were disturbed to find that as a public undertaking it had been included in the requirements for the increased Profits Tax.
My hon. and learned Friend has clearly stated the position. Quite apart from any
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other case which could be put forward, the Mersey Tunnel Joint Committee is in an entirely different class from other undertakings in relation to the increase in the Profits Tax. I ask the Treasury, to whom the whole of the facts have already been submitted, to look seriously at the position. If, on investigation, it is decided that a mistake has been made concerning the Mersey Tunnel Joint Committee, I assure the Treasury that the ratepayers of both Birkenhead and Liverpool will be very pleased indeed to find that the Tunnel is withdrawn from the increase in the tax of from 3 to 10 per cent.
Mr. Maudling: The Amendment, moved by the hon. and learned Member for Kettering (Mr. Mitchison), deals with public utility concerns carried on by local or public authorities. It would not, therefore, cover similar undertakings carried on by private companies—for example, water companies or bus companies. The case has been argued both on the general principle and on particular examples, and illustrations have been put forward by my hon. and gallant Friend the Member for Poole (Captain Pilkington), by the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine), the hon. Lady the Member for Liverpool, Exchange (Mrs. Braddock), the hon. and learned Member for Kettering and by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke), who have given examples and figures and spoken of the effects of this principle on individual undertakings.
In answering the debate on the Amendment, I do not think that it would be right for me to go into the details of the tax position of individual taxpayers. These have been quoted as illustrations of the effect of the Clause in particular cases. Strong as the case no doubt is on the figures given by the hon. Lady the Member for Liverpool, Exchange concerning the Mersey Tunnel, I do not think that it would be possible to sustain the argument that a similar case could not be made out for a number of other public and local authorities which provide services of this kind. Therefore, I must regard the individual examples which have been mentioned simply as examples and I will deal with the general point. If, as I hope, I can persuade the

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Committee that the general case is not made out, the individual cases must fall with the general principle.
Mr. Mitchison: There is the distinction that a local authority distributing water cannot in the nature of the case make a distribution to the proprietors, but a water company can.
Mr. Maudling: The hon. and learned Member is quite right. I was coming to that. I was trying to point out that some of the points which have been made are not within the ambit of the Amendment. I must, therefore, return to the general principle of the Clause.
It is impossible to conduct the discussion properly unless one relates it to the general principle, because the Amendments are amendments to a general principle. It is accepted that that general principle is disliked by the Opposition, from whom we have had notice of the intention to move its deletion. We cannot discuss the Amendments other than as Amendments to the Clause. Therefore, we must discuss them in the context of the decision to unify the Profits Tax.
The argument that was used was that, if the effect of unifying the Profits Tax was perhaps unfortunate in these cases, that principle should not have been applied. I think that that is the argument put by the hon. and learned Member. My answer to that is that, once again, we must look at the type of tax which this Clause will enact. The object of the Clause would be to enact a tax which was a tax on profits and not a tax on distribution, and, therefore, the Profits Tax will apply in this case.
It is said that that might well become essentially a tax on profits which would be generally applicable, as is Income Tax, to all trading profits and to all people who make trading profits. Profits Tax in this case will, like Income Tax, apply to all bodies corporate which are making trading profits, and it is the trading profits to which the tax relates, and not non-trading profits.
We must make a distinction between the various kinds of trading activities of local authorities, and remember that there is a clear distinction between the trading activities of local authorities which bear tax and their non-trading activities, which
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do not incur the tax. I think that the hon. and learned Gentleman is wrong. It was not a point on which I expected him to be wrong. Talking about the taxation of local authorities, he said that there is a difference between Income Tax and Profits Tax, and that losses in one activity can be set off against another for Income Tax purposes. That is true, but the same effect holds good in the case of Profits Tax, not because there is a surplus, but because of the trading activities of the local authority as a whole. Technically, there is a difference, but the practical effect is the same. Looking at Section 43 of the 1947 Act, we find that all trades or businesses shall be treated as one trade or business for the purpose of Profits Tax. Therefore, all their profit-making activities are amalgamated, and the effect is the same.
Mr. Mitchison: I owe the right hon. Gentleman and the Committee an apology, because I did not make the point quite clear. If he will look at the Sheffield case, where this comes from, he will find that they are not able to do that. Perhaps they carry on some activities under Private Acts, which, in fact, would not allow them to "roll them into the bundle." I took an unfortunate case about the cemetery and the graveyard, because the odds are that they would be able to do it, I agree. The difficulty is that they often have special powers.
Mr. Maudling: I will certainly look at the point in a particular case.
The argument is that a local or a public authority carrying on an undertaking like a water undertaking or a tunnel undertaking should not be subject to the normal rate of Profits Tax, which would be levied on the general profits of corporations which are carrying on commercial activities, and I think I have seen only two arguments advanced in support of it. I do not know that either is really conclusive.
The first is that they are carrying on something which is essential. That is not a sound and decisive argument. The provision of water is certainly essential, but so is the manufacture and distribution of food, and there is, therefore, no distinction there. In the case of the Mersey Tunnel, the Tunnel authority is not providing any more essential services than the owners of the many goods

1129
vehicles using the Tunnel. Both are equally essential and one cannot, therefore, make any distinction on the grounds that one of them is more essential than the other. If the Opposition are using the argument of what is essential, they should apply their argument to the public companies as much as to local authorities or privately-owned companies, but they do not do so. Therefore, the argument of essentiality falls to the ground.
The second argument used by the hon. and learned Gentleman was that these concerns do not make distributions, and, therefore, should not be charged with Profits Tax. I must come back to what I said earlier, that this is no longer designed as a tax on distribution. It is a tax on profits, of which the Opposition disapprove. I do not see that the argument that it should not apply to non-distributable profits is really relevant.
Mr. Mitchison: I am sorry to interrupt the right hon. Gentleman again. I feel that I am behaving rather badly. The right hon. Gentleman keeps on saying that I argued that these bodies should not pay Profits Tax. I did not. I simply said that the tax should not be put up, and I went into the history of the matter for that very purpose.
6.15 p.m.
Mr. Maudling: I am sorry if I misrepresented the hon. and learned Gentleman, but he certainly said it. I do not see that the argument for paying a lower rate of Profits Tax is any different from the argument that they should not pay any Profits Tax at all. If the argument is that they should be treated differently because they do not make a distribution, then that is an argument for saying that they should not pay the tax at all, though I agree that the hon. and learned Gentleman did not go as far as that.
Mr. Mitchison: That is not quite right. They have always paid the non-distributed rate before because they cannot distribute profits, but they are now being made to pay rates which are considerably higher because many other people can distribute profits and are, therefore, charged a higher rate.
Mr. Maudling: They were given the non-distributed relief from the dividends tax in respect of profits not distributed, but that is not relevant to what happens
1130
when there is a tax on profits and they make profits. There is a distinct difference of principle here.
We rely for our case on this question—and I do not think that it will surprise the Opposition—on the Royal Commission which was set up and which reported in paragraph 569—[An HON. MEMBER: "It was wrong."] It may be wrong, but it is quite clear:
"We do not think that the fact that such undertakings operate under what is to some extent a special regime"—
which is what hon. Members have been referring to—
"of statutory control of tariffs and dividends is a good reason for special tax treatment once it is accepted that Profits Tax has become part of the regular tax system of the country and has ceased to be, what national defence contribution was, a temporary measure in special circumstances."
In our view, Profits Tax should be regarded as analogous to Income Tax. It is a tax that falls on the trading profits of a firm, and if people make profits they pay Profits Tax. It is difficult to see why they should not, in those circumstances, pay Profits Tax, and I cannot advise the Committee to accept the Amendment.
Mr. Irvine: Will the right hon. Gentleman deal with one point concerning the particular case of the Mersey Tunnel, because that should be considered merely as an illustration of the general principle? Will he give consideration to the point that, in regard to the Mersey Tunnel Joint Committee, there is a distinctive and relevant feature in that there is a statutory limit upon the length of time over which revenue can be taken from the toll?
As the expiry of that period of time is approaching in connection with this very important undertaking, and the surpluses, if we can call them that, have been ploughed back against that contingency, will the right hon. Gentleman consider whether that feature does not afford a specific and distinctive point which might entitle the undertaking to a concession?
Mr. Maudling: I am not dealing with that point, but I cannot accept that that is the basis of exception. I should have thought that many corporations, both public and private, are ploughing back surpluses against contingencies, statutory or not. I do not think, therefore, that there can be a particular exception in the case of the Mersey Tunnel.
Mr. Roy Jenkins: The Paymaster-General sought to present his arguments against this Amendment in austerely logical terms, and while it is certainly better that an argument of this kind should be founded upon logic rather than upon a lack of logic, I do not think that it is necessarily the only approach to problems of this sort. We must concern ourselves not only with the principle but with its practical effect. In looking at that part of the Government's proposals which we seek to alter by the Amendment, we must consider whether the Government's reasons for providing that undertakings should now have their liability increased from 3 per cent. to 10 per cent. are good ones.
It is no answer to say that under the new régime 10 per cent. will be a logical figure and 3 per cent. an illogical one. I hesitate to say this to the right hon. Gentleman, but when imposing substantial burdens upon important undertakings we should consider arguments which are a little more practical and a little less purely theoretical than those which he has put forward.
Mr. Maudling: I did not say that 10 per cent. was logical and 3 per cent. illogical; I said that 10 per cent. was logical and that anything other than 10 per cent. was illogical.
Mr. Jenkins: That is a fairly fine distinction. It perhaps makes the position of the right hon. Gentleman clearer, but it does not make his argument more acceptable. Even on that austerely logical basis, I am not sure that his case holds water. Towards the end of his speech he said, with great vehemence, that the position which the Government took up was that where a concern was liable for and paid Income Tax, to that extent it should he liable for and should pay Profits Tax under the new disposition.
As I understand it, that is not necessarily the case. Several hon. Members will have received a very clear memorandum, drawn up and presented by the City Treasurer to the City of Sheffield, about its position in this matter. One paragraph states the position clearly, as follows:
"Local authorities are not primarily trading concerns, and it seems illogical that whilst for Income Tax purposes all activities, trading and non-trading, are considered together for the
1132
purpose of computing Profits Tax, the trading services must be separated from the remainder. The result in Sheffield, and in many other authorities, is that whilst no charge for Income Tax has to be borne, a charge for Profits Tax does fall on the authority."
If that is the position, what remains of the right hon. Gentleman's logic? I know his difficulty about arguing individual cases, and I do not want him to make a pronouncement about Sheffield, but if we are to be asked to accept his position here we should have from him an assurance that, as he understands and the Government wish it, a local authority will be liable for Profits Tax to the extent that and on the same basis it is liable for Income Tax. If he can give us that assurance it may go some little way towards easing our difficulties, but if he cannot I am afraid that a large part even of his austerely logical case collapses.
We are at present being asked to accept a provision by which these authorities which cannot distribute will be put in a more unfavourable position than they were prior to 1951—when they had no liability to Profits Tax at all—and also in a more unfavourable position than they have been in since 1951, when they have had a liability to Profits Tax, but a reduced one, at only 3 per cent. The right hon. Gentleman was also in error in assuming that our objection to the treatment of these activities on the part of local authorities stemmed necessarily and essentially from our dislike of the Clause as a whole. The Opposition dislike the Clause, but, even if that were not the case, and even if most of the arguments of the majority or the minority of the Royal Commission were accepted, there would still be a very strong case for considering this exception. We should still be very worried about the position of local authorities.
There is a chance that many companies in the ordinary course of business would benefit under the changes made here—even the bus companies about which the hon. Member for Twickenham (Mr. Gresham Cooke) was concerned. I think that his Amendment, and the argument that he adduced in favour of it, go altogether too far, and we should not wish to support it. Despite the horrific competition from pedal cycles, to which bus companies have to acclimatise themselves, they may be in a position to make distributions. Some bus companies may be benefited under the terms of the

1133
Clause; they stand to gain in the sense that the charge falling upon their distributions will be lower. But authorities of the sort with which we are concerned cannot possibly be in this position. This is one of the arguments for drawing a distinction between an undertaking which can distribute and one which, by its very nature, cannot.
The first at least has a possibility of gain; for the undertakings with which we are concerned there is no possibility of gain—there is no prospect for them other than that of now having to pay 10 per cent. instead of the previous 3 per cent.
Mr. William Shepherd: Has the hon. Member considered the enormous increases which have occurred in the trading services of local authorities? Is not that a practical consideration?
Mr. Jenkins: If it were to be argued that the Government were moved in their attitude to the Profits Tax by the enormous increase in the services of local authorities it might be another matter, but I do not understand that that is the position. It was certainly not the position put to us by the right hon. Member. The mere fact that such an increase has taken place—which cannot by its nature be a benefit merely to
a limited number of people, but must be of benefit to all the ratepayers concerned—does not seem to me to be an argument for increasing the rate from 3 per cent. to 10 per cent.
Mr. Mitchison: Is it a fact that there has been this increase?
Mr. Jenkins: My hon. and learned Friend, whose knowledge of these matters is much greater than mine, asks whether it is a fact. I will leave him to dispute that with the hon. Member for Cheadle (Mr. Shepherd).
Because we were unconvinced by the right hon. Gentleman's logic, because he has been unable—even with the assistance of his Parliamentary Private Secretary—to provide an assurance on the point which seems to me to be essential to the case he is making, and because we are quite unconvinced that at present, when companies as a whole are having substantial taxation concessions, local authorities should be put in a worse position than at any time in the past, I am sure that my hon. Friends will wish to divide.
Question put, That those words be there inserted:—
The Committee divided: Ayes 186, Noes 220.

Division No. 180.]

AYES

[6.27 p.m

Ainsley, J. W.

Darling, George (Hillsborough)

Hobson, C. R. (Keighley)

Albu, A. H.

Davies, Stephen (Merthyr)

Holman, P.

Allaun, Frank (Salford, E.)

Delargy, H. J.

Houghton, Douglas

Allen, Arthur (Bosworth)

Diamond, John

Howell, Charles (Perry Barr)

Allen, Scholefield (Crewe)

Dodds, N. N.

Hoy, J. H.

Awbery, S. S.

Donnelly, D. L.

Hughes, Emrys (S. Ayrshire)

Bacon, Miss Alice

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

Hughes, Hector (Aberdeen, N.)

Balfour, A.

Ede, Rt. Hon. J. C.

Hunter, A. E.

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

Edelman, M.

Hynd, J. B. (Attercliffe)

Benson, Sir George

Edwards, Rt. Hon. Ness (Caerphilly)

Irvine, A. J. (Edge Hill)

Beswick, Frank

Edwards, Robert (Bilston)

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

Blenkinsop, A.

Edwards, W. J. (Stepney)

Jeger, George (Goole)

Blyton, W. R.

Evans, Albert (Islington, S. W.)

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

Boardman, H.

Evans, Edward (Lowestoft)

Jenkins, Roy (Stechford)

Bottomley, Rt. Hon. A. G.

Fernyhough, E.

Johnson, James (Rugby)

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

Fletcher, Eric

Johnston, Douglas (Paisley)

Bowles, F. G.

Foot, D. M.

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

Braddock, Mrs. Elizabeth

Fraser, Thomas (Hamilton)

Jones, David (The Hartlepools)

Brockway, A. F.

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

Jones, Jack (Rotherham)

Broughton, Dr. A. D. D.

George, Lady Megan Lloyd (Car'then)

Jones, J. Idwal (Wrexham

Brown, Rt. Hon. George (Belper)

Gibson, C. W.

Jones, T. W. (Merioneth)

Brown, Thomas (Ince)

Gordon Walker, Rt. Hon. P. C.

Kenyon, C.

Burke, W. A.

Greenwood, Anthony

Key, Rt. Hon. C. W.

Burton, Miss F. E.

Grenfell, Rt. Hon. D. R.

King, Dr. H. M.

Butler, Mrs. Joyce (Wood Green)

Grey, C. F.

Lawson, G. M.

Champion, A. J.

Hall, Rt. Hn. Glenvil (Colne Valley)

Lee, Frederick (Newton)

Chapman, W. D.

Hannan, W.

Lee, Miss Jennie (Cannock)

Chetwynd, G. R.

Harrison, J. (Nottingham, N.)

Lever, Leslie (Ardwick)

Clunie, J.

Hastings, S.

Lewis, Arthur

Collins, V. J. (Shoreditch & Finsbury)

Healey, Denis

Lindgren, G. S.

Craddock, George (Bradford, S.)

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

Logan, D. G.

Crossman, R. H. S.

Herbison, Miss M.

Mabon, Dr. J. Dickson

Dalton, Rt. Hon. H.

Hewitson, Capt. M.

McAlister, Mrs. Mary

MacColl, J. E.

Pearson, A.

Stonehouse, John

MacDermot, Niall

Peart, T. F.

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

McGovern, J.

Pentland, N.

Summerskill, Rt. Hon. E.

McInnes, J.

Popplewell, E.

Sylvester, G. O.

McLeavy, Frank

Price, J. T. (Westhoughton)

Taylor, Bernard (Mansfield)

MacPherson, Malcolm (Stirling)

Probert, A. R.

Thomas, George (Cardiff)

Mahon, Simon

Proctor, W. T.

Thomas, Iorwerth (Rhondda, W.)

Mainwaring, W. H.

Pursey, Cmdr. H.

Tomney, F.

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

Rankin, John

Ungoed-Thomas, Sir Lynn

Mann, Mrs. Jean

Redhead, E. C.

Usborne, H. C.

Marquand, Rt. Hon. H. A.

Reeves, J.

Viant, S. P.

Mason, Roy

Reid, William

Warbey, W. N.

Mitchison, G. R.

Reynolds, G. W.

Watkins, T. E.

Monslow, W.

Rhodes, H.

Weitzman, D.

Morris, Percy (Swansea, W.)

Robens, Rt. Hon. A.

Wells, Percy (Faversham)

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

Roberts, Albert (Normanton)

Wells, William (Walsall, N.)

Mort, D. L.

Roberts, Goronwy (Caernarvon)

West, D. G.

Moss, R.

Rogers, George (Kensington, N.)

Wheeldon, W. E.

Moyle, A.

Shinwell, Rt. Hon. E.

White, Mrs. Eirene (E. Flint)

Neal, Harold (Bolsover)

Shurmer, P. L. E.

Willey, Frederick

Oliver, G. H.

Silverman, Julius (Aston)

Williams, David (Neath)

Oram, A. E.

Silverman, Sydney (Nelson)

Williams, Rev. Llywelyn (Ab'tllery)

Orbach, M.

Simmons, C. J. (Brierley Hill)

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

Oswald, T.

Skeffington, A. M.

Wilson, Rt. Hon. Harold (Huyton)

Owen, W. J.

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

Winterbottom, Richard

Paget, R. T.

Smith, Ellis (Stoke, S.)

Woodburn, Rt. Hon. A.

Palmer, A. M. F.

Sorensen, R. W.

Yates, V. (Ladywood)

Parker, J.

Soskice, Rt. Hon. Sir Frank

Parkin, B. T.

Sparks, J. A.

TELLERS FOR THE AYES:

Paton, John

Spriggs, Leslie

Mr. Short and Mr. J. Taylor.

NOES

Aitken, W. T.

du Cann, E. D. L.

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

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

Eccles, Rt. Hon. Sir David

Hyde, Montgomery

Alport, C. J. M.

Eden, J. B. (Bournemouth, West)

Hylton-Foster, Rt. Hon. Sir Harry

Amory, Rt. Hn. Heathcoat (Tiverton)

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

Jenkins, Robert (Dulwich)

Anstruther-Gray, Major Sir William

Emmet, Hon. Mrs. Evelyn

Jennings, J. C. (Burton)

Arbuthnot, John

Errington, Sir Eric

Jennings, Sir Roland (Hallam)

Armstrong, C. W.

Fell, A.

Johnson, Dr. Donald (Carlisle)

Ashton, H.

Finlay, Graeme

Johnson, Eric (Blackley)

Astor, Hon. J. J.

Fisher, Nigel

Joseph, Sir Keith

Atkins, S. S.

Fletcher-Cooke, C.

Keegan, D.

Balniel, Lord

Fraser, Sir Ian (M'cmbe & Lonsdale)

Kerr, Sir Hamilton

Barber, Anthony

Gammans, Lady

Kershaw, J. A.

Barlow, Sir John

Garner-Evans, E. H.

Lambton, Viscount

Barter, John

George, J. C. (Pollok)

Langford-Holt, J. A.

Batsford, Brian

Gibson-Watt, D.

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

Barter, Sir Beverley

Glyn, Col. Richard H.

Legh, Hon. Peter (Petersfield)

Beamish, Col. Tufton

Gough, C. F. H.

Linstead, Sir H. N.

Bell, Ronald (Bucks, S.)

Gower, H. R.

Llewellyn, D. T.

Bennett, F. M. (Torquay)

Graham, Sir Fergus

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

Bennett, Dr. Reginald

Grant, Rt. Hon. W. (Woodside)

Lloyd, Rt. Hon. Selwyn (Wirral)

Bevins, J. R. (Toxteth)

Green, A.

Longden, Gilbert

Biggs-Davison, J. A.

Gresham Cooke, R.

Low, Rt. Hon. Sir Toby

Bingham, R. M.

Grimond, J.

Lucas, P. B. (Brentford & Chiswick)

Bishop, F. P.

Grimston, Hon. John (St. Albans)

Lucas-Tooth, Sir Hugh

Black, C. W.

Grosvenor, Lt.-Col. R. G.

Macdonald, Sir Peter

Body, R. F.

Gurden, Harold

Mackeson, Brig. Sir Harry

McKibbin, Alan

Bonham Carter, Mark

Harris, Frederic (Croydon, N. W.)

Mackie, J. H. (Galloway)

Braine, B. R.

Harris, Reader (Heston)

McLaughlin, Mrs. P.

Braithwaite, Sir Albert (Harrow, W.)

Harrison, A. B. C. (Maldon)

Maclean, Sir Fitzroy (Lancaster)

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

Harrison, Col. J. H. (Eye)

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

Brooman-White, R. C.

Harvey, Sir Arthur Vere (Macclesf'd)

MacLeod, John (Ross & Cromarty)

Bullus, Wing Commander E. E.

Harvey, John (Walthamstow, E.)

Macmillan, Maurice (Halifax)

Campbell, Sir David

Head, Rt. Hon. A. H.

Macpherson, Niall (Dumfries)

Carr, Robert

Heald, Rt. Hon. Sir Lionel

Maddan, Martin

Cary, Sir Robert

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

Manningham-Buller, Rt. Hn. Sir R.

Clarke, Brig. Terence (Portsmth, W.)

Henderson-Stewart, Sir James

Markham, Major Sir Frank

Cole, Norman

Hesketh, R. F.

Marlowe, A. A. H.

Cooper-Key, E. M.

Hicks-Beach, Maj. W. W.

Maudling, Rt. Hon. R.

Craddock, Beresford (Spelthorne)

Hill, Rt. Hon. Charles (Luton)

Mawby, R. L.

Crosthwaite-Eyre, Col. O. E.

Hill, Mrs. E. (Wythenshawe)

Milligan, Rt. Hon. W. R.

Crowder, Sir John (Finchley)

Hirst, Geoffrey

Mott-Radclyffe, Sir Charles

Crowder, Petre (Ruislip—Northwood)

Hobson, John (Warwick & Leam'gt'n)

Nabarro, G. D. N.

Currie, G. B. H.

Holland-Martin, C. J.

Nairn, D. L. S.

Dance, J. C. G.

Holt, A. F.

Neave, Airey

Davidson, Viscountess

Hope, Lord John

Nicholls, Harmar

D'Avlgdor-Goldsmid, Sir Henry

Hornby, R. P.

Nicholson, Sir Godfrey (Farnham)

Deedes, W. F.

Horobin, Sir Ian

Noble, Comdr. Rt. Hon. Allan

Digby, Simon Wingfield

Howard, Gerald (Cambridgeshire)

Noble, Michael (Argyll)

Donaldson, Cmdr. C. E. McA.

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

Nugent, G. R. H.

Doughty, C. J. A.

Hughes-Young, M. H. C.

Oakshott, H. D.

1136

1137

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

Roper, Sir Harold

Thompson, R. (Croydon, S.)

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

Ropner, Col. Sir Leonard

Thorneycroft, Rt. Hon. P.

Orr, Capt. L. P. S.

Russell, R. S.

Thornton-Kemsley, Sir Colin

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

Scott-Miller, Cmdr. R.

Tiley, A. (Bradford, W.)

Osborne, C.

Sharples, R. C.

Tilney, John (Wavertree)

Page, R. G.

Shepherd, William

Vaughan-Morgan, J. K.

Pannell, N. A. (Kirkdale)

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

Vosper, Rt. Hon. D. F.

Partridge, E.

Smithers, Peter (Winchester)

Wade, D. W.

Peel, W. J.

Spearman, Sir Alexander

Wakefield, Edward (Derbyshire, W.)

Pickthorn, K. W. M.

Speir, R. M.

Wakefield, Sir Wavell (St. M'lebone)

Pike, Miss Mervyn

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

Wall, Patrick

Pilkington, Capt. R. A.

Stanley, Capt. Hon. Richard

Ward, Dame Irene (Tynemouth)

Pitman, I. J.

Stevens, Geoffrey

Webbe, Sir H.

Price, David (Eastleigh)

Steward, Sir William (Woolwich, W.)

Webster, David

Price, Henry (Lewisham, W.)

Stoddart-Scott, Col. Sir Malcolm

Whitelaw, W. S. I.

Ramsden, J. E.

Stuart, Rt. Hon. James (Moray)

Williams, Paul (Sunderland, S.)

Rawlinson, Peter

Studholme, Sir Henry

Williams, R. Dudley (Exeter)

Redmayne, M.

Summers, Sir Spencer

Wills, Sir Gerald (Bridgwater)

Rees-Davies, W. R.

Taylor, Sir Charles (Eastbourne)

Wilson, Geoffrey (Truro)

Renton, D. L. M.

Taylor, William (Bradford, N.)

Woollam, John Victor

Ridsdale, J. E.

Teeling, W.

Yates, William (The Wrekin)

Roberts, Sir Peter (Heeley)

Temple, John M.

Robertson, Sir David

Thomas, Leslie (Canterbury)

TELLERS FOR THE NOES:

Robinson, Sir Roland (Blackpool, S.)

Thompson, Kenneth (Walton)

Mr. Bryan and Mr. Chichester-Clark.

Mr. James H. Hoy: I beg to move, in page 14, line 31, at the end to insert:
Provided that in relation to any sports association carried on as a non-profit making body this subsection shall not have effect and accordingly the profits tax shall continue to be charged at the rate of three per cent.
The Deputy-Chairman (Sir Gordon Touche): I think that it would be convenient to discuss the Amendment with the one standing in the name of the right hon. Member for Huyton (Mr. H. Wilson), namely, the last but one Amendment on page 3062, in page 14, line 31, at the end to insert:
Provided that in relation to any trade or business carried on by any society registered under the Industrial and Provident Societies Acts, 1893–1954, or under the Industrial and Provident Societies Acts (Northern Ireland) 1893–1955, this subsection shall not have effect and accordingly the profits tax shall be charged at the rate of three per cent. of the profits computed without allowing any deduction for dividends, bonuses, and similar distributions to members on their shares in the society.
Mr. Hoy: The Amendment I am moving deals in the main with sporting associations. I put it on the Notice Paper in company with the hon. Member for Caithness and Sutherland (Sir D. Robertson) and my right hon. Friend the Member for Gower (Mr. Grenfell). It arises out of a Question which I put to the Chancellor of the Exchequer on 20th May, and I put it down as the result of representations which I had from the Scottish Rugby Union, who wanted to know what the increase in taxation would mean to the association.
The Committee will remember that the Question received considerable support in the House not only from my
1138
right hon. Friends the Members for Huyton and for Llanelly (Mr. J. Griffiths), but from hon. Gentlemen on the Government side. In a final reply to my right hon. Friend the Member for Huyton, the Chancellor of the Exchequer promised to look into the whole matter and to take into consideration the specific points which had been raised that afternoon.
He attempted, during Question Time, to stress the point that because the Royal Commission had made its recommendation he could not depart from it. He was reminded that although the Royal Commission, as it was entitled to do, had made its recommendation it was for Parliament to make the decision. I would recall to him the speech made by the hon. Member for Huddersfield, West (Mr. Wade) on the Second Reading of the Finance Bill. The hon. Gentleman then told the House that he was speaking for the Liberal Party. He accepted the Chancellor's proposal for a change in the flat rate of tax, and said:
"… if a flat rate is to be introduced it is most important for consideration to be given to certain special cases to which the application of Profits Tax is inappropriate, and to non-trading concerns which have been caught, perhaps unintentionally, by the Profits Tax net. By increasing the rate to 10 per cent. the anomalies become all the more marked. I believe that the Chancellor would be in a strong position in introducing a flat rate if, when doing so, he dealt sympathetically with the special cases."—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 125.]
It is that case which I am presenting this afternoon.
It seems peculiar, when so many other countries give financial assistance to

1139
sporting organisations, that the Chancellor should, in this Budget, be taking money from sporting organisations in this country. It is on that point that I base my case. It is a little difficult to present this special case, because I noticed that the Paymaster-General, replying to the debate on the last Amendment, said that these little special considerations consisted only of samples. That is an unusual way to argue in this Committee. It is usually said from the Treasury Front Bench, "Cannot you give us an example of what is meant?" So I propose to give the example of the Scottish Rugby Union.
The Scottish Rugby Union purchased Murrayfield Sports Ground in 1925. That tremendous arena cost £125,000. Debentures were issued and the rate of interest of 4 per cent. was paid, but some years later the interest rate was reduced to 3 per cent. In 1957, only last year, £80,000 of debentures were paid and a new issue of irredeemable debentures was issued on which no interest at all is paid. By so doing considerable sums of money were saved for the purposes of the Scottish Rugby Union. It intended to use that money to encourage Rugby clubs in the outlying districts to build up their clubs' strength—to give them assistance which they had been unable to give during the war years and the immediate post-war years.
By so doing, it was able to save £4,000 to £5,000 per annum, which, up to 1957, was paid in interest. As a result of the change made by the Chancellor the S.R.U. estimates that it will have to pay tax in the region of £2,000, that is, on the new 10 per cent. rate, compared with £600 it would have paid at the old rate. It seems absolutely mean and miserable of the Chancellor to try to take that sum of money from the organisation.
I have used that example to show the Chancellor what is happening, but the argument I have produced could be applied to every Rugby Union, the English, Irish and Welsh Unions, equally. They all have the same purpose. They are bodies which do not distribute profits, but take what is given back for the encouragement of the game.
I hope that the Chancellor will be a little more responsive on this Amendment than he was on the last, and will give the little encouragement for which
1140
we are asking to sporting organisations in Great Britain.
6.45 p.m.
Sir David Robertson: I rise to support strongly the case which has been put so well by the hon. Member for Leith (Mr. Hoy). I am glad that he did not particularise exclusively the Scottish Rugby Union, but brought in all the others who, with their great traditions of sport, produce not only good players, but people of the highest character who give service to the United Kingdom in war and on other occasions.
I speak on this subject with a certain amount of feeling. A few years ago I went back to my native City of Glasgow and spent a nostalgic weekend looking round the places I knew as a boy. I could not find one of the pitches I used to play on, pitches in the North, South, East and West on which I had played. I could not find one, not even First Hampden. It is true that part of that ground is preserved as a bowling green but the rest has gone for housing.
The Scottish Rugby Union, and the other unions, are the most non-profit-making bodies imaginable. They do not have shareholders, nor even debenture holders, but people agree to give their money, without interest, simply for the privilege of buying two tickets. Tickets cannot be bought from pirates, but only at the fixed price, when one is able to obtain them. These bodies render a great service by using the money to help small clubs on the fringes of big cities to buy grounds. That is the main purpose for which the money is used.
On the outskirts of big cities, where so many people have to spend their lives, games like Rugby and cricket are most valuable. Those who live in urban areas cannot enjoy the sun and the wind and the rain as those who live in country areas can. But for the help of these organisations, small clubs would never be able to buy their pitches.
I think it wrong at this time of "shamateurism", and when Government support is given to sporting organisations in many parts of Europe, that our organisations should be handicapped. We hear of "golden crown" sportsmen. I do not know what they are called behind the Iron Curtain, but we produce fellows who

1141
can play in a team. When I was a young fellow the Scottish Rugby Union would not permit the numbering of players. I am sorry that public opinion ever allowed that to be done, for it is not the fellow who touches the ball into who should count, but the whole team.
It is us, Parliament, who decide these things with the good will and help of the Chancellor and his colleagues on the Front Bench. I see my right hon. Friend is hanging his head. I think he feels very unhappy on this issue. He can regain his good spirits, as every hon. Member in the Committee can, if he will grant this concession. We do not want to penalise these people. We are not bloodsuckers wanting to chase people who support Rugby. No one in this country is paid to play Rugby. There can be no rule that is so general that no exception can be made.
I strongly urge my right hon. Friend to get out of the grips of bureaucracy, or whatever it is that is holding him back, and to do what obviously the whole Committee want him to do.
Mr. Raymond Gower: I also wish to support this Amendment. I hope that my right hon. Friend the Chancellor will not be carried away by a passion for uniformity which appears to have motivated him in this matter so far, with the unfortunate result of putting an extra impost on these amateur and voluntary sporting organisations. I would respectfully remind him that a few years ago his predecessors accepted the view that amateur sporting organisations deserved rather different treatment from professional organisations. Therefore, those amateur organisations first received help under previous Finance Bills. It seems a step in a totally different direction to increase the actual taxation which will be levied on these organisations.
The hon. Member for Leith (Mr. Hoy) cited the particular case of Rugby Unions. From my knowledge of Rugby in England and Wales, I can say that he certainly did not exaggerate the position. Rugby in South Wales, I suggest, has one feature which is not characteristic of the whole country. It embraces in a large degree the whole population.
It is, in a sense, the national game in parts of South Wales. Many people who play Rugby make a considerable sacrifice out of their modest earnings to take part
1142
in it. It will be appreciated that, in recent years, those sacrifices have been increased by increased travelling expenses and the additional expense of players in fitting themselves out with jerseys and kit. These people are, in the best sense of the word, amateurs. That cannot be said of all sport today.
Rugby clubs in Wales, as in Scotland, in many cases, can not provide the essential changing rooms, showers and baths which they need without assistance from the parent union. It is those unions which will suffer if the Finance Bill in its present form is implemented. I am sure that my hon. Friend the Member for St. Marylebone (Sir W. Wakefield) will confirm that that is also the position around London, where there has been such a great expansion in recent years both in the number of Rugby clubs and the number of teams which the various clubs run.
I am sure that many hon. Members have seen how clubs have provided themselves with these facilities only with the assistance of the Rugby Union. I hope that the Chancellor of the Exchequer will not be hard-hearted about this. I think that it is a proper case for special treatment. There are other games which obviously could be considered in this respect. There are organisations, apart from Rugby, which also deserve his consideration. There is, for instance, the parent body of cricketers which may similarly be affected. I hope that this Amendment will have special consideration.
Sir Wavell Wakefield: We have had appeals from Scotland and Wales. May I add the appeal from England for support from both sides of the Committee to help our great sporting bodies?
In my constituency we have the headquarters of cricket, the M.C.C. I have a letter from the secretary of the M.C.C. setting out figures for recent years which show very small surpluses indeed and on certain occasions none, and saying that if the present proposed increase in tax is made those slender surpluses will be even further reduced.
I also have particulars of the Rugby Football Union, of which I am a member of the Executive Committee. There again, surpluses will be substantially reduced if the present proposal of the Chancellor is carried through. I would point out that

1143
if the Chancellor gives the relief asked for, it will be very small indeed, but a substantial amount to these various voluntary organisations. That is the point. It is a few thousands but those few thousands just make all the difference.
When Entertainments Duty was removed it took away a great anxiety from these clubs. It enabled, instead of losses, small surpluses. I appeal to the Chancellor not to take away more of those surpluses, and I appeal to him most strongly for sympathetic consideration and help in this direction.
There has been special pleading this afternoon in connection with great financial institutions, like the building societies and various other commercial undertakings which provide services, buy and sell, and all the rest of it. The special pleading which we are now making is in a very different category. It is for these voluntary sporting bodies which pay no directors' fees, which have no shareholders and which do not pay dividends and interest. Everything that is made by them is ploughed back into the game.
This money is used to help provide playing fields and accommodation to which hon. Members have referred. I have a letter from a school in my constituency which will no longer be able to play Rugby football because a ground is not available for it. I hope that a Rugby club will enable that school to continue playing next season. There is an increasing demand for playing fields, and the money for them can come only from surpluses. The Rugby Football Union lends money from its surpluses at 1 per cent. or 2 per cent. to clubs, to obtain and buy their grounds and to enable school children, as well as grown men, to play games. These fields are used for cricket in the summer as well as football in the winter.
I do not want to take up the time of the Committee any longer in special pleading. I think that I have said enough to make it clear to the Chancellor that this is a special case and in quite a different category from the other cases which have already been discussed so fully this afternoon. I support the Amendment.
Mr. Tom Brown: I want, in a few words, to support very strongly the
1144
Amendment under discussion. We have heard the voice of Scotland, the voice of Wales and the voice of England. I now add my voice from Lancashire which is perhaps more important than the other three.
It is important that the Chancellor should have regard to the importance of sport in this country. I know that we tend from time to time to play our part in that direction, but, unfortunately, the Chancellor comes along and displays what I would call niggardliness when dealing with amateur sport.
I have in my constituency a very important Rugby Union club. It is a club which can run five teams. Those five teams are carried on by the sacrifices of inhabitants of that town. They have to depend very largely upon the assistance which they can secure from the Rugby Union. Anything that is done which jeopardises or hinders the assistance which the Rugby Union can give to the clubs which are coming up is a step in the wrong direction, and I think that the Chancellor is doing wrong by applying this tax to the Rugby Union.
I support very strongly the advocacy that the Chancellor should again consider this Amendment and see whether he cannot concede it because of its importance to those clubs outside the perimeter of the great cities.
7.0 p.m.
Mr. Gordon Walker: I think that I am right in saying that we are considering this Amendment with another, the purpose of which is that bodies and corporations, and so forth, which my their nature, form or terms of constitution cannot lawfully make any relevant distribution, shall continue to be taxed at 3 per cent. instead of 10 per cent.
Before turning to sport, I should like to say a word about that Amendment because it comprehends the cases of the sporting associations and which, if carried, would help them as well as a number of other bodies in somewhat similar conditions. Even if one grants that there ought to be an undifferentiated Profits Tax, which we are not prepared to grant, such a tax should be on profits in the normal sense and on bodies with shareholders, for example. The main argument which the Chancellor made when

1145
introducing this tax was that the existing differential rate disturbed the structure of companies between one kind of share and another.
If I concede all that for the purpose of argument, it remains true that it is inequitable that a body or corporation or any other society which cannot distribute profits should, for the sake of helping the general structure of capital, have this charge upon it. The great difference is that with ordinary companies the burden which falls on them may go up in some cases or down in some cases, but for bodies which cannot distribute the burden must go up from 3 per cent. to 10 per cent.
This applies to sporting associations, but also to many others which, because of their very nature, perhaps because of the Statutes which command them or their terms of association, cannot distribute. The only way in which the problem can be solved equitably is along the lines of the Amendment to which I have just referred. I hope that the Government will accept it, and, if not, that we shall divide in support of it when we reach it.
I want to turn to the particular case which, as will be seen from their speeches, obviously interests hon. Members very much—that of sporting associations. I do not agree with the hon. Member for Barry (Mr. Gower) that we are concerned specifically with amateur rather than professional sport. The fundamental point is that it should apply to bodies which cannot distribute, and, secondly, to bodies which, through any surpluses they make, help to provide playing fields, pavilions and other equipment. It is not essential that they should be amateur rather than professional. The test is whether they come in those two classes of not being able to distribute, because they have no shareholders, and of helping sport by providing playing fields and other facilities.
Like other hon. Members, I know of many examples of the way in which the Clause will impose an extra tax on playing fields and coaching schemes. By sticking to his doctrinaire position the Chancellor will put a tax on sport, on playing fields, on the equipment of sport and all those things which make it easier for people to play rather than to watch games. The tax applies to Association football as well as to Rugby Union.
1146
I remember once playing in a rugby match against the hon. Member for St. Marylebone (Sir W. Wakefield). He was a most terrifying fellow to have in the opposing pack, and I am glad to have him on the same side as myself tonight.
The Rugby Union will be paying £4,500 a year instead of £1,500 as a result of the tax on their savings. They distribute nothing except loans to clubs for playing fields and other facilities. This applies to the Rugby League and also to the M.C.C. It seems to me an indefensible change to be made for doctrinaire reasons which do not apply here at all. If the Chancellor does not reconsider this matter he will rightly earn for himself the name of the spoil-sport Chancellor, because that is what he is doing by rigidly insisting on a doctrinaire way of extending this change into a field where it does not apply.
I urge the Chancellor to think about this again. It seems eminently a case where there ought to be a free vote in the Committee, for it is not a matter of party doctrine. We are certainly prepared to have no Whips for the Division, if that is agreed by hon. Members opposite. This is not an issue in which one is either a Socialist or a Conservative; it is not a party issue. It is just a little, stupid extension of economic doctrine into an inappropriate field. In any case, I hope that we shall have the support of some hon. Members opposite and of the Liberals if we are most reluctantly forced to divide the Committee. I say "reluctantly" because I still very much hope that the Government will make a concession here.
Mr. Maudling: The Committee is discussing two Amendments, one of general and the other of particular character. I will take the general Amendment first and deal with it as best I can without trespassing on the argument of principle which should take place on the Question, "That the Clause stand part of the Bill." The Amendment is based on the principle that people who do not distribute profits should be treated differently from people who do distribute profits, but the principle of the Clause is to abolish that distinction, and it is therefore difficult for me to argue against the Amendment for making a special distinction in this case without also arguing the case for a unified Profits

1147
Tax. It would be a great pity if we were to have the case for unified Profits Tax discussed twice.
Mr. Gower: Is there not another distinction? These bodies not only do not distribute profits but cannot distribute profits. Does my right hon. Friend not see that that is a different case?
Mr. Maudling: I do not know whether my hon. Friend is talking about the general or the particular Amendment. In any case, I do not see that it makes any difference whether they do not or cannot distribute, because the purpose of the Clause is to charge Profits Tax on the basis of whether a profit is made. If a profit is made, the Clause will charge Profits Tax and will no longer take account of whether there is, can or cannot be any distribution. It will be argued that this is wrong, as it has already been argued that it is wrong, but I do not think it would benefit the Committee if I argued the principle on each Amendment as well as in the main debate which will take place at the end and which clearly will be important.
My right hon. Friend asks me to say that he has given a great deal of thought to the question of sports associations, as he undertook to do earlier. The position of those associations is that when they make profits they pay Income Tax and Profits Tax. The Amendment is a little misleading when it speaks of "non-profit making," because if a body does not make profits it does not pay Profits Tax. What is meant is that the profits are not distributed in the form of cash, but they are distributed in the form of benefits in kind to people who enjoy those benefits.
Mr. Gordon Walker: But not to shareholders.
Mr. Maudling: The shareholders are the members of the club. There is no difference in principle between making a profit which is taken out in the form of something in kind and making a profit which is taken out in cash. I agree that in this case the profit is not taken out by equity shareholders, but clearly there is a profit, because if there were no profit, then no Income Tax would be paid. If it were argued that there is no profit and that these clubs should pay no tax whatever on their trading income, that would at least be a consistent argument.
1148
I do not think it would be a good argument, and it is certainly not the argument before the Committee now.
The position is that these sporting bodies, like other bodies corporate, pay Income Tax and Profits Tax and receive the normal exemption and abatement provisions of Profits Tax. It would be a mistake to give the impression that this change in the Profits Tax would affect a lot of small clubs and associations, because they do not pay any Profits Tax unless their profits are more than £2,000 a year. Between £2,000 and £12,000 there is an abatement of one-fifth of the amount by which they fall short of £12,000. Those exemption and abatement provisions must be borne in mind when considering the effect of the tax upon the associations concerned.
The case has been put with considerable force and eloquence from both sides of the Committee and all sides of the compass, and it is that sporting bodies are so admirable and make such a contribution to our national life that they should be exempted from Profits Tax or should pay a specially low rate of Profits Tax. My right hon. Friend feels that that argument is no more valid than it would be to argue that they should have exemption from or be given a specially low rate of Income Tax. It is often argued that particular activities should pay specially low rates of Income Tax or should be specially exempt from Income Tax, but one of the great strengths of our taxation system is that it is based on certain clear principles and the avoidance wherever possible, of exceptions and anomalies. I think that that is particularly true of Income Tax.
My right hon. Friend feels that once we accepted that the sporting associations should have special exemption or special treatment in respect of Income Tax or Profits Tax, the way would be open to a large number of other claims. Therefore, my right hon. Friend is reluctantly forced to the conclusion that in unifying Profits Tax he is making it a simple tax falling on all the profits made by all bodies corporate, public or private, as recommended by the Royal Commission. He feels that he must stand by that principle and he regrets that he cannot depart from it, even to meet the very strong arguments put forward by hon. Members.
Mr. Hoy: I am extremely disappointed with the right hon. Gentleman's reply. I can well understand why the Chancellor of the Exchequer did not make that reply himself. He would have been ashamed to make it, so he called upon the right hon. Gentleman, who put one of the poorest cases which I have ever heard him make.
The right hon. Gentleman changed his argument, for he first referred to organisations which did not distribute profits and, when corrected and told that the argument was about organisations whose articles of association prevented them from distributing profits, he said that there did not seem to be very much difference. If he believed that, he would not occupy his present office. Of course it makes a difference.
The right hon. Gentleman said that the Amendment would result in different
rates of taxation, but there are already different rates of taxation. There are different rates throughout the Bill and there are different rates of Income Tax, depending upon one's income. The right hon. Gentleman said that this was a tidy arrangement. It is because it is tidy that it is unjust and he has argued that he would rather have it tidy and unjust than a little less tidy, but equitable.
The Minister's case was the poorest I have ever heard him make, and I am certain that not only my right hon. and hon. Friends but hon. Members in all parts of the Committee will want to make their protests in the Division Lobby.
Question put, That these words be there inserted:—
The Committee divided: Ayes 178, Noes 206.

Division No. 181.]

AYES

[7.12 p.m.

Ainsley, J. W.

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

McAlister, Mrs. Mary

Albu, A. H.

George, Lady Megan Lloyd (Car'then)

MacColl, J. E.

Allen, Arthur (Bosworth)

Gibson, C. W.

MacDermot, Niall

Awbery, S. S.

Gordon Walker, Rt. Hon. P. C.

McGovern, J.

Bacon, Miss Alice

Greenwood, Anthony

McInnes, J.

Balfour, A.

Grenfell, Rt. Hon. D. R.

McLeavy, Frank

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

Grey, C. F.

MacPherson, Malcolm (Stirling)

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

Grimond, J.

Mahon, Simon

Benson, Sir George

Hall, Rt. Hn. Glenvil (Colne Valley)

Mainwaring, W. H.

Beswick, Frank

Hannan, W.

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

Blenkinsop, A.

Harrison, J. (Nottingham, N.)

Mann, Mrs. Jean

Blyton, W. R.

Hastings, S.

Mason, Roy

Boardman, H.

Healey, Denis

Mitchison, G. R.

Bonham Carter, Mark

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

Monslow, W.

Bottomley, Rt. Hon. A. G.

Herbison, Miss M.

Morris, Percy (Swansea, W.).

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

Hewitson, Capt. M.

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

Braddock, Mrs. Elizabeth

Hobson, C. R. (Keighley)

Mort, D. L.

Brockway, A. F.

Holman, P.

Moss, R.

Broughton, Dr. A. D. D.

Holt, A. F.

Moyle, A.

Brown, Rt. Hon. George (Belper)

Houghton, Douglas

Neal, Harold (Bolsover)

Brown, Thomas (Ince)

Howell, Charles (Perry Barr)

Oliver, G. H.

Burke, W. A.

Howell, Denis (All Saints)

Oram, A. E.

Burton, Miss F. E.

Hoy, J. H.

Oswald, T.

Butler, Mrs. Joyce (Wood Green)

Hughes, Emrys (S. Ayrshire)

Owen, W. J.

Champion, A. J.

Hughes, Hector (Aberdeen, N.)

Padley, W. E.

Chapman, W. D.

Hunter, A. E.

Palmer, A. M. F.

Clunie, J.

Hynd, J. B. (Attercliffe)

Parkin, B. T.

Collins, V. J. (Shoreditch & Finsbury)

Irvine, A. J. (Edge Hill)

Paton, John

Craddock, George (Bradford, S.)

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

Pearson, A.

Crossman, R. H. S.

Jeger, George (Goole)

Peart, T. F.

Dalton, Rt. Hon. H.

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

Pentland, N.

Popplewell, E.

Darling, George (Hillsborough)

Jenkins, Roy (Stechford)

Probert, A. R.

Davies, Rt. Hon. Clement (Montgomery)

Johnson, James (Rugby)

Proctor, W. T.

Davies, Stephen (Merthyr)

Johnston, Douglas (Paisley)

Pursey, Cmdr. H.

Delargy, H. J.

Jones, David (The Hartlepools)

Rankin, John

Diamond, John

Jones, Jack (Rotherham)

Redhead, E. C.

Dodds, N. N.

Jones, J. Idwal (Wrexham)

Reeves, J.

Donnelly, D. L.

Jones, T. W. (Merioneth)

Reid, William

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

Kenyon, C.

Reynolds, G. W.

Ede, Rt. Hon. J. C.

Key, Rt. Hon. C. W.

Rhodes, H.

Edelman, M.

King, Dr. H. M.

Roberts, Albert (Normanton)

Edwards, Rt. Hon. Ness (Caerphilly)

Lawson, G. M.

Roberts, Goronwy (Caernarvon)

Edwards, Robert (Bilston)

Lee, Frederick (Newton)

Shurmer, P. L. E.

Edwards, W. J. (Stepney)

Lever, Harold (Cheetham)

Silverman, Julius (Aston)

Evans, Albert (Islington, S. W.)

Lever, Leslie (Ardwick)

Silverman, Sydney (Nelson)

Evans, Edward (Lowestoft)

Lewis, Arthur

Simmons, C. J. (Brierley Hill)

Fernyhough, E.

Lindgren, G. S.

Skeffington, A. M.

Fletcher, Eric

Logan, D. G.

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

Fraser, Thomas (Hamilton)

Mabon, Dr. J. Dickson

Smith, Ellis (Stoke, S.)

Sorensen, R. W.

Usborne, H. C.

Williams, David (Neath)

Soskice, Rt. Hon. Sir Frank

Viant, S. P.

Williams, Rev. Llywelyn (Ab'tillery)

Sparks, J. A.

Wade, D. W.

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

Spriggs, L.

Warbey, W. N.

Wilson, Rt. Hon. Harold (Huyton)

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

Watkins, T. E.

Winterbottom, Richard

Summerskill, Rt. Hon. E.

Weitzman, D.

Woodburn, Rt. Hon. A.

Sylvester, G. O.

Wells, Percy (Faversham)

Yates, V. (Ladywood)

Taylor, Bernard (Mansfield)

Wells, William (Walsall, N.)

Zilliacus, K.

Taylor, John (West Lothian)

West, D. G.

Thomas, George (Cardiff)

Wheeldon, W. E.

TELLERS FOR THE AYES:

Thomas, Iorwerth (Rhondda, W.)

White, Mrs. Eirene (E. Flint)

Mr. J. T. Price and Mr. Short.

NOES

Aitken, W. T.

Grosvenor, Lt.-Col. R. G.

Noble, Comdr. Rt. Hon. Allan

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

Gurden, Harold

Noble, Michael (Argyll)

Alport, C. J. M.

Harris, Frederic (Croydon, N. W.)

Nugent, G. R. H.

Amory, Rt. Hn. Heathcoat (Tiverton)

Harrison, A. B. C. (Maldon)

Oakshott, H. D.

Anstruther-Gray, Major Sir William

Harrison, Col. J. H. (Eye)

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

Arbuthnot, John

Harvey, Sir Arthur Vere (Macclesf'd)

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

Armstrong, C. W.

Harvey, John (Walthamstow, E.)

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

Ashton, H.

Heald, Rt. Hon. Sir Lionel

Page, R. G.

Atkins, H. E.

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

Pannell, N. A. (Kirkdale)

Baldwin, Sir Archer

Henderson-Stewart, Sir James

Partridge, E.

Balniel, Lord

Hesketh, R. F.

Peel, W. J.

Barber, Anthony

Hicks-Beach, Maj. W. W.

Peyton, J. W. W.

Barlow, Sir John

Hill, Mrs. E. (Wythenshawe)

Pickthorn, K. W. M.

Barter, John

Hirst, Geoffrey

Pike, Miss Mervyn

Batsford, Brian

Hobson, John (Warwick & Leam'gt'n)

Pilkington, Capt. R. A.

Baxter, Sir Beverley

Holland-Martin, C. J.

Pitman, I. J.

Beamish, Col. Tufton

Hope, Lord John

Price, David (Eastleigh)

Bell, Ronald (Bucks, S.)

Hornby, R. P.

Price, Henry (Lewisham, W.)

Bennett, Dr. Reginald

Horobin, Sir Ian

Ramsden, J. E.

Bevins, J. R. (Toxteth)

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

Rawlinson, Peter

Biggs-Davison, J. A.

Hughes-Young, M. H. C.

Redmayne, M.

Bingham, R. M.

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

Rees-Davies, W. R.

Bishop, F. P.

Hyde, Montgomery

Renton, D. L. M.

Black, C. W.

Hylton-Foster, Rt. Hon. Sir Harry

Ridsdale, J. E.

Body, R. F.

Jenkins, Robert (Dulwich)

Roberts, Sir Peter (Heeley)

Boyle, Sir Edward

Jennings, J. C. (Burton)

Roper, Sir Harold

Braine, B. R.

Jennings, Sir Roland (Hallam)

Ropner, Col. Sir Leonard

Braithwaite, Sir Albert (Harrow, W.)

Johnson, Dr. Donald (Carlisle)

Russell, R. S.

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

Johnson, Eric (Blackley)

Scott-Miller, Cmdr. R.

Joseph, Sir Keith

Sharples, R. C.

Bullus, Wing Commander E. E.

Keegan, D.

Shepherd, William

Campbell, Sir David

Kerr, Sir Hamilton

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

Carr, Robert

Kershaw, J. A.

Smithers, Peter (Winchester)

Cary, Sir Robert

Lambton, Viscount

Spearman, Sir Alexander

Chichester-Clark, R.

Langford-Holt, J. A.

Speir, R. M.

Cole, Norman

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

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

Craddock, Beresford (Spelthorne)

Legh, Hon. Peter (Petersfield)

Stanley, Capt. Hon. Richard

Crosthwaite-Eyre, Col. O. E.

Lindsay, Martin (Sollhull)

Stevens, Geoffrey

Crowder, Sir John (Finchley)

Linstead, Sir H. N.

Steward, Harold (Stockport, S.)

Crowder, Petre (Ruislip—Northwood)

Llewellyn, D. T.

Steward, Sir William (Woolwich, W.)

Currie, G. B. H.

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

Stoddart-Scott, Col. Sir Malcolm

Dance, J. C. G.

Lloyd, Rt. Hon. Selwyn (Wirral)

Stuart, Rt. Hon. James (Moray)

Davidson, Viscountess

Longden, Gilbert

Studholme, Sir Henry

D'Avigdor-Goldsmid, Sir Henry

Low, Rt. Hon. Sir Toby

Summers, Sir Spencer

Deedes, W. F.

Lucas, P. B. (Brentford & Chiswick)

Taylor, Sir Charles (Eastbourne)

Donaldson, Cmdr. C. E. McA.

Lucas-Tooth, Sir Hugh

Taylor, William (Bradford, N.)

Doughty, C. J. A.

Macdonald, Sir Peter

Teeling, W.

du Cann, E. D. L.

Mackeson, Brig. Sir Harry

Temple, John M.

Eden, J. B. (Bournemouth, West)

McKibbin, Alan

Thomas, Leslie (Canterbury)

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

Mackie, J. H. (Galloway)

Thompson, Kenneth (Walton)

Emmet, Hon, Mrs. Evelyn

McLaughlin, Mrs. P.

Thompson, R. (Croydon, S.)

Errington, Sir Eric

Maclean, Sir Fitzroy (Lancaster)

Thorneycroft, Rt. Hon. P.

Fell, A.

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

Thornton-Kemsley, Sir Colin

Finlay, Graeme

Macmillan, Rt. Hn. Harold (Bromley)

Tiley, A. (Bradford, W.)

Fisher, Nigel

Macmillan, Maurice (Halifax)

Tilney, John (Wavertree)

Fletcher-Cooke, C.

Macpherson, Niall (Dumfries)

Vosper, Rt. Hon. D. F.

Fort, R.

Maddan, Martin

Wakefield, Edward (Derbyshire, W.)

Fraser, Sir Ian (M'cmbe & Lonsdale)

Manningham-Buller, Rt. Hn. Sir R.

Wakefield, Sir Wavell (St. M'lebone)

Gammans, Lady

Markham, Major Sir Frank

Wall, Patrick

Garner-Evans, E. H.

Marlowe, A. A. H.

Ward, Dame Irene (Tynemouth)

George, J. C. (Pollok)

Maudling, Rt. Hon. R.

Webbe, Sir H.

Gibson-Watt, D.

Mawby, R. L.

Webster, David

Glyn, Col. Richard H.

Milligan, Rt. Hon. W. R.

Whitelaw, W. S. I.

Gough, C. F. H.

Mott-Radclyffe, Sir Charles

Williams, Paul (Sunderland, S.)

Gower, H. R.

Nabarro, G. D. N.

Wills, Sir Gerald (Bridgwater)

Graham, Sir Fergus

Nairn, D. L. S.

Wilson, Geoffrey (Truro)

Grant, Rt. Hon. W. (Woodside)

Neave, Airey

Woollam, John Victor

Green, A.

Nicholls, Harmar

Yates, William (The Wrekin)

Gresham Cooke, R.

Nicholson, Sir Godfrey (Farnham)

Grimston, Hon. John (St. Albans)

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

TELLERS FOR THE NOES:

Mr. Brooman-White and Mr. Bryan.

Mr. Frank Beswick: I beg to move, in page 14, line 31, at the end to insert:
Provided that in relation to any trade or business carried on by any society registered under the Industrial and Provident Societies Acts, 1893–954, or under the Industrial and Provident Societies Acts (Northern Ireland) 1893–1955, this subsection shall not have effect and accordingly the profits tax shall be charged at the rate of three per cent. of the profits computed without allowing any deduction for dividends, bonuses, and similar distributions to members on their shares in the society.
There has been a formidable attack upon the Paymaster-General's argument for uniformity and logic, and I am hoping that the cumulative effect of this attack has brought him to the point where he feels that he ought now to make a concession and take into account something other than just uniformity, tidiness and this so-called logic.
I want to make it clear at the outset that the effect of this Amendment, which should be considered together with the Amendment in Clause 21, page 15, leave out lines 23 to 26, is not to reduce the liability of the industrial and provident societies at all as compared with the position obtaining prior to this year's Budget. These two Amendments seek to put back those societies registered under the Industrial and Provident Societies Acts to the position in which they were at the beginning of this year. That in itself is a very modest request, and, indeed, several hon. Members have expressed surprise to me at the limited character of this Amendment.
After all, others are getting some reduction this year. The Budget as a whole tended to ease taxation. The Chancellor himself said on 15th April:
"… I can justifiably give up some small amount of revenue…."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 59.]
That, of course, is what he proceeded to do. He gave up some small amount of revenue to various bodies and sections of taxpayers.
I ask the right hon. Gentleman, when he is applying logic—he has been applying it so far to a very narrow consideration—what is the logic in giving up some small amount of revenue to various bodies and sections of taxpayers and then, when we come to the societies referred to in this Amendment, he is not leaving them as they were but he is, in fact, increasing their liability? I could
1154
have understood this if we were in some emergency, if we were having to scrape the bottom of the barrel, but we are in a year in which the Chancellor has felt able to make concessions amounting altogether to £108 million.
This Bill now increases the liability of co-operative societies by no less than £1·3 million a year—and this in a year when even within the Profits Tax there is a reduction in the liabilities of other companies amounting to £16 million a year while the building societies, whose case we were discussing earlier, have got a reduction in their liability of about £1 million a year.
Each co-operative society of which I am speaking has a separate calculation, and I am not proposing to give details of the individual cases, though I have no doubt that some of my hon. Friends could give quotations. But, in general, the effect of the changes in this Bill is to increase the liability of each society by twice as much as it was before. Some will pay a little less; some will have a liability amounting to three times that of last year, but in the main the effect will be to double the liability to Profits Tax. I cannot think that that is the result which the Chancellor either expected or desired.
Let us look again at the reasons which have been given for these changes. There is the first reason given by the Chancellor, supported by the Paymaster-General earlier today, that one rate of tax will be more simple, convenient and economic from the administrative point of view. I agree that the previous calculations were rather complicated. But they did not apply to co-operative societies. They paid at one rate of tax previously. There is no administrative advantage at all in this proposed change.
Then there is the argument that the differential rate led to distortion in the capital structure of companies. It is conceivable that the old lower rate for undistributed profits led some companies to retain some of the surplus which might otherwise have been distributed to shareholders. After all, that was its purpose. But it is also conceivable that some companies might have retained money which they could not immediately use. It is further conceivable—we can accept it for the purpose of argument—that some shareholders, if they were given a higher

1155
dividend, might well have reinvested the money in other companies where the money could have been more profitably employed.
Again, none of these considerations apply to the co-operative societies. Take, for example, a society such as that in which I have invested some money since I was a child—the Hucknall Torkard industrial and Provident Society. A member of that society would not go to the Barnsley British or to the Royal Arsenal to invest his money at a higher rate. That is not feasible and it does not apply. Apart from other considerations, a co-operative society is restricted by law in the interest which it pays on share capital.
In the second place—and this is an important consideration—a co-operative society did not have to retain surplus in order to evade tax or to reduce its liability. If it had really wanted to be obstinate and had wanted to avoid all taxation it could have distributed all its surplus as a dividend to customers on purchases. But I cannot really believe that that is what the Chancellor wishes to encourage.
That brings me to the other reasons which the Chancellor has given for this change. He has said that he wishes to strengthen the financial structure of industry and that he wishes to improve the supply of capital. On another occasion he said that he wanted to help in modernising and expanding our industrial system. But he does none of those things by means of this change as it applies to the co-operative societies. If he imposes this extra tax on the societies, he will not be encouraging them or helping them to expand, and he will not be improving their supply of capital. He will be putting pressure on them to pay more and more money in the form of dividends on purchases rather than ploughing it back into the development of their service to consumers. Here again, there is a difference as regards co-operative societies or societies registered under the Industrial and Provident Societies Acts and other companies in that the former cannot attract more capital by increasing their interest on shares. Their share interest is, of course, restricted by law. There can be no argument about it.
1156
Is it really the Chancellor's purpose to prevent capital accretion in and the expansion of the Co-operative movement? I ask him, a former Minister of Agriculture who knows something about the growing movement of agricultural co-operation, particularly in his own part of the world, whether he wants to make it more difficult for the agricultural co-operatives to collect more capital so that they can increase their service to farmers. Does he really wish to hamper their growth? I should have thought that the Chancellor, who has some interest in these principles, I know, and has a particular interest in agriculture, would have wished to go out of his way to help farmers to help themselves in reducing the costs of agriculture.
7.30 p.m.
Not one of the economic and administrative advantages claimed for this unification of Profits Tax applies to co-operative societies. So far, we have not had any justification at all on economic or administrative grounds for increasing the old flat rate as it applies to the industrial and provident societies to a new and higher flat rate. All that the Chancellor has been able to say, and all that the right hon. Gentleman said in reply to other arguments advanced earlier today, is that these changes placed all societies on, as he put it, precisely the same basis as other bodies. His other defence is that, in any case, the Royal Commission suggested that the changes should be made.
As regards the recommendations of the Royal Commision, not all of them has been accepted, and I should not have thought that that was a conclusive argument. In any case, this change does not put the industrial and provident societies on precisely the same basis as other companies, nor did the Royal Commission suggest that they should be so placed. The Royal Commission recommended, and the Chancellor agreed, that societies should be put on a different basis as regards interest on share capital. The Royal Commission accepted the principle that there was something very different between a society formed to give a service to its members and a company formed to make a profit on subscribed capital. The argument about putting them all on the same basis does not really carry very much weight. Moreover, I maintain that there is

1157
nothing at all in the Report of the Royal Commission which can be construed as recommending an increase in the burden of taxation upon co-operative societies, especially when the burden is being reduced elsewhere.
The Minister quoted from the Report several times. There are four paragraphs on page 169 dealing with industrial and provident societies. Three of those four paragraphs deal with the taxation history, and the fourth contains a recommendation that the societies should be given a concession, namely, that because the distinction between a society member and a creditor by deposit is such a fine one the interest on shareholdings ought not to attract Profits Tax. Indeed, the Commission goes further and apologises for not recommending immediate relief in this matter which it admits in logic it would be justified in doing. The only reference in the Report which can be held to justify this upward revision is contained in the few words the Minister quoted earlier, in paragraph 562:
"The main principle … is that a tax on the profits … should apply to all profits without distinction".
This is very nice and tidy, but I support what was said earlier today about niceness, tidiness and administrative convenience not being the only considerations that we should apply in taxation matters. In any case, as I said, the Report itself breaches this principle when it goes on to argue firmly that there is a difference between so-called profits in these societies and the profits of companies registered under the Companies Act.
The Commission itself points out very clearly what the differences are. In paragraph 572, it says:
"A member of one of these societies is not in a position easily comparable with that of an ordinary shareholder. There is a limit on the number of shares he can hold: his voting power is not pro rata to his shareholding; and, unless the rules of his society prescribe otherwise, he can withdraw the money represented by his share on notice."
The Commission goes on to emphasise the democratic character of the society—one member one vote.
The Commission could have pointed out that there was no such thing as capital appreciation in these societies. The Report says elsewhere that, to a large extent, the capital collected is reinvested in Government securities and the Co-operative movement is largely a small
1158
savings movement. It is, indeed, a movement which has done as much as, if not more than, any other organisation to encourage thrift. The Commission could have said that the movement has done a lot to keep down the cost of living. It could have pointed out that the system of co-operation was enabling farmers to pioneer new methods of marketing and self-supply and feed and fertilisers.
We are told today that the fight is against inflation. I should have thought that the Government would have departed from their narrow application of logic and considered what could be done to help in the fight against inflation. They ought to have considered what they could do to help thrift and self-help. How can we encourage the democratic principle, how to encourage this collective effort to cut down the cost of living? One would have expected the Government to have gone out of their way to encourage an organisation doing those things. But, instead of doing that, they have contrived to penalise the movement in a way which I cannot really believe was intended.
I am not here asking for concessions. We are not asking for the same reductions in the tax liability which the Chancellor has extended to private companies. We are pointing out that these changes as they apply to the societies have the curious effect of increasing their liability, with the result that this admirable sector of our economy is being harmed. If I may say so, the Financial Secretary listened very carefully when some of us went on a deputation to see him recently, and I hope very much that the right hon. Gentleman this evening will, on reflection, accept the Amendment.
Mr. A. E. Oram: The theme running through the replies of the Paymaster-General to the series of debates we have had today has been that the intention behind the changes in Profits Tax is to treat everything in the same way, to treat distributed profits in the same way as undistributed profits, to treat all kinds of organisations in precisely the same way.
My hon. Friend the Member for Uxbridge (Mr. Beswick) has pointed to some very significant differences between co-operative societies, on the one hand, and ordinary companies on the other. In my view, it cannot be too often said that

1159
the two types of organisation are entirely different in their financial structure and in the purposes they seek to serve. It is, therefore, wrong to suggest that justice can be done by imposing the same type of tax on both.
I wish to point to a significant difference which exists between co-operative societies and private companies in the setting aside of retained profits or reserves and the different considerations that are applied by a co-operative board of directors as compared with the board of an ordinary company.
I should like the Committee to consider the two boardrooms and the decisions that have to be taken in those boardrooms. I think that the Committee will agree that they are completely different decisions. In the boardroom of the private company there are people who have been elected by the shareholders, and the directors are appointed to serve the financial interests of the shareholders. In the boardroom of the co-operative society there are people elected by the consumer members and it is their purpose to serve the interests of the consumers.
When it is considered how much should be distributed and how much should be retained in reserve, there is a significant difference. It is true that in the company it is an important decision, perhaps a difficult decision, but it is not a tremendously burdensome decision. If it is decided to increase the dividend, that is obviously a direct advantage to the shareholders, but if, on the other hand, it is decided to retain the profits in the company it is an indirect, although not a very indirect, advantage to the shareholders as well, because the ploughing back of reserves in that way increases the capital value of the shareholding, and the individual shareholder can sell his shares on the Stock Exchange and reap the benefit which derives from the ploughing back of profits.
But that decision does not apply with regard to the Co-operative movement. The dilemma which the board of directors of the co-operative society has to face is this. Their whole urge, the whole purpose and point of co-operative activity, is to distribute the "divi" to the consumer member. It is the purpose of the board of the co-operative society to
1160
give the consumer member a deferred price reduction. In that way, a decrease in the cost of living is effected. However, there is also, obviously, the need to conserve resources. If the directors decide to plough the reserves back—and this is the significant difference between the two organisations—then the shareholder, the consumer member, reaps no direct personal advantage from the ploughing back of the reserves. Unlike the share in a company, his co-operative share is not realisable on any market. He can only put money into the society and withdraw it. He cannot sell his share to another member and he cannot reap any capital value.
In my judgment, that is a most significant difference. It means that the ploughing back of reserves into a co-operative society is an extremely difficult decision for co-operative boards of directors to make. I know, because I have wrestled with the same problem many times. This is revealed by the fact that co-operative societies have found themselves able to plough back in that way only about 4 per cent. of the surplus, whereas with companies the proportion is nearer 50 per cent. This shows that there is a fundamental difference between the two types of organisation.
7.45 p.m.
That is why we say that it is wrong and directly harmful to the co-operative society to impose a 10 per cent. tax upon the reserves which it ploughs back. It will double the dilemma which a thousand co-operative boardrooms are facing twice every year, and it will distincly hamper the development of co-operative enterprise. We hear from time to time that the benches opposite are filled with people who are friendly in their disposition towards the Co-operative movement. In their actions and decisions on occasions such as this we find that the opposite is very often the case. Tonight, we have a test whether they will pursue the policy of taxing co-operative societies in a way which will hamper co-operative development, or whether they will accept the Amendment and do justice to the Co-operative movement.
Mr. John Rankin: My hon. Friend the Member for East Ham, South (Mr. Oram) contrasted the difference between the ordinary company and the co-operative society. I think I

1161
should pursue the point a little further and contrast those who support the ordinary company and those who support the Co-operative movement. There is a very important difference, because the majority of those who carry on the main activity of the co-operative society are women of the working class. Their purchases, such as food, clothing, furniture and household necessities, are made in the co-operative society.
I think it can be safely said—and I know that this is true all over Scotland—that few of those women have the faintest interest in what goes on in ordinary companies. Stocks and shares are unknown quantities to them. Their primary interest in purchasing in the Co-operative movement is that, by their purchases and as a consequence of them, a little surplus will accumulate in their local store which will be to their credit. It is something that is apart from the income of the husband, something that the woman acquires. It is a little extra of her own which derives from her loyalty to the Co-operative movement.
My hon. Friend has suggested that 4 per cent. of that surplus is left to the societies for investment. At the end of every quarter in my local society five days have to be set aside for the women of the south side of Glasgow to draw out the little money that has been stored up as a result of their purchases in the society to help to supply in many cases their homes with still more of the amenities of life.
The danger is that the Chancellor of the Exchequer is going to limit these desirable activities. The Scottish Co-operative Wholesale Society, which is the wholesale organisation in Scotland, will pay £80,000 extra in tax. St. Cuthbert's Society, which is the largest retail society in Scotland, will be taxed £90,000 more. I should imagine, although I have no firm figures, that my own society, Glasgow South, will probably have to find £60,000 more. These amounts must come off what is paid at the end of the quarter to the women of whom I have been speaking. I am sure that that is something that the Chancellor of the Exchequer does not want to happen.
It is unfair to try to treat in the same way organisations which are fundamentally different, as the right hon. Gentleman is trying to do. That has been said
1162
by both of my hon. Friends and I apologise for saying it again, but it is a fundamental objection. We cannot treat the private company and the co-operative society in the same way, because, fundamentally, their methods of trading and their purpose are entirely different.
In this way, the Government are penalising thousands upon thousands, if not millions, of women all over the country who derive some little benefit from these simple transactions. I am sure that the right hon. Gentleman does not want to do that, and I hope that when he replies the Paymaster-General will say that that is not his intention and that he will take appropriate steps to remedy what he has done.
Mr. Maudling: The hon. Member for Uxbridge (Mr. Beswick), who moved the Amendment, and his hon. Friends who have supported it clearly have a great knowledge of the Co-operative movement and its activities. In dealing with the Amendment, I will try to deal as clearly and as cogently as possible with the basis upon which the new tax treatment of co-operative societies is to be based.
In the Bill, we are carrying out exactly the recommendations of the Royal Commission. The hon. Member for Uxbridge questioned this, but, looking at them again, I cannot see how we have in any way departed from the recommendations of the Royal Commission. That, however, is not my main argument. The argument I want to make is that this new system will be a fair and equitable way of taxing the profits of co-operative societies, a subject which has in the past been the cause of much controversy on both sides.
It has been said by one or two hon. Members that I have used the argument that all profits should be treated alike. What I meant to say—perhaps I did not make myself entirely clear—was that all trading profits, properly computed, should bear Profits Tax at the same rate. That is the principle of the Royal Commission. In computing what are to be treated as trading profits, however, one must take into account the circumstances of each type of organisation. That is why the Commission recommended that in computing the profits of co-operative societies they should be treated differently from the profits of private companies. That is absolutely right, for

1163
reasons which hon. Members have advanced. The Commission said that once the trading profits had been computed they should be taxed at the same rate as for other companies.
There has always been a certain amount of prejudice in the subject of the tax treatment of co-operatives, arising partly from the confusion between the two different types of dividend. I have often heard it argued that the ordinary "divi" which is paid out to people should be taxed. Of course it should not. That was always a bad argument. It is a rebate or, in effect, a reduction in price. On the other hand, there is the particular position of the dividend which is paid on the shareholdings in the co-operative societies, which has not been allowed as a deduction in computing the liability of the co-operative societies to Profits Tax. A proportion of that has, however, been allowed on the argument that of the money involved, the greater part—say, 80 per cent., if that is the figure—is normally lent to the Co-operative Wholesale Society and represents a form of loan and not money employed in a business. That was recognised by the Royal Commission and is accepted in the Bill. It is a point upon which the co-operative societies have a strong case, which has been acknowledged.
Broadly speaking, as the Commission said in paragraph 572,
"the distinction between a member and a mere creditor by deposit becomes a very fine one."
Therefore, the members of the societies are being treated for this purpose as depositors and the so-called dividend which is paid to shareholders is treated, as it ought to be, as a fixed interest payment on a loan and not as a dividend on an equity participation. That being so, the proper, logical and fair treatment has been arrived at by the Royal Commission and by the Bill in computing what should be the profits upon which the societies should pay Profits Tax. They will be only the profits earned by trading and retained in the business as retained profits. The money paid out as "divi" and the money paid out as dividends upon the shareholdings will be treated as expenses to be taken into account before settling what are the trading profits.
1164
Therefore, as I understand, the only sums which will be subject to Profits Tax will be that part of the trading profits of the societies which they plough back into the business. The hon. Member for East Ham, South (Mr. Oram) said this in his description of what was happening.
The question is whether the amount ploughed back into the business of co-operative societies should be taxed at the general rate or at a special lower rate. The argument for taxing it at the same rate is overwhelmingly strong. There can be no question here, as was raised on previous Amendments, of whether these are trading activities. Of course these societies are engaged in trading activities and they are earning trading profits. What is more—this is the overwhelming reason—they are engaged in direct competition with other people and other enterprises. They are engaged directly in competition with small private businesses and individuals, who, however, do not pay Profits Tax. The money that the societies plough back into the expansion and strengthening of their business is the same as the money ploughed back by the private trading concern into the strengthening and expansion of its business.
Mr. Beswick: Would the right hon. Gentleman not agree that the individual private tradesman does not pay Profits Tax?
Mr. Maudling: That is what I said. Perhaps I was speaking too fast and the hon. Member did not hear me. The Profits Tax applies not to individuals, but to companies. It is true that there have been the abatement provisions, but they apply to co-operatives as much as to anybody else. In so far as people competing with co-operatives pay Profits Tax, my argument is that they should pay it on the same basis as their competitors.
Mr. Oram: Does the right hon. Gentleman not recognise that these changes are having the effect of reducing the Profits Tax levied on the large competitors of the Co-operative movement and will put up the Profits Tax that the Co-operative movement is to pay?
Mr. Maudling: My argument is that they should both be placed on a fair basis. I do not see how it can be said to be fair that when two businesses are competing against one another and ploughing back profits to expand their

1165
business and strengthen their competitive power, one should be taxed on its retained profits at a higher rate than the other. That is a strong, if not overwhelming, argument in this case.
Reference has been made to the deputation that was received by my hon. and learned Friend the Financial Secretary. I assure hon. Members that all the arguments which have been put forward have been carefully studied and analysed. Nevertheless, we come back to the basic proposition, which the Government consider is decisive, that when there is direct competition between trading concerns, they should pay tax on their retained profits on the same basis. That is the reason why I cannot accept the Amendment.
Mr. Roy Jenkins: The Paymaster-General has ploughed on, rejecting a whole series of Amendments on roughly similar grounds. It is noticeable that as he has gone on the Government majority has shrunk steadily. I hope that, from the right hon. Gentleman's point of view, it will not go down much further. It was very low on the last occasion, and I am not sure that it can sustain many more appeals to strict logic on the part of the right hon. Gentleman.
As I understood his argument, the view of the Government is that until the Budget was brought in the taxation position relating to co-operative societies placed them at an unfair advantage as compared with other trading concerns. This must be the viewpoint of the Government if they believe, as is apparent, that a redistribution of the burden in favour of the great majority of private retail businesses and against co-operative societies produces a fairer sharing of the burden. The right hon. Gentleman shakes his head, but I cannot see to what other conclusion his argument can lead.
8.0 p.m.
Mr. Maudling: My argument was solely designed to show what would be the fair and proper way to treat co-operative societies in the entirely new context of unified Profits Tax, not a differential Profits Tax.
Mr. Jenkins: The right hon. Gentleman must not rest his case too much on rather metaphysical considerations of what should be the proper tax in a new, logical position.
1166
The fact remains that as the result of the change the co-operative societies will pay more and the private retailers will pay less. If the right hon. Gentleman regards that as a fair position he must have regarded the previous position as not being fair. That is not a position we have heard him take before. If the Government and the right hon. Gentleman have changed their view there is a large element of the ex post facto about the argument in favour of the position being brought about.
The right hon. Gentleman in a sense redefined and advanced to some extent his logical position in saying that the Government were overwhelmingly concerned that the rate of tax should be uniform and that it is a matter of comparative unimportance what should be the basis of the tax.
Mr. Maudling: I was explaining what the Royal Commission said, that the rate of tax on profits should be the same when we have computed the profits, but that when we apply the same principles of computation of profits to different circumstances we do get different results. It is perfectly simple. It is exactly the same principle as has always obtained with Income Tax.
Mr. Jenkins: Let us deal with what the Government believe rather than what the Royal Commission said. It is perfectly true that in this case the Government and the Royal Commission, at any rate the majority of the Royal Commission, march alongside one another, but the right hon. Gentleman knows perfectly well that there have been cases where, rightly, the Government have not been prepared to accept the Royal Commission's recommendations. While we should have at the back of our minds what the Royal Commission said, what we have to deal with are the Government's proposals and not the Royal Commission's arguments.
The Government, I understood the right hon. Gentleman to say, thought there was room for change, and indeed a change has been made, and that there was room for differences in the methods by which the basis of Profits Tax could be calculated, but that there was no room for difference in the weight of the tax. This amounts to a redefinition of the position which the right hon. Gentleman previously took up.

1167
I do not understand that the Government's logic in this respect carries them to such an extent that they would have complete exemption in the case of overseas trading corporations which, I should have thought, to some extent, whatever the rights and wrongs of that, would offend against the exact logic of the Government's position.
I return upon this Amendment to a point I made on a previous Amendment. We must judge the position which we are discussing and have been discussing previously not only by the theory behind it but by its practical effects. The practical effects of the position in which the Government now place the co-operative societies will be extremely difficult and anomalous, because we are not merely moving, as we have done with companies generally, from the state of affairs in which there was a substantial incentive not to distribute but to plough back profits to one in which we say that whether they distribute or not they pay the tax. For the co-operative societies there will be a positive incentive to distribute as much as they possibly can on dividends on purchases. The more conservative is the distribution policy of a co-operative society, the more anxious it is to plough back and to extend its business, the greater will be the amount of Profits Tax which it will be liable to pay. That seems to me to be a very odd position for the Government to create. The right hon. Gentleman shakes his head with great consistency tonight in one direction.
Mr. Maudling: It is exactly the same as the position of the private trader. One might say that it gave him an incentive to reduce prices and so to reduce profits. It is the same thing exactly.
Mr. Jenkins: No. I think the right hon. Gentleman is not quite right in that. The Profits Tax falls on both the distributed profits and the undistributed profits of the private trader. To the co-operative societies we are saying that it shall fall on their undistributed profits, and so
saying to any society in particular that its liability shall be greater the more it ploughs back to extend business. It is surely the case that if we have two co-operative societies which make exactly the same amount of profit and one, being perhaps a more dynamic society, is anxious to plough back a larger proportion of its profit and to pursue a more conservative dividend policy, that society shall have a higher liability to Profits Tax than the other society.
I am glad I have at last got the right hon. Gentleman shaking his head in one direction rather than the other. Thus we have now elucidated, with some difficulty, that this is the right hon. Gentleman's view of the position. I cannot think that he will not think that this is an odd position and certainly a great departure from the previous position of business generally that there should be a positive incentive to plough back. What this Clause as a whole does is to remove the general incentive to plough back, but for co-operative societies it goes fully in the other direction and gives them a positive incentive not to plough back. That seems to me to be a very undesirable and very anomalous position.
I think that my hon. Friends have made out overwhelmingly the case that co-operative societies are in a different position from the general run of private companies. In view if this, and of the fact that the Government have now created for co-operative societies a position in which they are penalised by ploughing back their profits, and that the Budget, on the whole, makes some concessions but singles, out co-operatives in these circumstances, with a limited number of other concerns, and puts them in a position of having to pay substantially more tax, I am sure that my right hon. and hon. Friends will wish to press this matter to a Division.
Question put: That those words be there inserted:—
The Committee divided: Ayes 178, Noes 215.

Division No. 182.]

AYES

[8.8 p.m.

Ainsley, J. W.

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

Bottomley, Rt. Hon. A. G.

Albu, A. H.

Benson, Sir George

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

Allen, Arthur (Bosworth)

Beswick, Frank

Braddock, Mrs. Elizabeth

Awbery, S. S.

Blenkinsop, A.

Brockway, A. F.

Bacon, Miss Alice

Blyton, W. R.

Broughton, Dr. A. D. D.

Balfour, A.

Boardman, H.

Brown, Rt. Hon. George (Belper)

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

Bonham Carter, Mark

Brown, Thomas (Ince)

Burke, W. A.

Hynd, J. B. (Attercliffe)

Popplewell, E.

Burton, Miss F. E.

Irvine, A. J. (Edge Hill)

Probert, A. R.

Butler, Mrs. Joyce (Wood Green)

Isaacs, Rt. Hon. G. A.

Proctor, W. T.

Champion, A. J.

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

Pursey, Cmdr. H.

Chapman, W. D.

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

Rankin, John

Clunie, J.

Jenkins, Roy (Stechford)

Redhead, E. C.

Collins, V. J.(Shoreditch & Finsbury)

Johnson, James (Rugby)

Reeves, J.

Craddock, George (Bradford, S.)

Johnston, Douglas (Paisley)

Reid, William

Crossman, R. H. S,

Jones, David (The Hartlepools)

Reynolds, G. W.

Dalton, Rt. Hon. H.

Jones, Jack (Rotherham)

Rhodes, H.

Darling, George (Hillsborough)

Jones, J. Idwal (Wrexham)

Roberts, Albert (Normanton)

Davies, Rt. Hon. Clement (Montgomery)

Jones, T. W. (Merioneth)

Roberts, Goronwy (Caernarvon)

Davies, Stephen (Merthyr)

Kenyon, C.

Shurmer, P. L. E.

Deer, G.

Key, Rt. Hon. C. W.

Silverman, Julius (Aston)

Delargy, H. J.

King, Dr. H. M.

Silverman, Sydney (Nelson)

Diamond, John

Lawson, G. M.

Simmons, C. J. (Brierley Hill)

Dodds, N. N.

Lee, Frederick (Newton)

Skeffington, A. M.

Donnelly, D. L.

Lever, Harold (Cheetham)

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

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

Lever, Leslie (Ardwick)

Smith, Ellis (Stoke, S.)

Ede, Rt. Hon. J. C.

Lewis, Arthur

Snow, J, W.

Edelman, M.

Lindgren, G. S.

Sorensen, R. W.

Edwards, Rt. Hon. Ness (Caerphilly)

Logan, D. G.

Soskice, Rt. Hon. Sir Frank

Edwards, Robert (Bilston)

Mabon, Dr. J. Dickson

Sparks, J. A.

Edwards, W. J. (Stepney)

McAlister, Mrs. Mary

Spriggs, Leslie

Evans, Edward (Lowestoft)

MacColl, J, E.

Stonehouse, John

Fernyhough, E.

MacDermot, Nlall

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

Foot, D. M.

McGovern, J.

Summerskill, Rt. Hon. E.

Fraser, Thomas (Hamilton)

McInnes, J.

Sylvester, G. O.

George, Lady Megan Lloyd (Car'then)

McLeavy, Frank

Taylor, Bernard (Mansfield)

Gibson, C. W.

MacPherson, Malcolm (Stirling)

Taylor, John (West Lothian)

Gordon Walker, Rt. Hon. P. C.

Mahon, Simon

Thomas, George (Cardiff)

Greenwood, Anthony

Mainwaring, W. H.

Thomas, Iorwerth (Rhondda, W.)

Grenfell, Rt. Hon. D. R.

Mallalieu, J. P. W. (Huddersfd, -E).

Usborne, H. C.

Grey, C. F.

Mann, Mrs. Jean

Viant, S. P.

Griffiths, William (Exchange)

Wade, D. W.

Grimond, J.

Mason, Roy

Warbey, W. N.

Hall, Rt. Hn. Glenvil (Colne Valley)

Mitchison, G. R.

Watkins, T. E.

Hannan, W.

Morris, Percy (Swansea, W.)

Weitzman, D.

Harrison, J. (Nottingham, N.)

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

Wells, William (Walsall, N.)

Hastings, S.

Mort, D. L.

West, D. G.

Hayman, F. H.

Moss, R.

Wheeldon, W. E.

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

Moyle, A.

Williams, David (Neath)

Herbison, Miss M.

Neal, Harold (Bolsover)

Williams, Rev. Llywelyn (Ab'tillery)

Hewitson, Capt. M.

Oliver, G. H.

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

Hobson, C. R. (Keighley)

Oram, A. E.

Wilson, Rt. Hon. Harold (Huyton)

Holman, P.

Oswald, T.

Winterbottom, Richard

Houghton, Douglas

Owen, W. J.

Woodburn, Rt. Hon. A.

Howell, Charles (Perry Barr)

Padley, W. E.

Yates, V. (Ladywood)

Howell, Denis (All Saints)

Palmer, A. M. F.

Zilliacus, K.

Hoy, J. H.

Pargiter, G. A.

Hughes, Emrys (S. Ayrshire)

Paton, John

TELLERS FOR THE AYES

Hughes, Hector (Aberdeen, N.)

Pearson, A.

Mr. J. T. Price and

Hunter, A. E.

Peart, T. F.

Mr. G. H. R. Rogers.

Hynd, H. (Accrington)

Pentland, N.

NOES

Agnew, Sir Peter

Braithwaite, Sir Albert (Harrow, W.)

Finlay, Graeme

Aitken, W. T.

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

Fisher, Nigel

Alport, C. J. M.

Brooman-White, R. C.

Fletcher-Cooke, C.

Amory, Rt. Hn. Heathcoat (Tiverton)

Bryan, P.

Fort, R.

Anstruther-Gray, Major Sir William

Bullus, Wing Commander E. E.

Fraser, Hon. Hugh (Stone)

Arbuthnot, John

Campbell, Sir David

Fraser, Sir Ian (M'cmbe & Lonsdale)

Armstrong, C. W.

Carr, Robert

Gammans, Lady

Ashton, H.

Cary, Sir Robert

Garner-Evans, E. H.

Baldwin, Sir Archer

Chichester-Clark, R.

George, J. C. (Pollok)

Balniel, Lord

Cole, Norman

Glyn, Col. Richard H.

Barber, Anthony

Cooper, A. E.

Godber, J. B.

Barlow, Sir John

Craddock, Beresford (Spelthorne)

Gough, C. F. H.

Barter, John

Crosthwaite-Eyre, Col. O. E.

Gower, H. R.

Batsford, Brian

Crowder, Sir John (Finchley)

Graham, Sir Fergus

Baxter, Sir Beverley

Crowder, Petre (Ruislip—Northwood)

Grant, Rt. Hon. W. (Woodside)

Beamish, Col. Tufton

Currie, G. B. H.

Green, A.

Bell, Ronald (Bucks, S.)

Dance, J. C. G.

Gresham Cooke, R.

Bennett, Dr. Reginald

Davidson, Viscountess

Grimston, Hon. John (St. Albans)

Bevins, J. R. (Toxteth)

D'Avigdor-Goldsmid, Sir Henry

Grosvenor, Lt.-Col. R. G.

Biggs-Davison, J. A.

Deedes, W. F.

Gurden, Harold

Bingham, R. M.

Donaldson, Cmdr. C. E. McA.

Harris, Frederic (Croydon, N. W.)

Bishop, F. P.

Doughty, C. J. A.

Harrison, A. B. C. (Maldon)

Black, C. W.

du Cann, E. D. L.

Harrison, Col. J. H. (Eye)

Body, R. F.

Eden, J. B. (Bournemouth, West)

Harvey, Sir Arthur Vere (Macclesf'd)

Bossom, Sir Alfred

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

Harvey, John (Walthamstow, E.)

Boyle, Sir Edward

Errington, Sir Eric

Heald, Rt. Hon. Sir Lionel

Braine, B. R.

Fell, A.

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

1170

1171

Henderson-Stewart, Sir James

Maddan, Martin

Sharples, R. C.

Hesketh, R. F.

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

Shepherd, William

Hicks-Beach, Maj. W. W.

Manningham-Buller, Rt. Hon. Sir R.

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

Hill, Mrs. E. (Wythenshawe)

Markham, Major Sir Frank

Smithers, Peter (Winchester)

Hirst, Geoffrey

Marlowe, A. A. H.

Spearman, Sir Alexander

Hobson, John (Warwick & Leam'gt'n)

Marshall, Douglas

Speir, R. M.

Holland-Martin, C. J.

Maudling, Rt. Hon. R.

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

Hope, Lord John

Mawby, R. L.

Stanley, Capt. Hon. Richard

Hornby, R. P.

Medlicott, Sir Frank

Stevens, Geoffrey

Horobin, Sir Ian

Milligan, Rt. Hon. W. R.

Steward, Harold (Stockport, S.)

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

Mott-Radclyffe, Sir Charles

Steward, Sir William (Woolwich, W.)

Hughes-Young, M. H. C.

Nabarro, G. D. N.

Stoddart-Scott, Col. Sir Malcolm

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

Nairn, D. L. S.

Stuart, Rt. Hon. James (Moray)

Hyde, Montgomery

Neave, Airey

Studholme, Sir Henry

Hylton-Foster, Rt. Hon. Sir Harry

Nicholson, Sir Godfrey (Farnham)

Summers, Sir Spencer

Jenkins, Robert (Dulwich)

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

Taylor, Sir Charles (Eastbourne)

Jennings, J. C. (Burton)

Noble, Comdr. Rt. Hon. Allan

Taylor, William (Bradford, N.)

Jennings, Sir Roland (Hallam)

Noble, Michael (Argyll)

Teeling, W.

Johnson, Dr. Donald (Carlisle)

Nugent, G. R. H.

Temple, John M.

Johnson, Eric (Blackley)

Oakshott, H. D.

Thomas, Leslie (Canterbury)

Joseph, Sir Keith

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

Thompson, Kenneth (Walton)

Keegan, D.

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

Thompson, R. (Croydon, S.)

Kerr, Sir Hamilton

Osborne, C.

Thorneycroft, Rt. Hon. P.

Kershaw, J. A.

Page, R. G.

Thornton-Kemsley, Sir Colin

Lambton, Viscount

Pannell, N. A. (Kirkdale)

Tiley, A. (Bradford, W.)

Langford-Holt, J. A.

Partridge, E.

Tilney, John (Wavertree)

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

Peel, W. J.

Vickers, Miss Joan

Legh, Hon. Peter (Petersfield)

Peyton, J. W. W.

Vosper, Rt. Hon. D. F.

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

Pickthorn, K. W. M.

Wakefield, Sir Wavell (St. M'lebone)

Linstead, Sir H. N.

Pike, Miss Mervyn

Walker-Smith, Rt. Hon. Derek

Llewellyn, D. T.

Pilkington, Capt. R. A.

Wall, Patrick

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

Lloyd, Rt. Hon. Selwyn (Wirral)

Pitman, I. J.

Webbe, Sir H.

Longden, Gilbert

Pitt, Miss E. M.

Webster, David

Low, Rt. Hon. Sir Toby

Price, David (Eastleigh)

Whitelaw, W. S. I.

Lucas, P. B. (Brentford & Chiswick)

Price, Henry (Lewisham, W.)

Williams, Paul (Sunderland, S.)

Lucas-Tooth, Sir Hugh

Ramsden, J. E.

Williams, R. Dudley (Exeter)

Macdonald, Sir Peter

Rawlinson, Peter

Wills, Sir Gerald (Bridgwater)

Mackeson, Brig. Sir Harry

Redmayne, M.

Wilson, Geoffrey (Truro)

McKibbin, Alan

Rees-Davies, W. R.

Wood, Hon. R.

Mackie, J. H. (Galloway)

Renton, D. L. M.

Woollam, John Victor

McLaughlin, Mrs. P.

Ridsdale, J. E.

Yates, William (The Wrekin)

Maclean, Sir Fitzroy (Lancaster)

Roberts, Sir Peter (Heeley)

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

Roper, Sir Harold

TELLERS FOR THE NOES

MacLeod, John (Ross & Cromarty)

Ropner, Col. Sir Leonard

Mr. E. Wakefield and

Macmillan, Maurice (Halifax)

Russell, R. S.

Mr. Gibson-Watt.

Macpherson, Niall (Dumfries)

Scott-Miller, Cmdr. R.

Mr. Roy Jenkins: I beg to—
Mr. Glenvil Hall: Do I understand, Mr. Blackburn, that you do not intend to call the Amendment in the name of my hon. Friend the Member for East Ham, South (Mr. Oram) in page 14, line 31, to substitute 3 per cent. for 10 per cent. in the case of building societies?
The Temporary Chairman (Mr. F. Blackburn): No, that is not being called for a Division.
Mr. Glenvil Hall: When we discussed building societies at the beginning of our sitting, I understood that the Chairman of Ways and Means indicated that this Amendment could be discussed with the other. It seems to me strange, if I may say so without offence, that we should be able to discuss the Amendment and not take the Committee's decision upon it.
The Temporary Chairman: It is quite correct that the Chairman of Ways and Means said that the Amendment could
1172
be discussed with the Amendment in page 14, line 27, in the name of the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall), but I think that the right hon. Gentleman knows that during the past few years the custom has been very often to discuss an Amendment without necessarily dividing on it. In any case, the decision is in the hands of the Chairman of Ways and Means and not in mine. He selects the Amendments and he has decided that there shall be no Division on this one. Until I receive different advice, I shall follow the decision of the Chairman of Ways and Means.
Mr. H. Wilson: Further to that point of order.
Hon. Members: No.
Mr. Wilson: Raising this matter as a point of order then—and I am not sure what my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) was raising it on if it was not on a point of order—it was, of course, disappointing

1173
that this Amendment was not called for a Division, particularly after there had been some misunderstanding about a vote on the earlier Amendment, which it had been understood was an all-party Amendment on which therefore there would be no Division.
I should like, through you, Mr. Blackburn, to put the point to my right hon. Friend the Member for Colne Valley that it is a matter of convenience in Committee on the Finance Bill that the Chairman of Ways and Means allows us on a number of occasions to move one Amendment and debate with it another Amendment, closely or even remotely connected with it. That practice widens the debate and allows hon. Members to make their points, but it does not follow necessarily that there should be a Division in every case.
I hope that the raising of this point will in no way cause the Chairman of Ways and Means to take a more restrictive
view of what Amendments he will allow us to debate together. I hope that my right hon. Friend will not press the point, if there is any danger of that situation resulting.
The Temporary Chairman: There is nothing for me to answer in the right hon. Gentleman's point of order.
Amendment proposed: In page 14, line 31, at end insert:
Provided that, in relation to any trade or business carried on by a body corporate, unincorporated society or other body, which by the nature, form or terms of its constitution cannot lawfully make any relevant distribution, this subsection shall not have effect and accordingly the profits tax shall continue to be charged at the rate of three per cent.—[Mr. Roy Jenkins.]
Question put, That those words be there inserted:—
The Committee divided: Ayes 184, Noes 221.

Division No. 183.]

AYES

[8.20 p.m.

Ainsley, J. W.

Fernyhough, E.

Lee, Frederick (Newton)

Albu, A. H.

Foot, D. M.

Lever, Harold (Cheetham)

Allen, Arthur (Bosworth)

Fraser, Thomas (Hamilton)

Lever, Leslie (Ardwick)

Awbery, S. S.

George, Lady Megan Lloyd (Car'then)

Lewis, Arthur

Bacon, Miss Alice

Gibson, C. W.

Lindgren, G. S.

Balfour, A.

Gordon Walker, Rt. Hon. P. C.

Logan, D. G.

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

Greenwood, Anthony

Mabon, Dr. J. Dickson

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

Grenfell, Rt. Hon. D. R.

McAlister, Mrs. Mary

Benson, Sir George

Grey, C. F.

McCann, J.

Beswick, Frank

Griffiths, William (Exchange)

MacColl, J. E.

Blenkinsop, A.

Grimond, J.

MacDermot, Niall

Blyton, W. R.

Hall, Rt. Hn. Glenvil (Colne Valley)

McGovern, J.

Boardman, H.

Hannan, W.

McInnes, J.

Bonham Carter, Mark

Harrison, J. (Nottingham, N.)

McLeavy, Frank

Bottomley, Rt. Hon. A. G.

Hastings, S.

MacPherson, Malcolm (Stirling)

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

Hayman, F. H.

Mahon, Simon

Braddock, Mrs. Elizabeth

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

Mainwaring, W. H.

Brockway, A. F.

Herbison, Miss M.

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

Broughton, Dr. A. D. D.

Hewitson, Capt. M.

Mann, Mrs. Jean

Brown, Rt. Hon. George (Belper)

Hobson, C. R. (Keighley)

Mason, Roy

Brown, Thomas (Ince)

Holman, P.

Mitchison, G. R.

Burke, W. A.

Holt, A. F.

Morris, Percy (Swansea, W.)

Burton, Miss F. E.

Houghton, Douglas

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

Butler, Mrs. Joyce (Wood Green)

Howell, Charles (Perry Barr)

Mort, D. L.

Champion, A. J.

Howell, Denis (All Saints)

Moss, R.

Chapman, W. D.

Hoy, J. H.

Moyle, A.

Clunie, J.

Hughes, Emrys (S. Ayrshire)

Neal, Harold (Bolsover)

Collins, V. J. (Shoreditch & Finsbury)

Hughes, Hector (Aberdeen, N.)

Oliver, G. H.

Craddock, George (Bradford, S.)

Hunter, A. E.

Oram, A. E.

Cronin, J. D.

Hynd, H. (Accrington)

Oswald, T.

Crossman, R. H. S.

Dalton, Rt. Hon. H.

Hynd, J. B. (Attercliffe)

Owen, W. J.

Darling, George (Hillsborough)

Irvine, A. J. (Edge Hill)

Padley, W. E.

Davies, Rt. Hon. Clement (Montgomery)

Isaacs, Rt. Hon. G. A.

Paget, R. T.

Davies, Stephen (Merthyr)

Janner, B.

Palmer, A. M. F.

Deer, G.

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

Pargiter, G. A.

de Freitas, Geoffrey

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

Paton, John

Delargy, H. J.

Jenkins, Roy (Stechford)

Pearson, A.

Diamond, John

Johnson, James (Rugby)

Peart, T. F.

Dodds, N. N.

Johnston, Douglas (Paisley)

Pentland, N.

Donnelly, D. L.

Jones, David (The Hartlepools)

Popplewell, E.

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

Jones, Jack (Rotherham)

Probert, A. R.

Ede, Rt. Hon. J. C.

Jones, J. Idwal (Wrexham)

Proctor, W. T.

Edelman, M.

Jones, T. W. (Merioneth)

Pursey, Cmdr. H.

Edwards, Rt. Hon. Ness (Caerphilly)

Kenyon, C.

Rankin, John

Edwards, Robert (Bilston)

Key, Rt. Hon. C. W.

Redhead, E. C.

Edwards, W. J. (Stepney)

King, Dr. H. M.

Reeves, J.

Evans, Edward (Lowestoft)

Lawson, G. M.

Reid, William

Reynolds, G. W.

Spriggs, Leslie

Weitzman, D.

Rhodes, H.

Stonehouse, John

Wells, William (Walsall, N.)

Roberts, Albert (Normanton)

Stones, W. (Consett)

West, D. G.

Roberts, Goronwy (Caernarvon)

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

Wheeldon, W. E.

Rogers, George (Kensington, N.)

Summerskill, Rt. Hon. E.

Williams, David (Neath)

Shurmer, P. L. E.

Sylvester, G. O.

Williams, Rev. Llywelyn (Ab'tillery)

Silverman, Julius (Aston)

Taylor, Bernard (Mansfield)

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

Silverman, Sydney (Nelson)

Taylor, John (West Lothian)

Wilson, Rt. Hon. Harold (Huyton)

Skeffington, A. M.

Thomas, George (Cardiff)

Winterbottom, Richard

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

Thomas, Iorwerth (Rhondda, W.)

Woodburn, Rt. Hon. A.

Smith, Ellis (Stoke, S.)

Usborne, H. C.

Yates, V. (Ladywood)

Snow, J. W.

Viant, S. P.

Zilliacus, K.

Sorensen, R. W.

Wade, D. W.

Soskice, Rt. Hon. Sir Frank

Warbey, W. N.

TELLERS FOR THE AYES:

Sparks, J. A.

Watkins, T. E.

Mr. J. T. Price and Mr. Simmons.

NOES

Agnew, Sir Peter

Godber, J. B.

Macmillan, Maurice (Halifax)

Aitken, W. T.

Gough, C. F. H.

Macpherson, Niall (Dumfries)

Alport, C. J. M.

Gower, H. R.

Maddan, Martin

Amory, Rt. Hn. Heathcoat (Tiverton)

Graham, Sir Fergus

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

Anstruther-Gray, Major Sir William

Grant, Rt. Hon. W. (Woodside)

Manningham-Buller, Rt. Hn. Sir R.

Arbuthnot, John

Green, A.

Markham, Major Sir Frank

Armstrong, C. W.

Gresham Cooke, R.

Marlowe, A. A. H.

Ashton, H.

Grimston, Hon. John (St. Albans)

Marshall, Douglas

Baldwin, Sir Archer

Grimston, Sir Robert (Westbury)

Mathew, R.

Balniel, Lord

Grosvenor, Lt.-Col. R. G.

Maudling, Rt. Hon. R.

Barber, Anthony

Gurden, Harold

Mawby, R. L.

Barlow, Sir John

Harris, Frederic (Croydon, N. W.)

Medlicott, Sir Frank

Barter, John

Harrison, A. B. C. (Maldon)

Milligan, Rt. Hon. W. R.

Batsford, Brian

Harrison, Col. J. H. (Eye)

Mott-Radclyffe, Sir Charles

Baxter, Sir Beverley

Harvey, Sir Arthur Vere (Macclesf'd)

Nabarro, G. D. N.

Beamish, Col. Tufton

Harvey, John (Waithamstow, E.)

Nairn, D. L. S.

Bell, Ronald (Bucks, S.)

Heald, Rt. Hon. Sir Lionel

Neave, Airey

Bennett, Dr. Reginald

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

Nicholson, Sir Godfrey (Farnham)

Bevins, J. R. (Toxteth)

Henderson-Stewart, Sir James

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

Biggs-Davison, J. A.

Hesketh, R. F.

Noble, Comdr. Rt. Hon. Allan

Bingham, R. M.

Hicks-Beach, Maj. W. W.

Noble, Michael (Argyll)

Bishop, F. P.

Hill, Mrs. E. (Wythenshawe)

Nugent, G. R. H.

Black, C. W.

Hirst, Geoffrey

Oakshott, H. D.

Body, R. F.

Hobson, John (Warwick & Leam'gt'n)

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

Bossom, Sir Alfred

Holland-Martin, C. J.

Orr, Capt. L. P. S.

Boyle, Sir Edward

Hope, Lord John

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

Braine, B. R.

Hornby, R. P.

Osborne, C.

Braithwaite, Sir Albert (Harrow, W.)

Horobin, Sir Ian

Page, R. G.

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

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

Pannell, N. A. (Kirkdale)

Brooman-White, R. C.

Hughes-Young, M. H. C.

Partridge, E.

Bryan, P.

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

Peel, W. J.

Bullus, Wing Commander E. E.

Hyde, Montgomery

Peyton, J. W. W.

Campbell, Sir David

Hylton-Foster, Rt. Hon. Sir Harry

Pickthorn, K. W. M.

Carr, Robert

Jenkins, Robert (Dulwich)

Pike, Miss Mervyn

Cary, Sir Robert

Jennings, J. C. (Burton)

Pilkington, Capt. R. A.

Chichester-Clark, R.

Jennings, Sir Roland (Hallam)

Pitman, I. J.

Cole, Norman

Johnson, Dr. Donald (Carlisle)

Pitt, Miss E. M.

Conant, Maj. Sir Roger

Johnson, Eric (Blackley)

Price, David (Eastleigh)

Cooper, A. E.

Joseph, Sir Keith

Price, Henry (Lewisham, W.)

Craddock, Beresford (Spelthorne)

Keegan, D.

Ramsden, J. E.

Crosthwaite-Eyre, Col. O. E.

Crowder, Sir John (Finchley)

Kerr, Sir Hamilton

Redmayne, M.

Crowder, Petre (Ruislip—Northwood)

Kershaw, J. A.

Rees-Davies, W. R.

Currie, G. B. H.

Lambton, Viscount

Renton, D. L. M.

Dance, J. C. G.

Langford-Holt, J. A.

Ridsdale, J. E.

Davidson, Viscountess

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

Roberts, Sir Peter (Heeley)

D'Avigdor-Goldsmid, Sir Henry

Legh, Hon. Peter (Petersfield)

Roper, Sir Harold

Deedes, W. F.

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

Ropner, Col. Sir Leonard

Donaldson, Cmdr. C. E. McA.

Linstead, Sir H. N.

Russell, R. S.

Doughty, C. J. A.

Llewellyn, D. T.

Scott-Miller, Cmdr. R.

du Cann, E. D. L.

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

Sharples, R. C.

Duncan, Sir James

Lloyd, Rt. Hon. Selwyn (Wirral)

Shepherd, William

Eden, J. B. (Bournemouth, West)

Longden, Gilbert

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

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

Low, Rt. Hon. Sir Toby

Smithers, Peter (Winchester)

Errington, Sir Eric

Lucas, Sir Jocelyn (Portsmouth, S.)

Spearman, Sir Alexander

Fell, A.

Lucas, P. B.(Brentford & Chiswick)

Speir, R. M.

Finlay, Graeme

Lucas-Tooth, Sir Hugh

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

Fisher, Nigel

Macdonald, Sir Peter

Stanley, Capt. Hon. Richard

Fletcher-Cooke, C.

Mackeson, Brig. Sir Harry

Stevens, Geoffrey

Fort, R.

McKibbin, Alan

Steward, Harold (Stockport, S.)

Fraser, Hon. Hugh (Stone)

Mackie, J. H. (Galloway)

Steward, Sir William (Woolwich, W.)

Fraser, Sir Ian (M'cmbe & Lonsdale)

McLaughlin, Mrs. P.

Stoddart-Scott, Col. Sir Malcolm

Gammans, Lady

Maclean, Sir Fitzroy (Lancaster)

Stuart, Rt. Hon. James (Moray)

Garner-Evans, E. H.

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

Studholme, Sir Henry

George, J. C. (Pollok)

MacLeod, John (Ross & Cromarty)

Summers, Sir Spencer

Glyn, Col. Richard H.

Macmillan, Rt. Hn. Harold (Bromley)

Taylor, Sir Charles (Eastbourne)

1176

1177

Taylor, William (Bradford, N.)

Vickers, Miss Joan

Wills, Sir Gerald (Bridgwater)

Teeling, W.

Vosper, Rt. Hon. D. F.

Wilson, Geoffrey (Truro)

Temple, John M.

Wakefield, Sir Waved (St. M'lebone)

Wood, Hon. R.

Thomas, Leslie (Canterbury)

Walker-Smith, Rt. Hon. Derek

Woollam, John Victor

Thompson, Kenneth (Walton)

Wall, Patrick

Yates, William (The Wrekin)

Thompson, R. (Croydon, S.)

Webbe, Sir H.

Thorneycroft, Rt. Hon. P.

Webster, David

TELLERS FOR THE NOES:

Thornton-Kemsley, Sir Colin

Whitelaw, W. S. I.

Mr. E. Wakefield and

Tiley, A. (Bradford, W.)

Williams, Paul (Sunderland, S.)

Mr. Gibson-Watt.

Tilney, John (Wavertree)

Williams. R. Dudley (Exeter)

Amendment proposed: In page 14, line 31, at end insert:
Provided that, in relation to the business carried on by the Mersey Tunnel Joint Committee, this subsection shall not have effect and accordingly the profits tax shall continue to be
charged at the rate of three per cent.—[Mr. A. J. Irvine.]
Question put, That those words be there inserted:—
The Committee divided: Ayes 183, Noes 223.

Division No. 184.]

AYES

[8.30 p.m.

Ainsley, J. W.

Harrison, J. (Nottingham, N.)

Oram, A. E.

Albu, A. H.

Hastings, S.

Oswald, T.

Allen, Arthur (Bosworth)

Hayman, F. H.

Owen, W. J.

Awbery, S. S.

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

Padley, W. E.

Bacon, Miss Alice

Herbison, Miss M.

Paget, R. T.

Balfour, A.

Hewitson, Capt. M.

Palmer, A. M. F.

Bellenger, Rt. Hon. F. J.

Hobson, C. R. (Keighley)

Pargiter, G. A.

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

Holman, P.

Paton, John

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

Holt, A. F.

Pearson, A.

Benson, Sir George

Houghton, Douglas

Peart, T. F.

Beswick, Frank

Howell, Charles (Perry Barr)

Pentland, N.

Blenkinsop, A.

Howell, Denis (All Saints)

Popplewell, E.

Blyton, W. R.

Hoy, J. H.

Probert, A. R.

Boardman, H.

Hughes, Emrys (S. Ayrshire)

Proctor, W. T.

Bonham Carter, Mark

Hughes, Hector (Aberdeen, N.)

Pursey, Cmdr. H.

Bottomley, Rt. Hon. A. G.

Hunter, A. E.

Rankin, John

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

Hynd, H. (Accrington)

Redhead, E. C.

Braddock, Mrs. Elizabeth

Irvine, A. J. (Edge Hill)

Reeves, J.

Brockway, A. F.

Isaacs, Rt. Hon. G. A.

Reid, William

Broughton, Dr. A. D. D.

Janner, B.

Reynolds, G. W.

Brown, Rt. Hon. George (Belper)

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

Rhodes, H.

Brown, Thomas (Ince)

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

Roberts, Albert (Normanton)

Burke, W. A.

Jenkins, Roy (Stechford)

Roberts, Goronwy (Caernarvon)

Burton, Miss F. E.

Johnson, James (Rugby)

Rogers, George (Kensington, N.)

Butler, Mrs. Joyce (Wood Green)

Johnston, Douglas (Paisley)

Shurmer, P. L. E.

Champion, A. J.

Jones, David (The Hartlepools)

Silverman, Julius (Aston)

Chapman, W. D.

Jones, Jack (Rotherham)

Silverman, Sydney (Nelson)

Clunie, J.

Jones, J. Idwal (Wrexham)

Skeffington, A. M.

Collins, V. J. (Shoreditch & Finsbury)

Jones, T. W. (Merioneth)

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

Craddock, George (Bradford, S.)

Kenyon, C.

Smith, Ellis (Stoke, S.)

Cronin, J. D.

Key, Rt. Hon. C. W.

Snow, J. W.

Crossman, R. H. S.

King, Dr. H. M.

Sorensen, R. W.

Dalton, Rt. Hon. H.

Lawson, G. M.

Soskice, Rt. Hon. Sir Frank

Darling, George (Hillsborough)

Lee, Frederick (Newton)

Sparks, J. A.

Davies, Rt. Hon. Clement (Montgomery)

Lever, Harold (Cheetham)

Spriggs, Leslie

Davies, Stephen (Merthyr)

Lever, Leslie (Ardwick)

Stonehouse, John

Deer, G.

Lewis, Arthur

Stones, W. (Consett)

de Freitas, Geoffrey

Lindgren, G. S.

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

Delargy, H. J.

Logan, D. G.

Summerskill, Rt. Hon. E.

Diamond, John

Mabon, Dr. J. Dickson

Sylvester, G. O.

Dodds, N. N.

McAlister, Mrs. Mary

Taylor, Bernard (Mansfield)

Donnelly, D. L.

McCann, J.

Taylor, John (West Lothian)

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

MacColl, J. E.

Thomas, George (Cardiff)

Ede, Rt. Hon. J. C.

MacDermot, Niall

Thomas, Iorwerth (Rhondda, W.)

Edelman, M.

McGovern, J.

Usborne, H. C.

Edwards, Rt. Hon. Ness (Caerphilly)

McInnes, J.

Viant, S. P.

Edwards, Robert (Bilston)

McLeavy, Frank

Wade, D. W.

Edwards, W. J. (Stepney)

MacPherson, Malcolm (Stirling)

Warbey, W. N.

Evans, Edward (Lowestoft)

Mahon, Simon

Watkins, T. E.

Fernyhough, E.

Weitzman, D.

Foot, D. M.

Mainwaring, W. H.

Wells, William (Walsall, N.)

Fraser, Thomas (Hamilton)

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

West, D. G.

George, Lady Megan Lloyd (Car'then)

Mann, Mrs. Jean

Wheeldon, W. E.

Gibson, C. W.

Mason, Roy

Williams, David (Neath)

Gordon Walker, Rt. Hon. P. C.

Mitchison, G. R.

Williams, Rev. Llywelyn (Ab'tillery)

Greenwood, Anthony

Morris, Percy (Swansea, W.)

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

Grenfell, Rt. Hon. D. R.

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

Wilson, Rt. Hon. Harold (Huyton)

Grey, C. F.

Mort, D. L.

Woodburn, Rt. Hon. A.

Griffiths, William (Exchange)

Moss, R.

Yates, V. (Ladywood)

Grimond, J.

Moyle, A.

Zilliacus, K.

Hall, Rt. Hn. Glenvil (Colne Valley)

Neal, Harold (Bolsover)

Hannan, W.

Oliver, G. H.

TELLERS FOR THE AYES:

Mr. J. T. Price and Mr. Simmons.

NOES

Agnew, Sir Peter

Harris, Frederic (Croydon, N. W.)

Noble, Comdr. Rt. Hon. Allan

Aitken, W. T.

Harrison, A. B. C. (Maldon)

Noble, Michael (Argyll)

Alport, C. J. M.

Harrison, Col. J. H. (Eye)

Nugent, G. R. H.

Amory, Rt. Hn. Heathcoat (Tiverton)

Harvey, Sir Arthur Vere (Macclesf'd)

Oakshott, H. D.

Anstruther-Gray, Major Sir William

Harvey, John (Walthamstow, E.)

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

Arbuthnot, John

Heald, Rt. Hon. Sir Lionel

Orr, Capt. L. P. S.

Armstrong, C. W.

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

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

Ashton, H.

Henderson-Stewart, Sir James

Osborne, C.

Baldwin, Sir Archer

Hesketh, R. F.

Page, R. G.

Balniel, Lord

Hicks-Beach, Maj. W. W.

Pannell, N. A. (Kirkdale)

Barber, Anthony

Hill, Mrs. E. (Wythenshawe)

Partridge, E.

Barlow, Sir John

Hirst, Geoffrey

Peel, W. J.

Barter, John

Hobson, John (Warwick & Leam'gt'n)

Peyton, J. W. W.

Batsford, Brian

Holland-Martin, C. J.

Pickthorn, K. W. M.

Baxter, Sir Beverley

Hope, Lord John

Pike, Miss Mervyn

Beamish, Col. Tufton

Hornby, R. P.

Pilkington, Capt. R. A.

Bell, Ronald (Bucks, S.)

Horobin, Sir Ian

Pitman, I. J.

Bennett, Dr. Reginald

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

Pitt, Miss E. M.

Bevins, J. R. (Toxteth)

Hughes-Young, M. H. C.

Price, David (Eastleigh)

Biggs-Davison, J. A.

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

Price, Henry (Lewisham, W.)

Bingham, R. M.

Hyde, Montgomery

Ramsden, J. E.

Bishop, F. P.

Hylton-Foster, Rt. Hon. Sir Harry

Redmayne, M.

Black, C. W.

Jenkins, Robert (Dulwich)

Rees-Davies, W. R.

Body, R. F.

Jennings, J. C. (Burton)

Renton, D. L. M.

Bossom, Sir Alfred

Jennings, Sir Roland (Hallam)

Ridsdale, J. E.

Boyle, Sir Edward

Johnson, Dr. Donald (Carlisle)

Roberts, Sir Peter (Heeley)

Braine, B. R.

Johnson, Eric (Blackley)

Roper, Sir Harold

Braithwaite, Sir Albert (Harrow, W.)

Joseph, Sir Keith

Ropner, Col, Sir Leonard

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

Keegan, D.

Russell, R. S.

Bryan, P.

Kerr, Sir Hamilton

Scott-Miller, Cmdr. R.

Bullus, Wing Commander E. E.

Kershaw, J. A.

Sharples, R. C.

Campbell, Sir David

Kimball, M.

Shepherd, William

Carr, Robert

Lambton, Viscount

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

Cary, Sir Robert

Langford-Holt, J. A.

Smithers, Peter (Winchester)

Cole, Norman

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

Spearman, Sir Alexander

Conant, Maj. Sir Roger

Legh, Hon. Peter (Petersfield)

Speir, R. M.

Cooper, A. E.

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

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

Craddock, Beresford (Spelthorne)

Linstead, Sir H. N.

Stanley, Capt. Hon. Richard

Crosthwaite-Eyre, Col. O. E.

Llewellyn, D. T.

Stevens, Geoffrey

Crowder, Sir John (Finchley)

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

Steward, Harold (Stockport, S.)

Crowder, Petre (Ruislip—Northwood)

Lloyd, Rt. Hon. Selwyn (Wirral)

Steward, Sir William (Woolwich, W.)

Currie, G. B. H.

Longden, Gilbert

Stoddart-Scott, Col. Sir Malcolm

Dance, J. C. C.

Low, Rt. Hon. Sir Toby

Stuart, Rt. Hon. James (Moray)

Davidson, Viscountess

Lucas, Sir Jocelyn (Portsmouth, S.)

Studholme, Sir Henry

D'Avigdor-Goldsmid, Sir Henry

Lucas, P. B.(Brentford & Chiswick)

Summers, Sir Spencer

Deedes, W. F.

Lucas-Tooth, Sir Hugh

Taylor, Sir Charles (Eastbourne)

Donaldson, Cmdr. C. E. McA.

Macdonald, Sir Peter

Taylor, William (Bradford, N.)

Doughty, C. J. A.

Mackeson, Brig. Sir Harry

Teeling, W.

du Cann, E. D. L.

McKibbin, Alan

Temple, John M.

Duncan, Sir James

Mackie, J. H. (Galloway)

Thomas, Leslie (Canterbury)

Eden, J. B. (Bournemouth, West)

McLaughlin, Mrs. P.

Thompson, Kenneth (Walton)

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

Maclean, Sir Fitzroy (Lancaster)

Thompson, R. (Croydon, S.)

Errington, Sir Eric

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

Thorneycroft, Rt. Hon. P.

Fell, A.

MacLeod, John (Ross & Cromarty)

Thornton-Kemsley, Sir Colin

Finlay, Graeme

Macmillan, Rt. Hn. Harold (Bromley)

Tiley, A. (Bradford, W.)

Fisher, Nigel

Macmillan, Maurice (Halifax)

Tilney, John (Wavertree)

Fletcher-Cooke, C.

Macpherson, Niall (Dumfries)

Vickers, Miss Joan

Fort, R.

Maddan, Martin

Vosper, Rt. Hon. D. F.

Fraser, Hon. Hugh (Stone)

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

Wakefield, Edward (Derbyshire, W.)

Fraser, Sir Ian (M'cmbe & Lonsdale)

Maitland, Hon. Patrick (Lanark)

Wakefield, Sir Wavell (St. M'lebone)

Gammans, Lady

Manningham-Buller, Rt. Hn. Sir R.

Walker-Smith, Rt. Hon. Derek

Garner-Evans, E. H.

Markham, Major Sir Frank

Wall, Patrick

George, J. C. (Pollok)

Marlowe, A. A. H.

Webbe, Sir H.

Gibson-Watt, D.

Marshall, Douglas

Webster, David

Glyn, Col. Richard H.

Mathew, R.

Whitelaw, W. S. I.

Godber, J. B.

Maudling, Rt. Hon. R.

Williams, Paul (Sunderland, S.)

Gough, C. F. H.

Mawby, R. L.

Williams, R. Dudley (Exeter)

Gower, H. R.

Medlicott, Sir Frank

Wills, Sir Gerald (Bridgwater)

Graham, Sir Fergus

Milligan, Rt. Hon. W. R.

Wilson, Geoffrey (Truro)

Grant, Rt. Hon. W. (Woodside)

Mott-Radclyffe, Sir Charles

Wood, Hon. R.

Green, A.

Gresham Cooke, R.

Nabarro, G. D. N.

Woollam, John Victor

Grimston, Hon. John (St. Albans)

Nairn, D. L. S.

Yates, William (The Wrekin)

Grimston, Sir Robert (Westbury)

Neave, Airey

Grosvenor, Lt.-Col. R. G.

Nicholson, Sir Godfrey (Farnham)

TELLERS FOR THE NOES:

Gurden, Harold

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

Mr. Brooman-White and

Mr. Chichester-Clark.

Motion made, and Question proposed,
That the Clause stand part of the Bill.
Mr. Dalton: The Bill contains on the whole few features of interest, but this Clause is an exception. I regard this Clause as being highly objectionable and exceedingly reactionary, but as presenting one of the few serious parts of the Bill.
Mr. Ellis Smith: So we shall divide against it.
Mr. Dalton: The reasons why I describe the Clause in that way are that, in my judgment, it encourages inflation, it discourages investment, it creates injustice on a great scale as between different firms and it sharply interrupts a gradual and growing bipartisan accord between the two sides of the Committee on the proper mode of taxation of profits.
To substantiate those statements I must seek to do so by way of a brief historical résumé. In my second Budget speech, in April, 1946, I finally repealed the Excess Profits Tax—which was welcomed by all sides of the Committee at that time—and said that I would wait until the next year before deciding whether some new Profits Tax was desirable. On that occasion I halted, I watched, I listened.
The National Defence Contribution, of course, continued in force from the time when Mr. Neville Chamberlain had first introduced it. This was a simple, small tax of 5 per cent., only 1s. in the £ on profits, whether distributed or not. At that stage there was no differential element. I will quote a few sentences from my remarks in April, 1946. I said that in deciding what to do next year I should be guided
"to some extent, by the conduct of private enterprise in the meantime…. Last autumn…I invited industry to plough back increased profits rather than distribute them to shareholders. The response to this invitation has been patchy. Many of the most efficient and up to date concerns have responded very well; but others have shown a tendency to chuck money about among the shareholders, rather than to strengthen their reserves and improve their equipment."
I said I thought it was:
"premature . . to decide now whether or not, next year,… to introduce a new tax designed to cheek these, as I think, unfortunate practices"—[OFFICIAL REPORT, 9th April, 1946; Vol. 421, c. 1834.]
In my third Budget, in April, 1947, I recalled the words I have just quoted and said:
1182
"I cannot pretend to be satisfied with the large increases in distributed profits and the higher dividends which have been paid out in so very many cases in the last 12 months. Too much, in my judgment has been distributed, and too little ploughed back into the business. These increased dividends are the clearest case, anywhere in our national economy, of an inflationary element."
I pointed out that, whereas discussion was proceeding about wage increases and often it was suggested that wage increases were justified only if there was increased productivity and the workers in question did more work, here was an increased dividend paid out to people who did no work at all. I said that this in my view
"clearly calls for some fiscal corrective. Therefore, I propose to leave the Profits Tax at its present level of 5 per cent., or one shilling in the pound, on undistributed profits which are added to companies reserves or otherwise reinvested in the business. But I propose to increase the tax to 12½ per cent., or from 1s. to 2s. 6d. in the £, on distributed profits."—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 84.]
This was the first time in our fiscal history when, whether right or wrong, this differential principle had been introduced into any form of tax on business profits, the differential being based on the use to which the profits had been put, whether ploughed back or distributed as the case may be. At this point I created a gap between 5 per cent. and 12½ per cent., a gap of 7½ per cent. between the two rates.
The extraordinary thing is that in the years that followed that gap was increased both by Labour and Conservative Chancellors. I introduced this plan, which was never discarded until in this year by the present Chancellor in this Clause, but which on the contrary was followed and extended. I lit a candle which only this Chancellor is trying to blow out eleven years later.
That was in 1947. I am coming to the end of my quotations from speeches made by myself and shall soon pass to quotations from Conservative Chancellors. In my fourth Budget speech, in November of that year, I said:
"I have noticed, with regret, a continuing and persistent inclination on the part of many concerns to declare increased dividends. This is contrary to advice which I have ventured to offer from time to time. It is inflationary, because it puts more purchasing power into circulation, and, it is very disturbing to industrial relations."

1183
At that time this was a very important point, Talks were proceeding about wage restraint, the wage freeze and national wage policies, and all sorts of other verbalisms of that kind, but the short point was that, if workers saw in their own industry or others the declaration of high dividends, it was very natural that they should demand higher wages. That was extremely natural, and therefore I deplored the bad lead, as I thought, given by many industrialists. I went on to say:
"… profits as a whole are still running at a very high level. I, therefore, propose to double the Profits Tax on all profits made from 1st January, 1947, thus raising the rate from 12½ per cent. to 25 per cent. on distributed profit…".—[OFFICIAL REPORT, 12th November, 1947; Vol. 444, c. 401.]
This widened the gap between the two rates from 7½ per cent. to 15 per cent.
8.45 p.m.
Sir Stafford Cripps spoke on these questions when he was Chancellor of the Exchequer and frequently urged restraint, particularly on industrialists, although also to some extent, and not fruitlessly, upon wage earners.
As regards actual changes in the tax, he increased the Profits Tax in 1949 on distributed profits from 25 per cent. to 30 per cent. and left the tax on undistributed profits unchanged and thus widened the gap between the two rates from 15 per cent. to 20 per cent.
Finally, in the story of Labour Chancellors' Budgets, my right hon. Friend the present Leader of the Opposition in his Budget speech in April, 1951, drew attention to the very sharp increases which had been taking place in distributed profits and declarations of dividends. He gave a number of striking figures which can be found in reading his speech again, as I have done, but I shall not quote those. I merely pass to the final point in his Budget. He increased the Profits Tax from 30 per cent. to 50 per cent. on distributed profits, leaving the rate on undistributed profits unchanged, and thus further widened the range and increased the gap from 20 per cent. to 40 per cent. as between the two rates. He said:
"In this way, we shall provide a powerful incentive to companies to put profits to reserve rather than increase dividends."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 855.]
1184
In this period of Labour Budgets, Conservative spokesmen in this House had also proposed to do just what we had been doing in slightly different detailed terms. They pressed to widen still further the gap. There was no talk then about having one single rate. On the contrary, they said that we should have two rates and that they ought to be wider apart.
Sir Anthony Eden, in June, 1950, moved an Amendment to exempt undistributed profits altogether from tax. There was a prima facie case for doing that, as the object was to hinder inflation, promote the ploughing back of profits into further investment, and carry further the principle, which I believe to be a sound one, of the dual rate.
Sir Anthony Eden in June, 1950, moved a new Clause when discussing Sir Stafford Cripps' Budget of that year. He said:
"Nobody will dispute the need for industrial concerns to conserve their profit by putting sums to reserve …"
He went on to explain the Clause that he had put down and said that if a company at a later date distributed this money in the form of dividends or anything else, then the tax would have to fall on them at the same rate as if they had not had an exemption; the tax would have to be a retrospective levy. That has a good ring about it; a robust initiative. It would have to be a retrospective levy and he said:
"That is what we have tried to make clear in the terms of our new Clause."—[OFFICIAL REPORT, 22nd June, 1950; Vol. 476, c. 1482–7.]
Sir Stafford Cripps did not feel able to accept that Amendment. He had done a lot of good things in the Budget. It was defeated by 296 votes to 283. The Conservatives worked very hard in the Lobbies in that Parliament. Therefore, the tax remained for the moment unchanged. I have quoted those words because they show that Sir Anthony Eden, after consulting all other leading figures in what, I think, they called the Shadow Cabinet, leading figures on the Conservative side, had come to the conclusion that it was possible and not, indeed, undesirable to continue with the dual Profits Tax, with all the complications upon which so much stress has been laid by the advocates of change who have got

1185
behind the present Chancellor in this matter.
The chief objection was that it was very difficult to know in advance what a company's future tax position would be; this was uncertain, as the Royal Commission said. Sir Anthony Eden clearly understood that the necessary result of this method of dual taxation on profits was that there must be a retrospective eye kept from year to year on the profits of all concerns which in one year had put profits to reserve at the lower tax rate, in order to make sure that in a later year, if they distributed them, they should not escape, but should pay, the higher tax on those profits as well as on the distributed profits in the current year.
I therefore quote Sir Anthony Eden to support the wisdom of retaining the gap between the two rates and also to show that he quite understood the position and did not regard as a disabling condition the objections, which have been stressed by the advocates of the single rate, to keeping an eye on the concern's profits from year to year and, if necessary, demanding a retrospective payment.
Finally, among Conservative spokesmen on this subject we have the present Foreign Secretary. When the Budget of my right hon. Friend the Leader of the Opposition was being considered, the present Foreign Secretary moved to widen the gap still further. By that time, under my right hon. Friend's Budget, it was 40 per cent., and he wanted to widen it to 45 per cent. He proposed to leave the tax on distributed profits at 50 per cent. but to reduce the tax on undistributed profits from 10 per cent. to 5 per cent. He did not propose to go as far as Sir Anthony Eden, who wanted to relieve undistributed profits altogether, but he thought that the tax on undistributed profits should be halved and that the tax on distributed profits should be maintained. He said:
"I wish to put the case for this Amendment at some length,"
And he did. He continued:
"… it is … one of the most important Amendments we shall have to consider."—[OFFICIAL REPORT, 11th June, 1951; Vol. 488, c. 1677.]
It is interesting to recall that the activities of the present Foreign Secretary
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seemed then to be heading for the Treasury rather than the Foreign Office. One of his speeches on finance which I have been reading was decorated with a Tennysonian peroration. He quoted from the famous poem "Ulysses", which is no doubt familiar to all hon. Members. He quoted lines and lines of it. I could not have got away with a long quotation like that, nor could many people. It is open to question whether, in his own interests and the interests of the country, he should have changed course in the Whitehall race. In any event, under Labour Governments we steadily widened this gap between the rate of tax on distributed profits and the rate on undistributed profits, and we were pressed to do even more by Conservative spokesmen when Labour was in power.
I come now to the sad and latest age, the series of Conservative Budgets, but I am not able to present them in this setting in their blackest aspect, because, I shall draw attention to some praiseworthy deeds of Conservative Chancellors, excluding the present occupant of that high office. In his first Budget of March, 1952, the present Lord Privy Seal introduced a new Excess Profits Levy. I will not speak much about that now; it was pretty well understood at the time to be a bright idea of the Prime Minister of that day, the right hon. Member for Woodford (Sir W. Churchill), who imposed it on the Chancellor of the Exchequer against the latter's better judgment and the advice available from official quarters. He made him take it.
I have no reason to doubt that that was so. It was a nonsensical tax and the next year the present Lord Privy Seal managed to escape from the grip of the then Prime Minister and the whole thing was repealed. However, for one year we had the Excess Profits Levy, on which there was much debate.
More important for my present theme is a small statistical point which should be made clear in order that people looking at figures will not be led into making false comparisons. The Lord Privy Seal introduced a change, to which I have no objection, in the basis of assessment to Profits Tax, which was no longer to be an allowance against Income Tax. The rates in future were to be net and not gross. The existing gross rates were then 10 per cent. on undistributed and 50

1187
per cent. on distributed profits, and those rates corresponded roughly, when the change was made, to net rates of half the amount, 5 per cent. and 25 per cent.
If that fact is not borne in mind and a column of figures is studied, a false impression may arise, and it may be thought that the Lord Privy Seal made substantial reductions of almost 50 per cent. That is not true. The figures are not strictly comparable. At first sight it appears that the tax, whether on distributed or undistributed profits, after this change in the Budget of 1952 was much lower compared with the earlier rates than, in fact, it was. I hope that I have explained how that comes about.
In addition, the Lord Privy Seal slightly readjusted the rates and the net rates under the new dispensation became 2½ per cent. on undistributed and 17½ per cent. on distributed profits. The Lord Privy Seal then said:
"I have loaded the reduction, as the Committee may observe, in favour of those who increase their reserves. Thus we fulfil the promise we gave in our Election statement to reduce the tax on profits ploughed back into the business."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1291.]
In their Election manifesto of 1951, this was one of the things which the Conservatives said that they intended to do. Although some of their promises were not fulfilled, for example the promise about "mending the hole in the purse", this was one which was fulfilled and for that they deserve great credit for political courage and rectitude. They said that they would widen that gap, and the Lord Privy Seal did so.
In his second Budget, of April, 1953, the Lord Privy Seal managed to wriggle out of the Excess Profits Levy, no doubt a wise thing to do since it was a hideous piece of nonsense. He increased Profits Tax on distributed profits from 17½ per cent. to 22½ per cent., pursuing the path of virtue and the promise to the electors that he would widen the gap still further.
At this stage, the net gap stood at some 20 per cent. There is nothing more to record in this context of the Lord Privy Seal's Budgets until his fifth and last, about which there has been much discussion on other points. All I am concerned with here is that, persistently
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advancing along the path of virtue and justice, he made a further increase in the tax on distributed profits, from 22½ per cent. to 27½ per cent., while leaving the other rate the same. The gap was thus further widened. That was the Budget in which he rejected the proposal of the Royal Commission on which the present Chancellor relies.
Referring to the proposal to have a single rate instead of a double rate, he said that that proposal
"would be very variable in its incidence and have the most anomalous, and in some cases, most surprising results."
These are the comments of a Cabinet colleague on what the present Chancellor is now proposing to do.
"For example, companies which distribute a high proportion of their profits would gain, while those which put a large proportion to reserve would lose—and the latter include a number of new and important industries. Therefore, I have decided, at any rate for the present, that such a change would not be directed to our present needs."
It has yet to be proved that what has happened since then makes the change better directed to our present needs in 1958 in the spring than in 1955 in the autumn. I know of no serious reason to support this suggestion.
9.0 p.m.
He continued:
"I have considered whether I should increase the rates of Profits Tax both on distributed and undistributed profits. I am reluctant to increase the rates specifically charged on amounts put to reserve, since to do so would tend to impede the necessary replacement of capital assets and to discourage future investment rather than current consumption…. I have, therefore, decided to increase the rate of Profits Tax on distributed profits from 22½ per cent. to 27½ per cent."—[OFFICIAL REPORT, 26th October, 1955; Vol. 545, c. 225–6.]
I think that case was admirably put, although I admit there was some clever hedging in the phrase "at least for the present."
I now come to the present Prime Minister. He has had only one Budget in April, 1956. He did not even go through the form of a genuflection to this Royal Commission as some people do, as though it were a god on a high altar instead of a number of hard-working people who, after all, are not all that more intelligent than

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Ministers and their own advisers. I am always doubtful about the desirability of appointing these para-departmental bodies to tell Ministers and their advisers what they ought to do.
Anyhow, able and admirable though the Royal Commission Report is in many respects—and they evidently worked very hard at it—I note that the Prime Minister did not give them even a reference or a genuflection. He went straight to the point. He said that he had decided to increase Profits Tax on distributed profits by a further 2½ per cent. and on undistributed profits by ½ per cent., making 30 per cent. and 3 per cent. respectively, further widening the gap, in accordance with all the best practice up to then, to 27 per cent. He said that he would get no increase in revenue from these changes till a year later. He then said:
"… the deflationary effect will not be deferred. The tax to be paid next year will have to be taken into account by boards of directors in formulating dividend policy…."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 887.]
This admirable statement could have been used by any of the previous Chancellors whom I have cited, including myself, in justification for what we were doing to restrain inflationary pressure.
Mr. Ellis Smith: And to restrain wages in particular.
Mr. Dalton: Let us stick to one point at a time. The simple point with which I was dealing is that the present Prime Minister recognised that the increase in the distributed rate as against the undistributed rate—in fact, he increased them both—and the further widening of the range between the two rates would have certain deflationary effects in the sense of checking further increases in dividends and distributed profits. There I think he was on the right lines. That is where we stand up to date.
The right hon. Member for Monmouth (Mr. P. Thorneycroft) told us in his Budget speech in April, 1957, that he was going to get another £60 million from Profits Tax mainly as a result of the increase made in the rates the year before, but he himself made no change in the tax.
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Now we come to the present Budget speech by the Chancellor on 15th April, 1958. This is what he said:
"… I come to a considerable reform. The Royal Commission on Taxation recommended, and I now propose …, that the two rates of Profits Tax at present charged … shall be replaced by a single rate to be levied on the whole of a company's profits."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 64–5.]
He went on to say that the single rate would be 10 per cent. as against rates of 30 per cent. on distributed profits and 3 per cent. on undistributed profits.
Thus, the tax on distributed profits was reduced by two-thirds at one blow. At once, people would get off two-thirds of the taxation on money distributed as dividends. But those who had been putting money by had to pay 10 per cent. instead of 3 per cent.; their tax burden was more than tripled. It was 10 per cent. instead of 3 per cent. on what they were ploughing back, to buy new machines, or even to invest—this is no bad thing considering the state of the national credit—in the gilt-edged market. That is a patriotic act, and it is really quite a good thing, if it comes as a by-product of putting money to reserves, that some of it should, for a time, go to support the ever sagging values of British Government securities.
Mr. William Shepherd: What about Daltons?
Mr. Dalton: They have fallen by one-third. I heard what the hon. Member for Cheadle (Mr. Shepherd) said, and I expected him to say it. The Goschens, the old Consols and the Daltons always move very closely together. They have fallen by nearly a third since the Conservative Party scrambled back to power. But I do not want to go into that tonight, although it would be fascinating to give some more particulars.
All I am saying is that one of the advantages in ploughing back, in my judgment, is not only that an industrialist buys better and more machines but he may have some money to invest, for a short time or for a long time, in Government securities.
The maintenance of this gap between the two rates, through a series of Budgets of a series of Chancellors, of very diverse

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political outlook, was consistently pursued, with great advantage to the country, from 1947 until 1958. There has now been a most blatant reversal of that policy. I am very disturbed that this should be so because, as I said earlier, there was here a growing accord, it seemed, between Chancellors of the Exchequer of successive Governments from different sides of the House that, whatever they disagreed about, here was a sensible thing to do about Profits Tax. This is all thrown overboard now, and, instead of the gap being further widened, it has been closed with a snap as though caught in the jaws of a dogfish. I intend no suggestion of personal similarity; I am just thinking of the way that particular creature behaves.
What reasons are given for the change? First of all, it is said that it was recommended by the Royal Commission. The Royal Commission recommended a tremendous number of things, some of them very good, some of them nonsense, and some of them debatable. Many of them have been done already. However, I am quite sure that, whether we be Ministers, or Members of Parliament on this side of the House or on that, we should do very wrong to get into a state of mind in which we think that a Royal Commission is almost certain to be right.
We should look at all these things with a keen dispassionate eye. The members of this Royal Commission were a very mixed body of people. One should always look at what both the minority and the majority say and then make up one's mind. It is a very poor argument, in my view, to say, "I will do this because it was recommended by the Royal Commission". Of course, on this issue the Royal Commission split wide open. The majority argued for it, but the minority took a very different view.
I have read the whole Report and I have not read a more unconvincing series of paragraphs than paragraphs 518 to 520 of the majority Report. It is a most unconvincing set of arguments for unifying the two rates. The minority took a different view and said that it was
"strongly opposed to the recommendation of the Majority that the differential profits tax should be abolished forthwith, quite independent of whether capital gains are taxed or not."
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The minority said that, if capital gains were taxed, then it thought there was a case for unifying the rates.
If the Chancellor is following the Royal Commission on this point, he is only following the majority of them, because the minority said that they were entirely opposed to the unification of the rate unless there was also a tax on capital gains. The minority go on to say:
"… the purpose of a differential profits tax is to keep down dividend distribution in relation to earnings"—
that will interest my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith)—
"and it can be a most efficacious instrument for the purpose … There can be little doubt that, but for the discouragement provided by the differential tax, the rise in dividends would have been more in line with the increase in earnings, Such an increase in dividends would have had the most undesirable effects."
Mr. Harold Lever: Will my right hon. Friend allow me—
Mr. Dalton: No, I will not. My hon. Friend will have plenty of time to develop his argument later. I am in the midst of an argument which I want to complete. [Interruption.] It is not a fact. I have quoted the exact words in two successive sentences. I am not prepared to give way. I am near the end of my speech. Then my hon. Friend will have a chance to put his argument.
The final argument used in favour of the change is that the process would be made simpler. Two rates are less simple than one. Of course they are. But where does that argument carry us? The Income Tax system would be simplified tremendously if we abolished all personal allowances, all progression and Surtax. Then we would have a very simple Income Tax system—5s. or 6s. in the £ on every £ of income. But it would not be just. Too much simplicity must not be sought at the expense of justice.
I certainly expect the Chancellor to produce a better argument tonight in favour of this most debatable and, as I think, unfortunate Clause. It is a volte face from all that has gone before. I do not know how easily he overcame the initial resistance, as it must have been, in the Cabinet of all the leading people in his own party whom I have

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quoted and what they had said in Budget speeches and debates. Perhaps he had a very hard fight, or perhaps their attention was elsewhere. Perhaps the Foreign Secretary was no longer thinking about finance.
I hope that I have substantiated my belief that the new Clause encourages inflation, discourages investment and multiplies injustice. For these reasons, we shall vote against it. Perhaps we shall seem to be accompanied in the Division Lobby by the penitent ghosts of those who furnished us with arguments against it—the penitent ghosts of the Prime Minister, the Lord Privy Seal and the Foreign Secretary, shadowy, embarrassed witnesses against the Chancellor.
Mr. C. W. Armstrong: There is one result of this Clause to which I think attention ought to be drawn. I refer to the effect that it will have on immigrant companies. The effect that it will have, for instance, on an American subsidiary will be to increase by 3½ per cent. the tax that it will pay on profits distributed to its parent company. There can be no doubt, I think, that this must be a discouragement to foreign companies to set up plants in this country, especially if we bear in mind that countries on the Continent are doing their best to attract such foreign enterprise into their own countries.
For instance, I am assured that the German budget proposals will result in its being 7 per cent. more attractive for a foreign company to go to Western Germany than to come to this country. Another result of the Clause will be that the rate of tax in this country—Income Tax and Profits Tax together—will be higher than the corresponding tax in the United States.
9.15 p.m.
I do not think there can be much doubt that the psychological effect of the tax in this country being higher than the tax in the United States will have the effect of deterring American companies from coming here, probably quite out of all proportion to the actual difference that is involved.
What I am more particularly concerned with, however, is the effect on unemployment, especially in the north of Ireland. We in the north of Ireland are particularly concerned over this, for two
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reasons. First, our unemployment is tragically high. As the Committee knows, it is enormously higher than in Great Britain. Secondly, we know by experience that it is easier to get, for instance, American companies to come to Northern Ireland than to get companies already established in Great Britain, for a fairly obvious reason.
An American company comes here because it wants to exploit the European market. It is free to choose where it will go. Therefore, it finds attractive the inducements that the Northern Ireland Government are able to offer. A company already established in Great Britain, however, is in a better position to deal with the European market where it is already established than by putting a branch further away across another sea passage in a remoter part of the United Kingdom in Northern Ireland.
The Clause, therefore, interferes with our rescue operations in dealing with our own unemployment. It is the more mortifying for us in that this effect is, as it were, accidental. This change has been brought in as a matter of convenience for the United Kingdom tax code, and it was in no way intended as a hit at foreign companies. It is, I think, true to say that the effect was not even realised by the Treasury, because to begin with we were assured that the difference would be only one-half of 1 per cent., whereas it is now admitted, I understand, that the difference is 3½ per cent.
I would not suggest that any new inducement should be given to foreign companies to come to this country. All I am suggesting is that the inducements which were previously held out to them should not be removed all in one fell swoop. What I ask my right hon. Friend the Chancellor to consider is that the American company should have no advantage over the British company on profits ploughed back, but I suggest that it would be reasonable, considering that when a British company was paying 30 per cent. the American company paid 3 per cent., now that the British company is paying only 10 per cent. the American company should be left at 3 per cent.
Admittedly I am considering this from a parochial, a Northern Ireland, point of view, but one of our lifelines, so to speak, in dealing with our employment is being

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taken from us, and from our point of view it is not so much a matter of abstract justice between an American or a foreign firm and a British firm. After all, we have our own long-established, indigenous firms to whom we have responsibility. It is a question whether we can afford in our difficulties to do without the American firms, and our feeling is that we cannot. I would ask my right hon. Friend if he can see his way to look at this aspect of this Clause again.
Mr. Glenvil Hall: I want briefly to support what my right hon. Friend the Bishop—[Laughter.] I mean my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) has said. It is rather refreshing to see him at that Box, and hear him taking part in our Finance Bill debates once more. I am sorry that we do not hear him often. What he said is absolutely right, that the Profits Tax was instituted for one purpose, and one purpose alone: it was an additional tax which was so designed as to differentiate between profits which were retained in the business and those which were distributed to shareholders. Because that was its underlying basis there has been throughout a considerable gap between the two rates.
If it were not a tax of that kind there would be little to be said for it because most taxation could be levied through Income Tax, but it was a tax on profits with that end in view. The Committee should get this firmly in its mind, that it was and should still be a tax to invite and to help companies to build up their reserves.
This afternoon we have been dealing with a proposal that building societies should not have to pay the new flat rate of 10 per cent. The main reason in the minds of those of us who supported that proposal was that the 10 per cent., and, indeed, Profits Tax as a tax, on the surpluses of building societies must inevitably eat into their reserves. I, and other hon. Members, gave the Committee a number of figures to show that the incidence of Profits Tax up to now, and its continued incidence under the new rate, means that reserves are eaten into. The time may come when those reserves would reach an even more dangerously low level than that at which they are now.
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We have this astonishing spectacle, that a company which can be largely antisocial in its activities is, by this Clause, to benefit to the extent of two-thirds of the rate of tax it has previously had to pay whereas building societies, which perform a great service to the State, are essential to the well-being of the community, and have assisted countless small people to buy their homes—a thing I should have imagined everyone on the other side of the Committee would have applauded—are to be taxed in the same way as any company however anti-social it may be. Ordinary companies will gain to the extent of two-thirds, whereas the tax on the surplus of the building societies will be a rate equal to an increase of 500 per cent.
I do not know whether the Chancellor has closed his mind to all argument on this issue. It seems to me that he accepted 10 per cent. because he had a tidy mind and as my right hon. Friend the Member for Bishop Auckland has just said, he accepted the findings of the majority of the Royal Commission. If that is the reason, it is a very unfair and unjust reason arising from a failure to examine the facts as they ought to be examined. If the rate is now 10 per cent., and the right hon. Gentleman or a future Chancellor decides next year to increase the Profits Tax to something more than 10 per cent., will a such higher rate be inflicted on the building societies just to keep the thing tidy? If so, many building societies will be in much greater difficulty than they are in at present over their reserves.
There has been some difference of view as to just how much those societies may gain by the change in the basis which the Chancellor announced in his Budget speech and which we certainly welcome. My hon. Friend the Member for Gloucester (Mr. Diamond) questioned the figure which I gave earlier, but I have here the figures actually prepared on the point. They show quite definitely that the amount involved is not the £1 million, which the Financial Secretary to the Treasury stated, or £600,000 to £800,000 which the hon. Member for Wimbledon (Mr. Black) gave today in what I thought a most deplorable speech. The hon. Member seemed to be in favour of abolishing the tax and to be wanting to keep it at the same time. He was in favour of a flat rate, yet he seemed to

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think that it might do the building societies harm. By the end of his speech it was very difficult to discover where the hon. Member stood on this matter.
This is what the building societies say on the subject, and they have gone in to it with great care:
"The figure to which regard should properly be had is a figure of £625,000. The fiscal year, however, is not the Profits Tax year and societies will, therefore, as regards the Profits Tax year 1958 have to pay for three months on the old basis and for nine months on the new. The estimated liability of societies on this for the Profits Tax year, 1958, will be £1,900,000 as compared with £2,325,000 for the Profits Tax year, 1957, or a reduction of only £425,000"
which was the figure I gave.
There is a very great difference between £425,000 and £1 million which the Financial Secretary stated they will save. The conclusion is that the building societies will not save a great deal by the change in the basis which the Chancellor has been good enough to announce.
I hope, therefore, that as he was unable, for very good reasons, to be here during the main part of the debate which we had on this matter at the beginning of today's Sitting, the Chancellor will be good enough to read through what was said by those who took part, keep an open mind, and, on Report, see if he can do something to help these societies. I can assure him that if it is possible so to do we shall return to this matter on Report. We hope that then he will have reconsidered the matter, looked at the figures, and become willing to meet us partially, if not wholly, in our claim.
9.30 p.m.
Mr. Geoffrey Stevens: I extend a very warm welcome to the Clause. On behalf of my right hon. and hon. Friends, once again I say, "Thank you very much" to the Chancellor for doing something which his hon. Friends have been urging him to do for the last three years.
I listened with the greatest possible attention to the speech of the right hon. Member for Bishop Auckland (Mr. Dalton). I was much interested in three aspects of the quotations with which he regaled the Committee. First, the vast majority of the quotations were from speeches made before the Report of the Royal Commission in June, 1955—and I shall say something about the composition of that Commission shortly.
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The second thing that interested me—and he perhaps overlooked this fact himself—was that all the quotations, without exception, were taken from speeches made in the context of an inflationary situation, whereas I do not think any hon. Member would suggest that an inflationary situation exists in this country at present. [HON. MEMBERS: "Oh."] It really is deplorable that I should be the only reader of the Daily Herald in the Committee. I read it every day, and every day I read stories of growing unemployment, a lowering of the Bank Rate—[HON. MEMBERS: "Hear, hear."] Hon. Members say "Hear, hear". Are those inflationary sounds? If hon. Members opposite do not recognise the opposite of inflationary signs when they see them, no wonder we got into such a mess when the right hon. Member for Bishop Auckland was Chancellor of the Exchequer.
He went on to refer to the admonishment that he had had to administer in 1946. He said that some companies were "chucking away their money" in dividends; too much was paid away in dividends and too little was ploughed back, and that all this kind of thing was inflationary and disturbing to labour relations. That was the third thing I noticed about his quotations; he had left behind the figures which might have substantiated his case. I am able to make good that deficiency, because I have the figures with me. They show just what did happen between 1938 and 1948; 1938 and 1956, and in various other periods, in regard to wages, salaries and dividends.
These figures are taken from a book published by the Central Statistical Office, called the National Income and Expenditure Blue Book, which I feel sure the right hon. Gentleman will accept. Looking at these figures we can see factually just how much increases in dividends did, or should have, inflamed the labour situation. Between 1938 and 1956 wages and salaries rose by 292 per cent.—by nearly four times. During that same period dividends on ordinary shares rose by 94 per cent.—just about one-third of the percentage rise in wages and salaries.
How those figures can be used to justify the very extravagant claims which the right hon. Gentleman used I do not know. In fact, the figures show the exact opposite. They show that throughout the history of the joint stock companies

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boards of directors have, from natural inclination and prudence, exercised dividend restraint—an example which one would have liked to see extended to other sectors of the economy. The right hon. Gentleman criticised the composition of the Royal Commission. It is not without interest to note that the personnel was selected and appointed by a Government which the right hon. Gentleman supported and of which he had been, until a short time earlier, himself a member.
Mr. Dalton: I was not criticising the Royal Commission, except in the sense that I said that it was a mistake to think that what the Royal Commission had written should be treated like Holy Writ. I do not think that the advice that it gave was very much superior to what any Minister, appropriately staffed, would get from his own reflections and his own Department.
Mr. Stevens: The right hon. Gentleman is confirming exactly what I said. He denigrated the Royal Commission. He talked of it as a "worthy, hard-working lot of people," and wrote them down as far as he possibly could, entirely unjustifiably. Despite the fact that a Labour Government appointed the Commission, it was a first-class lot of people and did a first-class job.
Mr. E. Fernyhough: Did the 98 per cent., which the hon. Member says was the increase in dividends on shares, include bonus shares?
Mr. Stevens: If a company issues bonus shares the effect is a decreased dividend per share in the following year and not an increase. It is a dividend on two pieces of paper instead of on one. If I went on to develop that factual argument you would call me to order, Mr. Storey. I shall be very pleased to meet the hon. Gentleman afterwards and to explain how these things happen.
Mr. Austen Albu: Has the hon. Gentleman ever known a case of the issue of bonus shares where the actual dividend has not been raised after a bonus distribution?
Mr. Stevens: Certainly. Once again I should be out of order if I replied fully, but I can give the hon. Gentleman a list of a hundred if he will meet me outside.
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It is not without interest to quote the final conclusions of the Royal Commission on this matter. The majority Report says:
"The use of differential rates may have been of some value in the immediate post-war years but the arguments against such a tax structure increase with the years and in the end must prove decisive."
Mr. Chapman: What paragraph is the hon. Gentleman reading?
Mr. Stevens: Paragraph 540, on page 159. The right hon. Member for Bishop Auckland said, "We must not listen to the majority Report only. We must look at the minority Report as well." He is absolutely right. Any objective person would do so. It is instructive to read the minority Report on this matter. I am not forgetting that the minority Report did very strongly advocate, in this context, a capital gains tax. None the less, in paragraph 103, on page 387, the minority Report sets out in the most potent fashion the arguments in favour of unification of the two rates. It says:
"We do not disagree with the majority's view that the artificial encouragement of the retention of profits by companies is not necessarily an economic advantage."
Later on it says:
"It can be argued also that the system of financing capital expenditure so largely out of the undistributed profits of companies, does not ensure the best use of the community's savings. It makes it more difficult for fast-expanding firms to raise funds in the capital market; it strengthens the monopolistic tendencies in the economy, and it encourages wasteful expenditure on behalf of those firms who have more money than they can use."
Those are the arguments deployed by the minority in supporting the majority. Whether or not it linked these arguments in due course—or rather the conclusions which it reached as the result of these arguments—with the capital gains tax, the arguments retain their validity. So both the majority and the minority support what my right hon. Friend has said. There is no question about that at all. All the figures are in the record, the figures which the right hon. Member for Bishop Auckland forgot to quote in support of his case. It was not a wise thing to do but I have noticed that it is rather a common tendency on the Opposition side of the Committee. [HON. MEMBERS: "Oh."] Yes, indeed, because the figures do not give support to the particular theory which hon. Members are putting forward.

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There is no doubt that the decision and the recommendation of the majority, supported by the minority, of the Royal Commission, was a wise one. I once again congratulate my right hon. Friend on amalgamating those two things, and I commend the Clause.
Mr. Harold Lever: We have heard various arguments in favour of retaining a differential rate of Profits Tax. I should say at the outset that I am very impressed with one only, which was not unduly emphasised in the Committee. It is widely believed by some that a differential rate on dividends tends to encourage a high rate of savings in the economy. If I believed that, I would be more sympathetic to the proposal that the differential rate should become a permanent feature of our fiscal system.
Although I am going to vote against this Clause tonight, I want to emphasise that it is not because I am anxious to perpetuate the system, as my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) seems to wish, of a differential, and I shall venture to give my reasons. First, it might help if I clear briefly some of the negative side of the matter from consideration. It is certainly very arguable whether a differential Profits Tax which encourages companies to plough back profits helps in dealing with inflation or not.
When a company is encouraged to plough back profits in an inflationary period by this differential means, money is available to the big companies and for the most important things which ought to be kept free of buying pressure—the capital goods section. If the result of larger dividends according to popular belief is that people will rush to the Ritz or Fortnum and Mason and fill themselves up with potted shrimps and pâté de foie gras, it might cause inflation in the prices of those delicacies, but it would not fundamentally damage the economy; but if the fiscal method tends to encourage ploughing back, that encourages people to buy goods which are in short supply on a market which is already overloaded, the capital goods market.

No one on this side of the Committee believes we are in an inflationary period at the moment. On the contrary, we want to know why the Chancellor thinks we should strangle the capital investments
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of the railways and the roads and deprive working people of increases in wages.
Mr. Stevens: Would not the hon. Member agree that the Bank Rate has been recently reduced and initial allowance has been increased by 50 per cent.?
Mr. Lever: The Chancellor faces two ways at the same time. One of my right hon. Friends described him the other day as a weather-cock. It is idle to charge this side of the Committee with having a misconception about the kind of situation in which we are. We do not think there is an inflationary situation, but we did not propose that we should have a 5 per cent. Bank Rate, nor did we welcome with enthusiasm the idea of a 7 per cent. Bank Rate a few months ago.
If the hon. Member is really convinced that the danger at the moment is deflation and not inflation, it is time he woke up to the financial facts of life and pressed them on his own Chancellor of the Exchequer who maintains a high Bank Rate. A differential rate of Profits Tax cannot be defended on the ground that it is needed because of inflation. In the first place, it is doubtful whether it is a help in that respect and, in the second place, most people, apart from the Chancellor and his expert advisers, are well aware that there is no inflationary danger in this country, nor indeed in the world at present—rather the reverse.
Two years ago I ventured to divide the House on this issue and proposed that the differential should be abolished. The then Chancellor of the Exchequer, who since—presumably for his efforts on that occasion—has been promoted to Prime Minister, resisted what I thought was an unanswerable case for the abolition. Aided only by the Leader of the Liberal Party, whom I regret not to see in his place, who acted with me as a Teller in that Division, my proposal received exactly no votes. In view of the ironical applause when we eloquently performed a pirouette to the Table to announce that lamentable decision to the Chairman of the Committee, and the cheers with which it was greeted from the other side, it is rather a pity that their unanimous enthusiasm for the abolition of the differential has been left so late. I wish that they had supported me two years ago when I advocated it.

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9.45 p.m.
I am sorry to find myself in disagreement in some particulars with the reasoning of my right hon. Friend the Member for Bishop Auckland. In spite of his discourtesy to me when I wanted to correct a misleading statement which he was putting before the Committee and which I shall now seek to do, we are all delighted to have him back again in his old form at the Dispatch Box. He claims a far better record in supporting Government credit than those who succeeded him. At least, in his day Britain's credit stood high. I did not altogether agree with his policies then, and I do not altogether agree with them now. But he is not like the present Chancellor who has so conducted our affairs that the Lottery Bond is the least speculative of all Government securities.
I want to refer to a further point which he was making. He said that the whole idea of the Profits Tax was to keep the ratio between earnings and dividends. He was trying to deal with what my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) had said, and he said that the idea of the Profits Tax was to keep the ratio between dividends and earnings in proper proportion. My hon. Friend is a staunch champion of the rights of the wage-earning folk of this country. I think that my right hon. Friend undoubtedly meant, and meant my hon. Friend to understand, that the Profits Tax differential was to keep down the ratio between company dividends and workers earnings. That is not what the Commission said at all. It was to keep down the ratio between company dividends and company earnings. The only purpose of this argument, so far as the worker is concerned, is that this differential made an excellent reason for declining to give an increase in wages, notwithstanding that profits were soaring, because the extremely profitable company was saying, "We have been told by the Chancellor to keep down our dividends and also to keep down our wages." I am not in sympathy with either of those views.
Some of us are wondering why there is so much excitement about building societies. I am in trouble because I hate to disagree with my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall). He is obviously under the
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impression that building societies are building societies and feels considerable sympathy for them. Of course they are nothing of the sort. They borrow and lend money right, left and centre and they are the beneficiaries of a quite illogical and unjustified tax concession.
Mr. Glenvil Hall: I am sorry to interrupt my hon. Friend in an interesting speech, but most Members of the Committee would like to hear what is this tax concession which the building societies enjoy.
Mr. Lever: I will put it briefly. The tax concession which the building societies enjoy is not enjoyed by ordinary companies. They are only companies engaged in the business of borrowing money and lending it. That is the purpose of building societies today. They enjoy this concession over all other companies, because whereas other companies have to pay the standard rate of Income Tax on their profits, the building societies pay only a composite rate.
Mr. Glenvil Hall: This was done originally, in consultation with the Inland Revenue, because so many people who invest money in building societies were not liable to pay Income Tax anyway and many others, who might have to pay tax, paid at a lower rate. Therefore, they had a compounded rate which is, I think, either 7s. 7d. in the £ or 5s. 6d. in the £, but something less than 8s. 6d. I can assure my hon. Friends that the Inland Revenue gets its pound of flesh.
Mr. Lever: I do not want to stray too far. It is a concession made only to building societies.
Mr. Chapman: It is not a concession.
Mr. Lever: I do not want to pursue what is very much beside the point. If it is not a concession, I should like to hear what my hon. Friend would say if the Chancellor took it away next year. The roof would be lifted with howls of pain from the building societies. [HON. MEMBERS: "No."] I invite the Chancellor to bear in mind that those who speak on behalf of the building societies do not think that it is a concession. I recognise that it is also an administrative convenience for the Inland Revenue, but it has many advantages to building societies.

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I wish to put briefly my reasons for opposing the retention of a differential rate of Profits Tax as a permanent feature of our fiscal life and freely concede that we have the authority of a former Tory Chancellor of the Exchequer, and no less authority than that of the former Prime Minister and the Foreign Secretary, in support of the contrary view.
Mr. Dalton: And the Lord Privy Seal.
Mr. Lever: But I wish to speak from the Labour Party point of view.
The Labour Party believes, and I feel that many enlightened hon. Members opposite believe, in a progressive system of taxation. Until profits take the form of dividends in a company they are not subject to a progressive tax. It does not matter whether those profits belong to a small shareholder or to a multi-millionaire; when undistributed they bear exactly the same rate of tax. When paid as dividends, however, if they are paid to a small shareholder, then the standard rate of Income Tax is paid and that is an end to it; but if they are paid to a multi-millionaire, he pays the greater part of the balance away in Surtax on unearned income.
In other words, this enthusiasm for the retention of profits rather than the distribution of dividends is widely shared among the richest members of the community. Indeed, so marked is the preference for the retention of profits among the rich that long before my right hon. Friend the Member for Bishop Auckland graced the Chancellory, his predecessors had to enact a section of the Finance Act to force them to pay dividends. It is only in soap box mythology that millionaires are dying to pay dividends which bring them within a progressive system of taxation.
If he refers to the facts, the Chancellor will find that it is the urgent duty of the Revenue to force the richer shareholders, who control most of these companies, to pay out dividends, or at any rate notional dividends, in order that they may attract Surtax. A sophisticated man once said that in love possession is nothing, only enjoyment matters. The Labour Party seem to have adapted the same principle about profits; in profits possession is nothing, and only their enjoyment matters. They say that their possession in the form of retained profits
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does not matter; only when they are enjoyed as dividends do they take on some consequence.
When they are earned by a company and retained, they belong to the shareholders, and we may be quite certain that sooner or later the shareholders get the benefit of these accumulated profits in the form of untaxed capital values. I do not wish to name companies, but I could name dozens under the control of extremely rich men who, according to this soap box mythology, are eager to pay their profits out as dividends but are restrained by my right hon. Friend's legislation. I can show examples where 90 per cent. of the profits are ploughed back, precisely because the rich men who control these companies do not want to pay Surtax but would rather accumulate profits as a capital accretion. From many points of view this is an advantage, because profits come within a progressive system of taxation only when they are declared as dividends. There is no reason why we should give a further incentive for their automatic retention. When a company makes profits and does not pay them out in dividends, after paying the standard rate of Income Tax it has them in the business as an addition to its capital.
Why should we give to companies which add to their capital an automatic tax concession for being good enough to do so, because that is what this means? There is no reason for giving a concession to company A, which has added to its capital by retaining £50,000 profit, any more than there is for giving such a concession to company B, which gets new capital by a subscription of £50,000. The position is identical in each case. If anybody suggested that we should give a tax concession to a company raising new capital, we should think that he was the victim of some form of delusion. Yet that is precisely the effect of the differential rates, which automatically give the concession when capital is added to companies which retain their profits whether they need to or not.
A company which retains its profits should do so on some rational ground, that it has something useful to do with them. Merely to say to a company, "You made a lot of money this year and it will look bad to the workers if you pay out large dividends and it is better that

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the workers should be denied what may be a reasonable increase in wages" is not a policy to which I can subscribe.
The Labour Party does not subscribe to the notion that there is something virtuous in preventing wage rises. I do not mean that there will not be occasions when a Socialist Chancellor, or a Conservative Chancellor for that matter, should be able to call on the workers for wage restraint. However, where in the world does the Labour Party get the idea that there is something evil, obnoxious and something which should be discouraged in workers making demands for wage increases? I am very suspicious of these sophistries of a financial character which are calculated to mislead workers into thinking that they are not entitled to make these demands.
To encourage companies to plough back profits, whether that is needed or not, amounts to saying, "You have money which you do not need and which you would not keep if you were to pay it in dividends, and by this discriminatory tax we will make it penal for you to part with it." The company is left with those funds and I have never thought it a good thing to press companies to swell their bank accounts with money which they do not need for business. That is not a policy calculated to make for a modest expansion or for frugal economy in business, nor for the sane management of the company's affairs.
While we have companies, we want them to be managed as sanely and as prudently as possible. Some of my hon. Friends with more drastic views may advocate the abolition of all companies and all finance, but while we have companies we do not want to encourage profligacy and wasteful expenditure; and yet nothing could be more calculated to do that than the possession of funds which those companies do not need and which they retain only because they are pressed by the tax incentive to do so.
I conclude my case from the Socialist point of view, this most important argument against the differential which encourages the ploughing back of profits. Encouraging companies to plough back profits weakens the social control of the financial directives which the Chancellor issues. If I had a small company and no money and I wanted to engage in a venture, I should have to go to the Capital
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Issues Committee or to the banks, both of which are subject to the Chancellor's directive, and if I wanted to make tin whistles or open a night club the Chancellor would be apt to say, "Not a farthing" and the banks would be apt to say, "Not a farthing"—and are very likely to do so and certainly would do so under a Labour Government. If I had been ploughing back profits and had vast funds, I should be autonomous and I could put my fingers to my nose at the Chancellor's directives. I should not give a hoot for the Chancellor, for the Capital Issues Committee, or for the directives.
Worse than that, companies which have ploughed back profits because of the differential rate, have funds which they do not need and which hence accumulate as regular funds. It is very nice to have Government securities or Daltons or whatever stock we want to see go up. I have an interest to declare here, because I hold War Loan, and I am glad to know that I qualify for the right hon. Gentleman's approval as a patriotic citizen. Incidentally, I have never been able to understand why Daltons, which are an identical stock to Goschens, have always been a fraction of a point lower.
10.0 p.m.
Mr. Dalton: Because they are repayable at a certain future date—I think 1975 or after.
Mr. Lever: As that stock is standing at somewhat under half its nominal value, this hardly seems to be a satisfactory explanation. I can understand the incurable romanticism of the financier who would rather have a shade less yield than have a stock bearing my right hon. Friend's name. I confess that it has never deterred me from preferring his stock to the slightly marginal decrease in yield of Goschens.
I have, however, strayed from my final point. By encouraging the accumulation of funds in companies one creates a number of autonomous chancellors who make their own capital directives, who have their own capital issues committee in the form of directors. They are sitting on millions which they have ploughed back and which by definition they do not need for their own business. But on the obverse side is a sort of grey market in capital, because when the Chancellor stops borrowing for essential

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purposes it makes money extraordinarily scarce for inessential purposes.
It is tempting to all these companies which have ploughed back so piously, with the approval of my right hon. Friend and to the avoidance of all Surtax, their vast profits in an inflationary period. They are now able to undermine the work of the Chancellor in planning our economy by having independent control of finance. For the centre of all democratic planning is the ability of the Government to control the flow of funds.
Some hon. Members were not present when I reminded the Committee that I divided the House two years ago on this very issue and I did not get a single vote from hon. Members opposite who are now clamouring for the abolition of the differential. They must examine their consciences and decide why they did not cover themselves with Parliamentary glory and take advantage of the opportunity that I offered them to support my Motion two years ago. The Labour Party, on the other hand, have been consistent in the matter. They believe in the differential. I do not believe in the differential. But I cannot approve this act of the Chancellor's in isolation from the other requirements of fiscal reform which ought to have gone with it.
If the Chancellor had reformed the fiscal system, into which I cannot go into detail now because I would be out of order, in a manner which would be approved by my party, I would not have voted against this reform of the Profits Tax, and I have a feeling that many of my hon. Friends would have been of the same mind too, had we had a thoroughgoing fiscal reform to our satisfaction.
I do not commit myself specifically to a capital gains tax; I personally do not believe in such a tax. I believe that some capital profits should be treated as income, and the others are not relevant to the discussion. I want merely to say in a sentence or two that, had the Chancellor redefined the meaning of income to include all capital profits which related to business or commercial activity and treated them as the income which they are—I enjoy them myself, but they are not taxed for they are called capital profits, and no doubt many hon. Members do—I should take a different view. They are capital profits under the present law and, with a redefined and
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realistic definition of income, they would be treated as taxable income.
The other capital gains accruing when, for instance, a man buys a house or a piece of porcelain which goes up in value should not be taxed at all, whether by a capital gains tax or any other kind of tax. But all other capital gains which are really income and can be spent as such should be taxed as income, with, let me say, a corresponding reduction of the present penal rates of tax. I do not at all envisage that, if capital gains were taxed, the present rates of taxation on earned income would be retained, but that is another matter coming under another part of the Bill.
I have no hesitation in voting against the Chancellor this evening, therefore, but I should like to go on record as saying that I would not like to see the differential rate of Profits Tax as a permanent feature of our fiscal system.
Mr. Hugh Fraser: I agree with every word spoken by the hon. Member for Manchester, Cheetham (Mr. H. Lever) except the last two or three sentences, in which he looked desperately for a reason to justify his action tonight. While we may have avoided political glory two years ago in not following him into the Lobby which he, with the Leader of the Liberal Party, uniquely filled, he is covering himself this evening with political spite in not joining us in the Question we propose to vote upon.
The hon. Gentleman has covered himself with even greater glory in the scorn and contumely he has poured on the "Bishop of Auckland" and on the "Curate of Colne Valley" who, I think, served together at one time in the Treasury. The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), whom we are all delighted to see back on the Front Bench opposite, thundered greatly and threw absolutes about the Chamber, but, after the great speech we have just heard from the hon. Member for Cheetham, we feel that all his arguments fall completely to the ground. We believe that, generally speaking, the Clause represents a definite step forward, for the reasons adduced by my right hon. Friend and other hon. Members, including the hon. Member for Cheetham.
I have one serious point to put to my right hon. Friend about the effect of his

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proposal on small businesses, of which there are very many in the West Midlands and Birmingham area, businesses employing 20 or 30 persons, frequently engaged in light engineering. Their position is difficult, and the difficulty was heightened a few months ago by the withdrawal of the "umbrella" from smaller companies. That umbrella was quite rightly withdrawn. Cases came to one's notice of companies starting with £5,000—doubtless, some of my hon. Friends would have wished to have shares in them, and so would I—paying no dividends, and finishing up with £2 million in the "kitty". However, the effect of the change had considerable effect on the smaller companies of the sort I have in mind, important small companies which are essential to the flexibility of the British economy—small, specialist fabricator employing 30 or so people, more or less a family business.
The withdrawal of the umbrella imposed by Sir Stafford Cripps meant that these people, who had frequently been forced to plough large amounts of money back into their businesses to keep them afloat at all, were faced with the problem of whether the Special Commissioners would impose upon them a Surtax direction. Many of the worst fears of these people did not materialise, but it is quite clear that the sudden change from 3 per cent. on retained profits in this kind of business to 10 per cent. puts them in a tricky situation.
I should like to ask my right hon. Friend to consider this problem, because it is a serious one for a large number of small companies. As my right hon. Friend and other hon. Members interested in taxation know, the complexities of Profits Tax are very considerable. As far as I can understand, it is based on three general conceptions, each of which is in itself variable and which could be adjusted by the Chancellor to ensure that smaller companies are benefited by expenses for directors and by help in other ways which could alleviate their position.
Beyond that, there is a further point which should be considered. I think that it is possible for my right hon. Friend to raise the lowest level at which Profits Tax is paid from £2,000 to, say, £5,000. That would obviously cost a
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fair amount to the Exchequer, but the damage which can be done to some small companies without help is very considerable indeed. Therefore, I hope that when my right hon. Friend replies, or between now and Report, he will consider what assistance can be given to small companies, which are of great benefit to the economy as a whole.
Mr. Diamond: There were two main reasons before we reached this stage of the debate why I opposed the end of a differential rate of Profits Tax. The first was the familiar one that it was ill-timed in relation to demands which were being made by the Chancellor at the same time for restraint in wages. It was most discouraging to those who were being asked to exercise restraint in wages to see a fiscal policy being implemented which tended to increase dividends.
It has been suggested that that is not the case. I shall make one or two quotations to the Committee which will put an end to that. Another point which one has to to consider is the timing, and, finally, we have to decide on what basis a flexible arrangement can be made having regard to what the Chancellor and the Paymaster-General have said.
First, I will deal with timing. What the Chancellor must do in his reply is to explain why it is that on the last three occasions on which these rates of tax have been altered they have been altered in one direction, namely, to increase the rate and the amount of variation between the distributed and non-distributed rate. It is no use the Chancellor relying on the conclusion of the majority Report, because it said, as has been already quoted:
"The use of differential rates may have been of some value in the immediate post-war years but the arguments against such a tax structure increase with the years and in the end must prove decisive".
This is how previous Chancellors have relied on the Report. As the years have gone by Chancellors have refused to accept those conclusions and have done quite precisely the opposite. As my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) wisely said, it is the responsibility of every hon. Member, particularly Ministers, to use their own heads with regard to the evidence put forward in Royal Commissions and to read the conclusions, but not necessarily

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to accept every conclusion merely because it is the logic of somebody else's mind.
No doubt the facts are valuable, but we can all draw our conclusions from them. Quite clearly, previous Chancellors have drawn the conclusion since June, 1955, when the Report was published, that this recommendation was precisely the opposite of what was beneficial and useful to the country at the time, namely, that the differential should be increased with the passing years and not decreased, as the Royal Commission suggested.
10.15 p.m.
I do not know what the Chancellor will say in explaining why, in previous years, it has been right to increase this differential and this year it is not only wrong to increase it, but right to demolish it completely. I do not know whether the Chancellor will say, as his hon. Friend the Member for Langstone (Mr. Stevens) said, that there is no question of any inflationary danger. I do not know whether he will say that there is no longer any need to discourage wage increases.
I have the clearest recollection of our discussion less than 24 hours ago, when the Joint Under-Secretary of State for the Home Department, a responsible member of the Government, replying to a Prayer, said that the reason why the firewomen were not getting the wage increase which had been recommended unanimously by both sides of the National Joint Committee, which had considered the matter, was the question of inflationary tendency. The amount involved, we were told, was £4,000 a year, of which probably three-quarters fell on the local authorities and a maximum of £1,000 a year on the Treasury. Because of that £1,000 a year, the Government were interfering to reject completely the unanimous conclusions of the National Joint Committee and they were refusing to give the wage increases which were then asked for. That was less than 24 hours ago.
I imagine, therefore, that the Chancellor will say that we are still in the same position as before and that thought had to be given to discouraging wage increases and encouraging wage restraint. The way to encourage wage restraint is not to encourage dividend increases. Whatever may be said about the size of them,
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nobody would argue against their psychological importance. As a result of the provisions of the Bill, dividends have already started to increase.
I will quote only one case. It is a report from The Times of as long ago as 5th May. It is headed, "Kemsley Newspapers Tax Benefit". I apologise for referring to a case by name, but I merely repeat what has already been in The Times. It said:
"Lord Kemsley, the Chairman of Kemsley Newspapers, tells shareholders in his statement with the latest accounts that on the basis of the profits earned in 1957 the charge for Profits Tax would have been reduced by about £130,000 if the flat-rate of 10 per cent. had applied for the profits."
He talked about an increased dividend and said that
"The prospect"—
only the prospect—
"that the Profits Tax burden will be lightened has influenced the Board in their decision to raise the Ordinary dividend from 10 per cent. to 12½ per cent."
That was as early as 5th May. That was in contemplation of the reduction in the cost of Profits Tax. I am sure that that is a responsible company and acting in the same way as many other companies are acting, and will act, in increasing dividends.
There have always been good reasons for the differential. My right hon. Friend the Member for Bishop Auckland has made them clear. Previous Chancellors, of both parties, have accepted that. Since the publication of the Royal Commission's Report, saying that the differential should be removed as the years went by, every Conservative Chancellor has either refused to remove it or has increased the differential. Now, the Chancellor is acting in a most harsh manner in interfering with and discrediting wage negotiations on the ground of the danger of inflation.
I will not repeat what the Chief Whip says. I understand him perfectly well, and I understand that he is not agreeing entirely with what I am saying. I do not suppose he could have been here last night and heard all the arguments which were made against firewomen having a wage increase costing £4,000 a year, the arguments being on the ground of inflation.
Having adopted that policy at this late hour and at the wrong time, we are now

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faced with the extraordinary situation that the sole reason which has prompted the Chancellor is that of administrative convenience. It is a nice, tidy arrangement to have one rate of tax. One thought at the time of the Budget speech that, of course, the Chancellor would be flexible-minded enough to realise that, although there might be arguments both ways, if there were a single rate of tax he would have to make adjustment and exceptions for cases which were not normal cases.
But the whole of today we have been putting forward Amendments to deal with cases which are absolutely apart from the normal run of businesses, and in every single case the Chancellor has turned us down flat, saying, through the Paymaster-General, "We have a single rate of tax, and it matters not whether we are considering local authorities and their undertakings, it matters not whether we are considering bodies which, by their constitution, cannot distribute profits, it matters not if we are considering building societies, it matters not whether we are considering Rugby and the encouragement to play Rugby throughout the country: nothing matters at all, but it has to be a single rate of Profits Tax."
Of course, that is the logical conclusion of this mistaken policy of having a single rate. The real argument in favour of a single rate is administrative convenience. The Chancellor is quite logical in sticking to it, but it produces all these unsatisfactory and inflexible results.
The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): This Clause, which provides for the unification of the Profits Tax rates, carries out one of the principal recommendations in the Report of the Royal Commission on the Taxation of Profits and Income and makes what, I think as an important change in our tax system.
I said in my Budget statement, and also in my speech on Second Reading of this Bill, why I decided to bring forward this proposal. After reviewing everything which has been said and written upon this subject I am bound to say that for economic, administrative, fiscal and legislative reasons I believe that this is not only a major reform but an extremely
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beneficial reform. I agree very much with almost everything my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) said tonight on this subject.
I want to make it clear that I am not of the opinion that a recommendation of the Royal Commission or any other committee should be accepted automatically, but I myself, who started with a very open mind on this subject, have been convinced by the arguments which the Royal Commission brought forward. It will be remembered that the majority Report of the Commission favoured strongly the merging of these rates. The minority of the Commission also thought that it would be a good thing to merge the rates, but conditionally on a capital gains tax. It would be out of order to talk about capital gains tax now.
The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) gave us a speech tonight, and I personally enjoyed his buoyant self-confidence. It was quite clear that his views and judgments were in direct conflict with those of the majority of the Royal Commission. Incidentally, from the way his right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) referred to him, I am not sure that that speech ought not to have been made in another place.
The right hon. Gentleman seemed to base his argument a good deal on the fact that, in his opinion, the merging of the rates would be inflationary, but that was against the background of the views expressed by many hon. Members opposite who made it perfectly clear that in their opinion the danger is deflation and not inflation. I should have thought, therefore, that the right hon. Gentleman's argument would not have made a great impact upon them.
I will not cover the ground which was dealt with by the Amendments that we discussed earlier today, designed to give relief to different types of organisations. I would say only that I am convinced that if I began to make exceptions there I should be departing from what I believe was a sound principle put forward by the Royal Commission. There is great force in the argument that if we are to do justice we ought to bring into the field of this Profits Tax all profits, without distinction between different types of corporations. Our object here is to see, as far as possible, that Profits Tax, now

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at the unified rate, follows as nearly as we can make it the principles on which Income Tax is applied to the profits of corporations of all kinds. As the Royal Commission said, only so can we achieve a fair balancing between the costs and prices of public, semi-public and private corporations.
The main criticism that has been advanced against the merging of the Profits Tax rates in general has been that it would lead to a spending spree in dividends and that it would be hitting companies which plough back a substantial proportion of their profits and pay low dividends. It is perfectly true that this tax will have a different incidence on different units of industry. Some will pay more and some will pay less, but I do not believe that it will stimulate a big rise in the general level of dividends. I have said that before and that remains my view after further study of this question. I believe, now that inflation is being eliminated from our system, that the pressure of profits margins will exert a strong influence in the opposite direction.
I do not believe, anyway, that boards of directors in general, milk their companies by extravagant dividends if they believe that money is required in the business for either immediate needs or for future expansion. If they do, then in the hands of their wealthier share holders those distributions will be subject to Surtax. The majority of the Royal Commission thought that the differential rate exerted only a minor influence on distribution when all other influences had been taken into consideration. We must remember that the lower rate of Profits Tax encouraged the retention of profits and not necessarily the ploughing back of profits. That point was made by the hon. Member for Manchester Cheetham (Mr. H. Lever).
10.30 p.m.
If companies—and there are many in this position—find themselves possessing surpluses after provision for their current and future needs, then it is in the long-term interest of our national economy that the money should find its way to other industries as new capital. The majority Report of the Royal Commission thought that that would be less likely to happen, on the whole, if the profits were retained by those companies which did not need
1218
them for ploughing back into their own businesses than if they were distributed. If the Royal Commission was right, then that is a very important factor. Nor did the majority of the Royal Commission consider that profits which were distributed were necessarily more inflationary than profits which were retained.
I regret that this change will lead to an increased tax bill for those low distribution companies which need to retain money as reserves for development, but that is the price which we must pay for a measure which I am convinced will be beneficial, on balance, to industry in general.
One important point has not been mentioned in this debate. That is the cumulative contingent liability of low-distribution companies under the differential Profits Tax system. The Royal Commission thought that that was a very bad feature of the Profits Tax as it has been to date. Of course, the greater the proportion of profits that are put to reserve the greater the magnitude of that contingent liability. Those companies will now be wholly relieved of that liability.
From the many views which I have had from industry, I understand that industry regards the removal of that contingent liability as an important gain. It was put to me that it was something overhanging those companies and that the blow might fall on them when a company might be engaged in a perfectly legitimate and useful process of reconstruction or rationalisation.
There is another change in the Budget which will help low-distribution companies which require to put a large proportion of profits to reserve, and that is the increase in the initial allowances. A most important reason for the change is that it mitigates the very serious cause of distortion in the financial structure of companies which resulted from the differential rates. There was invariably a tendency to encourage companies to resort to loan capital when they should have resorted to increases in equity capital. One can already see the result of that in the balance sheets of many otherwise extremely vigorous companies. The differential rate was unfair to companies which had an issue of preference shares, because the burden fell not on the preference shareholders, but on the equity shareholders.

1219
It is not necessary to stress the advantages which will accrue from the simplification of this part of the tax code and the enormous saving in work both to industry and to the Revenue—and I deliberately put it in that order because the time saved to industry is even more important than the time saved to the Revenue.
Mr. Roy Jenkins: The right hon. Gentleman is basing himself very heavily on the recommendations of the majority of the Royal Commission. Does he not recollect the fact that the majority thought that even a non-differential Profits Tax of this sort was not the way to solve the problem of preference shares, and that a different recommendation was made about that?
Mr. Amory: Yes, I realise that, but the majority of the Royal Commission undoubtedly recognised that the merging of the rates of Profits Tax improved the position enormously for companies which had a substantial proportion of their capital in the form of preference shares—and I think rightly so, too.
I was speaking about the simplification which will result from the merging of these rates. It will also lead to the repeal of a large amount of complicated and contentious legislation on the Statute Book, as hon. Members will see if they look at the Ninth Schedule. It will remove a main incentive to tax avoidance in this sector, and if I had not proposed the merging of the rates on this occasion I should have had to introduce some new and complicated legislation to counter the tax avoidance of which the differential rates were the cause.
I ought to refer to the psychological effect on wage increases. To some people this change is seemingly out to encourage higher dividends. I recognise the relevance of that consideration, but I think that its impact has been very much exaggerated. Our policy, as I think hon. Members know, is not a policy for a wage freeze or a dividend freeze. We want to encourage moderation in dividends and in wages. As my hon. Friend the Member for Portsmouth, Langstone pointed out, dividends have risen enormously less than wages since 1938. I will repeat the figures which he quoted, because they are relevant. Wages and salaries increased by 304 per cent. and dividends by 94 per cent. between 1938 and 1956.
Mr. H. Wilson: Will the right hon. Gentleman give the figures for the last two years?
Mr. Amory: I have not the figures for the last two years, but I think that I have some more recent figures. Between 1948 and 1956, a shorter period, wages and salaries increased by 81 per cent., gross profits of companies by 67 per cent. and ordinary dividends by 77 per cent. There again, ordinary dividends have increased by less than wages over the period.
Mr. Wilson: The right hon. Gentleman now goes back to 1948. Will he now look in another pocket and see whether he has the figures for the last two years? If he has not, will he take it from me that it was stated in the House, on Second Reading, and not challenged at the time, that dividends have risen considerably more than wages in that period?
Mr. Amory: I will accept that from the right hon. Gentleman but only against the background of the figures which I have given, showing the enormous gap between the amount by which wages have risen and the amount by which dividends have risen over the longer period.
Mr. Wilson: If the right hon. Gentleman is using this argument, he is basing himself on the assumption that the distribution of incomes in 1938 was the right distribution. Surely the one thing which even the right hon. Gentleman and the Tory Party will accept is that, in view of the heavy unemployment and the depressed standard of wages in 1938, the relationship between dividends and wages was wrong.
Mr. Amory: I am making no such assumption, but I have not time to follow the right hon. Gentleman into a detailed argument about the developments of the last twenty years.
If, as I believe, the evidence is that in the long-term the perpetuation of the differential rate would have imposed substantial harm on industry in general, I think it is dangerous to argue that we ought not to take remedial action because of the fears which we might have that the reasons for doing so might be misjudged.
My hon. Friend the Member for Armagh (Mr. Armstrong) appealed to me to consider whether a lower rate could

1221
be justified on the dividends paid by subsidiaries of foreign companies. He mentioned the relative advantages of taxation on such companies in this country and in other countries. Of course, such companies would no doubt consider not only the relative levels of corporate taxation but also other factors, such as the level of social service contributions.
As long as we had a differential rate there may have been some justification for giving the special relief that was given to foreign companies. But when we have one rate, as we shall have with this merging of the rates for all domestic corporations, I think it would be absolutely impossible to put subsidiaries of foreign companies in a position which would be more advantageous than that of our own companies. I would remind my hon. Friend of the benefit those companies get from the doubling of the initial allowances.
The right hon. Member for Colne Valley took me to task about the figure that was quoted by my hon. and learned Friend the Financial Secretary concerning the advantage that building societies are going to obtain. The figure, I think, was £1 million. The explanation is, as I think the right hon. Gentleman himself realised, that the lower figure which he mentioned was, of course, for a broken year, whereas the figure to which my hon. and learned Friend referred was the advantage which they will obtain in a full year.
Finally, I was interested in the arguments used by the hon. Member for Cheetham, though they were very difficult to reconcile with the views expressed by all his colleagues. A reason that has not been mentioned this afternoon, and one which I must say carried weight with me, was that the change which we are proposing has been very strongly welcomed by the bodies representative of industrial management, the Federation of British Industries and the National Union of Manufacturers, the latter body containing a large proportion of smaller firms.
It seems to me that there are arguments for a differential rate in particular circumstances, and they may have obtained at a period when we were undergoing a considerable measure of inflation. But I believe that today the economy is robust enough to justify us in attacking longer term objectives. I agree entirely with the
1222
majority Report of the Royal Commission, when it said that the arguments against the differential tax structure increased with the years and in the end must prove decisive. It said:
"Therefore, we recommend that the differential rates should be brought to an end."
On a balance of all considerations, I am sure that the unified Profits Tax rate will, in the long run, be better for industry and better for our national economy. That is why I am recommending this Clause to the Committee.
Mr. Gordon Walker: I hasten to agree with the Chancellor on one point, namely, that we support him in his refusal to have a differential between foreign companies and British companies in this country. That would be quite an impossible thing to do once we have a single Profits Tax. It was, of course, a perfectly reasonable thing to do when there was a differential Profits Tax. Apart from that, I must say that the right hon. Gentleman's decision to abolish the differential tax was a bad step and that he and his hon. Friends have advanced very bad and weak arguments in favour of it.
The right hon. Gentleman said that he only became convinced after starting with his mind leaning rather the other way. I wonder whether he will tell us when he became convinced, because since the Royal Commission reported the Lord Privy Seal has been Chancellor of the Exchequer and the Prime Minister has been Chancellor of the Exchequer. Both of them studied the Commission's arguments and both rejected them and they went out of their way to say why they did so. At what stage did the right hon. Gentleman become convinced? Was he convinced in those distant days when his right hon. Friend the Lord Privy Seal was Chancellor of the Exchequer or has he only been convinced, or even only just read the Report, since he came to his present office?
If the right hon. Gentleman was convinced in the time of the Lord Privy Seal, why did he not say so? Why did he keep so quiet? He has said nothing today to explain why it was right, for instance, for the Prime Minister when he was Chancellor of the Exchequer to reject these proposals of the Royal Commission and why it has suddenly become right for the present Chancellor to accept them.

1223
There has been a complete contradiction and no attempt has been made to reconcile these matters in any way.
10.45 p.m.
There have been a lot of bad arguments. One of the purposes of the change, we are told, is that it brings in simplicity and equity, and avoids distortion of the capital structure. There is a lot of mumbo-jumbo about that. We have had little evidence of distortion of the capital structure. In fact, we find that the result of what the Chancellor has done has been to produce a crop of inequities and distortions. All sorts of bodies like the Mersey Tunnel Authority, sports associations and the like, now have to bear a higher tax as a result of the Chancellor's activities. The Chancellor does not conceal, though he rather glosses over the fact, that the change has a very ill effect on the economy. It helps the wrong sort of companies. It helps breweries and property companies and hurts the commercial and industrial companies, steel companies and such concerns.
Is that the sort of selective expansion that the Chancellor really wants—breweries before steel companies? He is introducing a tax change which gives fiscal benefits to companies such as breweries and fiscal disadvantages to steel companies and similar bodies. If he really wants to do that, he should justify it. It is no good saying "This is the price one has got to pay for a doctrinaire proposal." It is a tremendous price to pay. It is distorting our economy—the very thing that the Chancellor says he wants to avoid doing.
I say to the hon. Member for Portsmouth, Langstone (Mr. Stevens) that it is not we who say that we have to avoid inflationary consequences of taxation. It is his right hon. Friend who is saying that all the time. It is his right hon. Friend who tells the workers, "You must not have a wage increase. It is very dangerous. It is inflationary." The right hon. Gentleman went out of his way to say that he agreed with almost everything that his hon. Friend the Member for Langstone said. I wonder whether he agreed with his hon. Friend when he said there was no longer any inflationary danger. He got rather near to saying this in the arguments that he was deploying in general.
1224
I say to the hon. Gentleman that we are not arguing that these changes are inflationary. We say that they constitute a regressive and unjust redistribution of wealth. They redistribute wealth wrongly to the rich at a time when every sort of effort is made to hold down wages by the right hon. Gentleman and his friends because it is dangerous.
They do this in two ways. First, they put up dividends. The Chancellor is extremely unconvincing about this part of his argument. All the financial Press has said that dividends will go up as a result of this proposal. My hon. Friend the Member for Gloucester (Mr. Diamond) gave one of a number of concrete examples. Does the right hon. Gentleman think that the National Union of Manufacturers would be so pleased with this change if it had so little effect on dividends as he pretends? Of course, it will increase dividends.
Mr. Stevens: Does the right hon. Gentleman accept bits and pieces in the financial Press rather than the Government Blue Book? Is he and is his right hon. Friend the Member for Huyton (Mr. H. Wilson) aware that the 1958 Blue Book will not be available until next month? Are they only prepared to quote figures which are not available?
Mr. Gordon Walker: I am saying that all the financial Press has assumed as a matter of course that one of the effects will be to put up dividends, and, of course, so have all hon. Gentlemen here. They have assumed that it will put up dividends on the whole—some more than others, breweries more than steel companies, for instance. This whole matted of a remission of this contingent tax liability encourages a distribution of reserves. In the past this has been discouraged because they have borne tax at 3 per cent. paid at the undistributed rate, and people did not distribute them because this would attract the distributed rate of 30 per cent.
Of course, reserves will be distributed in dividends much more than in the past. Because that is happening, capital gains will go up, as my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever), who seems to have left us again, was saying. It pushes up capital gains. They increase as the dividend rates go

1225
up. All this is done to increase the incomes of the rich at a time when the Government say that wages must not go up. This is one of the things we complain about so much in the effect of the tax changes.
The right hon. Gentleman said that it was his policy to encourage moderation in dividends and in wages. He had to go right back to 1938 to prove that he was doing this. But, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) said so very rightly, if the Chancellor makes that comparison, it must be on the assumption that the distribution of wealth in 1938 was somehow the perfect distribution, and one must always try to go back to it as quickly as possible, any departure from it being a distortion of the natural order of things.
What we are really discussing tonight is not what happened between 1938 and today. We are discussing the effect of the Chancellor's Finance Bill. Can the right hon. Gentleman honestly say that he has done anything in his Budget to encourage moderation in dividends, except talk about it? His actions will increase dividends. He has done a lot to encourage moderation in wages, but in this Budget he has done nothing to encourage moderation in dividend distribution.
The hon. Member for Langstone quoted the minority Report of the Royal Commission, and several hon. Members have quoted it against us. But, of course, the minority Report flatly condemned in terms what the Government are now doing. It said that to make this change in isolation, unaccompanied by other changes, would be wholly wrong. The hon. Member for Langstone talked about selective quotation, but he was really guilty of selective quotation himself in this respect. I will give the reference. The minority said that it was against what the Government are now doing, and the reference is page 388, paragraph 105.
Mr. Stevens: I really must protest at the right hon. Gentleman's lapse of memory in saying that I objected to selective quotation. I did nothing of the sort, and I made no such charge.
Mr. Gordon Walker: Perhaps I was wrong; I thought that the hon. Gentleman chided one of my right hon. Friends for selective quotation. In any case,
1226
whether he did or not, he himself was guilty of selective quotation.
The minority Report, of course, so far as it said that there should be this change, based that view on the assumption that there would be a capital gains tax. I must point out to hon. Gentlemen opposite that the one thing this change has done is enormously to increase the already great strength of the case for a capital gains tax. As the minority Report showed, there was a good case for it even with a differential Profits Tax, but with a single tax the case is overwhelming. Without it, there is a distribution of wealth towards the rich so that the situation really becomes socially intolerable. There would have to be a capital gains tax to balance a single Profits Tax. Perhaps hon. Gentlemen opposite, who have been jubilant tonight that this change should be made, may, one day, regret it, because it merely increases the strength of the case for a capital gains tax.
Of course, a differential Profits Tax has some disadvantages. All taxes have some disadvantages. No one denies that. The single Profits Tax has disadvantages, and so does Income Tax. But this differentiated tax introduced by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), and later developed and strengthened, as he showed, achieved certain very important social and economic ends. It was anti-inflationary at a time when that was very important. It encouraged the ploughing back of profits. It discriminated in favour of nationally useful industries and against less useful ones like breweries, if I may say so. [Interruption.] Less useful compared with steel. Do hon. Gentlemen say that the expansion of breweries is as important as the expansion of steel concerns? In fact, the differential tax discriminated in favour of things like steel concerns and against things like breweries. It did check capital gains to a considerable extent.
To alter this, without any other changes and in isolation, is really an extremely wrong and reactionary thing to do. It is unjust. It brings new inequities between company and company and corporation and corporation. It creates more anomalies than it cures. My right hon. and hon. Friends will vote

1227
with the best possible conscience against this reactionary and bad proposal put forward by the Chancellor.
Question put, That the Clause stand part of the Bill:—
The Committee divided: Ayes 199, Noes 155.

Division No. 185.]

AYES

[10.55 p.m.

Agnew, Sir Peter

Grimston, Hon. John (St. Albans)

Neave, Airey

Aitken, W. T.

Grimston, Sir Robert (Westbury)

Nicholson, Sir Godfrey (Farnham)

Alport, C. J. M.

Gurden, Harold

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

Amory, Rt. Hn. Heathcoat (Tiverton)

Harris, Frederic (Croydon, N. W.)

Noble, Comdr. Rt. Hon. Allan

Anstruther-Gray, Major Sir William

Harris, Reader (Heston)

Noble, Michael (Argyll)

Arbuthnot, John

Harrison, A. B. C. (Maldon)

Nugent, G. R. H.

Armstrong, C. W.

Harrison, Col. J. H. (Eye)

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

Ashton, H.

Harvey, Sir Arthur Vere (Macclesf'd)

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

Atkins, H. E.

Harvey, John (Walthamstow, E.)

Orr, Capt. L. P. S.

Baldwin, Sir Archer

Heald, Rt. Hon. Sir Lionel

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

Balniel, Lord

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

Osborne, C.

Barber, Anthony

Henderson-Stewart, Sir James

Page, R. G.

Barlow, Sir John

Hesketh, R. F.

Pannell, N. A. (Kirkdale)

Barter, John

Hill, Mrs. E. (Wythenshawe)

Partridge, E.

Batsford, Brian

Hirst, Geoffrey

Peyton, J. W. W.

Baxter, Sir Beverley

Hobson, John (Warwick & Leam'gt'n)

Pickthorn, K. W. M.

Biggs-Davison, J. A.

Holland-Martin, C. J.

Pike, Miss Mervyn

Bingham, R. M.

Holt, A. F.

Pilkington, Capt. R. A.

Bishop, F. P.

Hope, Lord John

Pitman, I. J.

Black, C. W.

Hornby, R. P.

Pitt, Miss E. M.

Body, R. F.

Horobin, Sir Ian

Ramsden, J. E.

Bonham Carter, Mark

Howard, Gerald (Cambridgeshire)

Redmayne, M.

Boyle, Sir Edward

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

Rees-Davies, W. R.

Braine, B. R.

Hughes-Young, M. H. C.

Renton, D. L. M.

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

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

Ridsdale, J. E.

Brooman-White, R. C.

Hyde, Montgomery

Roberts, Sir Peter (Heeley)

Bryan, P.

Hylton-Foster, Rt. Hon. Sir Harry

Roper, Sir Harold

Burden, F. F. A.

Irvine, Bryant Godman (Rye)

Scott-Miller, Cmdr. R.

Carr, Robert

Jenkins, Robert (Dulwich)

Sharples, R. C.

Cary, Sir Robert

Johnson, Dr. Donald (Carlisle)

Shepherd, William

Conant, Maj. Sir Roger

Johnson, Eric (Blackley)

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

Cooper, A. E.

Joseph, Sir Keith

Smithers, Peter (Winchester)

Craddock, Beresford (Spelthorne)

Kerr, Sir Hamilton

Spearman, Sir Alexander

Crosthwaite-Eyre, Col. O. E.

Kershaw, J. A.

Speir, R. M.

Crowder, Petre (Ruislip—Northwood)

Kimball, M.

Stanley, Capt. Hon. Richard

Currie, G. B. H.

Lambton, Viscount

Stevens, Geoffrey

Dance, J. C. G.

Langford-Holt, J. A.

Steward, Harold (Stockport, S.)

Davidson, Viscountess

Leburn, W. G.

Steward, Sir William (Woolwich, W.)

D'Avigdor-Goldsmid, Sir Henry

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

Stuart, Rt. Hon. James (Moray)

Deedes, W. F.

Legh, Hon. Peter (Petersfield)

Studholme, Sir Henry

Donaldson, Cmdr, C. E. McA.

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

Summers, Sir Spencer

Doughty, C. J. A.

Linstead, Sir H. N.

Taylor, Sir Charles (Eastbourne)

Drayson, G. B.

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

Taylor, William (Bradford, N.)

du Cann, E. D. L.

Longden, Gilbert

Teeling, W.

Duncan, Sir James

Low, Rt. Hon. Sir Toby

Temple, John M.

Eden, J. B. (Bournemouth, West)

Lucas, P. B. (Brentford & Chiswick)

Thompson, Kenneth (Walton)

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

Lucas-Tooth, Sir Hugh

Thompson, R. (Croydon, S.)

Emmet, Hon. Mrs. Evelyn

Macdonald, Sir Peter

Thorneycroft, Rt. Hon. P.

Errington, Sir Eric

Mackeson, Brig. Sir Harry

Thornton-Kemsley, Sir Colin

Farey-Jones, F. W.

McKibbin, Alan

Tiley, A. (Bradford, W.)

Fell, A.

Mackie, J. H. (Galloway)

Tilney, John (Wavertree)

Finlay, Graeme

McLaughlin, Mrs. P.

Vickers, Miss Joan

Fisher, Nigel

Maclean, Sir Fitzroy (Lancaster)

Vosper, Rt. Hon. D. F.

Fletcher-Cooke, C.

Macmillan, Maurice (Halifax)

Wade, D. W.

Fraser, Hon. Hugh (Stone)

Fraser, Sir Ian (M'cmbe & Lonsdale)

Macpherson, Niall (Dumfries)

Wakefield, Edward (Derbyshire, W.)

Gammans, Lady

Maddan, Martin

Wakefield, Sir Wavell (St. M'lebone)

Garner-Evans, E. H.

Markham, Major Sir Frank

Wall, Patrick

George, J. C. (Pollok)

Marlowe, A. A. H.

Webster, David

Gibson-Watt, D.

Marshall, Douglas

Whitelaw, W. S. I.

Glyn, Col. Richard H.

Mathew, R.

Williams, Paul (Sunderland, S.)

Gough, C. F. H.

Maudling, Rt. Hon. R.

Williams, R. Dudley (Exeter)

Gower, H. R.

Mawby, R. L.

Wills, Sir Gerald (Bridgwater)

Graham, Sir Fergus

Medlicott, Sir Frank

Wilson, Geoffrey (Truro)

Grant, Rt. Hon. W. (Woodside)

Milligan, Rt. Hon. W. R.

Woollam, John Victor

Green, A.

Mott-Radclyffe, Sir Charles

Gresham Cooke, R.

Nabarro, G. D. N.

TELLERS FOR THE AYES

Grimond, J.

Nairn, D. L. S.

Mr. Oakshott and

Mr. Chichester-Clark.

NOES

Ainsley, J. W.

Awbery, S. S.

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

Albu, A. H.

Bacon, Miss Alice

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

Allaun, Frank (Salford, E.)

Balfour, A.

Benson, Sir George

Allen, Arthur (Bosworth)

Bellenger, Rt. Hon. F. J.

Beswick, Frank

Blyton, W. R.

Howell, Charles (Perry Barr)

Paget, R. T.

Bottomley, Rt. Hon. A. G.

Howell, Denis (All Saints)

Palmer, A. M. F.

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

Hoy, J. H.

Pargiter, G. A.

Braddock, Mrs. Elizabeth

Hughes, Emrys (S. Ayrshire)

Pearson, A.

Brockway, A. F.

Hughes, Hector (Aberdeen, N.)

Peart, T. F.

Broughton, Dr. A. D. D.

Hunter, A. E.

Pentland, N.

Brown, Thomas (Ince)

Hynd, H. (Accrington)

Popplewell, E.

Burke, W. A.

Hynd, J. B. (Attercliffe)

Price, J. T. (Westhoughton)

Butler, Mrs. Joyce (Wood Green)

Irving, Sydney (Dartford)

Probert, A. R.

Champion, A. J.

Janner, B.

Pursey, Cmdr. H.

Clunie, J.

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

Redhead, E. C.

Collins, V. J. (Shoreditch & Finsbury)

Jeger, George (Goole)

Reynolds, G. W.

Craddock, George (Bradford, S.)

Jenkins, Roy (Stechford)

Rhodes, H.

Cronin, J. D.

Johnson, James (Rugby)

Rogers, George (Kensington, N.)

Crossman, R. H. S.

Jones, David (The Hartlepools)

Shurmer, P. L. E.

Dalton, Rt. Hon. H.

Jones, Jack (Rotherham)

Silverman, Julius (Aston)

Davies, Stephen (Merthyr)

Jones, J. Idwal (Wrexham)

Skeffington, A. M.

Deer, G.

Jones, T. W. (Merioneth)

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

de Freitas, Geoffrey

Kenyon, C.

Smith, Ellis (Stoke, S.)

Delargy, H. J.

King, Dr. H. M.

Sorensen, R. W.

Diamond, John

Lawson, G. M.

Soskice, Rt. Hon. Sir Frank

Dodds, N. N.

Lee, Frederick (Newton)

Sparks, J. A.

Donnelly, D. L.

Lee, Miss Jennie (Cannock)

Spriggs, Leslie

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

Lever, Harold (Cheetham)

Stonehouse, John

Ede, Rt. Hon. J. C.

Lever, Leslie (Ardwick)

Stones, W. (Consett)

Edelman, M.

Lindgren, G. S.

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

Edwards, Rt. Hon. Ness (Caerphilly)

Logan, D. G.

Summerskill, Rt. Hon. E.

Edwards, W. J. (Stepney)

Mabon, Dr. J. Dickson

Sylvester, G. O.

Evans, Albert (Islington, S. W.)

McAlister, Mrs. Mary

Taylor, Bernard (Mansfield)

Fernyhough, E.

McCann, J.

Taylor, John (West Lothian)

Fletcher, Eric

MacColl, J. E.

Thomas, George (Cardiff)

Foot, D. M.

MacDermot, Niall

Thomas, Iorwerth (Rhondda, W.)

Fraser, Thomas (Hamilton)

McInnes, J.

Thomson, George (Dundee, E.)

George, Lady Megan Lloyd (Car'then)

Gibson, C. W.

MacPherson, Malcolm (Stirling)

Warbey, W. N.

Gordon Walker, Rt. Hon. P. C.

Mahon, Simon

Watkins, T. E.

Grenfell, Rt. Hon. D. R.

Mallalieu, J. P. W. (Huddersfd, E.

Weitzman, D.

Grey, C. F.

Mann, Mrs. Jean

Wells, William (Walsall, N.)

Griffiths, David (Rother Valley)

Mason, Roy

Wheeldon, W. E.

Griffiths, William (Exchange)

Mitchison, G. R.

Wilcock, Group Capt. C. A. B.

Hall, Rt. Hn. Glenvil (Colne Valley)

Morris, Percy (Swansea, W.)

Williams, Rev. Llywelyn (Ab'tillery)

Hannan, W.

Moss, R.

Willis, Eustace (Edinburgh, E.)

Harrison, J. (Nottingham, N.)

Moyle, A.

Wilson, Rt. Hon. Harold (Huyton)

Hayman, F. H.

Neal, Harold (Bolsover)

Winterbottom, Richard

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

Oram, A. E.

Woodburn, Rt. Hon. A.

Herbison, Miss M.

Orbach, M.

Yates, V. (Ladywood)

Hewitson, Capt. M.

Oswald, T.

Hobson, C. R. (Keighley)

Owen, W. J.

TELLERS FOR THE NOES:

Holman, P.

Padley, W. E.

Mr. Short and Mr. Simmons

Houghton, Douglas

Clause ordered to stand part of the Bill.

Clause 21.—(AMENDMENTS AS TO SPECIAL CLASSES OF BUSINESS.)
Motion made, and Question proposed, That the Clause stand part of the Bill.
Mr. Wade: As this Clause deals with special classes of business, I think it is appropriate to refer to some classes which have not been covered by the Clause, but which. I think, might have been. The main purpose of the flat rate of Profits Tax, as we have heard, is to remove the distinction between distributed and undistributed profits. As a consequence of introducing the new flat rate, the Chancellor has brought to light a number of anomalies, and certain new hardships have been created which might have not been foreseen, some of which are difficult to justify.
We have heard the Paymaster-General point out more than once in these debates that where a surplus is liable to
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Income Tax it ought to be liable also to Profits Tax. I will not reopen the debate on that subject, but it is possible to have a case of an incorporated body which distributes part of its surplus in such a way that part of the surplus is not liable to Income Tax, but is liable to Profits Tax. I do not think that the logic of the Paymaster-General would apply to such a case.
I should like to refer, by way of illustration, to the problem I had intended to raise in an Amendment which has not been selected. There is a small group of insurance companies with a very limited field of activity. They were established to carry out insurance on such properties as churches, chapels and manses, and the profits from this insurance business is used to make grants to various denominational charities. The object of my Amendment was to allow the sums devoted to charity—
The Chairman: Order. That Amendment is not selected, and to try to use it as an illustration is not fair.
Mr. Wade: I will, if I may, limit my remarks to Clause 21, which deals with special classes of business, and elaborate the point that where the surplus of an incorporated body is devoted to charity, and, in consequence, there is no liability to Income Tax, there should not either be a liability to Profits Tax.
As I understand, there are these cases where a company has been formed for the purpose of devoting the profits, if that be the right word, to charity, and the major part of the surplus is used in that way. It seems reasonable that in such a case there should not be a liability to Profits Tax.
To quote the case of the Methodist Insurance Office, I understand that only an insignificant sum is paid by way of dividend. Last year, £94 was paid by way of dividend, while £22,850 was paid in grants to charities. I am informed that the surplus out of which these grants were paid is liable to Profits Tax. It seems that this is an anomaly which might well be remedied. I could give a number of examples showing that the increase in the rate will affect charities very seriously.
Rightly or wrongly, in the past the surpluses which have been distributed to charities have been treated as undistributed profits. The very small amount paid to shareholders has been treated as distributed profits. The remainder which has been distributed to charities has been treated as undistributed profits.
If it continues, the rate will increase from 3 per cent. to 10 per cent. and that will seriously affect charities which benefit from these companies. As it is late, I do not propose to give the figures which I could quote on this subject, but I hope that the Chancellor will look into this matter and, if necessary, introduce, on Report, legislation to remedy what I feel sure is an anomaly which cannot have occurred to him in introducing the Clause.
Mr. Maudling: I do not know that I entirely follow the hon. Member's argument, but as far as I do the answer is that the rule about charitable contributions is exactly the same for Income Tax and Profits Tax. These contributions
1232
are allowable only if they are wholly and exclusively expended in the course of the business of the persons concerned, that is, if they are charities for the employees of the business, for example. Where the hon. Member is confused is on the point that if a covenant is made by a company it can pay to someone after deduction of Income Tax and the recipient of the charity can claim the Income Tax because he is liable to Income Tax, but he cannot claim the Profits Tax because in any event he would not have been liable to Profits Tax.
The rule, as I have said, is the same and although I know the case which the hon. Member has in mind I cannot hold out any hope that at any stage my right hon. Friend would amend the basic rules about what are and what are not expenses for the computation of profits for Income Tax and Profits Tax purposes.
Question put and agreed to.
Clause ordered to stand part of the Bill.
Clause 22 ordered to stand part of the Bill.

Clause 23.—(PURCHASES OF INTERESTS IN EXPECTANCY.)
Major W. Hicks Beach: I beg to move, in page 17, line 30, at the end to insert:
"and for the purposes of estate duty that sum shall be deemed to have been a gift inter vivos made at the date of such purchase by the deceased to the vendor of that other interest".
I suggest that we also discuss the Amendments in my name in page 17, to leave out lines 31 to 43; in page 18, line 1, to leave out subsection (2), in page 18, line 11, to leave out subsection (3); and in page 18, line 25, to leave out subsection (4).
The Clause is extremely important, because it makes a very radical change in the law. Its purpose briefly is to bring within the ambit of the five-year rule transactions in circumstances where the life tenant seeks to buy out the interest of the reversioner. I do not propose to deal with the general principles because it is difficult to argue against the logic of that position when we find that as the law stands the five-year rule does not apply where there is a reversion to the life tenant.

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My Amendment is an administrative one. Its object is to provide that in the event of a purchase by a life tenant under a settlement of the reversioner's interest and the life tenant dies within five years, the accounting party for duty shall be the reversioner under the settlement who received his purchase money and not the trustee of the settlement as would be the case under the Clause as now drawn.
I should disclose that I am a practising solicitor and deal with a great number of settlements. The Amendment is put forward because I feel that, from a practical point of view, unless it is adopted there will be a considerable amount of hardship in cases where interested parties want to bring their settlements to an end. There is very good precedent for this proposal being adopted because, where there is a gift inter vivos from, say, A to B, and A dies within the five years, the accounting party is B. I cannot see why that principle cannot be applied where property is tied up.
11.15 p.m.
If the position is left as the Clause is now drawn, I anticipate that, from a practical point of view, there will be considerable difficulty in certain cases; and I qualify what I am saying by emphasising "in certain cases", but there will be difficulty and hardship in financing a transaction where a life tenant buys out a purchaser. In some cases, the practical effect will be that it will not be possible to bring a settlement to an end owing to the difficulties of arranging the necessary finance.
I have worked out an example, which is an extreme case, with the highest possible rate of Estate Duty, and where a life tenant has no means of providing security apart from his or her interest under the settlement. I take this extreme case because I think that the whole Committee will agree that such an example is as worthy of consideration as is a normal transaction; and between the figure which I am going to quote, and the lower level, there is a sliding scale where hardship will occur.
The example I give is this. If we take a person aged 75, who has a life interest in two funds—two trust funds—one for £10,000, and another, a very large one which he or she cannot deal with because the life interest is a protected one—and
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lawyers will be well acquainted with this—then this person may decide to bring the £10,000 settlement to an end by buying out the reversioner. The five-years rule will then apply. The rate of Estate Duty as estimated on this person's death is 80 per cent., that is, the death of the life tenant. I repeat that this is an extreme case, but on an actuarial basis he would have to buy out the reversioner for a figure representing 80 per cent. of the fund, that is, £8,000.
We all know that those who deal with this case will make an application under Section 44 of the Finance Act, 1950, for a certificate in favour of the trustees as to what sum they should retain for five years for a possible claim for duty in the event of the tenant dying under the five years' rule. There is some difference in legal circles about the interpretation of this Clause as to what would be paid, but some say that the trustees could retain the £8,000 or—and this is the view which I take—they would be entitled to retain 80 per cent. of the purchase consideration of £8,000, that is, £6,400. What is the position now, when the parties want to carry out this transaction?
Mr. Mitchison: I am very sorry to interrupt the hon. Gentleman, but I am trying to follow this complicated but most interesting matter. He has arrived at £8,000. He has not told us what is the amount of the capital of the trust fund.
Major Hicks Beach: I did say £10,000. At this late hour, I may not be making myself clear, and if that is the case, I will go more slowly. What I indicated was that this party wants to deal with a small trust which is £10,000 and, if my calculations are correct—and as the hon. and learned Gentleman and I went to the same school I hope that they are correct—80 per cent. of that is £8,000.
Mr. Mitchison: I must apologise to the hon. Gentleman. I did not know, perhaps because I had not followed him, to which of the trusts he was referring.
Major Hicks Beach: I said, I thought fairly clearly, that I could not deal with the large one because there was a protected life interest. We are now dealing with the smaller fund and this life tenant has to arrange to purchase a reversion to the tune of £8,000.

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Under the Estate Duty Law, he cannot offer any security, because that would give rise to a claim under another Clause. Therefore, he has to go to a bank and explain that he wants to borrow £8,000 and when the transaction is completed, the trustees of the £10,000 will have to retain securities to the figure of £6,400. After the sale, he will receive only £3,600 net worth of securities. He is, therefore, not in a position where he can get from any bank the funds to finance the transaction.
If my proposal is accepted, the transaction could go through and I should have thought that there was common agreement between both sides of the Committee that people should be at liberty to deal with their property within settlements, provided the Estate Duty laws are safeguarded. The position will be that the life tenant will be able to buy out the reversioner for £8,000 and if, by unhappy chance, the life tenant dies within five years, the person liable for the duty will be the reversioner, and, in fact, the whole transaction will be completed in a simple way.
I should have thought that that was a perfectly fair and original way of dealing with the matter and I see no reason why persons who enter into gifts inter vivos should be in a better position than those people who seek to deal with their settlements in a similar way, but who will be penalised by this Clause as it now stands, as I have tried to show. I hope that the Government will give careful consideration to the Amendment.
Mr. Charles Fletcher-Cooke: I support the Amendment. Like my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach), I think that the Government are absolutely right to correct this anomaly by which if someone buys a reversion Estate Duty is escaped if he dies within five years, whereas the other way round Estate Duty is not escaped. We have no quarrel on the general principle. My hon. Friend's argument is that once it has been completed, the transaction should be treated as if it were a gift inter vivos and the exceptional and unnecessary security upon which the Revenue insists and by which the trust is virtually kept
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in existence against the will of all those beneficiaries interested merely for the purpose of protecting the Revenue should not be allowed to apply.
Subsection (4) is the subsection which meets that end and is exactly similar to the terms of the appropriate provisions of the Finance Act, 1950. Many of my right hon. and hon. Friends objected to those provisions when they sat on this side of the Committee. Referring to the process of keeping trusts alive merely for the benefit of the Revenue—I am putting it broadly and inaccurately, but that is what it comes to—my right hon. and learned Friend the Attorney-General said:
"Why should the Revenue have this additional security in cases where there is a settlement? Why should they be able to recover from the trustees, even after the trust is determined, when they have already got the same security as they would have had had it been a free transfer of free money from a father to a son?"
That echoes the point made by my hon. and gallant Friend. He wishes it to be treated as if it were a transaction inter vivos, a free gift.
"I think that a very heavy burden is cast upon the right hon. and learned Gentleman in seeking to justify the inclusion of this Clause in the Bill. I ask him what possible justification is there for making the trustee also personally liable in the case where the money is the subject of the settlement."—[OFFICIAL REPORT, 19th June, 1950; Vol. 476, c. 968–9.]
Of course, ex hypothesi it is no longer the subject of the settlement because this transaction winds up the settlement. Much the same thing was said by my right hon. Friend the present Minister of Pensions and also by Sir David Maxwell Fyfe, as he then was, and we divided against it.
I think that a heavy onus is cast upon us to show why, now that we have power and are quite rightly putting this business into shape, we cannot follow that advice and treat this for the purpose of revenue collection, which, I understand, is the purpose of the Amendment, as if it were a gift inter vivos and not impose on such trustees, many of whom are voluntary and many of whom have sufficient responsibilities as it is, this business of keeping enough money in the "kitty" for five years, long after the trust has been wound up, merely for the benefit of the ease of collection. The Revenue ought to go after the person who has the money

1237
and not after the trustees who do not want to keep the money but wish to be relieved of their task.
I hope that my right hon. and learned Friend will reconsider this matter, because I do not think it is in keeping with the thought that he and I, and my hon. and gallant Friend, have in common.
The Solicitor-General (Sir Harry Hylton-Foster): I was greatly rejoiced to hear my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) say that the rest of his Amendments to this Clause are consequential. That has no doubt saved us from a great deal of discussion, because he would have mutilated the Clause by omitting one subsection after another and I should have had to explain why they had to be there.
Three points arise from my hon. and gallant Friend's speech, and I will seek to answer them all. One is: why do we not treat this transaction for Estate Duty purposes as though it were a gift inter vivos? The second is: why do we maintain accountability in the trustees after the trust has been brought to an end? The third is the question of hardship, because in the view of my hon. and gallant Friend it will not be possible to finance the transaction under these provisions.
We are not prepared to treat the matter as though the transaction were a gift because, as I feel sure my hon. and gallant Friend will agree when he thinks about it, it is not a gift. It does not bear the characteristics of a gift. When there is a gift, the donee receives what he receives gratis. He is the person who, throughout, profits by the transaction; he is the person who gets the benefit, if any, of the avoidance of duty which is involved in the transaction. The donor, on the other hand, has parted with the gift altogether and his estate is reduced by parting with it, and it is only natural in the circumstances of a gift to place the duty upon the recipient of the gift; and that has been done.
But a purchase is different because the purchaser receives as a result of the consideration which he pays out a valuable asset, in this context the interest of the remaindermen which he buys. He is no worse off than he was before. He acquires the fund in respect of which the avoidance of duty occurs and it is his
1238
estate which gains from what is vulgarly called Estate Duty profit, meaning the avoidance of the Estate Duty which occurs. That is why it seems right to place the charge of the duty upon him or rather upon the trustees who, in the circumstances, will be responsible to him, and not upon the recipient of the purchase money, because the recipient of the purchase money has received a price which takes into account the fact that his interest is one which always involved duty being paid on the settled fund before he received it.
That is all that he possesses as an interest, and the price which he receives ought to be one which takes into account that factor. So, clearly, the principal gainer from the transaction is the purchaser. It seems to us right, just and natural, to mark the contrast between a gift, on the one hand, and this case on the other, and to place the duty where it seems naturally to go, namely, on the person who profits from the transaction and who receives what I am calling the Estate Duty profit.
11.30 p.m.
On the question of why keep the accountability of the trustees, I confess that I do not altogether sympathise with the view that the Revenue is not entitled to protect the Revenue claim unless there is something unreasonable about it. Is there, on examination, anything unreasonable about keeping the trustees accountable? Throughout the history of Estate Duty trustees always have been made accountable, in the first instance, for duty in respect of the settled funds, and the duty that is avoided by this transaction is duty in respect of the settled funds.
The Section of the 1950 Act to which my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) referred was not incorporating any new idea. It was merely giving formal effect to what was the established practice. Trustees had always been maintained in the position of being accountable for duty on a settlement fund. That is all that it was doing, and since the words uttered by my right hon. Friend on the occasion in 1950, to which he has referred, we have had some experience of the working of the Section. For my part, I do not know that it has worked otherwise than satisfactorily. One is entitled to look at that experience at this moment and to say let it be.

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The Clause is in line with that Section. It seems right to put this transaction, where the purchase is by the life tenant of the reversionary interest, into line with the position when the transaction is carried out the reverse way round and the reversioner acquires the life tenant's interest. The duty, being duty on the settled property, ought to come out of the settled property. It is a duty for which, if the transaction never took place, the trustees would be accountable. In those circumstances, it does not seem to us to be in any way unreasonable to maintain the accountability of the trustees just for all that this Clause is going to make them accountable for, that is, for the prospective rate of duty upon the purchase price paid—for the reversionary interest.
Now about finance. We have looked with very great care at the examples which my hon. and gallant Friend very kindly gave us and I have been listening with the maximum attention of which I am capable to the case that he was just laying before the Committee. I confess that we have not been able to find any case in which we believe that, as a result of this Clause, there will be any material difficulty about financing the transaction that my hon. and gallant Friend has in mind.
I speak with great diffidence about these matters in the presence of my hon. and gallant Friend who has business with them and is dealing with them all the time. I do not wish to appear to be at all scornful about what he is saying, and, therefore, I am puzzled about the difference between us. The case which my hon. and gallant Friend is putting is that of this elderly life tenant, aged 75. I hope that I am not being discourteous to any hon. Member who is being kept up to this late hour by treating 85 as elderly.
This person was apparently advised by somebody to pay £8,000 for a reversionary interest in that case. That seems to ordinary mortals—and I am not certain whether I should include actuaries in that category without being discourteous—something that even somebody 75 could not be persuaded to do, on the facts given by my hon. and gallant Friend.
Major Hicks Beach: That happened to be the actuarial valuation. I am prepared to give my right hon. and learned Friend the figures certified by the actuary.
The Solicitor-General: I am obliged to my hon. and gallant Friend, because that confirms my view of what must be the difference between us, and I will try to explain where I think it lies.
The interest of the remainderman—what he has to sell in the open market to a stranger—is this: it is to receive the capital of the settled fund when the life tenant dies, but to receive it after it has paid Estate Duty. To take the case that my hon. and gallant Friend was putting, the £10,000 fund less the rate of duty of 80 per cent., in the circumstances that he was quoting, would be reduced to £2,000; discounted in respect of the interest of the life tenants who are surviving—that would be by one-fifth on my hon. and gallant Friend's figures—it would be £1,600. That is the open market value.
Of course, when parties get together like this, they can split what I am calling the Estate Duty profit between them, and one can add whatever the parties thought was a fair slice of the Estate Duty avoided to the remainderman and add it on to the £1,600, but not by the slightest imagining can one get the figure up to £8,000 on that basis. Of course, one cannot finance the transaction if one offers to pay for the interest one is buying, something that is fantastically beyond common sense.
The only explanation is this. My hon. and gallant Friend's advisers, the actuaries apparently, in this instance, were advising on the basis that one should not take into account the fact that the interest that the remainderman will get is only in the settled fund after it has paid duty. Of course, we find it very difficult to believe that actuaries ever do value on that basis. It would be quite strange, and I am rather confirmed in my puzzlement about it because my hon. and gallant Friend was good enough to submit to us a case—I do not wish to mention names—if I call it the "O" case he will recognise it—in which highly creditable actuaries were employed in advising him, and I noticed the way that they did it; it is the way that the Revenue people think that actuaries value in these cases.

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I can only take advice in this case, because I do not know. In that case of my hon. and gallant Friend's, the actuaries valued in this way. They took the whole value of the fund and they first of all valued on an actuarial basis the value of the life tenant's interest—a certain percentage of the whole. Then they valued the remainderman's interest, setting it out as a percentage of the whole, but the two added together did not make up the 100 per cent., because in valuing the remainderman's interest they took into account the fact that that is a case in which he can only acquire the interest after duty had been paid on the death of the life tenant. The balance of the percentage remaining they regarded as the Estate Duty profit, and it was not for the actuaries to decide how that was divided between the parties. That was up to them. That was the way they valued it, and to a mere amateur like myself, it appears to be the only sensible way of conducting the valuation.
I have been applying my mind to see what price the elderly life tenant referred to by my hon. and gallant Friend could have paid for this interest, an interest worth, I suggest, £1,600 to a stranger; that is all. She could have paid, I think, £4,000 for it to the remainderman. I work it out in this way. If she paid £4,000, the trustees would have to keep 80 per cent. of the £4,000, that is, £3,200. The fund that the life tenant acquires by the transaction is £10,000. So, if the trustees keep £3,200, the life tenant gets down £6,800, and out of the £6,800 has to pay the remainderman £4,000. I suspect that there are many bankers, not unduly suspicious, who would not mind financing that. In the circumstances, I could not advise the Committee to accept the Amendment.
Sir Toby Low: To those of us not well versed in the law, it did seem—speaking for myself, at any rate—that my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) made a valid point. In the debate which took place in Committee on 19th June, 1950, some of my right hon. Friends, including the present Lord Chancellor, took a completely different view about the provisions of the Clause. I have just been looking at the Division list. I find that this was the main point upon which the Committee was dividing. I
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see my name there. I find there the names of my right hon. and learned Friend, my night hon. Friend the Paymaster-General, and my right hon. Friend the Chancellor of the Exchequer.
It is really very perplexing, particularly at this late hour of the night, for those of us who do not understand the intricate problems of the law, to find that, in the course of eight years, we seem altogether to have changed our minds. I beseech my right hon. and learned Friend to think about this important point once again, between now and the Report stage. I am bound to say that, although I followed his argument, which was, as always, lucid and clearly expressed, I was not persuaded that the Amendment was so bad as he sought to persuade us that it was.
Amendment negatived.
The Solicitor-General: I beg to move, in page 17, line 31, to leave out "subsection (2)" and to insert "subsections (2) and (3)".
This is merely to make the proviso read rather better. The proviso to subsection (1) requires both these subsections to make it work properly in all cases.
Amendment agreed to.
The Solicitor-General: I beg to move, in page 18, line 24, at the end to insert:
(4) In determining under this section the duty chargeable by reason of the purchase of an interest in settled property, any consideration for the purchase consisting of another interest under the settlement shall be disregarded, unless there has been a prior purchase of that other interest, being a purchase in respect of which duty would be chargeable on the death under this section apart from the proviso to subsection (1) and apart from this subsection; and if there has been such a prior purchase, the consideration for it shall be treated for the purposes of this section (except for the purpose of determining its value) as given not for that purchase but, in place of the said other interest, for the first-mentioned purchase.
To make the Amendment intelligible, I should be compelled to use my best endeavours in delivering an abominably long lecture to the Committee, and I do not feel that that is required of me at this hour. The reason that the new subsection has to be put into the Clause is this. It is designed to deal with the not extraordinary case where the life tenant and the reversioner divide the totality of the settled fund in specie, as it were. Unless this provision is added, that transaction

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would have the result of attracting to itself two separate varieties of anti-avoidance legislation, namely, this Clause and the provisions of Section 43 of the Finance Act, 1940, dealing with the disposing of life interests and the like. The result would be an overcharge.
The words in the proposed subsection down to "disregarded" lay down the general principle of its operation, which is to disregard, in computing the duty, any consideration for the purchase which consists of another interest under the settlement.
It is necessary to qualify the general rule there provided to deal with the case where there are successive purchases of interests within the five years and what is bought in the first instance is used as consideration for the second purchase. That is the explanation of the need for the subsection. If I have to elaborate it, I would have to be longer, but I am at the disposition of the Committee if hon. Members so desire.
11.45 p.m.
Major Hicks Beach: I fully appreciate the complicated nature of the subsection, which my right hon. and learned Friend has explained well. Am I not correct, however, in saying that it is necessary because the Clause as drawn would have meant that in certain cases people would have had to pay more duty than the money they would receive? This illustrates the extreme importance of reviewing the Clause to consider some of the great anomalies which arise.
I sent representations on the matter to the Inland Revenue and I am appreciative that the point has been taken. This shows, however, the need for careful consideration of the Clause. We accept that the Government have now put the matter right, but what would have happened if it had not been spotted?
Amendment agreed to.
The Solicitor-General: I beg to move, in page 18, line 29, to leave out "or other dealing with".
This Amendment does not alter the effect of the Clause. It only makes it more easy to read.
Amendment agreed to.
Mr. Fletcher-Cooke: I beg to move, in page 20, line 7, at the end, to insert:
(e) where the purchased interest was immediately before the purchase vested in a charity, the period of one year shall be substituted for the period of five years mentioned in subsection (1) of this section.
Shortly, the object of the Amendment is to ensure that charities which have a concession concerning the five-year period under the existing law do not lose that concession when the law is amended. At present, if a life tenant disposes of his life interest to a charity, interest in reversion, whether voluntarily or for value, to the trust fund escapes duty after one year; but under the Bill as drawn, if the life tenant purchased the charity's reversion, the purchase money and the trust fund might well remain liable to duty for five years.
Since it is the object of the Government, which we all support, to harmonise the law relating to these two methods of achieving the same object, I am sure that the Government would like to harmonise it completely in the case of charities.
The Solicitor-General: My hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) has put the point so neatly that I need not develop it. It looks as though the Clause would seldom be in point in the kind of case that my hon. and learned Friend has in mind, because if property is left to Mr. A for life, and then to a charity, it would be the charity that would suffer duty on Mr. A's death and the odds are that the charity would be the person anxious to bring the settlement to an end and that the transaction would be done the other way round by the charity buying the life tenant's interest.
Obviously, however, there might be cases where, because the life tenant desired to retain certain assets in the fund, the transaction was done the other way round. My hon. and learned Friend's Amendment is right in principle and I am obliged to him for raising and stating the point so neatly. The Amendment, however, is not quite right, because it would give this benefit only to charities and the parallel case to which my hon. and learned Friend referred deals with public or charitable purposes, a rather wider category of matters. It would seem that it ought to run parallel in both cases.

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If, having raised the point, my hon. and learned Friend were minded to withdraw his Amendment, I have authority to say we would undertake to put down an appropriate Amendment to meet the point on Report.
Mr. Fletcher-Cooke: I am very grateful to my right hon. and learned Friend for that assurance and concession, and I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Major Hicks Beach: I beg to move, in page 20, line 20, at the end to add:
"except that it shall not have any effect in relation to any purchase in respect of which the Commissioners of Inland Revenue had before the fifteenth day of April, nineteen hundred and fifty-eight, given to the trustees of the settlement an assurance in writing exonerating them in the event of the purchase being completed from liability for estate duty on the death of the deceased in respect of the settled property in which subsisted the interest purchased".
The object of this Amendment is to clarify the position which may arise, and has arisen, I have no doubt, in a number of cases, where it has been agreed between the parties to bring the settlement to an end and on terms agreed application has been made by the parties to the Revenue under Section 44 of the Finance Act, 1950, for what is called a clearance certificate given by the Revenue conditionally on the terms being carried out.
In certain cases it is probable—and I believe it to be so, although I am not personally concerned in many such cases—that a formal assignment of the reversioner's interest to the life tenant has not physically been carried out. If this Amendment were accepted the position would be made clear that where there has been agreement between the parties before 15th April, 1958, the agreement would be regarded as final.
I do not know what the view of the Treasury may be, but my own view is that where we have an agreement of that nature the mere completion of the formal assignment would not be necessary. We have a very good example in an ordinary purchase of house property. Once the contract is signed there is an agreement between the parties, which is enforceable, and there is no necessity to have a formal conveyance.
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I move the Amendment to make the position clear. If that is the view of the Revenue, if the position I have stated is legally correct, then the Amendment should be made to the Clause, because it is not the view of the Revenue which makes law, but decisions of the courts. I therefore very much hope that the Government will accept the Amendment.
The Solicitor-General: I think that it is necessary just to see what my hon. and gallant Friend's Amendment would do. As the Clause now stands, by virtue of the provision in subsection (11) it will not impose a charge to duty in any case unless the purchase of the interest bought took place after Budget day. My hon. and gallant Friend's Amendment would also exclude purchases made after Budget day from this charge in cases where the trustees had obtained an assurance that if the purchase were made they would be exonerated from duty in respect of it.
I think that there are two situations to be looked at. I think that I can give my hon. and gallant Friend quite firmly the basic assurance which he wants without accepting his Amendment, which goes further than my right hon. Friend could accept in the context. There are two categories of people to be considered. Trustees usually do not get this assurance until the arrangements for the transaction are fairly far advanced. Once they get the assurance the transaction is usually completed fairly quickly, and the more so as one gets near to Budget day, because people in this field know that Budget day is likely to be important.
In those cases where the parties, before Budget day, have committed themselves in respect of the assurance given—that is to say, have entered into a binding legal obligation to purchase—those cases, for the purpose of this Clause, are quite safe.
The test is not, has the transaction been formally completed before Budget day, but, from the Revenue angle, was there a binding obligation to purchase before Budget day? If there was, there would be no charge of duty. People are well aware of this, because after Budget day they were writing to inquire whether their particular purchase would be held to have occurred before Budget day. In a number of cases it has been decided that this is so.

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In cases where the parties have not entered into a binding commitment before Budget day, it does not seem right to include them, whether they had an assurance or no, because they were free to withdraw when they heard what the Chancellor said. It would be difficult to draw a line between them and anyone else contemplating a transaction and in a position to withdraw after Budget day.
I hope that I have given my hon. and gallant Friend the precise assurance which he desired and explained why we could not go so far as to accept the Amendment.
Major Hicks Beach: That has not gone quite far enough. I want to get clear whether the case is covered where an application for a clearance certificate has been applied for, and the Revenue has said, as it always does, that it is only prepared to allow it if the parties are agreed.
The Solicitor-General: I cannot do better than state the test as I believe it to be. Was there a binding commitment between the parties to buy and sell before Budget day? That is the test.
Mr. Mitchison: Am I right in assuming that the meaning the Solicitor-General is giving to purchase is a binding agreement completed?
The Solicitor-General: Yes.
Amendment negatived.
Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
Mr. Glenvil Hall: I do not think that we can let this Clause pass without someone voicing the perturbation which many hon. Members feel at the number of Amendments which have been made to this Clause. I know that it is a technical matter and not easy to understand or to draft. The Chancellor himself has moved two or three Amendments, and the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) has moved an Amendment, the subject of which had obviously been overlooked by the Treasury. I should like an assurance from the Solicitor-General that the Clause is now as water-tight as it can be and is designed to, and will, operate the functions which it is intended to perform.
12 midnight.
The Solicitor-General: Devoutly I hope that that is so, but I should not like the right hon. Gentleman or any hon. Member to gain the impression that if someone has a good idea, which we think is one, we shall hesitate from any amour propre to insert it in the Clause. I do not mind getting a thing as good as we can possibly get it at any stage, and it is a brave man, with respect to the right hon. Gentleman, who thinks that, in a field so abominably technical and difficult as this, one can get it right at first blush without all the assistance that one can find.
Mr. Mitchison: The general intention of the Clause is perfectly clear and so is the type of avoidance with which it is intended to deal. We understand the Solicitor-General to say that he devoutly hopes that it has done its job. We understand him at least to hint that if it has not, the job will be completed. He would complete the picture if he were to say that the job would be completed retrospectively, if necessary.
Question put and agreed to.
Clause, as amended, ordered to stand part of the Bill.

Clause 24.—(EFFECT OF PRESUMPTIONS AS TO ORDER OF DEATHS.)
Major Hicks Beach: I beg to move, in page 20, line 24, to leave out from "others" to the end of line 27 and to insert:
"each of such persons shall for all purposes of the estate duty chargeable on his death be deemed to have died immediately before the other persons so dying".
The Amendment is not in any way intended to be critical of the object of the Clause, of which I think the whole Committee thoroughly approves. As we are all aware, the Clause seeks to overcome a grossly unfair, though perfectly proper, decision of the Courts in re Beare, where double duty was levied when a husband and wife were killed in a road accident. Great credit is due to my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling), who raised this matter by means of a Private Member's Bill and, with all respect to the Government Front Bench, made a great contribution in forcing the Government to take active steps to overcome a difficulty

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which probably had been known for many years.
This is a purely drafting Amendment which seeks to suggest to the Government that it would be very much better to draw a clause to deal with the problem by adopting the wording of Section 46 (3) of the Administration of Estates Act, 1925, as amended by Section 1 of the Intestates Estates Act, 1952—a later wording than that of Section 184 of the Law of Property Act, 1925. Consideration should be given to drafting the Clause in such a way as to make certain that it does what the whole Committee wants it to do.
The Financial Secretary to the Treasury (Mr. J. E. S. Simon): I should like to endorse what was said by my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) in paying tribute to my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) for producing the reform of the law which this Clause embodies. If I cannot accept the Amendment, it is not because of any difference of view between my hon. and gallant Friend and myself as to what we desire to achieve. We are at one there. The difference lies in the fact that I do not think that the Amendment does what my hon. and gallant Friend wishes to do, whereas I think that the Clause does.
The Clause is designed to deal with cases where people die together in a common disaster and the legal fiction deems the younger to have survived the older. The Committee will be aware of one case in particular, where a husband and wife died together in a common disaster, with the result that Estate Duty became payable first on the husband's death and secondly on the wife's death because of the legal fiction that she survived him—to the detriment of four young children.
It was quite clear that when the matter was debated on my hon. Friend's Bill the feeling of the House was that that was a position which ought to be rectified. The natural way in which to do so would be to refer to the devolution of property; but the Amendment does not do so, and that, I submit, is its first fault. Secondly, it poses two mutually inconsistent suppositions about the order of the two deaths and that, on the face of it, produces a curious result.
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My hon. Friend has written into the Clause that if A and B die in circumstances which render it uncertain as to who survived the other, then, for the purposes of Estate Duty, A has been presumed to have died before B and B has been presumed to have died before A. It would be extremely odd to write that into an Act of Parliament; but let me give an actual example of the results of my hon. Friend's intention.
We shall be discussing later a Clause which seeks to amend Section 40 of the Finance Act, 1930, relating to sales of works of art and their exemption from death duty in certain circumstances. Under that provision, duty is payable on the proceeds of sale in respect of the last death; the death of the person to whom the object had passed. Under the terms of my hon. Friend's Amendment, each estate could claim that it was exempt because the other would be deemed to have survived it and this reveals what is, on the face of it, a curious formula to write into an Act of Parliament.
What the Clause does is to say that, there being a legal fiction governing the devolution of property which results in the double charge for duty, and the Chancellor having decided that the double charge should not be imposed, Estate Duty should be charged as if neither estate has any property derived from the other. Estate Duty is a mutation duty chargeable on property which passes on the death of one person to another person. If we ensure, in the words of the Clause, that the
"… estate duty in respect of each death shall be ascertained as if they had died at the same instant and all relevant property had devolved accordingly"
it is clear that there is no possibility of the property passing from one estate to another, and what we all desire will have been achieved.
Amendment negatived.
Clause ordered to stand part of the Bill.
Mr. William Teeling: I should like to say a few words on the Clause.
The Temporary Chairman (Mr. S. Storey): I am sorry, but the hon. Gentleman is too late.
Mr. Teeling: I stood up, Mr. Storey.
The Temporary Chairman: The hon. Member stood up after I had put the Question. The Committee has decided.

Clause 25.—(QUICK SUCCESSIONS.)
Mr. Stevens: I beg to move, in page 21, line 3, at the end to insert:
where the earlier death occurred within three months, by seventy-five per cent.
I readily agree that Clause 24 does, in fact, implement the undertaking given by the Financial Secretary when he gave the Government's view during the debate which took place on the Double Death Duties Bill which was introduced by my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling), to whom I offer my congratulations on his choice of Bill and his success with it. I say on his behalf, as he was unable to catch your eye a moment ago, Mr. Storey, how much we all appreciate what has happened and the Government's action.
Clause 24 has dealt with the matter, I agree, but in a very narrow fashion and has applied only to circumstances where the deaths are simultaneous, circumstances rendering it uncertain which of them survived the other or others. Unhappily, I imagine that most of us have had experiences of a man and wife being involved in a motor car accident, aeroplane crash, railway disaster, or something of that sort, where both have been killed as a result of that accident. However, it may be that one has survived the other by a few minutes, by an hour, or by a day or so.
Clause 24 does not cater for that eventuality. It deals with the precise legal point of simultaneous death and it does not deal with the spirit of my hon. Friend's Bill, the payment of two death duties on the assumption that a woman, for example, having survived her husband by an hour or by a day, has enjoyed an income from the estate bequeathed to her for that short space of time.
I gave a good deal of consideration on how to deal with that point, and here I give a very warm welcome to Clause 25, which extends to personal property the right of succession relief which has applied for many years to real property. However, it does not go far enough. By enlarging it by the Amendment, we can make Clause 25 deal with the contingency
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with which the Committee as a whole would like to deal, where two deaths occur from the same catastrophe, the same accident, the same disaster, but not simultaneously.
It seems logical, reasonable, and the desire of the Committee that we should extend the Clause in the manner suggested in the Amendment and that where the earlier death occurs within three months, which embraces a whole series of disasters which I have in mind, the duty should be reduced by 75 per cent. That does not go the whole way, but it goes a very long way and I commend the Amendment to the Committee.
The Temporary Chairman: It might be for the convenience of hon. Members if, with this Amendment, we take the Amendment in page 21, line 5, to leave out from "by" to end of subsection and to insert "twenty-five per cent."
Mr. Diamond: I am grateful to you, Mr. Storey, for allowing discussion of this very similar Amendment, although in somewhat the opposite direction to that moved by the hon. Member for Langstone (Mr. Stevens). I shall not discuss it at length, for we members of the Labour Party discuss matters at length only, as has been made absolutely clear, when we feel that they demand lengthy and detailed discussion. Although Clause 24 is a Clause with which we can all agree, and for which we can have immediate sympathy, Clause 25 goes much too far in giving relaxation in circumstances where such relaxation is not necessary. The hon. Member for Langstone referred to husband and wife, but there is nothing in the Clause to say that it will apply only to husband and wife. It also refers to property which might be left to complete strangers. I agree that one must deal with cases which are not completely simultaneous. The hon. Member mentioned the period of three months and in certain circumstances cases within one year might require consideration, because of the time needed to clear up assets and to take any action desired, and so on, and in which there was no time to do those things.
12.15 a.m.
One ought to have some sympathy where death occurs within one year, and the sympathy proposed in the Amendment is a 25 per cent. reduction. It is difficult to see why we should go beyond

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one year, especially in cases which are not necessarily of husband and wife but possibly of complete strangers. My hon. Friends and I who have put our names to the Amendment feel that it would be adequate to deal with the case of two deaths affecting the same property within one year by giving a 25 per cent. relief and no more. The purpose of the Amendment is to make the point quite clear and to seek a full explanation why we should go much further and why, because of the proper case covered by Clause 24, we should then proceed in Clause 25 to cover five years from the date of death, which is a very long time during which many things may happen. The Financial Secretary will have to satisfy us that in every possible case covered by the Clause there is some hardship even at the end of five years which entitles the second owner of the property to some special relief.
Mr. Simon: If my hon. Friend the Member for Langstone (Mr. Stevens) or any other hon. Member would be good enough to re-read the speech which I made on Second Reading he would agree that the changes made in Clauses 24 and 25 meet not only the letter of the undertaking which I gave but also the spirit of it. I said that there were three methods of dealing with the problem. The first I need not trouble the Committee with. The second is the method embodied in Clause 24 and the third is the method embodied in Clause 25. I said that my right hon. Friend had not decided whether to adopt one or the other or even some quite different method. In point of fact, my right hon. Friend has dealt with it by two of the methods, thus giving extensive relief.
Having said that, I come to the point raised by the hon. Member for Gloucester (Mr. Diamond). His Amendment restricts a relief which has stood since 1914. Since 1914, for agricultural land and family businesses, there has been a similar scale to that set out in Clause 25. In other words, when the earlier death occurs within one year, there is a 50 per cent. abatement, and so on, down through a five-year scale to the point at the end of five years where there is a 10 per cent. abatement. It seems unnecessarily harsh now to restrict any relief to 25 per cent. and to terminate it at the end of a year.
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When this matter was debated, the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) went in the direction indicated by my hon. Friend the Member for Langstone. He said that what should be considered is that when a person dies within a shorter period than twelve months there should be a greater increase than 50 per cent. in the concession. He wanted to see a general extension of the concession and of the sliding scale established under the 1914 Act. He wanted it extended in the direction for which my hon. Friend has argued. I can see no argument for restricting a concession which has stood for some time.
Mr. Mitchison: Could the hon. and learned Gentleman tell me whether the 1914 Act made this concession to agricultural property in the same way that agricultural property gets the benefit of a lower rate of Estate Duty, or was it a wider concession?
Mr. Simon: I rather think that the general Estate Duty concession of 45 per cent. was later than 1914. What the 1914 Act said was that the sliding scale should apply to quick successions in the case of agricultural land and family businesses. That has since been extended in certain respects.
Mr. Diamond: To members of the same family?
Mr. Simon: It was not restricted. It was absolutely general, and it seems to me that it would be quite wrong and almost impossible administratively to cut it down to members of the same family.
The only question is whether we should extend it in the direction for which my hon. Friend the Member for Langstone has argued today and as the hon. and learned Member for Leicester, North-East asked last January. The original justification for the relief under the 1914 Act was the difficulty of raising two lots of duty out of property like agricultural land or family businesses without selling such property.
Now that the sliding scale has been made general, that argument has, I think, gone; but side by side with that argument there has always been the feeling that Estate Duty ought not to strike more than once in a generation, and that,

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generally speaking, it is unfair to levy the full duty twice in quick succession.
It is a matter of judgment as to where one starts the scale and where one starts the relief, but the concession for which my hon. Friend asks, and for which the hon. and learned Member for Leicester, North-East argued on the previous occasion, would cost £50,000 this year and £100,000 in a full year. I think my hon. Friend is right in saying that it would go some way to meet the very hard case where the deaths do not occur simultaneously in a common disaster, but where one of the parties in the disaster survives the other for a short time.
Considering that matter and considering the hardship that can be caused in cases of that sort, my right hon. Friend is prepared to accept the Amendment.
Mr. Glenvil Hall: Surely no question of hardship arises in the case of two people not dying simultaneously—say, a wife, with her husband—but of one of them, the wife, dying perhaps a month or two afterwards. She would still come under the first leg because the death would occur within one year. Therefore, it seems to me that she would be entirely covered except that relief would only be up to 50 per cent. instead of the 75 per cent. for which the hon. Member for Langstone (Mr. Stevens) asks.
I listened with great care to what the Financial Secretary said. I am inclined to accept what he said as reasonable, although I can imagine cases where instead of hardship being inflicted on the individual, as in many cases in the past, the hardship will be inflicted on the Exchequer because of the five-year rule applying in cases where money or an estate passes not between relatives or close business associates, but to people whom one might describe as complete strangers.
We all want to see the concession extended to relatives and close business associates and others connected in that way, but I hope that the hon. and learned Gentleman will resist the suggestion of the hon. Member for Langstone, which goes too far.
Mr. Stevens: As I understand my hon. and learned Friend, so far from suggesting that he would resist the Amendment,
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he said that he would urge his right hon. Friend to accept it, and I should like to express my sincere thanks to him.
Mr. Mitchison: It seems to me that there are two distinct matters here. The first is the question of the death of the deceased by disaster, and to hear the hon. Member for Langstone one would think that he and all his hon. Friends invariably died from motor car accidents. I hope that some of them will perish more peaceably in their beds.
If we are to consider this matter solely from that point of view, I agree that it is a question of judgment, and I am not at all convinced that the proposal that he has made does not go much too far. But if an Amendment is to be introduced by the Government at a later stage—I am sure I shall be corrected if I am wrong—I would rather look at it when it comes.
Mr. Simon: I do not think I can have made it clear—and it is only right that I should make it clear to the Committee—that I am advising the Committee to accept my hon. Friend's Amendment for the reasons that I gave.
Mr. Mitchison: I regret that that has been done without further consideration. I feel myself that this will cover the case of the accident and of the two people being injured and dying in a short interval, but it will also cover a number of other cases in which the coincidence of the two deaths is a matter of no accident at all but purely in the ordinary course of life.
When one comes to the Amendment moved by my hon. Friend, I am bound to say that I found the hon. and learned Gentleman's answer somewhat unconvincing. He said that this is an attempt to upset an arrangement which has been in force for a considerable time. But later on he gave, quite correctly I believe, the reason why that arrangement was introduced and why it has been in force for a considerable time. The reason simply is that in both the cases—agricultural property and family businesses—the incidence of two sets of Estate Duty, the one shortly after the other, imposes an exceptional difficulty due to the character of the property, and I may add, a difficulty, too, very often from the point of view of the Revenue of collecting the duty in such cases.

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It has been because of the exceptional character of the property, and for no other reason, that that exceptional treatment has persisted for that kind of property only for a number of years. We are now asked to make a similar concession not merely for that kind of property but for every other kind of property, too. We are asked to extend it to cases where two people die at an interval of three or four years and the only property consists, let us say, of a substantial holding of what I believe are commonly known as "Daltons." That is a very different matter indeed from the previous case and raises quite different considerations.
It seems to me that my hon. Friend's Amendment raises quite different considerations from those which were suggested in respect of the accident cases. The trouble about the Amendment relating to accidents is that it is not limited to accidents. I should have thought in general that as a venture, as it were, the Government proposals went too far. They cost £1¾ million, we were told, in the first year and £3½ million in the second year. I cannot but remember that a number of personal reliefs have been refused which would certainly have cost about the same comparable amount. I think that it would have been better to have made rather more concessions in the personal relief part of the Bill and to have been more critical of these concessions on the lines suggested by my hon. Friend.
There it is. We may have to consider other action in connection with this Clause at a later stage of the proceedings. For the moment, I can only say that it makes me somewhat uneasy, partly because of the reasons which the Government have adduced about it, which I thought were more than usually unconvincing, and partly because I do not feel that, if the Government are unable to make concessions over other matters, particularly personal reliefs, they should be quite so ready to go quite so far on this type of proposal.
Amendment agreed to.
Mr. Simon: I beg to move, in page 21, line 23, at the end to add:
(5) If the enactments relating to estate duty in force in Northern Ireland make provision corresponding to this section, and include provision for giving relief by reference to duty paid under the law in force in Great Britain,
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then for the purpose of determining the relief (if any) to be given under this section on any death, account shall be taken of the operation of the said enactments on that or any earlier death in relation to property on which estate duty is not payable under the law of Great Britain, so that the like relief shall be given under this section as if in the case of any such property duty payable and relief allowable under the said enactments were payable or allowable under the law of Great Britain; and for this purpose any reference in the Eighth Schedule to this Act to any provision of the law of Great Britain shall include a reference to any corresponding provision of the law of Northern Ireland.
The object of the Amendment is to enable the quick succession relief to be given in cases where the property liable to duty on the second death bore duty on the first death in Northern Ireland, but not in Great Britain. Northern Ireland is following this country in introducing the new quick succession relief and is making reciprocal provisions. The Amendment ensures, also, that the two countries between them do not give more relief than is laid down in the scales. I am prepared to spell that out at greater length if the Committee wishes it.
Mr. Mitchison: I have but one question to put. Has the hon. and learned Gentleman any statistics available about simultaneous deaths in motor accidents on the Ulster border?
Amendment agreed to.
Motion made; and Question proposed, That the Clause, as amended, stand part of the Bill.
12.30 a.m.
Mr. Teeling: I am glad to have this opportunity, on this Clause, of saying what I should like to have said on Clause 24. Both the Chancellor of the Exchequer and the Financial Secretary have referred several times to my Double Death Duties Bill, which has passed its Second Reading and is still awaiting further consideration. In view of the fact that not only has the Chancellor carried out the promise which the Financial Secretary made, more or less, on his behalf, but has gone a good deal further than I even expected, I am deeply grateful to him, and so, I know, are many hon. Members of the Committee and many members of the legal profession. I intend now to withdraw the Bill.
Mr. Diamond: I hope that the Financial Secretary will say more than he did in explanation of what is embodied in

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the Clause, namely, the extension of the quick succession relief to all kinds of property. The hon. and learned Gentleman made it clear that there were two precedents, but they are quite special, and this is an extension of the principle to all kinds of property. He did not really say one ward in justification of the extension. I will remain on my feet while he is refreshing his memory on the points he wanted to make then, I am sure, but had no opportunity of making.
After all, this is an expensive change, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) said. It is not a negligible Amendment; it is to cost £3 million in a full year, and it is a matter of some substance compared with other concessions. If there is really no justification for the change, other action will be called for later.
Mr. Simon: I need only say that it has now become completely anomalous that the concession in the quick succession relief in the 1914 Act should be limited to agricultural land and family businesses. It has been to some extent extended since then over the years, but it is still subject to limitations which cannot really be justified in modern conditions.
It was the general view throughout the House in the debate on the Bill introduced by my hon. Friend the Member for Brighton, Pavilion (Mr. Teeing) that it should be extended to property generally. The hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas), who has great experience in this type of case, gave his view to that effect; I read a passage from his speech. It was the view of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) and of a great many other hon. Members who have considerable experience. It seems to me that there is every argument in logic in extending to property generally the quick succession sliding scale.
Mr. Mitchison: I think that we on this side would be much more sympathetic to the accident cases, if I may so call them, than to the considerably more comprehensive provisions that occur in the Clause proposed by the Government. These provisions are not accident cases. They are cases for lowering the death duty in a manner that was originally
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designed to meet a special case and is now being extended at a considerable cost to meet other cases too. So far as they go beyond a comparatively short period, they are not accident cases at all.
Our comment is—I repeat it—that if this amount of money can be spared by way of a concession, we are inclined to believe that it would have been better spared on some of the personal relief matters in which the Chancellor so far has, in our view, been rather close. There is, however, an opportunity for repentance, for there will be new Clauses, too, which will give him an opportunity.
Question put and agreed to.
Clause, as amended, ordered to stand part of the Bill.

Clause 26.—(WORKS OF ART, ETC. BOUGHT AT AUCTION FOR PUBLIC COLLECTIONS.)
Mr. John Hobson: I beg to move, in page 21, line 32, at the end to add:
Provided that this section shall not apply when upon any such sale being effected by public auction it is a term of the contract of sale made by such auction that the purchaser, being the National Gallery, the British Museum, or any other similar national institution, a university, county council, or municipal corporation in Great Britain, or the National Art Collections Fund shall pay to the vendor not the price at which the work of art or other property previously exempted was knocked down to it, but only a sum equal to that price less an amount equal to such estate duty as would otherwise have been chargeable and no more.
The object of the Amendment is to assist in preserving for the public some of our heritage of works of art, to assist our public galleries and museums and to give some necessary assistance to cultural and artistic matters. The present position is that certain works of art and other property, if they are adjudged to be of national, historic or artistic interest, are free of Estate Duty so long as they remain unsold, but that as soon as they are sold Estate Duty becomes payable as though they formed part of the estate at the last death.
By the Finance Act, 1921, however, Estate Duty is not chargeable even on such a sale if the sale is to the National Gallery, the British Museum, any similar national institution, a university, a county council or the National Art Collections Fund, to which I shall refer hereafter as the public galleries and museums.

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What happens at the moment is that if, by private treaty, the National Gallery or any of those public galleries desires to acquire an exempted work of art, it can approach the vendor and negotiate a price which is likely to approximate to the market value less this amount of duty which will be payable. Under the present provisions of the law, however, the vendor can put his work of art up for sale by auction. In such a case, he will receive the full price. If one of the public galleries or museums is the purchaser, he is lucky because he gets the full price and no Estate Duty is payable, whereas if a private buyer or a foreign museum buys it, he has to pay the amount of Estate Duty to the Inland Revenue.
I concede that that position is wrong and requires rectifying, because it means that vendors are getting additional benefit merely because they have sold at public auction and they have been lucky enough to have a purchaser who is one of the public galleries or museums.
The way in which the Government propose to deal with this matter by this Clause is simply to say that a work shall remain exempt only if the sale is by private treaty. I submit that that is not satisfactory. What my Amendment proposes is, first, that, of course, if the sale is by private treaty the work remains exempt and no duty is payable—
Notice taken that 40 Members were not present;
Committee counted, and 40 Members being present—
Mr. Hobson: I propose, by my Amendment, that if the work which is an exempted work of art is put up for sale at public auction and is bought by one of those named public galleries or museums, the price payable at such auction by such a public gallery or museum shall not be the price at which it was knocked down, but only a sum equal to that price less the amount of the duty payable.
In other words, the public galleries and museums, whether they buy privately or whether they buy at auction, will have the benefit of the exemption. After all, the intention of allowing the exemption was always so that works of art which are of importance to this
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country when they are sold should be diverted into our public galleries and not sold for export or in such a way that the public cannot enjoy them.
The Government's method of dealing with the matter by the Clause without my Amendment has, I submit, three grave disadvantages. First, there are very large numbers of cases where works of art cannot reasonably be sold by private treaty. One gets complete collections, or the complete contents of a house, a complete set of manuscripts or engravings. The only sensible and reasonable way of disposing of them would be to put them in a public auction room. To say that the public galleries would be allowed to go round and take their pickings and that the balance should be sold by public auction is an impossible proposition from the point of view of vendors.
There has recently been sold a large collection of coins, which took three years to dispose of at public auction. Many public galleries might have been interested in them. There could not have been any agreement to dispose of that collection sensibly by allowing public galleries and museums to take what they wanted and to sell the balance at public auction. There may be works of art—and we are not talking only of El Greco and other paintings, but pieces of silver, plate and other things—which may be in a house in Yorkshire and which may have a particular interest for people in Wiltshire. Those in Yorkshire may have no idea that in another part of the country there is an interest in them. If the works of art go to public auction and a public gallery or museum wants to buy them it will have to pay the full price, whereas if my Amendment were adopted it would be able to acquire them with the benefit of the exemption despite the fact the works were sold at public auction and not by private treaty.
The second objection which I submit there is to the Government's proposal is that it is not right that there should be special exemptions in particular cases, according to the method by which particular goods are disposed of. The Government's proposal allows the exemption in the case of a private treaty sale, but not in the case of a public auction sale.

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12.45 a.m.
Thirdly and lastly, the effect of the Government's proposal as it stands is purely discriminatory against auctioneers and art dealers who deal by way of auction in the City of London. There are important auctioneers, such as Sotheby's and Christie's, who, since 1948, have established this country as an important centre of international art marketing. Many of the works of art in this country which have been sold and exported to America since 1948 have been brought back for sale in London as a result of the importance of the London art market.
In addition, many of the continental sellers send works of art for sale in London. Anything that tends to divert important works of art from auction rooms into the private art dealers in London will tend to depress that market, depress earnings of foreign currency, keep visitors away, and detract from the primacy which we have in dealings with and in knowledge of important works of art.
My Amendment proposes that the vendors shall, in any event, be left only with the price less the amount of duty payable, whether they sell by public auction or by private sale treaty. According to my Amendment, the museums will be able to have the benefit of the exemption whether they buy by public auction or by private treaty. If they do not have that advantage they will always be at the mercy of a vendor from whom they particularly wish to acquire a work of special interest to them. Galleries often have to pay large sums of money because they particularly want a particular work of art. My Amendment would mean that there would be no discrimination between ordinary art dealers and auction art dealers.
It would make little difference to the Revenue, because it would mean that works of art would not be diverted from private dealers, and the London art market and auction rooms would not be affected.
A number of museums have been approached about this matter. Of the 35 approached so far, none has opposed it and 17 have supported, including Fitzwilliam Museum, Cambridge, Ashmolean, Oxford, St. Andrews University Library,
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Durham University and Newcastle Museum, and the city art galleries at Manchester, Bristol, Brighton, Norwich, Durham County (the Bowes Museum), Belfast and Nottingham.
What is particularly notable is that these are largely provincial and the smaller museums and galleries. Normally, they acquire their works at public auction because the opportunity of dealing direct with vendors does not arise because it normally does not occur to vendors that any of these galleries would be interested in certain works of art.
I concede that my Amendment might require tidying up in that it would be essential to know which was an exempted work which public galleries might be able to buy at a reduced figure. It is also necessary that any independent purchaser, whether public museum or private buyer, should be able to discover what is the rate of duty which will be deductible.
It may be said that it puts the public museum and gallery at an advantage, but it is no more than a device to give them additional funds by which they can buy such works. When one realises the wealth of some of the foreign museums with which they are competing, it means only that our public galleries and museums will be in a position in which they can compete on reasonably equal terms with those better endowed with funds. The alternative is to give them more money direct, which they can spend at public auction.
But the only argument which has been put forward in favour of the Government's method of dealing with this was put by my hon. and learned Friend on 12th May when he said that
"At auction, after all, the vendor is not consciously dealing with a public collection in preference to an overseas or private buyer."—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 48.]
That really is not so, because the vendor who puts his exempted work in the hands of a private dealer in London is simply trying to get the best price. There are many people who deal by way of private treaty whose only object is to get the best price, and there are many people who require to put a complete collection in the hands of the auctioneer who are very anxious indeed that the public gallery should be able to obtain the work cheap but who have no other reasonable method of disposing of the work.

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It is not a question of whether the intention of the vendor should be looked at, but whether the public gallery or museum or the Revenue should have the benefit of exemption, or the difference in price created by exemption, when there is a sale by public auction. Why there should be this difference in that respect when the sale is by private treaty instead of by public auction I have so far been unable to understand. I hope, therefore, that my hon. and learned Friend will reconsider the matter and allow exemption, whether the sale is by private treaty or by public auction in order that the public galleries may have the advantage.
Mr. Wedgwood Benn: I formally support the hon. and learned Member for Warwick and Leamington (Mr. John Hobson), who has made a case at great length most forcibly and persuasively. The Bristol Museum is interested because it believes that the Amendment is in the interest of the museum and of the people who enjoy the gallery. I very much hope that the Amendment will be considered sympathetically.
Mr. Teeling: I should very much like to support my hon. and learned Friend the Member for Warwick and Leamington (Mr. John Hobson). It is only appropriate that I should do so, since not only is my name appended to the Amendment but I am the only hon. Member who represents an art gallery, for the Pavilion happens to be one. I know, as the Member for Brighton, Pavilion, that Christie's and Sotheby's are particularly anxious that the Chancellor should do something about this if he possibly can.
The more one goes about London at this time of the year and sees the Antique Dealers' Fair at Grosvenor House and other exhibitions of furniture, the more one sees large numbers of wealthy people from America and the Continent who have come to buy. There is no doubt that auctions and sales bring a great deal of money into the country. This has been increasingly so in the last few years. I hope that something can be done to help auctioneers in the dilemma in which they might be put at present. If it were done, the Chancellor would also be doing something for the tourist industry as well.
Mr. Peter Smithers: I regret to detain the Committee at this late hour. I should have liked to have spoken at greater length on this subject, but I content myself with saying that if the Amendment is not accepted we shall be causing great inconvenience to both sellers and buyers of works of art of a museum category. We shall be damaging an important international market which has its centre in London, which has been hard to win and is hard to maintain, and, in practice, we shall be discriminating against two firms in particular.
All these four things are very undesirable things to do and, therefore, I hope that my hon. and learned Friend the Financial Secretary will tell us that he is not going to do them.
Mr. Simon: One starts off with the fact that Estate Duty is leviable on the whole of an estate. From the beginning of the system of Estate Duty, to encourage that there should not unduly be a dissipation of heirlooms, it was thought that there should be an exemption for works of art while they were enjoyed in kind. That has been so ever since 1896, and it is reinserted in the Finance Act of 1930. A claim is made for the work of art or something of great scientific interest which makes it of sufficient national importance to be exempt; but when the exemption right is lost it has been turned into cash and it is then charged like the rest of the estate, and it pays what we regard as the proper rate. That, surely, is right.
That system continued until after the 1914–18 war, when there were considerable sales of important works of art abroad, and it was desired to encourage the sale of works which had previously been exempt to national collections. Therefore, it was enacted that where a sale was to a national collection, the exemption should be retained; and I emphasise that the object was to encourage sales to the national collections. Advice could be taken as to the proper market prices, and the people who frequently advised as to those proper values were those experts and firms of auctioneers who have been mentioned in this discussion tonight.
The object was to encourage the owner to sell to a national collection, but not to reward him if, by a bid at an auction, he sold to a national collection. That

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would be only fortuitous. And it was not to enable the national collection concerned to buy at less than the market price. Indeed, the system is of mutual advantage; because what happens is that the exemption is split by negotiation, or, in the case of the Ministry of Works, the division is prescribed between the vendor and the national institution.
The disadvantage of the methods suggested by my hon. and learned Friend are very considerable. In the first place, what they would mean, in practice, is a rigging of the auction. One would be putting in a bidder bidding at a false price. My hon. and learned Friend knows that the exemption may amount to 80 per cent. if it is an estate subjected to a high rate of duty, and so, for every £20 bid the national collection would, as it were, be offering a much smaller sum. Everybody bidding against him suffers that disadvantage. If that is not rigging the auction, I do not know what is.
1.0 a.m.
The only alternative is to tell everybody who the bidder is and to let them know the rate of exemption. To let them know which is an exempt article and what the rate of exemption is would infringe on a fundamental principle of our fiscal law, namely, that the tax affairs of any individual shall not be disclosed. Here, there would be a very wide area of disclosure.
There is another reason why this suggestion is by no means to the advantage of the national collections. One has only to think of the case I have mentioned, where there is an artificially deflated bid, to see how one would bid up the market price, instead of the present arrangement which operates to the advantage of both vendor and national collections. Let hon. Members imagine one of the national collections bidding against a Greek ship-owner with all the advantage of his millions, and the national collections bidding on the strength of an Estate Duty exemption. Under such conditions there would be wholly artificial prices for works of art, which would be bound to inure to the disadvantage of the public collections.
I will deal with the four specific points made by my hon. and learned Friend the Member for Warwick and Leamington (Mr. John Hobson). He said that certain
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works could not be sold by private treaty, for example, complete collections. However, what happens when a complete collection is put up for auction is that it is sold object by object. There is no conceivable reason why certain objects should not be sold by private treaty to the national collections by face to face negotiation and advisedly, any more than in an auction room.
Secondly, my hon. Friend said that public collections might not know of the sale and that a certain work might be of interest to a provincial collection. The National Art Collections Fund exists to deal with precisely that sort of case. If any vendor is in doubt, he can approach the National Art Collections Fund which is fully cognisant of all the needs of the provincial collections.
Mr. Mitchison: Can the hon. and learned Gentleman say whether a sale to the National Art Collections Fund by private treaty is exempt from Estate Duty?
Mr. Simon: Yes, it is. I have used the expression, "public collections." That includes the universities, provincial collections and the National Art Collections Fund.
Finally, it was held that this was discriminatory against the auctioneers and my hon. Friends stressed the importance of the auction market in London. This is not wrongly discriminating against a particular form of sale. The purpose of the exemption is to promote a sale advisedly to a national collection. If objects are put up for auction, that is not selling advisedly to a national collection and it is purely fortuitous if a national collection succeeds in getting the article. It might just as easily go to some individual at home or abroad. It is of the very nature of the exemption that it demands a sale face to face and by private treaty. That does not mean necessarily by an individual dealer. It could be done in a number of other ways, through the National Art Collections Fund, or through the auctioneers themselves, who can negotiate private sales.
For all those reasons, I cannot advise the Committee to accept the Amendment.
Mr. Mitchison: All of us, including those who have spoken for the Bristol Art Gallery and those many of us who

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represent otherwise and by our personal appearance the provincial art galleries, would like to see some advantage given, if possible, to galleries and museums and the National Art Collections Fund when bidding in auctions. I appreciate the difficulty of doing it in the way suggested and I appreciate, too, that there is no case for giving the seller an enhanced price, but if the matter were taken one stage further and if the public gallery, having bought at an auction in the open market, were entitled to reclaim from the Treasury the amount of death duty which in those circumstances the Treasury would receive but would not have received had the sale been made by private sale, would not the purpose which we all have in mind be carried out, and carried out without any inconvenience? Is not the Treasury prepared to go that far in connection with public auctions if it is prepared to go as far as it goes in connection with private sales?
Mr. Simon: I think I answered that. There would still be the difficulty that it would be a rigged auction. The public gallery should be bidding in that case in the knowledge that it was an exempt article.
Mr. Mitchison: The public gallery would not know the amount and need not even know that it was an exempt article.
Mr. Simon: The difficulty is that we would still not give the vendor an incentive to sell to the gallery. In the end, looking at the system as a whole, we feel that it would operate to the disadvantage of the galleries.
Mr. Mitchison: If I may trespass on the patience of the Committee for one moment, may I ask the hon. and learned Member to remember that there is a very powerful incentive, in any event, in respect of major works of art in that he may not be able to export them. That has a considerable effect. Could not the Government see their way to think again about this problem, because I do not think it is insuperable and I think it is the general wish on both sides of the Committee, on the one hand that the vendor should get no more than the market price because he is selling to a public gallery and, on the other hand, that public galleries, which are very starved nowadays—I cannot go into that
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question—should as far as possible get the benefit of exemption from death duty in a public auction just as they get it in private transactions.
Mr. Glenvil Hall: This is a matter in which we are all keenly interested and on which I do not think the last word has been spoken. I support what has been said by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and others. Could the Chancellor, between now and Report, have another look at the matter? It may be that there is no solution to the problem. On the other hand, it is possible that in the light of the discussion tonight reins will be loosened and someone will have a bright idea. If so, perhaps on Report the Treasury would have some good news for us and would offer a solution which was satisfactory to all. Frankly, we should all like to see a solution.
Mr. Simon: This matter excites the interest of hon. Members and my right hon. Friend has it always very much at heart and under review. It strikes me that there is a considerable disadvantage in the method the hon. and learned Member and the right hon. Member for Colne Valley (Mr. Glenvil Hall) have put forward. If we wish to enable the galleries to buy more extensively it is more sensible to increase their grant than to give them, purely fortuitously, a grant based on the degree of exemption which a particular work of art attracts. The system of the review committee to which the hon. and learned Gentleman referred is, I think, preferable in that respect.
Amendment negatived.
Clause ordered to stand part of the Bill.
Clause 27 ordered to stand part of the Bill.

Clause 28.—(CONVEYANCES ON SALE, ETC.)
Mr. Mitchison: I beg to move, in page 22, line 14, after "chargeable", to insert:
"in relation to any conveyance or transfer on sale of any estate or interest in lands, tenements, hereditaments or heritages and so chargeable."
This Clause does two things. It deals with a reduction of Stamp Duty and it recodifies, and in minor respects maintains, the provisions of the Stamp Act. It is in relation to the former of those

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two matters that this Amendment has been put down.
Perhaps it would be convenient if I referred almost in one sentence to the remaining Amendments standing in the same names, which are as follow: In page 22, line 39, to leave out subsection (3) and to insert:
(3) Subsection (1) of this section shall not affect the duty chargeable on or any provisions concerning any instrument, conveyance or transfer on sale not being such a conveyance or transfer on sale as is mentioned in that subsection.
In page 23, line 6, to leave out from "disregarded" to "and" in line 17.
In line 22, to leave out from beginning to "made" in line 45 and to insert:
(5) Where any such conveyance or transfer on sale as is mentioned in subsection (1) of this section is.
and in page 24, line 1, to leave out "or by reference to."
Those, however, are Amendments simply relating to the recodification, and as it is beyond the powers of this side of the Committee to adapt the recodification to the Amendments proposed, we have, in effect, left out the recodification by those Amendments. That is not to say that there is any impossibility of doing so, but it is a matter of extreme difficulty and complication. We take off our hats in these matters to the Parliamentary draftsmen and would never seek to emulate them on a venture of this sort.
What I am putting before the Committee tonight is, in substance, the first of these Amendments. Its object is to limit the reductions made by subsection (1) to conveyances or transfers on sale relating, in effect, to land and houses. When the Chancellor referred to this matter in his Budget speech on 15th April he referred entirely to houses. He proposed, he said, in a modest way to help people who wished to buy their houses. He then mentioned the figures referring to conveyances of land and buildings, and in a comparatively short passage he did not make any reference to any other subject matter at all.
Of course, the conveyance or transfer on sale does cover in the Stamp Act conveyances or transfers on sale of everything but marketable securities. It covers a whole variety of things which are not land or houses and which were
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not, therefore, referred to by the right hon. Gentleman in his Budget speech and as regards which his benevolence might not be so appropriate and would certainly be more indiscriminatory.
It is, in effect, the residual part of the conveyances or transfers on sale that we are discussing and that we see no particular reason to include. If I may, I will give a couple of examples. Suppose that a shop and a business are sold. The conveyance or transfer on sale may relate—and probably will in most cases—not merely to the value of the property itself, the land and the building, but also in some form or another to the business. I think that the stock in trade is otherwise provided for in the Stamp Act and certainly the item of goodwill is.
The effect of the reduction as put forward here is to cover not merely the shop, the physical thing, but also such an item as goodwill, and that is only one case. "Marketable security" means a security that is marketable on a Stock Exchange in accordance with its ordinary use and practice, not necessarily regularly or frequently marketable. I can only leave hon. Members to imagine for themselves the variety of things that will fall between, on the one hand, marketable securities, with which we are not concerned, and, on the other, the land and houses that, so far as this Amendment goes, we all agree should receive the benefit of a reduction.
1.15 a.m.
The case put forward by the Chancellor was simply that in a modest way he proposed to help people who wished to buy their houses. So does the Labour Party. Although I am not going into the party's proposals for doing so, it has, in fact, made considerable and detailed proposals with a view to helping people to buy their houses. They are not in a position to deal with Stamp Duty. I do not think that it is mentioned in those proposals, but we are glad to see that in this matter we have, at any rate, the concurrence of the right hon. Gentleman in the end, although the means are, no doubt, somewhat different and he might perhaps disapprove of our proposals. We do not disapprove of his proposals so far as land and houses are concerned. On the contrary, we welcome them.

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However, when it comes to dealing with the vast possibilities of other things which may be covered by conveyances or transfers of sale, and, in one case, of goodwill—one could think of many others—I see no real reason why the reduction should be made and no particular reason for the proposed concession. That is really the point.
It is getting very late, and I do not think that if I talked for a great deal longer I should say much more that was of any value to the Committee. I hope I have made my point clear. It is a very real point, and I hope that, though put shortly, it will be at least taken seriously and at most accepted.
Mr. Maudling: The hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) is quite right. Clause 28 is intended to help home ownership, but it affects transfers of certain other items of property such as, in particular, goodwill or copyright or book debts, to which he referred. It is true that my right hon. Friend did not refer to those specifically in his Budget speech. The reason is simple. These items have always, in practice, moved with the abatements or special provisions of duty in the case of small properties.
From 1891 onwards, when they were included under the same head in the Stamp Act with transfers of land, they have always been treated on the same basis. I will not go through all the examples. There was a case in the 1910 Finance Act, where there was a special provision for transfers not exceeding £500; again in 1920, in 1952 and 1956.
The precedent which will, I hope, weigh with the hon. and learned Gentleman the Member for Kettering is that in the Finance Act of 1947, where his own Government doubled the rates of Stamp Duty. Of course, Stock Exchange transactions and transactions in marketable securities have always been treated differently, but they not only continued the small transactions relief in respect of conveyances and transfers up to £500 but extended it to conveyances and transfers up to £1,500. In that case, they did what we are doing now, which has always been done: they included with the transfers of land these other items such as goodwill and copyright, which have, ever since the Stamp Act, 1891, been charged under the same head.
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The simple argument is the argument of precedent. It has always been done in this way by both parties, and, although it may not be altogether logical, I think it is a good precedent. I see no strong reason for departing from it at this late stage in the life of the Stamp Act or at this late hour of the night.
Mr. Mitchison: We may have to refer to this matter again later. The only comment I make now could be applied to the last Amendment we were discussing. I rather wish that the Government would see their way to giving more help to museums and public galleries and not so much to the vendors of goodwill or copyright.
The particular reasons for giving people help in buying their own houses do not really apply in those other cases, and precedents can occasionally be varied even by a Tory Government. This is quite an expensive concession, involving, we were told, the best part of £3¾ million this year and the best part of £6 million in a full year. In the circumstances, I suppose that we shall have to let the Amendment be defeated for the moment, reserving the right to refer to it again.
Amendment negatived.
Mr. Maudling: I beg to move, in page 24, line 15, at the end to insert:
(8) In exemption (11) in the heading "Receipt" in the same Schedule (which exempts certain receipts endorsed or otherwise written upon or contained in an instrument liable to stamp duty and duly stamped), the reference to an instrument liable to stamp duty and duly stamped shall be taken to extend to any instrument wholly relieved of duty by the provisions of this section relating to instruments certified at three thousand five hundred pounds.
Receipts are normally subject to the 2d. Stamp Duty, but they are exempt from the Duty by exemption (11) of the First Schedule to the Stamp Act, 1891, if they are contained in documents which are themselves liable to Stamp Duty and duly stamped. The Bill is exempting from Stamp Duty conveyances of property where the consideration is not more than £3,500. In consequence, exemption (11) to which I referred will no longer cover receipts for money contained in conveyances for £3,500 or less. Failure to put a 2d. stamp on such conveyances might well render them ineffective as being documents not duly stamped. This was not in contemplation at the time the

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Clause was drafted, and it is only common sense that the Amendment should be made.
Mr. Mitchison: I am glad to hear that the Government take the view that it is only common sense to throw some twopences down the drain.
Amendment agreed to.
Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
Mr. H. Wilson: I do not wish unduly to detain the Committee at this late hour, although there is a very important point involved here, as the Financial Secretary knows, because we have had an exchange about it at Question Time and in correspondence. Perhaps I should do no more than give notice that we hope to raise the matter on the Report stage of the Bill. Whether it will be called is not something on which anyone can make a forecast at this stage.
This change in Stamp Duty announced by the Chancellor has effect only as from the beginning of August. It was not possible by a simple Amendment to deal with the point; at least, we have not so far found it possible, because of the very serious complications mentioned to us by the Financial Secretary when we first raised the matter at Question Time. He explained—I think this is right—that the Stamp Duty is not covered by the Provisional Collection of Taxes Act, and, therefore, a change in Stamp Duty cannot have any statutory effect until the Finance Bill itself becomes law. I hope that one result of this will be that, even between now and Report, the Chancellor will take steps to ensure that the Stamp Duty should be covered by the Provisional Collection of Taxes Act, so that the point will not be in doubt on a subsequent occasion. I think that has happened before.
The Committee cannot be in any doubt about the serious difficulty that this has presented in connection with the sale of houses and other property over the past few months. Anyone who knows that there is to be a substantial reduction in Stamp Duty will inevitably be tempted to postpone the transaction. My information is—I have had letters about this; I expect other hon. Members have, too—that there has been chaos and confusion
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in the house purchase market because of the failure—I do not use the word in a critical sense—or, at least, inability of the Government to give immediate effect to this as soon as the Chancellor announced it.
To save the time of the Committee, as the hour is very late, I put it to the Chancellor that this is a point that should be cleared up, if possible, on this Bill. If that is not possible, at least there should be legislative provision to ensure that this trouble does not recur. We hope, therefore, to discuss the matter on Report by means of a suitable Amendment. Even if we find that the Amendment does not meet all the problems that were described to us by the Financial Secretary, we hope at least to have an Amendment on which it will be possible to hang some sort of discussion.
Mr. Maudling: As my hon. and learned Friend the Financial Secretary undertook, since the right hon. Member for Huyton (Mr. Wilson) asked his Question on 24th April, we have made a further examination of the suggestion and the possibilities of retrospective legislation. Despite the examination, we still feel, however, that the practical difficulties of doing it are insuperable.
Mr. Wilson: I do not want to invite the right hon. Gentleman into a long speech on the subject. We have had one or two in the last hour or so, although this is a far more important point than the one on which we have just spent 40 minutes. Is the problem simply that of the Provisional Collection of Taxes Act? Are we in some way precluded from making this retrospective now in the Bill because of that, or did the omission of this provision from that Act merely explain why the Chancellor could not do it at the time? In other words, would there not be a case, for example for taking powers in this Bill, when it becomes law, to make this provision retrospective, for instance, tonight?
I can understand the difficulties of putting in the Bill something which would go right back to Budget day, 15th April. There would then need to be an enormously complicated machine for refunding tax paid and all the rest. Is there, however, anything to prevent the Chancellor announcing today, or, at latest, on Report, that this will be done

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retrospectively to the date of the announcement and that the Bill should validate that by the time that it receives the Royal Assent?
I am sure that this is a form of retrospective legislation to which no hon. Member opposite would object. It would be covered by an appropriate Ministerial warning or, in this case, promise. There could be no argument about it. In any case, it would be to the benefit of the tax-payer and the detriment of the revenue, instead of the other way round, as was the case we debated a week or two ago. We have already had this done or promised in relation to initial allowances, for which the Chancellor is getting in effect a piece of retrospective legislation. I wonder whether the Treasury would look at this matter again and see whether something could be done on Report to give effect to that proposal, at least if we cannot go back to Budget day.
Mr. Maudling: The difficulty concerning retrospection is not legal, but practical. The right hon. Gentleman may be right in saying that by Report it might be less impractical, but it would also have less practical effect, because between Report and the coming into effect of the Bill there would be such a small gap that I doubt whether much inconvenience would be caused to people dealing in property. The difficulty is one in practice of making repayments and is not a difficulty of law.
Mr. Wilson: I understand that, but I want to put this to the Paymaster-General. Would the right hon. Gentleman consider the time of the year we have reached? If it were possible to give effect to this—shall we say?—next week or from the date of Report, whenever that may be, it would perhaps enable to go forward a number of transactions which, I think he will agree, have been held up pending the coming into effect of the lower rate of Stamp Duty. It would enable a number of families to move into their new homes in July or at the latest the August Bank Holiday weekend.
I know of families who are waiting to move. It seems a little hard, after this concession has been announced, that they should have to be faced with this choice, that they must either pay the higher rate of duty now or delay their move until September, or some such much later date.
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Perhaps the right hon. Gentleman will consider this, or consider an Amendment on Report, or propose one himself then.
1.30 a.m.
Mr. Graham Page: I appreciate the argument of the right hon. Gentleman the Member for Huyton (Mr. H. Wilson), but I think that he has missed the point, that if a conveyance were completed now it could be held for Stamp Duty for 28 days without anyone running into penalty. So there would be little point in passing a provision such as he has suggested. If necessary, a conveyance can be completed next week and dated next week and can be held for stamping until the beginning of August.
Mr. Wilson: I was proposing giving longer in view of the announcement which has been made and because this is a critical time of year.
Question put and agreed to.
Clause, as amended, ordered to stand part of the Bill.

Clause 29.—(MISCELLANEOUS AMENDMENTS.)
Mr. Maudling: I beg to move, in page 25, line 6, at the end to insert:
This subsection shall not be taken as affecting the duty chargeable on an instrument under the said heading "Mortgage, Bond, Debenture, Covenant" in respect of any security by way of charge on property or in respect of an agreement to give such a security.
The purpose of the Amendment is to clear up certain doubt which, we have been advised, might arise. The purpose of subsection (1) of the Clause is to reduce Stamp Duty payable on certain contracts for the sale or hire of goods, and the execution of building works. The object, as the Committee will be aware, was to assist our exporters who might be hampered by the existing duty. We have been advised that this wording as it stood might be construed to cover a mortgage created in order to build a house.
Clearly, that was not the intention. If such an interpretation were given to the legislation it would create a serious anomaly, for instance, if a mortgage to build a house were subject to only 6d. or 10s. duty while a mortgage for purchasing an existing house were liable to ad valorem duty.

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The purpose of the Amendment is to avoid any doubt that the Clause is intended to refer to contracts for the hire and sale of goods, the construction of installations, machinery, and so forth.
Amendment agreed to.
Mr. Maudling: I beg to move, in page 25, line 24, at the end to insert:
(3) Any discharge (by re-conveyance, surrender or otherwise) of a security for sums payable to a local authority in respect of the sale or letting of houses by that authority under any of the enactments mentioned below in this subsection shall be exempt from stamp duty.
The enactments in question are—

(a) as regards England and Wales, paragraph (d) of subsection (1) of section fifty-nine of the Housing Act, 1925, paragraph (d) of subsection (1) of section seventy-nine of the Housing Act, 1936, and subsection (1) of section one hundred and four of the Housing Act, 1957; and

(b) as regards Scotland, paragraph (d) of subsection (1) of section forty-five of the Housing (Scotland) Act, 1925, and paragraph (d) of subsection (1) of section sixty-five of the Housing (Scotland) Act, 1950.

A number of Sections under which there is power to grant mortgages are specified in subsection (3) of this Clause. It now appears that the subsection as drafted is not quite exhaustive. We have been informed that other Sections are Section 104 of the Housing Act, 1957, and Section 65 of the Housing (Scotland) Act, 1950. Therefore, the purpose of the Amendment is to make it quite clear that the relief is given to all discharges on mortgages taken by local authorities for the sale or lease of council houses by virtue of the powers given in those Sections 104 and 65. The purpose of the Amendment is to repair an omission which, I think, is now repaired.
Mr. Mitchison: Are the Government satisfied that they have now stopped all the holes?
Mr. Maudling: The Government are satisfied that they have done their best. Beyond that they will not go.
Mr. Mitchison: Will there be retrospective legislation if the Government have omitted from this Bill the provisions of some other Act?
Amendment agreed to.
Clause, as amended, ordered to stand part of the Bill.

Clause 30.—(EXCHEQUER ADVANCES TO NATIONALISED INDUSTRIES AND UNDERTAKINGS.)
Motion made, and Question proposed, That the Clause stand part of the Bill.
Mr. H. Wilson: It might be appropriate to draw attention to the fact that in the last two and a half hours we have passed, with small Amendments, 14 Clauses of the Bill. When one reckons that 40 minutes was taken in discussing an extremely small Amendment to Clause 21—although important to the hon. Member who moved it—it shows the Chancellor the unique co-operation which the Opposition have given to him on the Bill.
Mr. Smithers: Was the right hon. Gentleman co-operating when he tried to count the Committee out?
Mr. Wilson: There was no prospect, hope or danger of the Bill being counted out, but it was desirable to point out that it was becoming a strain on our patience that hon. Members opposite were speaking at such length without the support of their own side.
I hope that the Chancellor will note that we have co-operated fully in getting through this Bill so quickly. On one of the Clauses now before us I could make a speech of several hours on the question of the Treasury Chest. I do not propose to do so. But if we had been in a fractious mood, as we have seen Oppositions on Finance Bills in the past, the Bill would have been a sitter for the purpose. We shall not avail ourselves of that opportunity.
Mr. Amory: Before the right hon. Gentleman changes his mind, I would like to pay tribute to the degree of co-operation I have received and to express the hope that we may maintain the same speed in disposing of Clauses tomorrow. If we can do that, we should make sure of a good night's sleep tomorrow.
Question put and agreed to.
Clause ordered to stand part of the Bill.
Clauses 31 to 34 ordered to stand part of the Bill.
The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. G. R. H. Nugent): I beg to move—
Mr. H. Wilson: I understood that the Chancellor was going to move to report Progress. We had agreed that if we reached the new Clauses we might deal with the first two. But as we have now gone until 1.40 a.m. I hoped the Chancellor would move to report Progress. I wonder, Sir Charles, whether you would accept such a Motion from me? I beg to move, "That the Chairman do report Progress and ask leave to sit again".
Mr. Amory: Looking at the remainder of the work before us, we have a very full day's work tomorrow. I would very much hope that we could deal with the first two new Clauses tonight. I had a word with the right hon. Gentleman earlier and I do not remember any particular hour being mentioned. I would hope that these two new Clauses would not take more than a few moments.
Mr. Wilson: I am sorry if there has been any misunderstanding. We had our meeting before 3.30 this afternoon, when I explained to the Chancellor that I thought it might be possible to make a start with the new Clauses, while leaving the more contentious new Clauses for tomorrow. But that was only a goal or target. I did not envisage then that we should be talking about this at 1.40 a.m. If the Chancellor had wanted to make progress on the new Clauses there was an obligation on the Patronage Secretary to make some attempt to restrain the eloquence of the right hon. Gentleman's colleagues. Practically all the Amendments to the 14 Clauses with which we have dealt since 11 o'clock have been moved from the other side of the Committee. We on this side have greatly restrained ourselves in not putting Amendments on the Notice Paper in order to make progress, and it has been somewhat galling to my hon. Friends to have had some of the Amendments argued excessively by hon. Members opposite.
I suggest to the Chancellor, therefore, that he does not attempt to make further progress tonight. The Committee is entitled to hear his explanations at a more reasonable hour of the day. We have given the Chancellor assurances about the time-table which we have fully kept throughout the Committee stage. At various times we have felt a good deal of optimism and thought that we might
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get on a little faster, as happened a fortnight ago. We had hoped to make great progress by a reasonable hour.
The Chancellor is quite right in saying that we have a great deal of work to do tomorrow. I should not like to give an undertaking about the time at which we shall finish discussion of the Clauses which you select tomorrow, Sir Charles, but we have certainly no desire to delay the proceedings tomorrow. We hope to fulfil the same kind of self-denying ordinance to speak quickly and briefly and have as many of the Clauses dealt with as possible, because they are of a wide range of interest to hon. Members in all parts of the Committee.
How late we shall go tomorrow, therefore, may very well depend upon the eloquence of hon. Members opposite, as well as that of those on this side of the Committee. While we should not like to give any assurance about the time when the end of the Bill and the final Schedules are reached, I can certainly say that we shall continue to co-operate. Tomorrow, we shall have even more of a vested interest than we have had so far in getting on quickly with the Bill, because we want to deal with as many of the Clauses as possible. In the circumstances, I hope that the Chancellor will move to report Progress. I think that he will find the Committee reasonable tomorrow, and I hope that we shall finish at a not too unreasonable hour.
Mr. Amory: I feel in sporting mood. Would the right hon. Gentleman agree to split the difference here? If so, I would agree that we should complete the first new Clause and let the other go. It seems to me a very fair offer, particularly as I believe that the first Clause is one which will appeal to both sides of the Committee and therefore will be non-controversial. I hope that the right hon. Gentleman will feel that that offer is in accord with the spirit of co-operation to which he has referred.
Mr. Wilson: I do not think that that is in any sense an unfair proposal, if it is for the convenience of the Committee. I cannot speak for my hon. Friends—the two of them. I do not know whether they will feel that the Clause is not controversial. They may wish to make long speeches. The Chancellor is taking a great risk, but in view of the spirit in

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which he has made his offer, I beg to ask leave to withdraw the Motion.
Motion, by leave, withdrawn.

New Clause.—(USE OF TRADE LICENCES FOR COLLECTION AND DELIVERY OF ROAD VEHICLES.)
(1) The purposes for which the holder of a trade licence within the meaning of the Vehicles (Excise) Act, 1949, may be authorised to use the licence by regulations under section ten of that Act shall not include the collection or delivery of mechanically propelled vehicles on or by means of another mechanically propelled vehicle except in connection with activities which would be treated for the purposes of the said section ten as part of his business as a motor trader apart from subsection (5) of section seven of the Finance Act, 1952 (under which in certain circumstances the collection and delivery of motor vehicles is to be treated as itself constituting or forming part of the business of a motor trader).
(2) This section shall not invalidate any regulations made under the said section ten before the coming into force of this section, but the purposes for which they authorise trade licences to be used shall be taken to be limited in accordance with the foregoing subsection.
(3) This section shall come into force on the first day of January, nineteen hundred and fifty-nine, or such later date (if any) as may be appointed by order of the Minister of Transport and Civil Aviation made by statutory instrument.—[Mr. Nugent.]
Brought up and read the First time.
The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. G. R. Nugent): I beg to move, That the Clause be now read a Second time.
I thank the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) for his co-operative spirit. I do not think it will take long for me to explain the purpose of the Clause. It is to end an anomaly which has arisen out of Section 7 (5) of the Finance Act, 1952. The purpose of that Section was to allow a person who carries on a business mainly or solely of collecting and delivering mechanically propelled vehicles to use a general trade licence for driving these vehicles on the road. The intention was to enable new motor vehicles to be driven under their own power from factories to ports and inland distributors.
This happened to a considerable extent, but unexpectedly the practice has also developed in a few cases of carrying new vehicles on transporters which carry six or eight new vehicles at a time, but still under a general trade licence, with
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the result of losing to the revenue the difference between the £100 to £120 per annum cost of the appropriate licence and the £25 per annum cost of a general trade licence, and secondly, admitting the operators concerned into general haulage business without making application to the Licensing Authority for a carrier's licence to carry goods for hire or reward. For some persons to be doing this transporter business under a general trade licence alongside others who are doing it under an A or B licence is highly anomalous. This new Clause will remove that anomaly. The firms concerned must apply for an A or B licence, going through the normal procedure for obtaining a carrier's licence.
1.45 a.m.
Subsection (3) provides that this new provision shall not come into force until 1 January next year, and it gives the Minister power to postpone by Order if necessary. This, we think, gives sufficient time for firms concerned to adjust their affairs to meet these new conditions, and I would like to give an assurance to those concerned. The business of collecting or delivering motor vehicles separately under the general trade licence is not affected, nor is the use of a car transporter by a manufacturer or repairer. This new Clause simply closes an unsuspected loophole in the Finance Act, 1952. That is all.
Mr. Mitchison: As I understand the purpose of this Clause, it is partly to secure the revenue and partly to enforce, would it be, the difference between A and B licence provisions? So far as the revenue is concerned, the position is, if I understand the Parliamentary Secretary correctly, that the collection of vehicles may no longer be carried out under a trade licence where those vehicles are carried on transporters. It may, however, be carried out where the vehicles are collected separately.
Undoubtedly, the Parliamentary Secretary will have made inquiries as to the extent of the practice and will be able to inform the Committee of the revenue loss owing to this practice. Or may I put it the other way round? No doubt he will be able to tell us what is thought to be the revenue gained or recovered as a result of the operation of this new Clause.
Mr. Nugent: I can give the hon. and learned Gentleman only a rough idea.
Mr. Mitchison: I believe I overheard the hon. Gentleman saying he could give only a rough idea. I do not see how he could give more. That is all I am asking for.
I was about to say that, secondly, I notice that this does not come into force for another five or six months. Have steps been taken to make known to the trade the exact limits and effect of these slightly complicated provisions? Is it thought that the traders can reasonably and properly adapt themselves? I gather from what has been said that it is simply a matter of paying rather more duty. I imagine that there will be no difficulty in getting the necessary licences. Can the hon. Gentleman tell us how the matter stands?
Mr. Nugent: Our information is that probably some 20 to 30 transporter firms are involved in this anomaly, and it would seem that about £2,000 to £3,000 for the Revenue is at stake. The trade will, of course, be informed that the Committee has approved the Clause, and it will be informed of the exact effect of the Clause. It will then be necessary for those businesses concerned to apply to the licensing authorities for carriers' licences, to make out their case if need be and, if need be, to meet objections. We reckon that the time of five months should be ample and reasonable for that and the businesses will then have to meet the ordinary conditions of the licensing court.
Mr. H. Wilson: In view of the very courteous and helpful way in which the hon. Gentleman has explained the Clause, I am sure that I am speaking for the Committee when I say that his long wait has not been in vain. I am glad that the Chancellor was able to propose this compromise which has enabled us to get through the Clause and make it unnecessary for the hon. Gentleman to sit with us again tomorrow, although, of course, we shall always be very glad to see him. It was extremely gratifying that he was able to give my hon. and learned Friend even a rough answer about the amount of revenue involved.
Since by passing this Clause—as I shall recommend my right hon. and hon. Friends to do—the Chancellor will now
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be in receipt of additional revenue to the tune of some £2,000 or £3,000, on which a few minutes ago he could not have counted, since this windfall has come to the Revenue, will the Chancellor again consider the whole question of paying firewomen, since this windfall would just about meet the amount involved?
Mr. Amory: I am afraid that there will be some windfalls less for me to incur tomorrow.
Question put and agreed to.
Clause read a Second time and added to the Bill.
Mr. Amory: I beg to move, That the Chairman do report Progress and ask leave to sit again.
In all the circumstances, we have made very satisfactory progress, for which I thank hon. Members. We have a strenuous day before us tomorrow, and I should like to think that hon. Members will enjoy a few hours' rest and refreshing sleep between now and then.
Question put and agreed to.
Committee report Progress; to sit again this day.

CHILDREN [MONEY]
Resolution reported,
That, for the purposes of any Act of the present Session to make fresh provision for the protection of children living away from their parents and to amend the law relating to the adoption of children, it is expedient to authorise—

(a) any increase in the sums payable out of moneys provided by Parliament under the Family Allowances Acts, 1945 to 1956, which is attributable to any provision of the said Act of the present Session authorising a child in the care of a local authority to be treated in certain circumstances as included in a family for the purposes of family allowances; and

(b) any increase in the sums payable out of moneys provided by Parliament under section forty-seven of the Children Act, 1948, Part I of the Local Government Act, 1948, or the Local Government (Financial Provisions) (Scotland) Act, 1954, as amended by the Valuation and Rating (Scotland) Act, 1956, which is attributable to any provision of the said Act of the present Session extending the functions of local authorities with respect to children and authorising the payment of grants under the said section forty-seven in respect of expenditure incurred in discharging those functions.

Resolution agreed to.

PORTUGUESE COLONIES
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Legh.]
1.53 a.m.
Mr. Wedgwood Benn: I rise to draw the attention of the House to a matter very different from that with which it has been dealing in the course of this evening's debate. The rather obscure subject, which, on the face of it, calls for some initial explanation, is the guarantees entered into by this country in respect of the sovereignty of Portugal and her colonies during the war and the political consequences which flow from that and other commitments which bind us.
I should explain what it was that first put me on to this subject, because we have some lessons which we can draw from it. Along with perhaps every other hon. Member, in February I received a pamphlet issued by the Portuguese Embassy and consisting of reprints from a series of editorials in Portuguese newspapers dealing with relations between Britain and Portugal during the war. In the course of these articles, I read an account of the Azores Base Agreements, under which Portugal made certain bases available to this country. In commenting, the editorial said,
"… in addition, guarantees were given jointly with the Government of the Union of South Africa concerning the maintenance of Portuguese sovereignty over all the Portuguese overseas Provinces …."
I had never heard of such an agreement, and I made inquiries therefore to see whether it was correct. I first wrote to the Portuguese Embassy, who replied most courteously, gave me the text of the agreement and said that as far as they knew it had been published in this country. I naturally looked to the White Paper published just after the war dealing with the agreements covering the Azores, Cmd. 6854 of 1946, but I found no reference whatever to any guarantees given by Britain to Portugal or her colonies. In desperation, I turned to the Foreign Office. Without desperation, I should never have dared to do so.
I found them very helpful, for they conveyed to me the text of the correspondence between the British Ambassador in
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Lisbon and the Portuguese Prime Minister, which they admitted had never been published at the time. I should like briefly to deal with the text of these agreements. The Foreign Office made it quite clear—and the Under-Secretary of State pointed it out in writing to me—that these agreements had been published in Portugal but not in the United Kingdom.
In the exchange of letters which the Foreign Office sent me, I came across the passage for which I had been searching. It appeared in a letter dated 16th June, 1943, signed by Sir Ronald Campbell, our Ambassador, and addressed to Dr. Salazar. In paragraph 14 of that letter occur the operative words,
"I am authorised to inform Your Excellency that His Majesty's Government in the United Kingdom are prepared, not only to guarantee the withdrawal of their forces from the Azores at the end of hostilities but also to give assurances regarding the maintenance of Portuguese sovereignty over all the Portuguese Colonies."
In acknowledging this letter—in a letter dated 23rd June—Dr. Salazar expressed his gratitude and included the following passage:
"The Portuguese Government take note of the formal undertaking that, at the close of hostilities, the British troops in the Azores will be withdrawn; and, though they consider such guarantees to be unnecessary in view of the appeal made to the Treaties of Alliance which expressly provide them, they thank His Majesty's Government for repeating the guarantees…."
This promise of guarantees was formally conveyed by Mr. Hopkinson, as he was then—Lord Colyton as he is now—who was in charge in the Ambassador's absence, on 14th September. He conveyed officially the British Government's guarantee on the maintenance of Portuguese sovereignty in all Portugal's colonial possessions after the war. It was in that letter, sent by Mr. Hopkinson, that there appeared for the first time the suggestion that these guarantees extended beyond the period of hostilities and into the past-war period. It was this which encouraged me to write further to the Foreign Office to find out what was the position.
I wrote on 14th April to the Under-Secretary of State, who, I think, is now in hospital; I send him my good wishes. No doubt he would have liked to take part in this debate. I have his permission to make use of the exchange of letters between us. I thanked him for making

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available the correspondence and asked him whether he could answer certain questions.
The first was, did the assurances have a permanent validity or were they valid only for the duration of the Allied use of the Azores?
The Under-Secretary of State, in dealing with that question, said:
"Our assurance had no time limit written into it, but it was circumscribed by the words 'in the event of any threat to Portugal and the Portuguese Empire developing in consequence of an affirmative response by the Portuguese Government to the appeal now made ….' This in practice does provide a time limit, since no threat now to Portugal or the Portuguese Empire could seriously be held to arise from the granting of facilities in the Azores in 1943."
I asked my second question, whether if these were held to be of permanent validity Her Majesty's Government still felt bound by the assurances they had given. The Under-Secretary of State went on in his letter to say:
"The main intention of our guarantee was to assure the Portuguese that we ourselves had no designs on their colonies. In these circumstances an exchange of notes has no relevance or validity today, except that we still have no designs on the Portuguese colonies."
I was very satisfied with that reply, and I ventured to put down a Parliamentary Question in order to get the words repeated on the record so that they might be generally known. But when I put down a Question on 12th May the Secretary of State for Foreign Affairs failed to give me an answer in the same words and created in my mind some doubt as to what the position really was. He said:
"The assurances to which the hon. Member refers, which were in keeping with the tradition of the Alliance, were by their terms concerned with a particular period and particular circumstances and have not been the subject of discussions between our two Governments since the war."
And later, when I pressed him further, the right hon. Gentleman said:
"I have not entered into the wider aspects of the matters at all."—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 22.]
This placed in my mind the fear that this country was still bound to the maintenance of Portuguese sovereignty by other engagements. I continued to question the right hon. Gentleman the following week, and I again thought that his answer was not as clear as it should have been. Therefore, I engaged in a
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certain amount of elementary detective work, and the hon. Gentleman who is to answer this debate tonight will no doubt tell me whether the results of my work were correct or not.
The reason why I entered into this research was because Dr. Salazar himself has made the constant claim since the war that the treaty of 23rd June, 1661, which gave a guarantee to Portugal at that time, was still in force. This is not an academic matter that we are discussing. We are discussing the controversy which has developed between Portugal and India over the future of Goa, and Dr. Salazar, who is a great campaigner for his country's cause in Goa, in a broadcast on 12th April, 1954, and on other occasions also, firmly claimed that the old treaty still applied in its entirety and gave him British support in his controversy with India about Goa. The phrase in the treaty of 23rd June, 1661, is as follows:
"To defend and protect all conquests or colonies belonging to the Crown of Portugal against all his enemies"—
that is, his faithful Majesty the King of Portugal—
"as well in the future as at present."
I wonder whether, in fact, this agreement is still in force. I must say that I have no doubt in my mind that it is regarded as being still fully operative, and I would cite a number of sources in support of this view. First of all, in the book published by Lord McNair on the law of treaties, he gives an extract from an opinion given by the Queen's Advocate in 1843 when this point was put to him with regard to the British guarantees for Portuguese sovereignty as they applied to the Portuguese control of Macao.
In a letter addressed by the Queen's Advocate to their lordships, he states quite clearly that in his opinion, although Macao cannot be considered as part of the Portuguese dominions inasmuch as the sovereignty thereof appears to remain in the Empire of China, yet the Portuguese are possessed of such an interest therein as to bring it within the true meaning of the treaty. That opinion was confirmed in 1898 when the House of Commons Parliamentary Paper, Cmd. 9088, was published in which all the treaties between England and Portugal going right back from 1373 to 1703

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were reprinted as being still in force. Indeed, a year later in 1899 the British Government had an additional practical reason why they wished to reaffirm the validity of these treaties. At that time the war with the South African Boer Republics was boiling up and the British Government were anxious that Lourenco Marques should be open to the British for the supply of arms and troops, and that Portugal should not declare her neutrality in the war that was about to take place because this would gravely inconvenience the Admiralty in coaling our ships in Delagoa Bay. The treaty was reaffirmed specifically in an exchange of notes between Lord Salisbury and the Portuguese Ambassador.
Much more recently than that, in 1930, the Secretary of State for Foreign Affairs specifically reaffirmed the validity of these treaties. Looking through some HANSARDS which happened to be left on the bench while I was listening to the debate on the Finance Bill, I came across a Question put by my father on this subject in 1937 asking the same question, and he was told—the subject was then important because of the Spanish war—that these treaties were still held to be in force. Undoubtedly the exchange in 1943 to which I referred with regard to the Azores agreement gave life to these agreements, and undoubtedly Salazar is right in the sense that the British Government hold these agreements to be in force.
Up to now I have only explained what I took the position to be, and I am open to correction, of course. The Secretary of State took a somewhat cautious line in dealing with the possibility that these treaties might be invoked when he said that it would be up to the Portuguese to establish the case for the implementation of the treaties, and he suggested that that might not be a very easy thing for Portugal to do.
My only complaint now is against the Labour Government that the secret agreements entered into by the Coalition Government during the war were not published in the White Paper at the end of the war. It is an unsatisfactory state of affairs that a Member of this House should receive a publicity hand-out from a foreign Government acquainting him
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for the first time of an obligation entered into by his own Government which might at some time have to be invoked. But I do not make a great deal of this because this is not a complaint against the present Administration.
What I want to do in the remaining few moments is to take this state of affairs as a fact and consider what it actually means and what its political implications are. The Portuguese overseas provinces are very numerous. Macao is, I suppose, the most vulnerable in that it lies under the guns of the Chinese Communists and there are also Cabo Verde, Timor, Mosambique and, of course, Goa.
It is primarily on the question of Goa that I want to refer to the situation which confronts us. I want the House to consider whether it is desirable that these agreements which give us an interest in Portugal's control over her colonies should be allowed to continue in their present form. I must raise it as a political point to some extent, because it has the effect of putting us on the side of Portugal, which is not a democratic country in the sense that we understand it. It has not got those freedoms which we revere and value. It has not got the freedom of the Press, or habeas corpus. We may be put in the position of having to defend Portugal in her colonial interests in Goa against a country which is a member of the Commonwealth, and which, in statistical terms, is the largest democratic country in the world. India, with her 400 million people going peacefully and democratically to the polls, is the greatest example of the victory of the ideas for which this House has stood throughout the many years of its history.
I regard it as very unattractive and undesirable that we should put ourselves in the position of having to defend, or being bound to defend, the interests of Portugal in Goa. Goa, of course, was only one of the smaller of the foreign settlements in the Indian sub-continent. Nobody, least of all the Indian or the British leaders, imagined that when the British decided to leave India there would be any question of the French or the Portugese remaining. Indeed, I understand that when the late Sir Stafford Cripps and Lord Pethick-Lawrence were in India with the Government Mission which

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negotiated the transfer of power the question was publicly put to them as to what would be the position of the other settlements. I think it was Sir Stafford Cripps—my predecessor in my constituency—who answered by saying that, of course, once India was free this would be a matter for the Indian Government only.
It is certainly held by the Indian Government to be a matter of legitimate concern to them. They believe, quite rightly, that the people of Goa, given the chance, would opt for India. They cite the fact that they are Indian people. By race, by language, and even by religion, although there are many Catholics there, and by trading interests, Goa is part of India. They cite the fact that, since the conquest by Albuquerque in 1510, there have been no fewer than forty major revolts by the people of Goa against the Portugese. Since 1946, of course, there has been constant peaceful protest inside Goa most cruelly repressed. In the colony of Goa itself, there are none of the democratic rights enjoyed by the people of India.
In a practical sense, these engagements which the Government entered into during the war, which gave life to the old treaties, have produced a very undesirable situation. In the eyes of the world, we are put on the side of Portugal and her policy in Goa against free elections and self-determination. This is not an academic point; it is a very practical matter of immediate concern to the Indian Government. Dr. Salazar leans very heavily upon the British connection not only to support his own régime internally but also in his attempt to bring pressure to bear upon India. In Notes that he has himself addressed to the Indian Government, he has pointed out—wrongly, in my judgment—that N.A.T.O. offers some protection to the Portugese interests in Goa.
It is true to say that we in Britain, along with other N.A.T.O. member countries, have agreed to support the application of Portugal to discuss the Goan question in N.A.T.O. This is by no means acceptable to the Indians, as can be readily imagined. I suppose that what gave the greatest offence to the Indian Government was the fact that they had regularly tried for some time to get the Portuguese Government to discuss Goa but had been met with refusal.
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Then, in 1954, the British Government warned India not to take any action, without giving a similar warning, as far as one can make out, to the Portuguese Government. In 1955, of course, Mr. Dulles, speaking for another N.A.T.O. member, joined with Dr. Cunha in warning India.
It is an old treaty. I should like to try to sum up what can usefully be done about it. First, I think the Government ought to make clear the strict limits under which the treaty operates. It is a negotiated agreement entered into, which cannot be repudiated, but the limits can be set strictly to exclude any suggestion that the sovereignty of Portugal can be protected in an endeavour to deny the people of Goa the freedom they desire. Secondly, and much more important and constructive, is the need for us, because of our position as an old ally of Portugal and a comrade of India within the Commonwealth, to use our good offices in trying to bring about a peaceful settlement. Nobody wants to see this settled by force, but if we are not willing to see it settled by force we should use our influence to try to persuade the Portuguese Government to do something they have never agreed to do: that is, to negotiate the matter with India. If the United Nations were in the last resort the court to which one took this matter, there is no doubt where the feeling of the General Assembly would lie.
My reason for raising tonight this detailed point, which has such a rare and limited interest in the United Kingdom, is my belief that if this country is to hold its position, if it is to justify the claims it makes for itself in its propaganda abroad, it must surely care about freedom for Goa just as it did about freedom for India. I deeply resent the suggestion that the civilising mission of the West, a phrase which Dr. Salazar often uses, should be used to justify oppression in India when, if the Western civilisation has any meaning at all, it means a liberalising influence carrying out free institutions for them to enjoy. It is because I think that freedom is indivisible and that the British Government in their policy should recognise this, that I feel that this debate, although limited in scope and at this late hour, has had some importance.
2.16 a.m.
The Minister of State for Foreign Affairs (Mr. D. Ormsby-Gore): The hon. Member for Bristol, South-East (Mr. Benn) has referred to a number of ancient treaties. I should say at the outset that this brings home to us the extraordinary antiquity of the Anglo-Portuguese alliance. In the days of shifting alliances and rapid changes of side, this is a remarkable thing of which both countries should be proud.
In the first part of his speech, the hon. Member mentioned the exchange of Notes which took place in 1943 between Portugal and the United Kingdom. These Notes were intended to cover the provision of wartime facilities for British Armed Forces in Portuguese territories, in the Azores in particular. They contained a phrase about the maintenance of Portuguese sovereignty over all the Portuguese colonies. As my right hon. and learned Friend the Foreign Secretary said in the House on 12th May in answer to a Question from the hon. Member, these assurances related to a particular period and particular circumstances.
I will give a slightly fuller quotation of the relevant portion of the Note, because it shows the full context in which this exchange of Notes, took place. It said:
"In the event of any threat to Portugal and the Portuguese Empire developing in consequence of an affirmative response by the Portuguese Government to the appeal now made …"
that was, during wartime—
"His Majesty's Government are prepared … to give assurances regarding the maintenance of Portuguese sovereignty over all the Portuguese colonies."
I think it will be obvious to anyone that my right hon. and learned Friend summed up the situation correctly and that there is nothing much I can add this morning. Clearly, the Notes were dealing with particular circumstances which might arise during the war.
As regards the point made by the hon. Member concerning publication, after twelve years I cannot say exactly why these Notes were not published in England in 1946 at the time they were made public in Portugal. As, however, they were published in Portugal at that time, I do not think the question is of great importance and, as the hon. Member fairly said, the Government responsible for not
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publishing in this country were, in fact, the Labour Government of that time.
Turning to the treaties which, the hon. Member suggested, were the actual documents on which Dr. Salazar rested his case, the earliest was the one concluded in 1373, making Portugal our oldest ally. Several of these treaties contained clauses enjoining friendship and mutual assistance in general terms. For instance, Article 1 of the Treaty of 1373 provides that the two countries shall be
"friends to friends and enemies to enemies and shall assist, maintain, and uphold each other mutually by sea and by land against all men that may live or die, of whatever dignity, station, rank or condition they may be and against their lands, realms and dominions."
In the Treaty of 1661, to which the hon. Member referred, there is an article which specifically covers Portuguese colonies. This Article was reinforced by the Declaration of 1889.
In addition to these bilateral treaties, there are, of course, certain multilateral treaties to which both the United Kingdom and Portugal are parties. There is, first of all, the general position under the United Nations Charter, and Portugal is a member of the United Nations. And I should say here that the actual treaties we have with Portugal are not inconsistent with our obligations under the Charter in that obligations to go to the assistance of victims of acts of aggression apply as much to dependent territories as to the metropolitan country. Then Portugal is also a member of N.A.T.O., and its metropolitan territory, which includes Madeira and the Azores, is covered by Article V of the N.A.T.O. Treaty.
It is not, I think, necessary for me to go further into the position under the United Nations Charter and N.A.T.O. which is exactly the same for Portugal as for any other member of those two organisations.
Can one, therefore, in summing up, define exactly the limits of those commitments? That is, I think, what the hon. Gentleman would like me to do tonight. It really is impossible to define them in any hypothetical case. I cannot really define our obligations more closely than they are already defined in the treaties themselves. As in the case of all treaties, it would be a question of the party invoking the treaty making out that the circumstances bringing into play the relevant

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obligations did in fact exist. I think that if the hon. Gentleman would consider that phrase he would see it covers very largely the case he was mentioning.
I do not know that it is very profitable for me to discuss in any detail the possibility of our having to defend the Portuguese position in Goa. As he suggested, there is no question of our expecting an armed attack on Goa, and the Indian Government have given repeated assurances that they do not intend to resort to force, and they are dealing with the matter in, if I may say so, an extremely statesmanlike way. Certainly the position there is entirely peaceful at the present time.
It may be said that these treaties were concluded in circumstances which bear no relation to the problem of the present day, but they do exist among
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this country's other treaty obligations, although neither I nor my right hon. and learned Friend was responsible for negotiating them. The Government respect these ancient treaties, and we certainly do not wish to set any example of repudiating treaties. I think they are a symbol of the close relationship between our two countries, and fortunately we do not foresee that either side intends to invoke the military clauses of the treaty. We do value these treaties, just as we value the old ties of friendship with Portugal, and I am glad to say those ties of friendship remain as strong as ever.
Question put and agreed to.
Adjourned accordingly at twenty-three minutes past Two o'clock.

SCIENTIFIC AND INDUSTRIAL RESEARCH
  Scientists and Technicians
  Scientists and Technicians
SCOTLAND
  Crofters Commission (Report)
  Crofters Commission (Report)
  Westfield Park Home, Dalkeith
  Westfield Park Home, Dalkeith
  Water Supplies, Portree
  Water Supplies, Portree
  The Highlands (Development)
  The Highlands (Development)
  DISTRIBUTION OF INDUSTRY
  DISTRIBUTION OF INDUSTRY
NATIONAL FINANCE
  Wages and Salaries
  Wages and Salaries
  Universities (Admissions)
  Universities (Admissions)
LOCAL GOVERNMENT
  Petrol Filling Stations
  Petrol Filling Stations
  Rent Act, 1957
  Rent Act, 1957
  Central Advisory Water Committee
  Central Advisory Water Committee
  Control of Advertisement Regulations
  Control of Advertisement Regulations
  Bevan's Works, Swanscombe
  Bevan's Works, Swanscombe
MAURITIUS
  Sugar Industry (Wages)
  Sugar Industry (Wages)
  National Insurance
  National Insurance
AFRICAN TERRITORIES
  Co-operative Societies
  Co-operative Societies
  ARDWICK CEMETERY, MANCHESTER
  ARDWICK CEMETERY, MANCHESTER
TRANSPORT
  Merchant Shipping
  Merchant Shipping
EDUCATION
  Grammar and All-Age Schools
  Grammar and All-Age Schools
  Independent Schools (Places)
  Independent Schools (Places)
TELEPHONE SERVICE
  Edinburgh
  Edinburgh
EMPLOYMENT
  Edinburgh
  Edinburgh

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR On the Woolsack.
Prayers

HOUSE OF LORDS COMMITTEES
2.35 p.m.
THE SECRETARY OF STATE FOR COMMONWEALTH RELATIONS (THE EARL OF HOME): My Lords, I beg to move the four Motions standing in my name on the Order Paper.
Motions moved—

That the Earl St. Aldwyn be added to the Committee for Privileges.

That the Earl St. Aldwyn be added to the Select Committee on the House of Lords Offices.

That the Earl St. Aldwyn be added to the Select Committee on the Procedure of the House.

That the Earl St. Aldwyn be added to the Select Committee on Leave of Absence.—(The Earl of Home.)

On Question, Motions agreed to.

METROPOLITAN POLICE ACT, 1839 (AMENDMENT) BILL
2.36 p.m.
Order of the Day for the Second Reading read.
VISCOUNT INGLEBY: My Lords, I do not think I need detain your Lordships for more than three or four minutes in commending to you this useful little measure, which has passed all its stages in another place with unanimous assent. It amends paragraph 13 of Section 54 of the Metropolitan Police Act, 1839, and thereby increases from the present figure of 40s. the maximum penalty for the use of threatening, abusive or insulting words or behaviour in a public place within the Metropolitan Police District. This maximum penalty has remained unchanged since 1839, and 40s. then was just about the equivalent of £10 to-day. The Bill therefore prescribes a maximum of £10 for a first offence and £20 for a second or subsequent offence. The present fine
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is absolutely trivial, and offences under this section are on the increase.
In 1955, the charges brought numbered 3,260; in the following year, 1956, they went up to 3,400; and in 1957, last year, to 4,300; and nearly 90 per cent. of the persons charged are, in fact, convicted. There are several different classes of offender. There are the drunk and disorderly; there are the young hooligans and "Teddy Boys" who are indulging in a little exhibitionism; there are a few prostitutes, though not many, since they are usually charged under a different paragraph; and there is a new type of "road hog" with whom some of your Lordships may have become familiar, who hurls insulting words at anybody else whom he thinks is in any way impeding his progress.
The Bill deals with only one small aspect of this much wider problem. It will, I think, surprise many of your Lordships that this petty crime is met by local and not by public general legislation, and accordingly the penalties for it vary all over the country. It is much cheaper to indulge in insulting words and behaviour in the Metropolis than in any other part of England or Wales. I cannot speak for Scotland. In England and Wales, £5 is a commonly adopted maximum. Curiously enough, in Cheltenham there has been since 1882 a maximum penalty of £10—the penalty which I am suggesting London should adopt to-morrow. And it is fascinating, I think, to speculate why Cheltenham adopted in 1882 what was then a heavy penalty. Was it that the people of Cheltenham attached exceptional importance to the observance of good manners in public? Or could it be that previous long years of military service had given some of its citizens a predisposition to the use of strong language in public places? Be that as it may, the fact remains that Cheltenham did seventy-six years ago what I suggest London should do at the present time.
The Bill deals, as I say, with a very limited question and with only one offence. However, I was glad to see it announced in another place that the Home Secretary was embarking on a review of all statutory fines to see which of them should be brought up to date. I am sure your Lordships will agree that the task of the police, which is to prevent

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crime and to maintain law and order, is made infinitely more difficult by inadequate penalties such as are provided for this petty offence at the present time. My Lords, I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Viscount Ingleby.)
2.44 p.m.
LORD CHESHAM: My Lords, I am glad to be able to join with my noble friend Lord Ingleby in commending this Bill to your Lordships. It is a small measure but one which will nevertheless, be useful in giving the courts in the Metropolis more effective means of dealing with disorderly behaviour. My noble friend has already told your Lordships how the figures for these offences are on the increase, and while I understand that the figure for 1957 was inflated by an unusually large number of convictions occurring shortly after November 5, the figures undoubtedly suggest that the offences in question are sufficiently prevalent to make it desirable to ensure that magistrates have adequate means of dealing with them.
My noble friend also drew your Lordships' attention to the review of small statutory fines which is going on. Many of these were fixed in the last century, and my right honourable friend the Home Secretary feels it necessary to ascertain which are obsolete and which are still of sufficient importance to be brought up to date. It may well be that in due course this will result in the raising of the maximum fines for a number of other minor offences, but in the meantime Her Majesty's Government see no reason why the maximum fine for this particular group of offences, which obviously is not obsolete, should not be brought up to a realistic level.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I suppose your Lordships would not differ from the view that the noble Viscount, Lord Ingleby, ought to be congratulated on producing this Bill. On the other hand, as an old-fashioned Parliamentarian I am bound to say that I should very much prefer that measures of this kind, involving an increase of fines against individual members of the community for petty offences, came from Her Majesty's Government. This
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should be a Government measure. I know that the ground covered in the Bill is very wide, as this series of offences mentioned in the Act of 1839 covers nowadays a multitude of offences, for included in it will be the act of soliciting, insulting behaviour and the like. If we are to deal with such matters we really should have a Government measure which has been properly thought out and, I should have considered, debated in another place. It may be that if the Bill passes through your Lordships' House and goes downstairs it may be debated, but I feel that a measure of this type, especially one dealing, as it does with the London Metropolis, should come from Her Majesty's Government, and should not be done through a Private Member's Bill.
VISCOUNT STANSGATE: My Lords, is no reply to be made to the observations of my noble Leader? His point seems a very good one, although I am told that this Bill has passed through another place.
THE EARL OF HOME: My Lords, I thought that the noble Viscount, Lord Alexander of Hillsborough, was expressing his opinion, as he is perfectly entitled to do. I do not see why a Private Member of either House who has a good idea should not bring it forward in the form of a Bill of this type; and if it appears to your Lordships to be appropriate, this House will adopt and recommend it. That would not prevent Her Majesty's Government from bringing in a more comprehensive Bill if the Home Secretary responsible so wished. But I should not like to see the Socialist Party responsible for damping down the activities of Private Members in either House.
VISCOUNT STANSGATE: My Lords, it is usual in a House of Parliament when the Leader of the Opposition makes some remarks calling for comment, for the Leader of Her Majesty's Government to reply.
THE EARL OF HOME: My Lords, I am sure the noble Viscount knows that I should never intentionally be guilty of discourtesty in that respect.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

LOCAL GOVERNMENT AND MISCELLANEOUS FINANCIAL PROVISIONS (SCOTLAND) BILL
2.47 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Strathclyde.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MERTHYR in the Chair.]
Clause 1 [General grants to local authorities]:
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD STRATHCLYDE)THE MINISTER OF STATE, SCOTTISH OFFICE (LORD STRATHCLYDE) moved in subsection (1) to leave out "otherwise than under section thirty of" and insert:
" for those years under any enactment passed before this Act other than ".
The noble Lord said: In rising to move the first Amendment appearing on the Marshalled List may I say that it may be for the convenience of the Committee if I explain that, with the exception of those which are purely of a drafting nature, all the Amendments which stand in my name are designed to implement the undertakings set out in the White Paper on Local Government and Central Departments in Scotland, which was published last month and to which I referred in the course of my remarks on Second Reading.
Paragraph 3 of the White Paper explained that most of its proposals related to the relaxation of statutory controls; that most of them could be given effect to in the current Bill, and that suitable Amendments would be tabled for this purpose. This afternoon Her Majesty's Government are fulfilling that promise. The White Paper, which embodies the outcome of the review of the administrative arrangements carried out by a Working Party, in which were included local authority officials, was not published until after the Bill had been passed by another place. We are now taking the first opportunity to implement the undertakings of the White Paper. As your Lordships will be aware, the purpose of the proposals set out in the White Paper was to give local authorities the maximum amount of freedom to manage their own affairs. Amendment No. 1 on
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the Marshalled List is purely to make clear the scope of the general grant. I beg to move.
Amendment moved—
Page 2, line 1, leave out (" otherwise than under section thirty of ") and insert (" for those years under any enactment passed before this Act other than ")—(Lord Strathclyde.)
On Question, Amendment agreed to.
Clause 1, as amended, agreed to.
Clauses 2 to 7 agreed to.
VISCOUNT COLVILLE of CULROSS VISCOUNT COLVILLE of CULROSS moved, after Clause 7, to insert the following new clause:
Rights of Salmon fishing
" . For the purposes of the Rating and Valuation (Apportionment) Act, 1928, and of the Act of 1956, rights of salmon fishing (being rights of salmon fishing which are exercised by net or cruive and are thereby regularly exercised throughout that part of the year during which that method of fishing is for the time being permitted by law and in respect of which no revenue is derived by the owner or occupier thereof from any other method of fishing in the said part of the year) shall be deemed to be agricultural lands and heritages:
Provided that for the purpose of making up any valuation roll for the year 1961–62 or any subsequent year the gross annual value, the net annual value and the rateable value of any dwelling-houses, bothies, net stores, or other buildings or drying greens occupied in connection with the exercise of any such rights of salmon fishing or used or suitable for use in connection therewith shall be determined in accordance with the provisions of section six of the Act of 1956."
The noble Viscount said: The new clause which I have put down on the Marshalled List appears complicated but I will attempt to explain it to your Lordships as simply as I can. First of all, I must say that salmon fisheries in Scotland are at the moment divided into two parts; that which consists of the right to fish in the river and that which consists of a certain number of small huts, or even a dwelling-house and a drying green on dry land. With that distinction in mind I am suggesting to your Lordships that the following system ought to apply to the salmon fisheries after 1961: that there shall be no rates levied at all on the right to fish in the river. At the moment rates for this right are paid at 25 per cent., and this 25 per cent. is assessed on the actual amount paid by the occupier of the fishery to the landlord for the right to fish in the river. At the same time, if I am correct in my Amendment, so far as the

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dry land part of the fishery is concerned it will mean that the dwelling-house on that dry land, or any other building, or the drying green if there is no other building than that, will pay 100 per cent. rates. At the present moment some of them pay 100 per cent. and some pay 25 per cent., because the interpretation of Section 46 (2) of the Local Government (Scotland) Act, 1929, is not very clear and some rating officers say that it should be 100 per cent. and some say it should be 25.
I should like to compare this suggestion with the position of agriculture as I understand it will be after 1961. The salmon fishery right in the river will be similar to the agricultural fields, on which no rates will be paid, but the dwelling-house and the other buildings on the dry land part of the salmon fishery will be the equivalent of a dwelling-house on a farm on which, after 1961, 100 per cent. rates will be charged, assessed at the rent which the farm is worth in view of the fact that it is being occupied in connection with the rest of the farm. I am now suggesting that the dwelling-house or other buildings of the salmon fishery should be assessed at l00 per cent. rates in view of their occupation in connection with the salmon fishery. I propose in that way that the salmon fishery and agriculture should be brought very broadly into line, except that where there is no dwelling-house in the salmon fishery they will still be charged 100 per cent. rates on their premises on dry land.
When I raised the matter on the Second Reading, the noble Lord, Lord Strathclyde, invited the noble Lord, Lord Lovat, to produce any new information about this matter which has not already been before Parliament, and I have worked out some interesting comparisons between salmon fisheries, industry and farming. I should like to tell your Lordships of the comparison between them so far as rates are concerned. A salmon fishery at present rateable at £1,200 a year—that is, the old rateable value—will probably employ eight men whose wages for the year will be £3,500. A farm assessed at £1,200 a year will probably employ about twelve men and the wages will be £6,000 a year. An industry rated at £1,200 will probably employ about 350 men and their wage bill will be £3,500 a week instead of £3.500 a year as in
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the case of the salmon fishery. To put it the other way round, if you have a salmon fishery which employs eight men, the rates are £1,200 a year. If you have an industry which employs eight men, the rates are about £50 a year. In between comes a farm which employs eight men, and the rates will probably be about £600 a year—half that of the salmon fishery.
There is no doubt that salmon fishery and agriculture are very similar forms of occupation. Both produce food, both work in the country and, as I said on the Second Reading, in Scotland, at any rate, both employ the same people because they fit in—peak employment in the salmon fisheries coinciding with the period of lowest employment in agriculture and vice-versa. But in comparison with agriculture salmon fisheries have a very poor deal. They have no subsidy for their crop; they have no capital grants for their buildings, and they have no drainage grants or any sort of subsidy from the Government at all. On the other hand it is a highly precarious occupation. As much as £15,000 worth of nets may be lost in a single storm and there is no method of replacing them except by drawing on profits which have been made; and even they are very doubtful indeed. That comparison between wages and rates is an interesting one because it shows the percentage of the industry's money that must be employed in paying rates in comparison with what is available for the rest of the industry's day-to-day concerns.
If this Bill should not be amended either as I suggest here or in any other way, salmon fisheries are going to be in a peculiarly prejudicial position. They will not only be paying double the rates under the 25 per cent. increase, but treble, and I should like to explain why this is so. Take a salmon fishery which was rateable at £100 per year. Before 1956 it paid 25 per cent.—that is, £25—and this was split up between the owner and the occupier equally; the owner paid £12 10s. and the occupier paid £12 10s. Between 1956 and 1961 the owner's rate is being removed, so that the occupier pays £25 in full. But in return for this he pays £12 10s. less rent to his owner, so in effect he is still paying £12 10s.; but in 1961 his rateable value will be raised to 50 per cent. and he will be liable for the whole of it. Therefore he

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will pay £50, but he will still get only £12 10s. off the rent he pays to the owner; therefore he is paying £37 10s. That is treble what he was paying before, both now and in 1956.
I hope that some of my noble friends will expand on the importance of these fisheries, both from the point of view of depopulation of rural Scotland and also from the point of view of the unemployment in some of the areas which are at present threatened by the closure of these stations. Both on its merits and on this very important unemployment and depopulation issue, I suggest that this Amendment should be accepted by your Lordships. I beg to move.
Amendment moved—
After Clause 7 insert the said new clause.—(Viscount Colville of Culross.)
LORD FORBES: My Lords, in giving full support to this Amendment, I must at the outset declare an interest in salmon net fishing. Those who are employed in salmon net fishing, which is incidentally one of the oldest occupations in Scotland, come mainly from the Highlands and from the more remote parts of the country, and it is these remote parts which are slowly but surely becoming depopulated. This depopulation goes on almost unrecognised except by those who live there and see families and individuals packing their belongings, never to return again to the land or to the parts of the country which their ancestors once inhabited. Too often to-day it is the big things that catch the public eye. To many people figures can be most misleading. For instance, if we hear that 600 people have become unemployed in an area having a population of 10,000, there would, I think, be an outcry at once; but if we hear that six men in a little fishing village of one hundred inhabitants have lost their employment, this goes by almost unrecognised. It is just a question of raising it to attract more notice. In this way the Highlands and more remote areas of Scotland have suffered and are now continuing to suffer.
If this rating is increased in any way, there is little doubt that more salmon net stations will have to close down and that the men from these stations will be turned out of their employment. And they will not return to the Highlands; they will go to seek employment in the industrial parts of the country. Surely
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the issue before us is this. We have heard so often from Government circles that the depopulation of the Highlands and the remote parts of the country is to be deplored. Is this really meant? Or are those responsible prepared to see one day—and that day may not be very far distant—the Highlands and the remote parts of Scotland inhabited by only a few nomadic clansmen? If not, the line that has to be drawn somewhere, and I suggest to your Lordships that the line should be drawn now by accepting this Amendment.
LORD LOVAT: I should like to congratulate my noble friend Lord Colville of Culross who has more than summed up the situation. He has given facts and figures which hardly need further clarification, but, speaking as a Highlander, I should like the noble Lord, Lord Strathclyde, to know (perhaps he already knows because he was in Inverness last week) that in the Moray Firth area alone there are nearly 250 men who work the salmon nets as a seasonal occupation. They represent the backbone of the crofting counties, and they are, in fact, crofters. It would be a terrible thing to see their livelihood destroyed for a principle with such a small stake, for a sum of money which, in its total amount, runs between £1½ and £2 million of net-caught salmon per annum.
A similar Amendment to that now before your Lordships was defeated by only four votes in another place, where the very word "salmon" causes considerable feeling between the two sides of the House. But I think that in the calmer light of your Lordships' House noble Lords both on this side and on the Benches opposite are quite ready to eat salmon caught in a net—even if they do not agree about how they are caught, and who catches them by rod—hot or cold, smoked or fresh. I assure your Lordships that in all equity, in a precarious living such as that gained from salmon netting there is no resemblance to an industry under industrial rating. I should like to see the noble Lord, Lord Strathclyde, out on the Culbin Sands in waders on a cold spring morning, watching the salmon running up the middle of the Firth for two or three weeks on end and seeing his tackle swept away or filled with seaweed and shellfish. A company in which

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I have an interest paid out £25,000 in wages to eighty men last year, and lost money on the venture; and many smaller organisations of this kind are working a precarious living up and down the coast. I cannot see, I am sure that your Lordships cannot see, how an industrial rate can be applied to salmon netting, and I hope that my noble friend will have a Division on this issue.
VISCOUNT STONEHAVEN: I should like to support my compatriots who have spoken most ably on this matter. The point that I want to stress, and which I have stressed before, is unemployment. The noble Lord, Lord Strathclyde, in his reply to the Second Reading debate (he will correct me if I misquote him), said that he hoped for the best but he did not think that the re-rating of salmon net fishings would cause any unemployment. I can tell him that there is a netting station on the coast of Kincardineshire which, according to the owners and operators, will definitely be closed down if re-rating comes into effect. I should say that while I own some stretches of nets on the coast, I do nothing towards running them; but those who do, no matter how small the return, find the job more difficult than it used to be. Legislation of this kind, which is surely in the interest of tidiness, has the flavour of twisting the tail of a dog that cannot bark. I shall support the Amendment, and I hope that my noble friend takes it to a Division.
LORD STRATHCLYDE: The effect of accepting this Amendment would be that until revaluation in 1961 salmon net fishings would be rated on one-eighth of their gross annual value. From 1961 agricultural subjects will not be rateable at all, but farmhouses will be valued in full, like any other houses, except that valuation will be on the assumption that they cannot be occupied otherwise than in connection with agriculture. The Amendment seeks to apply this arrangement to salmon net fishings by providing that any dwellinghouses, bothies, net stores or other building or drying greens occupied in connection with the exercise of the salmon fishing should be fully rated.
The history of the Scottish system is not straightforward. The conclusions as regards salmon net fishings appear to be,
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first, that the salmon net fishings and land used for agricultural purposes were assessed on the same basis only for the purpose of the burgh general assessment (which was, of course, only part of the rates payable in burghs) and only from the year 1892 until 1926. Apart from this, relief from the burgh general assessment and any concessions from individual parishes by way of "classification", which began to fall into desuetude as long ago as 1896, salmon fishings were fully rated until 1929, though there had been an attempt to give them the deductions provided for industry in the First Schedule to the 1926 Act. From 1929 up to date the fishings have been de-rated with the rest of industry to 25 per cent. of their net annual value.
The reasons against the acceptance of this Amendment appear to me to be that in practice the ancillary subjects are already separately, as the noble Viscount said, and fully rated, and the effect of the Amendment therefore would be to de-rate the actual salmon net fishings entirely. Then there is the argument that the fishings are analogous to agriculture.
SEVERAL NOBLE LORDS: Hear, hear!
LORD STRATHCLYDE: Well, that is open to dispute. After all, the definition of agricultural lands and heritages has remained practically unaltered since 1896, and it has not been held so far that salmon net fishings could reasonably come within this definition. Further, to make an exception for one industry, it seems to me, would impair the general principle that industry as a whole should be re-rated to 50 per cent. If the noble Lord will allow me to continue, since 1929 the salmon fishing industry has been satisfied to be classed as industry and Her Majesty's Government do not see any good reason to change over to agriculture at this moment.
LORD LOVAT: I interject only to ask how does the noble Lord reconcile the fact that the Minister in charge of agriculture is the Minister of Agriculture, Fisheries and Food?
LORD STRATHCLYDE: By "the Minister in charge of Agriculture and Fisheries" no doubt the noble Lord is referring to my right honourable friend, the Secretary of State for Scotland.
LORD LOVAT: They come under the same heading.
LORD STRATHCLYDE: Maybe they do; but I do not see that that is an argument why they should be treated in the same way. As I say, the fishing people have been quite satisfied since 1929 to be rated as industry. And now the change! I cannot see that any good reason for it has been given.
The noble Viscount, Lord Colville of Culross, spoke about the owners' and occupiers' rates. I would say to him that it was made clear during the passage of the Valuation and Rating (Scotland) Act, 1956, that the abolition of owners' rates under that Act would not, by itself, lead to any increase in the tenants' total outgoings for rent and rates. The noble Viscount will remember that the rent was reduced to compensate for the increase in occupiers' rates. The noble Lord, Lord Forbes, the noble Lord, Lord Lovat, and the noble Viscount, Lord Stonehaven, all spoke feelingly of depopulation and unemployment. They ought to know, and I am sure they do, that Her Majesty's Government are very much concerned about depopulation in the Highlands and Islands and are doing everything possible to maintain the population which is still there and, indeed, to attract people to go back to those parts of our country. But no one has produced a single figure or any relevant fact vouched for in any way to prove that depopulation will result; nor, with all due deference to the noble Viscount, Lord Stonehaven, has anything been produced to prove that any fishery will close down. The noble Viscount made a statement to the effect that he knows a certain fishery will close down in the event of this Bill going through. All I can say is that it must be a poor fishery, because, after all, the amount of money which will go out in re-rating is not all that serious so far as any efficient and profitable business is concerned.
The noble Viscount, Lord Colville of Culross, has produced a number of figures; I have not had an opportunity of studying them, and they seem to me to be somewhat difficult to understand. I would say to him that salmon net fishings and industry are and will be rated on the same basis; and, with all respect, I do not quite follow how the wage bill
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comes into the argument. Nevertheless, in view of the figures the noble Viscount has produced, which, as I say, I have not yet studied, I am quite willing to look at them; and while I do not hold out much hope, in the event of their containing anything fresh that has not been taken into consideration in another place I will see what can be done on the Report stage. In the meantime, I would ask the Committee not to pass this Amendment, and in view of the assurance I have given I hope my noble friend will withdraw it.
VISCOUNT ALEXANDER OF HILLSBOROUGH: May I intervene to say that I am glad to hear the noble Lord, Lord Strathclyde, say he will look at this matter again between now and the Report stage. I say that, not that I myself could declare that I am wholly against his point of view at the moment, but because we on this side, leaving aside the question of legislative history and the principle of the thing, have been impressed by the manner in which the Amendment has been presented. I think the noble Lords who presented the case were most persuasive. The speech of the noble Lord, Lord Lovat, reminded me of the debate we had the other day when he gave striking figures of the depopulation of the northern part of Scotland, where, over a matter of years, the population, I think he said, had nearly halved. That is a serious state of affairs, and if there is in actual fact a danger that depopulation of that part of Scotland will be intensified by the effect of this proposed legislation, then I think it is a matter to be taken into consideration between now and the Report stage of the Bill.
I am a little alarmed, as one interested in the farming industry, at the rejoinder of the noble Lord, Lord Strathclyde: "What difference does that make?", when it is pointed out that the Minister of Agriculture, Fisheries and Food is in charge of both those sections of industry. I was talking to somebody the other day who said: "The salmon fishing industry at any rate makes large profits; or if it does not, it charges high enough prices to the public to be able to get them." But I am bound to say, in honesty to myself, that the agricultural industry is not carried on specifically with the idea of making a loss. I should not like to think by any means that this was going

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to be regarded as the thin end of the wedge, or to make any attack at all upon the proved benefit of the present position of de-rating of agriculture. Therefore I look at this matter pretty well with an open mind. I ask the noble Lord, Lord Strathclyde, to read the speeches made, which moved me to my innermost. I thought those speeches were excellently presorted, and I could do with recruits of that calibre on this side of the Committee.
LORD DOUGLAS OF BARLOCH: It is unusual, I suppose for somebody from this side of the Committee to come to the rescue of the noble Lord who is in charge of this Bill, but I am not entirely convinced by the arguments which have been put forward. This is an economic problem. It is said that if the rateable value of salmon fishings is increased, it will prevent salmon fishing from going on; that men will become unemployed and the industry will diminish. I am under the impression that salmon fishings pay rents to the owners, and if that were to begin to happen, the obvious result would be that the owners, rather than sacrifice their rents completely, would have to reduce the rents; and in the end they would have to reduce them, if this argument is true in its initial stage at all, to a point at which the salmon fishing will be able to continue as an economic proposition. That seems to be the economic outlet of the problem, and, if that is so, then there is no case for the Amendment.
LORD STRATHCLYDE: I hope that the blandishments of the noble Viscount the Leader of the Opposition will not induce Members to cross the Floor of the House. I want to make abundantly clear what I am holding out. It is that if, on reading the speeches which have been made to-day (and I, too, would join in tendering my compliments to noble Lords and particularly to the noble Viscount who moved the Amendment), I find anything in them which has not been taken into consideration in another place, where, as has been said, this present situation was carried in Committee by four votes, then I will certainly see what can be done on the Report stage. But further than that I cannot go. I know how often this matter has been discussed, and I do not hold out great hopes that there is anything in what
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the noble Lord has said which has not been taken into consideration already.
VISCOUNT COLVILLE OF CULROSS: I am most grateful to the noble Lord, Lord Douglas of Barloch, for bringing up the question about owners reducing their rents. At the moment, it is true that salmon fishery is assessed on the actual rent paid. After 1961 it will not be so assessed, but will be assessed on the hypothetical value of that salmon fishery, and, therefore, may have no connection with the actual rent paid at all. Nor would it necessarily be reduced if the owner reduced his rent.
While thanking the noble Lord, Lord Strathclyde, for his answer, I should like to take him up on certain points. It is true that, since 1929, it has suited salmon fisheries to be classed as industry; but that is only because if they had not been classed as industry they would have been paying 100 per cent. rates. It is true also that the definition in 1896 of "agricultural land and heritages", upon which the whole trouble is based, did not include salmon fisheries. But if that were so in 1896, does it necessarily have to be so to-day? The situation is entirely different. Further, the noble Lord, Lord Strathclyde, said that it would be a loophole for other industries. Can the noble Lord tell me what other industries would be likely to take advantage of this particular arrangement? What other industries could in fact be classed as agricultural in the same way as this industry? If the noble Lord would tell me I should be very interested to consider the matter, but I cannot think of any.
As far as unemployment and depopulation are concerned, I am certain that the noble Lord is as anxious as anybody to prevent them. But the fact remains that, at present, along the coast of Kincardine and North Angus, which is one of the main salmon fishery areas, there is a very high level of unemployment (higher than anywhere else in Scotland, so far as I know), and stations have already closed down there because of the present rating situation. If rates are put up, it will be impossible for thorn to carry on. I cannot, of course, give the noble Lord any specific examples of stations that will close down, but if the people who run them say they will close down, I cannot but accept the

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fact. Also, if the noble Lord says that it is a very small amount and, therefore, the industry or the occupation should be able to carry it, he is not taking into account the fact that this is a very small occupation, and it is exactly that
The numbers being equal, it was (pursuant to Standing Order No. 49) resolved in the negative: Amendment not agreed to accordingly.
Clauses 8 to 11 agreed to.
Clause 12 [Extension of maximum period for repayment of sums borrowed for certain purposes]:
3.30 p.m.
LORD STRATHCLYDE LORD STRATHCLYDE moved to leave out "as defined in the Act of 1947". The noble Lord said: I think it will be convenient for the House if I take Amendments Nos. 3 to 10 together, as they all relate to the same subject. These Amendments give effect to an undertaking which appears in paragraph 7 of the White Paper. Their effect is, first, to widen the provisions already contained in Clause 12 of the Bill, so as to extend the borrowing period for all buildings provided under Section 74 of the Local Government (Scotland) Act, 1947 instead of buildings provided solely for public meetings and assemblies; and, secondly, to extend to such period, not exceeding sixty years, as may be sanctioned by the Secretary of State the present borrowing periods for crematoria, homes for old people and land which is not already covered by another statutory provision. I
small amount that will break the camel's back. I would beg your Lordships to accept this Amendment.
On Question, Whether the Amendment shall be agreed to?
Their Lordships divided: Contents, 24; Not-Contents, 24.

CONTENTS

Lothian, M.

Archibald, L.

Moyne, L.

Burden, L.

Rea, L.

Addison, V.

Darwen, L.

Silkin, L.

Clifden, V.

Forbes, L.

Sinha, L.

Colville of Culross [Teller.]

Gisborough, L.

Trefgarne, L.

Stansgate, V.

Haden-Guest, L.

Tweedsmuir, L.

Stonehaven, V. [Teller.]

Killearn, L.

Waleran, L.

Lovat, L.

Wise, L.

Amulree, L.

Milner of Leeds, L.

NOT-CONTENTS

Kilmuir, V. (L. Chancellor.)

Winterton, E.

Douglas of Barloch, Z.

Hampton, L.

Salisbury, M.

Soulbury, V.

Hawke, L.

Mancroft, L.

Albemarle, E.

Barnby, L.

Merrivale, L.

Bathurst, E. [Teller.]

Birdwood, L.

Merthyr, L.

Craven, E.

Cawley, L.

Pethick-Lawrence, L.

Home, E.

Chesham, L. [Teller.]

Rathcavan, L.

Selkirk, E.

Clitheroe, L.

Strathclyde, L.

Swinton, E.

should make it clear to your Lordships that the Amendments do not mean that in future repayment of loans for these purposes will always be spread over sixty years, but they will enable a period of up to sixty years to be sanctioned by the Secretary of State where that is justified by the probable life of the asset. This is a useful relaxation of a point on which the Scottish statutes are too rigid; the flexibility provided by these Amendments is already available in England and Wales. I beg to move.
Amendment moved—
Page 8, line 33, leave out "as defined in the Act of 1947".—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move the next Amendment.
Amendment moved—
Page 8, line 35, at end insert ("(b) the Cremation Act, 1902.").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move this Amendment.
Amendment moved—
Page 8, line 37, leave out from (" 1947 ") to end of line 39 and insert ("(which relates to the provision of halls, offices and other buildings)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 8, line 42, leave out (" or") and insert ("(f) section twenty-one of the National Assistance Act, 1948, or").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 9, line 8, after second (" years" ") insert ("and in the entry relating to the Cremation Act, 1902, for the words 'Twenty years ' there shall be substituted the words 'Such period not exceeding sixty years as may be sanctioned by the Secretary of State '").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 9, line 13, leave out ("so far as relating to the provision of buildings for public meetings and assemblies ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 9, line 21, at end insert—

" Section twenty-one of the National Assistance Act, 1948.

Such period not exceeding sixty years as may be sanctioned by the Secretary of State.").

—(Lord Strathclyde
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move this Amendment.
Amendment moved—
Page 9, line 25, at end insert—
("(2) Where a local authority is authorised to borrow money for the purpose of any enactment, any provision (whether in that or another enactment) that any sum so borrowed shall be repaid within a period of fewer than sixty years, or within such period not exceeding fifty-nine or fewer years as the local authority or a Minister may determine, shall be construed as applying only to sums so borrowed for expenditure otherwise than on the acquisition of land; and any sum so borrowed by the local authority for expenditure on the acquisition of land (being a sum to which any such provision as aforesaid would, apart from this subsection, apply) shall be repaid within such period not exceeding sixty years as may be sanctioned by the Secretary of State, or, where the consent of another Minister is required for the borrowing, by that other Minister.
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(3) In this section 'local authority' and ' Minister ' have the same meanings as in the Act of 1947, and references to the acquisition of land do not include references to the acquisition, with any land, of buildings or other works thereon, being buildings or other works required to make the land fit for the purpose for which it is acquired.").—(Lord Strathclyde.)
On Question, Amendment agreed to.
Clause 12, as amended, agreed to.
LORD STRATHCLYDE LORD STRATHCLYDE moved, after Clause 12 to insert the following new clause:
" Abolition of certain requirements relating to local government administration
13.—(1) For the purpose of abolishing cerain requirements relating to local government administration and for making provision consequential thereon the enactments specified in the Schedule (Local Government Administration) shall have effect subject to the modifications so specified in relation to them respectively.
(2) This section shall come into operation on the sixteenth day of May, nineteen hundred and fifty-nine."
The noble Lord said: The purpose of this new clause is to pave the way for the relaxations which are set out in the new Schedule which appears on page 4 of the Marshalled List, Amendment No. 20. I beg to move.
Amendment moved—
After Clause 12 insert the said new clause.—(Lord Strathclyde.)
LORD SILKIN: I have to apologise for intervening in this debate, but I am doing so at the request of my noble friend Lord Greenhill, who wished to say something on this new clause but is unavoidably unable to be present.
LORD STRATHCLYDE: May I interrupt the noble Lord? We have not yet reached the new Schedule; that is Amendment No. 20. This is merely an Amendment to pave the way for the new Schedule.
LORD SILKIN: I do not mind speaking on this one or on the other. I thought it might be convenient now, but I will reserve my remarks till later. I think the noble Lord knows roughly what I am going to say. I will do whatever he pleases.
LORD STRATHCLYDE: I think it would be more convenient to leave it to the later Amendment.
On Question, Amendment agreed to.
3.39 p.m.
LORD STRATHCLYDE LORD STRATHCLYDE moved, after Clause 12, to insert the following new clause:
" Amendment of Education (Scotland) Act, 1946, s. 7
14. Subsection (1) of section seven of the Education (Scotland) Act, 1946 (which subsection requires certain functions of education authorities to be exercised in accordance with schemes approved by the Secretary of State) shall have effect as if, in paragraph (a) thereof, after the word ' Act ', there were inserted the words ' other than such voluntary part-time or full-time courses of instruction for persons over school age as the Secretary of State may direct '."
The noble Lord said: The purpose of this new clause is to amend subsection (1) (a) of Section 7 of the Education (Scotland) Act, 1946, so as to require an education authority to exercise some, but not all, of the functions described in Section 1 (5) (b) of the 1946 Act in accordance with schemes approved by the Secretary of State. This new clause will give effect to the recommendation of the working party of departmental and local authority representatives that the establishment of certain technical education courses should be subject to the approval of the Secretary of State. Submission of schemes and approval of them is considered desirable to ensure regional and national co-ordination in the provision of technical educational facilities, to avoid overlapping or unnecessary provision and to secure that account is taken of the views of all interested parties before new courses or facilities are provided. I beg to move.
Amendment moved—
After Clause 12, insert the said new clause.—(Lord Strathclyde.)
On Question, Amendment agreed to.
3.40 p.m.
LORD STRATHCLYDE LORD STRATHCLYDE moved, after Clause 12, to insert the following new clause:
" Inspection of minutes of certain authorities
15.—(1) The minutes of—

(a) the proceedings of a local authority, and

(b) the proceedings of any committee appointed by a local authority so far as such proceedings relate to any of the authority's functions under the National Health Service (Scotland) Act, 1947, the Town and Country Planning (Scotland) Act, 1947, or the National Assistance Act, 1948,

shall be open to the inspection of any local government elector for the area of the authority on payment of a fee not exceeding
408
one shilling, and any such local government elector may make a copy thereof or an extract therefrom.
(2) In this section ' local authority' and ' local government elector ' have the same meanings as in the Act of 1947."
The noble Lord said: This Amendment implements the proposals in paragraph 14 of the White Paper. Its effect is to give local government electors a right of access to all minutes of the full council, and to those of any committee so far as dealing with health, planning or welfare. I beg to move.
Amendment moved—
After Clause 12 insert the said new clause.—(Lord Strathclyde.)
On Question, Amendment agreed to.
Remaining clauses agreed to.
First to Third Schedules agreed to.
Fourth Schedule [Consequential modifications of enactments]:
LORD STRATHCLYDE: This Amendment is to correct a printing error. I beg to move.
Amendment moved—
Page 22, line 7, after (" provided") insect (" for ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: The purpose of this Amendment is to repeal words in subsection (7) of Section 70 of the Education (Scotland) Act, 1946, which are no longer necessary in view of the Amendments to that section already provided for in the Bill, in the Fourth Schedule, paragraph 6 (3). I beg to move.
Amendment moved—
Page 22, line 9, at end insert.—
("(d) in paragraph (7) the words ' in addition to any sums voted by Parliament for the training of teachers' shall be omitted").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: The purpose of this Amendment is to re-define the meaning of the expression "code" used in the Education (Scotland) Act, 1946. I beg to move.
Amendment moved—
Page 22, line 31, at end insert—
(" (7) In section one hundred and forty-three, in subsection (1), for the definition of ' code' there shall be substituted the following definition, that is to say—
' "code" means regulations made under subsection (8) of section one of this Act '").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: This Amendment is designed to repeal a provision in the Superannuation (Miscellaneous Provisions) Act, 1948, which, with the abolition of the Education (Scotland) Fund, is no longer necessary. I beg to move.
Amendment moved—
Page 24, line 8, at end insert (" and subsection (8) shall cease to have effect.")—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: It might be convenient to the Committee if we took Amendments Nos. 18 and 19 together. They are both consequential. I beg to move.
Amendment moved—
Page 26, line 25, leave out (" (d)") and insert ("(e)").—(Lord Strathclyde.
On Question, Amendment agreed to.
Amendment moved—
Page 26, line 26, leave out (" (7) and (8)")and insert (" (8) and (9)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
Fourth Schedule, as amended, agreed to.
3.45 p.m.
LORD STRATHCLYDE LORD STRATHCLYDE moved, after tire Fourth Schedule to insert the following new Schedule:

LOCAL GOVERNMENT ADMINISTRATION
The Allotments (Scotland) Act, 1922
1. Section nine of the Allotments (Scotland) Act, 1922 (which requires the councils of certain burghs to establish allotment committees) shall cease to have effect.
The Education (Scotland) Act, 1946
2. In section three of the Education (Scotland) Act, 1946 (which relates to the provision of facilities for recreation and social and physical training), in subsection (1), the words ' with the aproval of the Secretary of State' shall cease to have effect.
3. In section twenty-five of the said Act of 1946 (which relates to contributions by education authorities to the maintenance of certain schools and institutions), in subsection (6), the words ' with the sanction of the Secretary of State ' shall cease to have effect, and for the words ' the Secretary of State,' where those words secondly occur, there shall be substituted the word; ' the education authority'.
4. In section twenty-seven of the said Act of 1946 (which relates to educational research) the words ' with the approval of the Secretary of State' shall cease to have effect.
5. In section thirty-four of the said Act of 1946 (which relates to exemption from school attendance) subsection (5) shall cease to have effect.
6. In section forty-five of the said Act of 1946 (which relates to the provision of transport and other facilities), in subsection (1), the words ' or as the Secretary of State may direct' shall cease to have effect.
7. In section seventy-four of the said Act of 1946 (which relates, among other things, to the examination of accounts of education authorities) subsections (2) and (3) shall cease to have effect:
Provided that this paragraph shall not have effect as respects accounts for any period before the year beginning on the sixteenth day of May, nineteen hundred and fifty-nine.
The National Health Service (Scotland) Act, 1947
8. In section twenty-two of the National Health Service (Scotland) Act, 1947 (which relates to the care of mothers and young children), in subsection (3), the words ' with the approval of the Secretary of State ' shall cease to have effect.
9. In section twenty-seven of the National Health Service (Scotland) Act, 1947 (which relates to the prevention of illness, the care of persons suffering from illness or mental deficiency and the after care of such persons), in subsection (3), the words ' with the approval of the Secretary of State' shall cease to have effect.
10. In section fifty-one of the National Health Service (Scotland) Act, 1947 (which relates to the duties of local health authorities under the Lunacy and Mental Deficiency Acts), in subsection (3), the words ' with the approval of the Secretary of State' shall cease to have effect.
11. The Fifth Schedule to the National Health Service (Scotland) Act, 1947 (which requires local health committees to make the minutes of their proceedings available for inspection by electors) shall cease to have effect.
The Local Government (Scotland) Act 1947
12. In section one hundred and five of the Act of 1947, subsection (2) (which requires county councils and town councils of large burghs to have administrative schemes for the discharge of their functions as local health authorities), subsection (3) (which requires county councils to have administrative schemes for the discharge of their functions relating to roads) and subsection (4) (which precludes county councils and the town councils of large burghs from revoking administrative schemes approved under section fourteen of the Local Government (Scotland) Act, 1929, otherwise than by making another administrative scheme) shall cease to have effect and any reference in subsection (5) or subsection (6) of the said section one hundred and five to an administrative scheme shall be construed as a reference only to an administrative scheme relating to education.
13. Section one hundred and seven of the Act of 1947 (which prescribes the contents of certain administrative schemes required to be made by county councils and town councils of large burghs) shall cease to have effect.
14. Section one hundred and ten of the Act of 1947 (which requires county councils to appoint committees for the purposes of their functions relating to roads) shall cease to have effect.
15. Section one hundred and eleven of the Act of 1947 (which relates to health committees required to be appointed by county councils and town councils of large burghs) shall cease to have effect.
16. Section one hundred and twelve of the Act of 1947 (which requires county councils and town councils which are police authorities to appoint committees for the purposes of their functions relating to police) shall cease to have effect.
17. In section one hundred and fourteen of the Act of 1947 (which relates to the appointment of sub-committees of committees for administrative scheme functions) for subsection (1) there shall be substituted the following subsection, that is to say—
'(1) Save as otherwise provided in this Part of this Act a sub-committee of the education committee of a county council may consist to an extent not exceeding one half of persons who are not members of the council:
Provided that a person who is not a member of the council or of the committee shall not be appointed to a sub-committee except with the consent of the council.'
18. Section one hundred and fifteen of the Act of 1947 (which relates to the appointment of committees and sub-committees of county councils, town councils of burghs and district councils) shall have effect with the addition of the following subsection, that is to say—
'(3) Any committee appointed by a local authority under subsection (1) of this section for the purposes of the authority's functions under the Allotments (Scotland) Act, 1922, the National Health Service (Scotland) Act, 1947, the Town and Country Planning (Scotland) Act, 1947, or the National Assistance Act, 1948, may to an extent not exceeding one third of its membership consist of persons, not being members of the local authority, who have special knowledge or experience in regard to the functions for the purposes of which the committee is appointed.'
19. In section one hundred and fifty-seven of the Act of 1947 (which relates to the acquisition of land in advance of requirements) the words 'with the consent of the Minister concerned ' shall cease to have effect.
The Town and Country Planning (Scotland) Act, 1947
20. Part IV of the First Schedule to the Town and Country Planning (Scotland) Act, 1947 (which requires local planning authorities to establish planning committees for the discharge of their functions under that Act) shall cease to have effect.
21. In Part V of the First Schedule to the Town and Country Planning (Scotland) Act, 1947 (which relates to sub-committees), in paragraph 1, for the words 'The planning committee of a local planning authority' there
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shall be substituted the words ' Any committee established by a local planning authority for the discharge of their functions under this Act '; after the words ' the committee' there shall be inserted the words '(hereinafter referred to as "the planning committee")' and for the words ' not less than three-fourths of the members of any such sub-committee which consists of more than three persons ' there shall be substituted the words ' not less than two-thirds of the members of any such committee'; and in paragraph 3, for the words 'a planning committee established under Part IV of this Schedule', there shall be substituted the words ' a committee to which paragraph 1 of this Part of this Schedule relates '.
The Local Government Act, 1948
22. In section one hundred and thirty-five of the Local Government Act, 1948 (which relates to instruction, lectures, etc.. on questions relating to local government) in subsection (1), the words Subject to such conditions and restrictions, if any, as the Secretary of State may by regulations prescribe' shall cease to have effect.
The National Assistance Act, 1948
23. Part I of the Third Schedule to the National Assistance Act, 1948 (which requires county councils and town councils of large burghs to establish committees for the discharge of their functions under Part III of that Act) shall cease to have effect.
The Valuation and Rating (Scotland) Act, 1956
24. Section two of the Valuation and Rating (Scotland) Act, 1956 (which requires valuation authorities to have administrative schemes for the discharge of their functions relating to valuation) shall cease to have effect."
The noble Lord said: This is the new Schedule. The Amendments contained in this Schedule and in the repeal provisions contained in the Fifth Schedule give effect to the substance of the White Paper. They are designed to give local authorities the maximum amount of freedom to manage their own affairs. Briefly, the effect of the Amendments is as follows. Paragraphs 1, 12 to 18, 20, 21, 23 and 24 abolish the requirements that local authorities must have separate committees and administrative schemes for particular purposes, and provide that the membership of the committees at present statutory and now to be permissive may include up to one-third of non-councillors. Paragraphs 2 to 7 provide for relaxations of controls by repealing or amending the provisions in the Education (Scotland) Act, 1946, relating to the giving of approvals by the Secretary of State.
Paragraphs 8 to 10 repeal the requirements that the Secretary of State's consent be obtained to contributions by local health authorities to voluntary organisations including among their objects the

413
care of mothers or young children, voluntary organisations including among their objects the prevention of illness, the care of persons suffering from illness or mental deficiency, or the after care of such persons, and voluntary organisations performing, by arrangement with the local health authority, any services in connection with the duties of that authority under the Mental Deficiency (Scotland) Acts or under Part V (Mental Services) of the National Health Service (Scotland) Act. Paragraph 11 repeals the existing provision regarding inspection of the minutes of proceedings of local health authorities. The effect of paragraph 19 is that it will no longer be necessary for local authorities to apply for the Secretary of State's consent before acquiring land by agreement in advance of requirements. Paragraph 22 removes the Secretary of State's power to make regulations regarding the arrangements which local authorities may make for publicising questions relating to local government. That shows the greater freedom which these Amendments give the local authorities. I beg to move.
Amendment moved—
After Fourth Schedule insert the said new Schedule.—(Lord Strathclyde.)
LORD SILKIN: The purpose of this Amendment, the incorporation of the new clause, is, as the noble Lord, Lord Strathclyde, has explained, to give to local authorities greater freedom to manage their own affairs having regard to the new basis of grant and to the general policy of this Bill. I should like to put to the noble Lord a further case where I think this principle can be extended. I was apologising for intervening at all in the debate, but I do apologise for not having put down in writing the Amendment that I think is necessary to incorporate what I wish to say. As I was asked to take part only early this morning, obviously I have not been able to put down any Amendment. But it relates to Section 21 of the National Health Service (Scotland) Act, 1947.
As the noble Lord is aware, this section requires local health authorities to go through a long and cumbersome procedure in connection with their health functions. They have to prepare a scheme; they have to give notice to the voluntary organisations, to the executive
414
council and to the regional hospital board; they have to wait two months for any observations that these organisations may make, and, eventually, and no doubt after lengthy discussions, the Secretary of State may approve the proposals with or without qualifications. Those qualifications may include additions or exceptions, or the Secretary of State may recommend that the local health authority shall submit new proposals. If this section remains, I would submit that the freedom which the Bill contemplates giving to local authorities is very restricted. The section applies to a number of health services—six in all: care of mothers and young children, midwifery, health visiting, home nursing, vaccination and immunisation, the prevention of illness, and care and after-care. These are very wide functions.
If the section remains, then in the case of every one of these functions the local authorities would be required to go through this very lengthy and cumbersome procedure and eventually to submit to the Scottish Office proposals they have put forward, and to accept any amendment. I would suggest that the maintenance of this clause is quite out of keeping with the general doctrine which the noble Lord, Lord Strathclyde, has twice enunciated this afternoon in connection with these Amendments—namely, that they are put down with the desire of giving the maximum amount of freedom to local authorities to manage their own affairs.
Had I had the opportunity I should have put down an Amendment to this present Amendment to delete the whole of Section 21 of the National Health Service (Scotland) Act, 1947. I am bound to admit, though, that there is one subsection of that section which Her Majesty's Government might wish to retain: subsection (5), the default provision. I had hoped that I might be able to do a deal with the noble Lord, Lord Strathclyde, for the maintenance of that particular power; I hoped he would agree that the rest of the section is quite unnecessary in the new circumstances and having regard to the fact that no specific grant is now being paid in respect of these services. I am asking the noble Lord only to examine this point. I believe he has had some notice of it, which is more than I have had, and I hope that at least he will examine it and perhaps see his way to doing something on the Report stage.
LORD STRATHCLYDE: I believe that your Lordships will be grateful to the noble Lord, Lord Silkin, for stepping into the breach at such short notice and putting the case so clearly before the Committee, but I hope that when I have said what I have to say he will perhaps agree that there is a way of looking at the matter other than that which he has suggested. Under Section 21 of the National Health Service (Scotland) Act, 1947, local health authorities are required to submit to the Secretary of State their proposals for carrying out their duties under the Act. During the discussions on the relaxation of administrative controls, some of the local authority representatives asked for the repeal of this section requiring local health authorities to submit proposals. I would remind your Lordships here that these proposals are to be distinguished from the administrative schemes referred to in paragraph 12 of the new Fifth Schedule which we are discussing; the requirement to submit these schemes is to be repealed (except for education).
It was explained at the Working Party that the Department of Health would be glad to examine any suggestion put forward for the simplification of the procedure for dealing with amendments or modifications of approved proposals; for instance, where local health authorities are given additional functions like poliomyelitis vaccination, a circular might be used as the medium for amending the proposals of all local health authorities, in this way avoiding separate formal submissions.
The arguments justifying the retention of the requirement to submit proposals are these: first, the Secretary of State is required under Section 1 of the National Health Service Act to provide or secure the effective provision of a comprehensive health service, in accordance with the provisions of the Act. That duty extends not only to services provided by direct delegation (for example, to regional hospital boards), but also to services whose effective provision he secures in other ways (for example, through the local health authorities). Secondly, the proposals submitted by the local health authorities enable the Secretary of State to carry out his duty by setting out the scope of the services to be provided, and the method by which they are to be carried out. Thirdly, the proposals also
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fulfil a useful function in co-ordinating the provisions of the Health Service as a whole, as the Act requires that copies shall, before approval, be sent to the executive councils, the regional hospital boards and all voluntary organisations likely to be concerned.
Suggestions for an amendment were put forward by Glasgow Corporation yesterday to the Secretary of State. These include the repeal of the provision that the Secretary of State shall approve the proposals put forward by local health authorities. Instead, the Secretary of State would make recommendations to the local health authority for modifying draft proposals. In addition, the requirement that it shall be a duty of the local health authority to carry out their duties in accordance with the proposals would also be repealed. The Committee will appreciate that both these points are matters of principle, and with regret I say to the noble Lord that I can hold out no hope that Her Majesty's Government will be able to bring forward an Amendment on the lines that have been suggested. I would say quite frankly to the noble Lord that, on reading over the proposals of the Corporation of Glasgow, which I understood the noble Lord, Lord Greenhill, wished to put forward to-day, it seemed to me that they were even more extensive than what is required at the present time.
LORD SILKIN: I do not wish to press this matter too far, because it is none of my affair, but in reading Section 1 it occurs to me that, in the light of the new circumstances, it is in need of modification. Therefore, I hope that the mind of the noble Lord and of Her Majesty's Government is not entirely closed upon this matter. I am not myself the sponsor of the recommendations of the Corporation of Glasgow, but I am sure that it is not necessary to go through all this elaborate and cumbersome procedure to-day when no question of grant is involved. I could understand that if there were a 50 per cent. grant Her Majesty's Government would want to know exactly what proposals were coming along; I can understand that to-day they want to be satisfied that local authorities are really carrying out their duties in connection with health; but I cannot understand why all this elaborate procedure should be necessary, and I hope that the noble Lord will give

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some thought to the matter to ascertain whether some simplification can be resolved, in agreement with Scottish local authorities.
LORD STRATHCLYDE: It would be merely courteous for me to say to the noble Lord that we asked the Working Party to be good enough to tell us of any simplification that was possible. I told the Committee earlier the result, and it seems to me that the suggestions which have been made are not an improvement or simplification at all, but rather the reverse.
On Question, Amendment agreed to.
Fifth Schedule [Repeals]:
4.0 p.m.
LORD STRATHCLYDE: This Amendment is consequential.
Amendment moved—
Page 26, line 41, at end insert—

(" 11 & 12 Geo. 5 c. 58.

The Trusts (Scotland) Act, 1921.

In section ten, in subsection (1), in paragraph (a), sub-paragraph (8).")

—(Lord Strathclyde)
On Question, Amendment agreed to.
LORD STRATHCLYDE: This also is a consequential Amendment.
Amendment moved—
Page 27, line 10, column 3, after (" (4)") insert (" in paragraph (7) the words ' in addition to any sums voted by Parliament for the training of teachers'").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: This Amendment provides for the repeal of a provision concerning the Education (Scotland) Fund which is no longer required.
Amendment moved—
Page 27, line 31, column 3, at end insert ("and subsection (8)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I think it would be for the convenience of the House if we were to take Amendment No. 24 and Amendments Nos. 26 to 35 together. These Amendments to Part III of the Fifth Schedule are consequential on the changes made by the new Schedule which implement the White Paper proposals which we have discussed. I beg to move.
Amendment moved—
Page 27, fine 46, at end insert—

(" 12 & 13 Geo. 5. c. 52

The Allotments (Scotland) Act, 1922

Section nine,")

—(Lord Strathclyde)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move this Amendment.
Amendment moved—
Page 28, line 6 column 3 after first (" In ") insert (" section three, in subsection (1), the words 'with the approval of the Secretary of State '; in section, twenty-five, in subsection (6), the words ' with the sanction of the Secretary of State'; in section twenty-seven, the words ' with the approval of the Secretary of State '; in section thirty-four, subsection (5); in section forty-five, in subsection (1), the words ' or as the Secretary of State may direct '; in ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move No. 27.
Amendment moved—
Page 28, line 9, column 3, at end insert (" in section seventy-four, subsections (2) and (3)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 28, line 10, column 3, after (" In ") insert ("section twenty-two, in subsection (3), the words ' with the approval of the Secretary of State'; in section twenty-seven, in subsection (3), the words ' with the approval of the Secretary of State'; in section fifty-one, in subsection (3), the words ' with the approval of the Secretary of State '; in ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move:
Amendment moved—
Page 28, line 11, column 3, at end insert (" the Fifth Schedule.")—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move this Amendment.
Amendment moved—
Page 28, line 16, column 3, at end insert (" In section one hundred and five, subsections (2), (3) and (4); section one hundred and seven; section one hundred and ten; section one hundred and eleven; section one hundred and twelve; in section one hundred and fifty-seven, the words ' with the consent of the Minister

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concerned'; in section two hundred and three, subsection (3); in section two hundred and eight, subsection (1)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 28, line 17, column 3, after first (" In ") insert ("section two, in subsection (5), the words ' and Part IV' and the words 'and of planning committees respectively'; in ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
THE CHAIRMAN OF COMMITTEES: In the next Amendment there is a misprint. Would your Lordships be good enough to insert the word "and" before the words "in the First Schedule, Part IV"?
LORD STRATHCLYDE: I beg to move the Amendment, with the alteration indicated by the Lord Chairman.
Amendment moved—
Page 28, line 20, column 3, at end insert (" and in the First Schedule, Part IV ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move Amendment No. 33.
Amendment moved—
Page 28, line 21, column 3, at end insert (" in section one hundred and thirty-five, in subsection (1), the words 'Subject to such conditions and restrictions, if any, as the Secretary of State may by regulations prescribe', and subsection (2)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 28, line 23, column 3, at end insert (" in section thirty-three, in subsection (2), the words ' committees and'; in the Third Schedule, Part I; in Part II, in paragraph 9, sub-paragraph (3), and in paragraph 11, subparagraph (f); and in Part III, in paragraph 12, in sub-paragraph (a) the words from ' and for any reference' to the end of the sub-paragraph; sub-paragraphs (b), (c) and (d)").—(Lord Strathclyde.)
On Question, Amendment agreed to.
LORD STRATHCLYDE: I beg to move.
Amendment moved—
Page 28, line 45, column 3, leave out first (" In ") and insert ("Section two; in section
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three, in subsection (4), paragraph (c); in ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
Fifth Schedule, as amended, agreed to.
LORD STRATHCLYDE: This is a drafting Amendment designed to ensure that the Long Title of the Bill refers appropriately to the matters dealt with in the Amendments already approved by the Committee. I beg to move.
Amendment moved—
In the Title, line 4, after (" finance ") insert (" and administration ").—(Lord Strathclyde.)
On Question, Amendment agreed to.
Title, as amended, agreed to.
House resumed.

MERCHANT SHIPPING (LIABILITY OF SHIPOWNERS AND OTHERS) BILL
4.7 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Viscount Stonehaven.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MERTHYR in the Chair.]
Clause 1 agreed to.
THE MINISTER WITHOUT PORTFOLIO (LORD MANCROFT)THE MINISTER WITHOUT PORTFOLIO (LORD MANCROFT) moved, after Clause 1 to insert the following new clause:
Amendments as to nature of liability limited by Merchant Shipping Act, 1894, s, 503
"2.—(1) In subsection (1) of section five hundred and three of the Merchant Shipping Act, 1894, the following paragraphs shall be substituted for paragraphs (c) and (d)—

"(c) where any loss of life or personal injury is caused to any person not carried in the ship through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship or in the loading, carriage or discharge of its cargo or in the embarkation, carnage or disembarkation of its passengers, or through any other act or omission of any person on board the ship;

(d) where any loss or damage is caused to any property (other than any property mentioned in paragraph (b) of this subsection) or any rights are infringed through the act or omission of any person (whether on board the ship or not) in the navigation

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or management of the ship, or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers, or through any other act or omission of any person on board the ship;"

and for the words "loss of or damage to vessels, goods, merchandise or other things", both where they occur in paragraph (i) and where they occur in paragraph (ii), there shall be substituted the words "such loss, damage or infringement as is mentioned in paragraphs (b) and (d) of this subsection."
(2) For the purposes of the said subsection (1), where any obligation or liability arises—

(a) in connection with the raising, removal or destruction of any ship which is sunk, stranded or abandoned or of anything on board such a ship, or

(b) in respect of any damage (however caused) to harbour works, basins or navigable waterways,

the occurrence giving rise to the obligation or liability shall be treated as one of the occurrences mentioned in paragraphs (b) and (d) of that subsection, and the obligation or liability as a liability to damages.
(3) The application of the said section five hundred and three to any liability shall not be excluded by reason only that the occurrence giving rise to the liability was not due to the negligence of any person.
(4) Nothing in the said section five hundred and three shall apply to any liability in respect of loss of life or personal injury caused to, or loss of or damage to any property or infringement of any right of, a person who is on board or employed in connection with the ship under a contract of service with all or any of the persons whose liabilities are limited by that section, if that contract is governed by the law of any country outside the United Kingdom and that law either does not set any limit to that liability or sets a limit exceeding, that set to it by that section.
(5) Paragraph (a) of subsection (2) of this section shall not come into force until such day as the Minister of Transport and Civil Aviation may by order made by statutory instrument appoint.
(6) The Minister of Transport and Civil Aviation may by order make provision for the setting up and management of a fund, to be used for the making to harbour or conservancy authorities of payments needed to compensate them for the reduction, in accordance with paragraph (a) of subsection (2) of this section, of amounts recoverable by them in respect of the obligations and liabilities mentioned in that paragraph, and to be maintained by contributions from such authorities raised and collected by them in like manner as other sums raised by them in respect of vessels; arid any such order may contain such incidental and supplementary provisions as appear to the Minister to be necessary or expedient.
(7) The power to make an order under sub-section (6) of this section shall include power to vary or revoke any such order by a subsequent order and any such power shall be exercisable by statutory instrument, which shall be
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subject to annulment in pursuance of a resolution of either House of Parliament."
The noble Lord said: There is a formidable list of Amendments on the Order Paper standing in my name but I can assure your Lordships that there is no real cause for alarm. As I explained on the Second Reading of Lord Stonehaven's Bill, the Government were taking this opportunity to amend his Bill to include certain Amendments which would give effect to all the provisions of the Brussels Convention not covered by it. This would not only bring up to date our own law, now seriously out of date, but would also enable the Government to ratify the Convention with the minimum of delay. By doing so we hope to encourage other Governments to ratify this important Convention.
I outlined briefly on Second Reading the Amendments I suggested you might like to consider for incorporation into the Bill. Your Lordships were good enough to indicate that they met with your approval—indeed, I think they are all non-controversial and have been very largely agreed by the interests concerned. I must emphasise that we have been at pains to consult all the interests concerned. There are one or two points where some differences exist, and I will indicate those when we come to them. I will go through them in the usual form but will only briefly touch on the main points concerned because they are highly complicated and highly technical Amendments. I will try to help your Lordships on any point of clarification but hope you will take it from me that they are not likely to give rise to any difference of opinion.
The Lord Chairman has called Amendment No. 1, which is a new Clause 2 dealing with the nature of liability limited by the Merchant Shipping Act, 1894. What we are seeking to do is as follows. The principal change is to allow limitation of liability for death and personal injury caused to persons on shore. Hitherto, limitation of liability has been allowed in respect of damage caused to property on shore but not in respect of death and personal injury caused to persons on shore. Subsection (2), contains the only other point in the first part of the clause to which I need refer. It adds to the claims for which liability may be limited by including liability in respect of wreck removal and of damage

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to harbour works, basins or navigable waterways. I think that I also ought to draw your Lordships' attention to subsections (5) and (6). These are intended to suspend the operation of subsection (2) (a) until the Government have been able to work out, in conjunction with the Dock and Harbour Authorities' Association, the British Transport Commission, the Chamber of Shipping and the Liverpool Steamship Owners' Association, a scheme acceptable on all sides whereby harbour authorities may be compensated for sums rendered irrecoverable by reason of shipowners being entitled under the Act to limit their liability for the costs of wreck removal. It is intended that a dry shall not be appointed under subsection (5) until an order has been made under subsection (6). In turn, such an order will be made only when a scheme has been worked out which is satisfactory to all the parties concerned. Those are the provisions of the first Amendment standing in my name on the Marshalled List. I beg to move.
Amendment moved—
After Clause 1, insert the said new clause.—(Lord Mancroft.)
4.12 p.m.
LORD GEDDES: May I first declare an interest in this Bill, as I am a director of a shipping company. Through the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association, I have been advised upon and will express the views of the shipping industry. There is little that I can add to the explanation of the Amendments to the Bill already given by my noble friend Lord Mancroft, and I would ask your Lordships to accept my remarks as applicable, not only to this but equally to the subsequent Amendments which are to be moved by him. I have at least one point in common with the noble Viscount who introduced this Bill to your Lordships' House, in that I am no lawyer and have no legal qualifications at all. If this Bill was complex in the form in which it was received from another place, it can scarcely be said that it will be simplified by the Amendments now proposed. On the contrary, it is being expanded in several important respects in order to give effect to the main provisions of the Brussels Convention; and it is for this reason that my
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remarks may seem in pattern to be more appropriate to the Second Reading than to the Committee stage.
The principle that a shipowner is entitled to limit his liability was probably first established in the Nertherlands in the sixteenth century and was adopted in British law in 1734, when shipowners became entitled to limit liability for loss of cargo by theft by the master or members of the crew. The circumstances in which limitation could be claimed were extended in scope in various subsequent Acts, and in 1854 the right to limit was applied to claims for loss of life or personal injury. As has already been emphasised, the existing monetary limits—that is to say, £8 per ton of a ship's tonnage for property damage, and up to £15 per ton for loss of life—were fixed as long ago as 1862.
Although the principle of limitation has been generally accepted throughout the maritime countries, the manner in which it has been applied has varied. In particular, the basis upon which limitation is calculated has differed. In the United Kingdom since 1862, the criterion has been the tonnage of the ship, but in many Continental countries it has been the value of the ship which has been adopted for this purpose. As my noble friend Lord Simon emphasised during the debate on the Second Reading of this Bill, limitation by reference to value can operate unjustly in favour of the owner of an ill-found and possibly ill-equipped ship. The conflict of laws about limitation of liability has created difficulty and confusion in the courts of the various maritime countries, and it was not surprising that this was among the topics discussed by the Comité de Maritime International at its first conference in 1897. After more than twenty-five years of discussion, sufficient agreement was reached internationally on the terms of the Convention, which was signed by the United Kingdom, among other countries, in 1924. This Convention was an attempt at a compromise between the British and Continental systems. It received limited support but was never ratified in this country.
In post-war discussions among British shipowners, agreement was reached that the existing monetary limits under the Merchant Shipping Acts were too low and that a further attempt should be

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made to reach international agreement on the subject of limitation as a whole. It is to be noted that the shipping industry came to this conclusion purely upon consideration of policy and without any external pressure, Parliamentary or otherwise. The British Maritime Law Association, representative of shipowners, underwriters and the National Constituent Association of the Comité Maritime International, prepared a draft convention which was considered at conferences held in Brighton in 1954 and in Madrid in the following year. It is upon this draft that the provisions of the Brussels Convention of 1957 are based.
Its most important provisions are, first, the adoption of the British basis of limitation—that is to say, the tonnage of the vessel; secondly, the increase in the monetary limits, which will go a long way to avoid the inequitable position of claimants, such as was described by the noble and learned Lord, Lord Merriman, in the debate on the Second Reading; thirdly, the extension of the classes of persons who may limit their liability; and fourthly, the widening of the circumstances in which limitation may be claimed. If the Government Amendments are accepted, the Bill will give effect to the main provisions of the Limitation Convention. In view of the part taken by British shipowners in drafting the Convention, the incorporation of all of its provisions into British law has the full support of the shipping industry. I beg to support the adoption of the Amendments to the Bill.
VISCOUNT STONEHAVEN: When faced with this formidable list of Amendments, being no lawyer, I consulted an expert on shipping law who, fortunately, in his retirement from a firm, is now Sheriff of Aberdeen, and I spent Sunday morning endeavouring to find out what they are all about. I do not know how successful I was, but I can assure your Lordships that a completely independent opinion was all in favour of my noble friend's Amendments to the Bill. They make it a better Bill on this aspect of limitation than its original promoters could ever have hoped for when they originally produced their small and more modest Bill. If it meets with your Lordships' convenience, I shall not speak again unless points are raised by other noble Lords who are experts in these matters
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and who wish me to do so. I shall merely accept the Amendments when my noble friend Lord Mancroft moves them.
LORD CHORLEY: I speak with diffidence on this matter, but with such knowledge as I have (which is not an expert knowledge, though I have been a student of shipping law for a number of years), I should like to support what was said by the noble Lord who introduced the proposed Amendments. The Amendments much improve the Bill, which, so to speak, took one bite at the cherry. If it had been passed as drafted, it would have left the law in an unsatisfactory state in that it would have improved it in part yet left it where it was in other parts. It seems to me that this series of Amendments are valuable, not only because they will bring this country and other maritime countries much more into uniformity with each other in respect of this aspect of maritime law, but also because the proposals contained in them are of great value. I have no doubt that your Lordships will accept them, and I think we should be wise to do so.
On Question, Amendment agreed to.
LORD MANCROFT LORD MANCROFT moved, after Clause 1 to insert the following new clause:
Extension to other persons of provisions applying to shipowners
"3.—(1) The persons whose liability in connection with a ship is excluded or limited by Part VIII of the Merchant Shipping Act, 1894, shall include any charterer and any person interested in or in possession of the ship, and, in particular, any manager or operator of the ship.
(2) In relation to a claim arising from the act or omission of any person in his capacity as master or member of the crew or (otherwise than in that capacity) in the course of his employment as a servant of the owners or of any such person as is mentioned in subsection (1) of this section,

(a) the persons who liability is excluded or limited as aforesaid shall also include the master, member of the crew or servant, and, in a case where the master or member of the crew is the servant of a person whose liability would not be excluded or limited apart from this paragraph, the person whose servant he is; and

(b) the liability of the master, member of the crew or servant himself shall be excluded or limited as aforesaid notwithstanding his actual fault or privity in that capacity, except in the cases mentioned in paragraph (ii) of section five hundred and two of the said Act of 1894."

The noble Lord said: This Amendment is concerned with the extension to other persons of the provisions applying to shipowners. Perhaps I ought to draw attention to subsection (1). This subsection gives partial effect to Article 6 (2) of the Convention. It extends the right to limit to charterers otherwise than by demise and to any person interested in or in possession of the ship. This will include shipbuilders who are in possession of the ship, for example while she is on trials. Subsection (2) is new. This subsection also gives partial effect to Article 6 (2) of the Convention. It entitles the master and members of the crew to limit their liability incurred in the course of their employment, thereby preventing plaintiffs from avoiding the shipowner's right to limit by suing his servant instead. These are, I think, the principal provisions of this Amendment. I beg to move.
Amendment moved—
After Clause 1, insert the said new clause.—(Lord Mancroft.)
On Question, Amendment agreed to.
LORD MANCROFT LORD MANCROFT moved, after Clause 1 to insert the following new clause:
Unregistered ships and ships in course of completion or construction
"4.—(1) Part VIII of the Merchant Shipping Act, 1894, shall apply to any structure, whether completed or in coarse of completion, launched and intended for use in navigation as a ship or curt of a ship, and the expression 'ship' in the said Part VIII and in this Act shall be construed accordingly.
(2) The said Part VIII shall apply to any British ship notwithstanding that it has not yet been registered.
(3) The tonnage of any ship or structure to which the said Part VIII applies by virtue of this section shall, for the purposes of that Part, be ascertained as provided by subsection (2) of section five hundred and three of the said Act of 1894 with regard to foreign ships."
The noble Lord said: This Amendment applies to unregistered ships and ships in the course of completion or construction. Under the existing law, if I understand it aright, limitation of liability applies only in relation to ships. This subsection extends limitation to any structure, whether or not completed, which is intended for use in navigation as a ship, or part of a ship, provided that it has been launched, thereby eliminating the possibility of dispute about the stage of construction at which the structure becomes a ship. I beg to move.
Amendment moved—
After Clause 1, insert the said new clause.—(Lord Mancroft.)
VISCOUNT SIMON: I hope that before the Committee approves this new clause, as I have no doubt it will, I may he allowed to ask the noble Lord who introduced it whether he could explain the reference to "a part of a ship". I have tried hard to understand this. As I see it, the object of the clause—and it is linked to the previous one—is largely concerned with the liabilities of shipbuilders when a ship is not yet complete and with giving them the benefit of limitation of liability. It appears that this construction, whatever it is, has to be launched and has to be intended for use in navigation. I cannot understand how part of a ship can be launched and intended for use in navigation. To me it seems a curious reference.
Apart from that, what are the claims in respect of which this liability is limited? We have to go back to Section 503 of the old 1894 Act, as amended by the first Amendment to-day, and we find that they are claims which arise from actual omissions in navigation or management of the ship. You cannot navigate or manage part of a ship; and I do not think the shipbuilders manage the ship at all. I have a suspicion that this clause is brought in to deal with the sort of case which happened some time ago and may be in some of your Lordships' minds—the case when there is a serious accident on trials before the ship is delivered to her new owners, and difficult questions of limitation arise. But I do not see how they can arise in respect of a part of a ship, and I should have thought that it was only confusing to include those words.
Finally, may I say that if it is conceivable that there is a part of a ship that can be concerned, I do not understand how the tonnage of any part of a ship to which this applies could be ascertained as provided by subsection (2) of Section 503 of the Act of 1894, because that relates solely to the ascertainment of the tonnage of a ship. I hope that before the Amendment is passed the noble Lord may be able to give us an explanation. I gave him notice of this point, but I am afraid it was short notice, and he may well say that he would rather give an explanation later.
LORD CROOK: Is it not a fact that one of the triumphs of the shipbuilding industry in this country to-day is that it is able to build ships in halves, move them away and then bring them together again? Would not that be a "part" in the meaning of this clause?
LORD MANCROFT: I think the noble Lord, Lord Crook, has the right answer. My noble friend, Lord Simon, has said that he does not understand how a claim can arise in respect of a part of a ship. I am informed that it does not infrequently happen that a large ship is launched in two parts which will be subsequently joined together. Alternatively, new parts of damaged ships may be launched on their own. One has seen pictures of such new parts being sailed out to meet the old parts. As for the difficulty my noble friend feels of ascertaining the tonnage of a part of a ship, I am given to understand that this can quite readily be done by a certificate issued by the Surveyor-General of Ships which is provided for in Section 503 (2) (6) of the Act of 1894 which will be applied by Clause 4 (3) of the Bill. My noble friend knows more about this than I do, but I understand that that is the answer to the problem that is worrying him.
On Question, Amendment agreed to.
LORD MANCROFT LORD MANCROFT moved, after Clause 1 to insert the following new clause:
Release of ship, etc.
"5.—(1) Where a ship or other property is arrested in connection with a claim which appears to the court to be founded on a liability to which a limit is set by section five hundred and three of the Merchant Shipping Act, 1894, or security is given to prevent or obtain release from such an arrest, the court may, and in the circumstances mentioned in subsection (3) of this section shall, order the release of the ship, property or security, if the conditions specified in subsection (2) of this section are satisfied; but where the release is ordered the person on whose application it is ordered shall be deemed to have submitted to the jurisdiction of the court to adjudicate on the claim (or, in Scotland, to have prorogated that jurisdiction).
(2) The said conditions are—

(a) that security which in the opinion of the court is satisfactory (in this section referred to as "guarantee") has previously been given, whether in the United Kingdom or elsewhere, in respect of the said liability or any other liability incurred on the same occasion and the court is satisfied that, if the claim is established, the amount for
430
which the guarantee was given or such part thereof as corresponds to the claim will be actually available to the claimant; and

(b) that either the guarantee is for an amount not less than the said limit or further security is given which, together with the guarantee, is for an amount not less than that limit.

(3) The circumstances mentioned in subsection (1) of this section are—

(a) that the guarantee was given in a Convention country;

(b) that the relevant port or, as the case may be, one of the relevant ports, is in the country in which the guarantee was given.

(4) For the purposes of this section,—

(a) a guarantee given by the giving of security in more than one country shall be deemed to have been given in the country in which security was last given;

(b) any question whether the amount of any security is (either by itself or together with any other amount) not less than any limit set by section five hundred and three of the Merchant Shipping Act, 1894, shall be decided as at the time at which the security is given.

(5) In this section—
" Convention country" means any country in respect of which the Convention is in force (including any country to which the Convention extends by virtue of Article 14 thereof);
" relevant port"—

(a) in relation to any claim, means the port where the event giving rise to the claim occurred or, if that event did not occur in a port, the first port of call after the event occurred; and

(b) in relation to a claim for loss of life or personal injury or for damage to cargo, includes the port of disembarkation or discharge.

" the Convention" means the International Convention relating to the Limitation of the Liability of Owners of Seagoing Ships signed in Brussels on the tenth day of October, nineteen hundred and fifty-seven.
(6) If Her Majesty by Order in Council declares that any country specified in the Order is a Convention country within the meaning of this section, the Order shall, while in force, be conclusive evidence that the country is a Convention country; but any Order in Council under this section may be varied or revoked by a subsequent Order in Council.
(7) In the application of this section to Scotland the references to arrest shall be construed as referring to arrestment on the dependence of an action or in rem and for the references to release from arrest or to the ordering of such a release there shall be substituted references to the recall of an arrestment."
The noble Lord said: This Amendment applies to the release of ships. The new clause gives effect to Article 5 of the Convention, which provides for the release of ships which have been arrested or of security which has been given if

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security up to the Convention limits has been given in another contracting State. The purpose is to prevent the arrest of ships or the giving of security on more than one occasion in respect of the same incident. The clause will apply only in those cases in which it appears to the court that the shipowner or other person is entitled to limit his liability; that is to say, the applicant for release will have to satisfy the court, at any rate with prima facie evidence, that the claim is one to which limitation applies and, in particular, that he himself has not been guilty of actual fault or privity. The weight of evidence which the court will require will be a matter for the court itself to decide, subject to any Rules of Court which may be made on the subject.
Some doubt has arisen, I understand, on the precise meaning of the words "relevant port" in subsection (5) of this clause; and, in particular, whether they mean actual port or intended port. There is the rather macabre point that if the victim of an accident is buried at sea there will be no "actual" port of disembarkation at all. I should like to get this as an agreed measure, and I would ask your Lordships to pass this Amendment, including subsection (5), and to allow me to consult with the interests concerned in order to see whether we cannot get a slightly clearer drafting of subsection (5) to meet the points which have been made, with which I have not yet had time to deal, but with which I should wish to deal. I beg to move.
Amendment moved—
After Clause 1, insert the said new clause.—(Lord Mancroft.)
LORD MERRIMAN: I should like to say a few words on this clause generally, and, in particular, in relation to the matter which the noble Lord, Lord Mancroft, mentioned a moment ago, of the determination of fault or privity. I have not put down an Amendment, and I am not suggesting that any is necessary, because I think the clause deals with the point about which I know those who advised the shipping community are worried. It arises in this way. As the noble Lord, Lord Mancroft, said, the right to limit applies only if fault or privity is negatived. It is well settled that it is for the shipowner to disprove that he has been in any way guilty of fault or privity which has been
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the cause of the casualty. If I may be technical for a moment, the words "fault or privity" apply not only to negligence by his servants and that sort of thing, which may be the immediate cause of the casualty, but also to such things as sending to sea a vessel which is unseaworthy when her unseaworthiness has in fact been the cause of the casualty. That is only one example, but it is the best example of fault or privity, and that has to be disproved by the owner. I believe that point has been covered by the opening words of the clause. If I may, I will read them:
"Where a ship or other property is arrested in connection with a claim which appears to the court to be founded on a liability to which a limit is set by section five hundred and three …"—
I have just given your Lordships an outline of that section. In other words, the question of fault or privity is to be decided by the court.
The point I wish to make is that it must be decided before any question of release arises at all. I think that is the effect of the new clause, but I should be glad to have it confirmed that that is the view of the Government on the subject. I mention this point only because, in the nature of things, the issue of fault or privity is likely to be a lengthy one. In certain cases it may be the key to the whole controversy, and there is no doubt that when questions of fault or privity arise they are apt to be fought hard and bitterly. Therefore, it must not be taken for granted that release under this Convention, which is embodied in this clause, is necessarily swift or automatic. That is the main point on this clause.
There is, however, another point which the noble Lord, Lord Mancroft, indicated, without dealing with it—it is with regard to the giving of the security under subsection (3). The Convention (if I may call your Lordships' attention to it) makes it obligatory, in Article V, for the court to release a ship which has been arrested if the prescribed guarantee is given in a port. I call it, for short, as it is called in the Bill, "the relevant port". It does not matter for my purposes whether the port is the port in which the accident happened, or whether it is the next port of call, to instance two of the things which are covered in the Bill by the definition, "the relevant port". For some reason which I do not understand,

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the Bill, instead of saying that the guarantee must be given in the relevant port in order to cause the release to be mandatory, says that it may be given anywhere "in a Convention country". I, and others, see a danger to British shipping in this change from the Convention to the wording of the Bill.
It might arise in some such way as this. Suppose, for the sake of argument, that a British ship comes into collision in the Channel and makes for Southampton Water, and is then arrested by the foreign shipowner for his damages in the collision. Bail is usually given in this country in London. Then suppose that, instead of bail being given in Southampton, which is the next port of call in those circumstances, it is given in London; and the ship is released and goes off, we will say, to Le Havre, where some other claimant in connection with the same usually arrests her again. Our shipowner demands instant release on the ground that he has given sufficient guarantee. The French might well say, "That is all very well. You have given guarantee in accordance with the English Act of Parliament, but you have not given guarantee in accordance with the Convention. Therefore we are not obliged to release." I think that that is a serious danger which ought to be removed. It can be got rid of perfectly simply by making "the relevant port"—which at present, as the Bill is drafted, has no relevance at all, if I may be permitted to say so—the port at which the guarantee is to be given. Then the situation fits the Convention. I call attention to those points for clarification only, and I hope that I have made them sufficiently clear.
VISCOUNT SIMON: May I add one word to what the noble and learned Lord, Lord Merriman, has said on the subject of "the relevant port," because it seems to me that the noble Lord. Lord Mancroft, has undertaken to look into it. I want to put into your Lordships' minds one thought. If an accident occurs in which a ship is in collision and is sunk, and the owners of the cargo in the ship wish thereupon to sue, they will find that there is no "relevant port" at all. The ship has been sunk, so she makes no next port of call. The cargo is not discharged anywhere and, therefore, so far as I can see, there is no
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"relevant port" of call. It was with that rather in mind that, in advance of the Sitting, I suggested to the noble Lord, Lord Mancroft, that possibly it might make more sense if the port of discharge were the port of intended discharge; that is, the port to which the bill of lading is made out, otherwise there may be many cases arising where there is no "relevant port."
LORD MANCROFT: The noble and learned Lord, Lord Merriman, has raised two important points here. I accept, of course, his first point. The release under Clause 5 will not be automatic. The court must be satisfied that there is no actual fault or privity. But with regard to the noble and learned Lord's second point, and also the point that my noble friend Lord Simon has addressed to your Lordships, may I ask them to let me have another look at these to see whether I can draft an Amendment to cover them? I think they are valid points and we must obviously look at them again.
On Question, Amendment agreed to.
4.38 p.m.
LORD MANCROFT LORD MANCROFT moved, after Clause 1 to insert the following new clause:
Restriction on enforcement after giving of security
"6.—(1) No judgment or decree for a claim founded on a liability to which a limit is set by section five hundred and three of the Merchant Shipping Act, 1894, shall be enforced, except so far as it is for costs or (in Scotland) expenses, if security for an amount not less than the said limit has been given, whether in the United Kingdom or elsewhere, in respect of the liability and the court is of opinion that the security is satisfactory and is satisfied that the amount for which it was given or such part thereof as corresponds to the claim will be actually available to the person in whose favour the judgment or decree was given or made.
(2) For the purpose of this section any question whether the amount of any security is not less than any limit set by section five hundred and three of the Merchant Shipping Act, 1894, shall be decided as at the time at which the security is given."
The noble Lord said: This Amendment is concerned with the restriction on enforcement after the giving of security. It restricts the enforcement of judgments except for costs, or in Scotland expenses, if security up to the limits of liability has been given in the United Kingdom or elsewhere and the court is of the opinion

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that the security is satisfactory and is satisfied that the security, or such part as corresponds to the claim, will be actually available to the person in whose favour the judgment is given. The purpose of this new Amendment No. 5 is to give effect to Article 2 (4) of the Convention. I beg to move.
Amendment moved—
After Clause 1, insert the said new clause.—(Lord Mancroft.)
On Question, Amendment agreed to.
LORD MANCROFT LORD MANCROFT moved, after Clause 1 to insert the following new clause:
Distribution of limitation fund
"7.—(1) In making any distribution in accordance with section five hundred and four of the Merchant Shipping Act, 1894, the court may, if it thinks fit, postpone the distribution of such part of the amount to be distributed as it deems appropriate having regard to any claims that may later be established before a court of any country outside the United Kingdom.
(2) No lien or other right in respect of any ship or property shall affect the proportions in which under the said section five hundred and four any amount is distributed amongst several claimants."
The noble Lord said: This Amendment introduces a new Clause 7, dealing with the distribution of the limitation fund. I think there are only two brief points to which I need draw your Lordships' attention. Subsection (1) empowers the court to postpone the distribution of the limitation fund under Section 504 of the Merchant Shipping Act, 1894, or of such part thereof as it deems appropriate, having regard to any claims that may later be established before a court of any country outside the United Kingdom. It thereby removes the doubt which has hitherto existed whether a court has power to take account of contingent claims abroad. Subsection (2) gives effect to Article 3 (2) of the Convention by providing that the limitation fund shall be distributed among the claimants in proportion to the amounts of their established claims without regard to liens or other rights in respect of any ship or property. Those are the two points that arise. I beg to move.
Amendment moved—
After Clause 1 insert the said new clause.—(Lord Mancroft.)
On Question, Amendment agreed to.
LORD MANCROFT: These are only minor and consequential Amendments and repeals. I beg to move.
Amendment moved—
After Clause 1 insert the following new clause:
Minor and consequential amendments and repeals
"8.—(1) In section five hundred and two of the Merchant Shipping Act, 1894, the word "sea-going" shall be omitted.
(2) For subsection (3) of section five hundred and three of the Merchant Shipping Act, 1894, there shall be substituted the following subsection—
" (3) The limits set by this section to the liabilities mentioned therein shall apply to the aggregate of such liabilities which are incurred on any distinct occasion, and shall so apply in respect of each distinct occasion without regard to any liability incurred on another occasion."
(3) In section five hundred and four of the Merchant Shipping Act, 1894, for the words "in respect of loss of life, personal injury or loss of or damage to vessels or goods" there shall be substituted the words "in respect of any occurrence in respect of which his liability is limited under section five hundred and three of this Act".
(4) In Part VIII of the Merchant Shipping Act, 1894, the expression "owner" shall be construed as including, where it occurs in section five hundred and two, every person whose liability is excluded by section three of this Act, and elsewhere, except in the second place where it occurs in section five hundred and five, every person whose liability is limited by that section.
(5) In section five of the Crown Proceedings Act, 1947, the following shall be substituted for paragraph (a) of subsection (6)—
"(a) any structure to which Part VIII of that Act is applied by section four of the Merchant Shipping (Liability of Shipowners and Others) Act, 1958; and"
and in subsection (8) for the reference to the Merchant Shipping (Liability of Shipowners) Act, 1898, there shall be substituted a reference to sections three and four of this Act.
(6) The enactments mentioned in the Schedule to this Act are hereby repealed to the extent specified in the third column of that Schedule."—(Lord Mancroft.)
On Question, Amendment agreed to.
LORD MANCROFT LORD MANCROFT moved, after Clause 1 to insert the following new clause:
Saving for occurrences taking place before commencement
"9. Nothing in this Act applies in relation to any liability arising from an occurrence which took place before the commencement of this Act."
The noble Lord said: This clause provides that nothing in the Act shall apply in relation to any liability arising from an occurrence which takes place before the commencement of the Act. There is no provision in the Bill for its coming into force; and it will accordingly come into force when it receives the Royal Assent, apart from the provision relating to the costs of wreck removal, to which I referred in dealing with Clause 2 (5). I beg to move.
Amendment moved—
After Clause 1, insert the said new clause.—(Lord Mancroft.)
On Question, Amendment agreed to.
LORD MANCROFT: This clause extends the Bill to Northern Ireland, with consequential adaptations. I beg to move.
Amendment moved—
After Clause 1, insert the following new clause:
Provisions as to Northern Ireland
("10.—(1) This Act extends to Northern Ireland.
(2) In the application of this Act to Northern Ireland the reference in section eight to the Crown Proceedings Act, 1947, is a reference to that Act as it applies in Northern Ireland.
(3) For the purposes of section six of the Government of Ireland Act, 1920 (which relates to the powers of the Parliament of Northern Ireland to make laws), this Act shall be deemed to have been passed before the day appointed for the purposes of that section.")—(Lord Mancroft.)
On Question, Amendment agreed to.

"SCHEDULE ENACTMENTS REPEALED

Session and Chapter

Short Title

Extent of Repeal

57 & 58 Vict. c.60

The Merchant Shipping Act, 1894…

In section five hundred and two, the word "sea-going".

Section five hundred and eight.

61 & 62 Vict. c.14

The Merchant Shipping (Liability of Shipowners) Act, 1898.

The whole Act.

63 & 64 Vict. c.32

The Merchant Shipping (Liability of Shipowners and Others) Act, 1900.

Section one.

6 Edw. 7. c. 48

The Merchant Shipping Act, 1906—

Sections seventy and seventy-one.

11 & 12 Geo. 5. c.28

The Merchant Shipping Act, 1921…

Subsection (2) of section one."

—(Lord Mancroft.)
On Question, Amendment agreed to.
LORD MANCROFT: This clause is the usual clause for application to British possessions. I beg to move.
Amendment moved—
After Clause 1, insert the following new clause:
Application to British possessions, etc.
"11.—(1) Her Majesty may by Order in Council direct that the provisions of this Act, and (so far as they do not so extend apart from the Order) the existing limitation enactments, shall extend, with such exceptions, adaptations and modifications as may be specified in the Order, to—

(a) the Isle of Man;

(b) any of the Channel Islands;

(c) any colony, or any country or place outside Her Majesty's dominions in which for the time being Her Majesty has jurisdiction, or any territory consisting partly of one or more colonies and partly of one or more such countries or places.

(2) In this section "the existing limitation enactments" means Part VIII of the Merchant Shipping Act, 1894, section two of the Merchant Shipping (Liability of Shipowners and Others) Act, 1900, and any incidental or supplementary provisions of any enactment applying the said Part or section."—(Lord Mancroft.)
On Question, Amendment agreed to.
Clause 2 agreed to.
LORD MANCROFT: This is merely the Schedule. I beg to move.
Amendment moved—
After Clause 2, insert the following Schedule:
The Title:
LORD MANCROFT: This Amendment is necessary so as to enlarge the Title of the Bill to embrace the rather comprehensive series of Amendments we have been discussing, for your Lordships' kind approval of which I am very grateful. I beg to move.
Amendment moved—
In the Title, line 1, leave out from "to" to the second "and" in line 2 and insert (" amend Part VIII of the Merchant Shipping Act, 1894, and section two of the Merchant Shipping (Liability of Shipowners and Others Act, 1900.").—(Lord Mancroft.)
On Question, Amendment agreed to.
House resumed.

TRADING REPRESENTATIONS (DISABLED PERSONS) BILL
4.47 p.m.
Order of the Day for the Second Reading read.
LORD CHORLEY: My Lords, the Bill for which I am asking a Second Reading this afternoon is a short one. I venture to hope, and indeed I think, that it will receive your Lordships' approval, because it was introduced to meet what I believe has become a very real grievance which has sprung up over recent years. I refer to the door-to-door canvassing, and also the canvassing by post, for the purpose of selling articles by firms and traders under such names as "Blind Employment", "Blind Homework", "Disabled Ex-Servicemen", and other such trading names. Those names are obviously intended to give to the people called upon by these canvassers the impression that the articles in question have been made by blind people or by war-disabled people, thus very naturally evoking their sympathy and obtaining their custom for the articles in question. Quite a number of the firms and traders behaving in this sort of way are really not selling articles made by the blind or by disabled people at all: the whole thing has become very much a "racket".
Another aspect of the question was the selling of articles alleged to be for the purpose of providing money for the blind or for war-disabled people, though in some, at any rate, of those cases there was reason to believe that the blind or
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disabled saw none, or very little, of the money which was obtained in that way. The articles were often sold at high prices, prices a good deal higher than those for which similar articles could be purchased in the ordinary shops; and the whole matter is, I think, very much of a grievance. There were very seldom any profits for the blind; the profits, or certainly the substantial portion of them, went into the pockets of the unscrupulous people who were behaving in this way. A number of these cases were, I believe, brought to the attention of the police and of the Ministry of Labour, but it was usually found that under the existing law it was not possible to bring a prosecution, or, at least, to bring a prosecution with hopes of a conviction. Therefore, various Members of Parliament felt that it was necessary to bring in a Bill, and we have this Private Member's Bill which is before your Lordships' House this afternoon.
In effect, the Bill establishes a licensing system for this type of selling by requiring, subject to some exceptions to which I shall draw your Lordships' attention, that where selling or soliciting of orders for goods is carried through by house-to-house canvassing or by post, under the pretext that the people engaged in the making or preparation, packing or production of these goods are blind or disabled people, or alternatively, that the benefit from the sales is to go to such people, the persons carrying on the business must be registered. If they are not registered—if they do not come within one of the exceptions—they will be liable on conviction to a fine not exceeding £100 or to imprisonment for a term not exceeding three months. The penalties are based on the similar provisions of the Disabled Persons Employment Act, 1944, which was passed with the object of meeting a not dissimilar sort of situation.
The exceptions, which your Lordships will find in subsection (2) of Clause 1, are intended to cover all the existing nonprofit-making organisations which have been very properly engaged in work of this kind. Many of them have been so engaged for quite a number of years, and I am quite sure that your Lordships will agree that it is very right and proper that this sort of work should go on, because in this way inestimable and valuable results have been achieved by a number of these organisations in the interests of

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blind and disabled men and women. It was far from the object of the promoters of this Bill to wish to bring that to an end. Clause 2 deals with licensing, under which people wishing to carry on this type of work may apply to the Minister of Labour for a licence to be permitted to do so. Your Lordships will see that it is a lengthy clause, and I do not think that there is any need for me to go in detail into its provisions. It is lengthy because it is obviously, I think, necessary to prevent a colourable satisfaction of the requirements of the Act on the part of the unscrupulous people who have been engaged on this sort of work, as they might do by putting one or two blind people into a workshop or perhaps having one or two blind people on their staff who might be used in connection with canvassing and so on, thus providing a colourable case, but one which was not really genuine in any real sense of the term. Therefore, the clause goes into the requirements which will have to be satisfied before the appropriate Minister will grant the necessary licence.
My Lords, that is almost all that I need to say on this particular point, but before sitting down I should like to pay a tribute to the work which has been put into this Bill by the Member for Shoreditch and Finsbury and also by the Member for Mitcham, who at one time was Parliamentary Secretary to the Ministry of Labour and whose collaboration enabled Mr. Victor Collins, the first Member of Parliament in question, to produce this Bill and to get it through another place. I am sure that it meets the very real grievance which, as I have said, has been becoming apparent over the last months,
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and in those circumstances I am sure that your Lordships will feel that it should have a Second Reading. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Chorley.)
4.54 p.m.
EARL BATHURST: My Lords, on behalf of Her Majesty's Government I beg to commend this Bill to your Lordships' House. In doing so, I wish to congratulate the noble Lord opposite and the honourable gentleman, Mr. Victor Collins, who was responsible for promoting this Bill in another place. I am sure that your Lordships will wish this Bill Godspeed through its remaining stages, and will join with me in trusting that this measure will stamp out the wicked evil that has been the reason behind the introduction of the Bill which, as I say, I commend to your Lordships.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

LICENSING OF BULLS AND BOARS BILL [H.L.]
4.55 p.m.
Read 3a (according to Order), and passed, and sent to the Commons.

PARK LANE IMPROVEMENT BILL
Reported from the Select Committee, with Amendments and recommitted to a Committee of the Whole House.
House adjourned at three minutes before five o'clock.