Sitting of 12 May 1958

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
DEATH OF A MEMBER
Mr. Speaker: I regret to have to inform the House of the death of Major Sir Duncan McCallum, ME., Member for Argyll, and I desire, on behalf of the House, to express our sense of the loss we have sustained and our sympathy with the relatives of the honourable Member.
PRIVATE BUSINESS

  CAMMELL LAIRD AND COMPANY BILL [Lords]
  Queen's Consent, on behalf of the Crown, signified:
  Bill read the Third time and passed, with Amendments.

  CLERGY ORPHAN CORPORATION BILL [Lords]
    COVENTRY CORPORATION BILL [Lords]
    Read a Second time and committed.
ORAL ANSWERS TO QUESTIONS
  HOSPITALS

    New Hospital, Coventry
    Miss Burtonasked the Minister of Health to make a statement on the progress made concerning the proposed general hospital at Coventry.
    The Minister of Health (Mr. Derek Walker-Smith): Acquisition of the site is nearing completion, and the regional hospital board is working on details of the accommodation required with a view to preparing sketch plans.
    Miss Burton: As the Minister will be aware, this has been going on a very long time, though that is not his fault, but is he also aware that locally it is felt that it would be most helpful if the Ministry could act as a prod in this matter? Can the right hon. and learned Gentleman tell us what the next step for him will be?
    Mr. Walker-Smith: The position at the moment is that the board was given authority to acquire the modified site in August last year. The matter has been held up simply by differences of view about the ownership of certain of the lands, which has resulted in conveyancing difficulties. As to the rest, the basic considerations' affecting the plans for the hospital are being studied by a special committee of the board. Therefore, there

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    is nothing for me to do at this moment, but if and when the matter comes before me again, I will certainly bear in mind its urgency.

    Mental Defectives, Liverpool (Accommodation)
    Mrs. Braddockasked the Minister of Health if he is aware that parents and relatives of mentally defective persons, many of whom are low grade cases, have been waiting for as long as five years for bed accommodation for the defective, and that in one instance a child was taken to a Liverpool court as being outside the control of the parents; and what steps he will take to improve the position in regard to such cases.
    Mr. Walker-Smith: I am aware of the difficulties due to shortage of accommodation, particularly in this area. The regional hospital board has already increased the number of mental deficiency beds by 400 since 1948 and expects to add a further 198 within the next year. Other substantial developments are in progress, or at an advanced stage of planning.
    Mrs. Braddock: But is not the Minister aware that Liverpool is in a rather peculiar position because, prior to the National Health Service Act, we had no mental deficiency beds at all? They were part of the Lancashire Board, to which Liverpool paid a precept. In view of the case, particulars of which I have sent to him, and the very serious comments made by a Liverpool magistrate in ordering the mental defective into hospital accommodation, can he say what will happen if the parents of the 108 very low-grade mental defectives, who have been looking after them in circumstances of very great difficulty but with very great loyalty, are taken to court and the Liverpool magistrates order, as they can by law, every one of those mentally defective cases to be admitted to hospital? If that is the position, why cannot something be done for these very serious cases immediately?
    Mr. Walker-Smith: I fully accept that there is a problem here, as the hon. Lady has indicated, owing to the shortage in the Liverpool region since the inception of the scheme in 1948. In the intervening years, however, there has been a good increase—from 465 beds
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    in 1948 to 871 at present, with the promise of 198 more beds in this year. In addition to that, as the hon. Lady will, I think, know, there are these large schemes in various stages of progress, and we will press on with those as fast as possible.
    Mrs. Braddockasked the Minister of Health if he is aware of the dissatisfaction of the parents and relatives of mentally defective persons at the further delay in the provision of additional beds at Newchurch Hospital, near Warrington; and, in view of the fact that these delays have been going on since 1950, what action he is going to take to stop the delay.
    Mr. Walker-Smith: I fully recognise the need for this large development scheme. Detailed planning could not be authorised until the hospital capital programme was enlarged in 1955, and since then it has been necessary to review the proposals in the light of the recommendations of the Royal Commission on the Law relating to Mental Illness and Mental Deficiency. More recently, the estimated costs of engineering services have given rise to some difficulty, but with the help of the regional board I hope that this will shortly be resolved and that an early start will be possible.
    Mrs. Braddock: Is the Minister aware that there is perfect agreement between both the local authority and the Liverpool Regional Hospital Board on this matter, and that both have been pressing very strongly for this accommodation? This has been under consideration since 1950, and it is only in a Circular of 13th March that we have been told that there is no possibility in the very near future of this Newchurch scheme proceeding. As we get only half, and sometimes less than half, of the beds available because of our dependence on the Manchester region, will the Minister say whether this Newchurch scheme can be hurried up so as to relieve the position in Liverpool?
    Mr. Walker-Smith: I appreciate that there is pooling of accommodation between the two regions, and I have that in mind. I think that the hon. Lady has, if I may say so, formed rather too pessimistic a view about this matter. It is simply a question of getting right these engineering problems with regard to heating, and we shall certainly press on as soon as may be with that.

    Wages and Salaries (Payment by Cheque)
    Mrs. Braddockasked the Minister of Health whether he will require hospital management committees to consult the staffs of hospitals before they decide to pay staff wages and salaries by cheque; and if he will take steps to safeguard the rights of individual members of the staff if payment by cheque creates hardship.
    Mr. Walker-Smith: It is the normal practice of hospital authorities to consult their staff individually before introducing new arrangements to pay wages and salaries by cheque, and I am not aware of any case of requirement to accept a cheque in payment resulting in hardship. However, if the hon. Member has any particular case in mind, I will gladly consider it if she will send particulars to me.
    Mrs. Braddock: I will send the Minister particulars, but a matter of principle is involved. Is he aware that at the moment many hospital management committees are paying salaries and wages by cheque and that this puts great hardship on many of the staffs? Will he circulate hospital management committees telling them that, although they may pay by cheque, the position must be left open so that the staff may claim their wages in cash if they so desire?
    Mr. Walker-Smith: I will certainly consider the step which the hon. Lady has suggested. I think that, generally speaking, hospital authorities are aware of the position and that if employees wish to be paid in cash they are entitled to be so paid. At the same time, there are many conveniences in paying by cheque, particularly in the avoidance of the movement of large sums of money in isolated areas where mental hospitals are normally situated.

    London Teaching Hospitals
    Mr. Liptonasked the Minister of Health what plans he is now considering to reduce or change the number of London teaching hospitals.
    Mr. Walker-Smith: None, Sir.
    Mr. Lipton: Has the right hon. and learned Gentleman seen the reports stating that he is considering closing three London hospitals—Charing Cross, St. George's and Westminster? Is there any truth at all in those reports?
    Mr. Walker-Smith: I did see a report in a usually well-informed newspaper, but, in fact, I am not considering that course. There are certain proposals in mind with reference to Charing Cross and the Royal Free Hospital with which the hon. Gentleman is no doubt familiar, but there is no question of amalgamation.

    Land, Norwich
    Mr. J. Patonasked the Minister of Health what conclusions he has reached in his examination of the matters involved in the holding by the City of Norwich Corporation of land behind Norfolk and Norwich Hospital on behalf of the regional hospital board.
    Mr. Walker-Smith: I have carefully studied the implications and practicability of the four possible lines of approach discussed when the hon. Member and my hon. Friend the Member for Norwich, South (Mr. Rippon) brought representatives of the corporation to see me. I am making a suggestion to the corporation and am writing to the hon. Member and to my hon. Friend about it.

    Private Beds (Charges)
    Mr. John Hallasked the Minister of Health if he will amend the charges for hospital private beds so that the patient is charged only the difference between the cost of a public and private bed.
    Mr. Walker-Smith: No, Sir. This course would require legislation, and I doubt whether it would be the best way of using any additional money available for the Health Service.
    Mr. Hall: Will my right hon. Friend agree that National Insurance contributors who, for medical reasons, may be caused to occupy private beds are normally entitled to the full benefits of National Health Insurance, and is there not an element of injustice in forcing such a person to pay the full charge for a public bed which normally he or she could occupy free of charge, plus a further cost of 5 to 15 per cent.? Will he not look at this matter again?
    Mr. Walker-Smith: As I think my hon. Friend will know, this method of payment is prescribed by Section 5 of the National Health Service Act, 1946, and has been followed since then. If we were to vary it, it would require an amendment of that Section.
    Dr. Summerskill: Does the Minister realise that this is a retrograde suggestion, which would, indeed, lead to the heavy subsidisation of private beds and, consequently, a great abuse of the Health Service?
    Mr. Walker-Smith: I do not think I would associate myself with the harsh epithet the right hon. Lady applies to my right hon. Friend's suggestion, but there are difficulties in it which are not confined to the legislative difficulty which I indicated.

  MINISTRY OF HEALTH

    Artificial Limbs and Appliances
    Mr. Simmonsasked the Minister of Health whether he will indicate the steps now being taken to develop the work of the department of research and experiment to secure improvements in the design, performance and fitting of artificial limbs; and the extent of any co-operation Which exists to secure precise information about new artificial limbs and appliances available in other countries.
    The Parliamentary Secretary to the Ministry of Health (Mr. Richard Thompson): Since last year, the work of the research department at Roehampton has been under the regular supervision of a small executive committee of the Standing Advisory Committee on Artificial Limbs. On the recommendation of these committees, a special plastics laboratory is about to be established. The research staff keep in close touch with colleagues in other countries by correspondence, exchange of literature and samples, and by visits. Two members of the staff are at present visiting research establishments in the United States.
    Mr. Simmonsasked the Minister of Health whether he will introduce a series of leaflets for issue to limbless persons outlining the refinements and aids to all types of artificial limbs and appliances which are available through his Department's Artificial Limb and Appliances Services.
    Mr. R. Thompson: I am sending to the hon. Member a copy of a special leaflet which is given to arm amputees listing the appliances available for use with artificial arms. If the hon. Member
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    has other suggestions in mind and will let my right hon. and learned Friend have particulars, he will be glad to consider them.
    Mr. Simmons: Is the hon. Gentleman aware that my information is that the leaflet is of very flimsy paper and its contents comprise a jumble of things and that it is not at all specialised? I had more in mind the kind of leaflet issued by the Ministry of Pensions and National Insurance. Will the hon. Gentleman consider giving members of the Ministry of Pensions Advisory Committee copies of literature issued in respect of war disablement when matters affecting disabled ex-Service men are to be considered?
    Mr. Thompson: I will look at the leaflet and see whether it can be improved in any way. I will also bear in mind what the hon. Gentleman said in the second part of his supplementary question.

    Motor Tricycles
    Mr. Simmonsasked the Minister of Health whether he will state the numbers of motor tricycles issued to war disabled pensioners and the numbers issued to National Health Service patients; and whether, in view of the special circumstances in which war pensioners sustained their disabilities, he will now extend the regulations to ensure that all war pensioners who have had both legs amputated are entitled to receive a mechanically propelled vehicle at State expense.
    Mr. R. Thompson: At the end of March in England and Wales, 1,778 power propelled tricycles were on issue to war pensioners and 10,655 to National Health Service patients. Eligibility depends on the degree of loss of use of the legs and, in those less seriously disabled, on employment needs also, and a number of war pensioners with double amputations below the knee as well as double amputees with at least one amputation above the knee are eligible on these grounds. My right hon. and learned Friend is not satisfied that he would be justified in varying the present practice.
    Mr. Simmons: Has there been any variation in the qualification for the vehicles since the merger between the Ministry of Pensions and the hon. Gentleman's Ministry in respect of the

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    scheme, and how many of the vehicles are the all-weather type of self-propelled tricycles?
    Mr. Thompson: In reply to the first part of the hon. Gentleman's supplementary question, there have been no variations. If the hon. Gentleman will give me notice of the point raised in the second part of his supplementary question, I shall be glad to give him the information.

    Poliomyelitis Vaccine
    Mrs. Castleasked the Minister of Health what target he has set for the production of anti-poliomyelitis vaccine by Messrs. Glaxo and Burroughs Wellcome, respectively.
    Mr. Edelmanasked the Minister of Health what invitations he has given to firms other than the present contractors to participate in the production of the British type of anti-poliomyelitis vaccine; and when these invitations were made.
    Mr. Walker-Smith: It continues to be the Government's intention that, as soon as supplies are sufficient, only the British type of vaccine should be used in the vaccination scheme. The manufacturers are aware of this, and the issue of individual invitations to produce vaccine does not arise. Nor is there any question of the Government setting a production target for individual firms.
    Mrs. Castle: Is the Minister aware that, on an A.T.V. programme the other day, Dr. Wheeler of Burroughs Wellcome explained that his firm had had no kind of guidance from the Ministry as to how much vaccine it should produce, and that it had set its own target, which was merely four million doses per annum? In view of the fact that that is quite inadequate for current needs, is it not nonsense to talk about making a British vaccine the basis of our supplies, and is it not wrong to leave the production of British vaccine really to the initiative of British firms governed purely, as Dr. Wheeler made plain, by commercial considerations?
    Mr. Walker-Smith: The hon. Lady has asked several questions. In regard to the first, I am not, of course, responsible for what is said on an A.T.V. or any other programme. As to whether a sufficient
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    order was placed, the orders placed with the British manufacturers were for the quantities which the firms thought they could produce for a period of six months. In point of fact, as, I think, she and the House know, the quantities delivered did not come up to orders placed, so I do not think it can be said that the Government were remiss in not placing larger orders.
    Mr. Edelman: But as the Minister has described this vaccine as the safest and has said that it is his ultimate aim to provide all unvaccinated children with it, why does he tolerate a semi-monopoly in its production? Why not invite the whole pharmaceutical industry, irrespective of patent rights, to co-operate in order to produce the vaccine that he has described as being the safest and let it be available to every child?
    Mr. Walker-Smith: It is not a matter of the Government issuing invitations to these commercial companies to produce this vaccine. Only large and well-equipped companies, as I think the hon. Gentleman will appreciate, can enter this field. I certainly would welcome supplies of British vaccine which is up to the standard from any source, and I am certainly ready to consider the purchase of British-type vaccine from whichever company chooses to put it forward.
    Dr. Summerskill: Can the right hon. and learned Gentleman tell the House whether he has told companies other than Messrs. Glaxo and Burroughs Wellcome that he is prepared to receive the vaccine from them?
    Mr. Walker-Smith: I think they are well aware of that position. Indeed, there is a third British firm which has, in fact, entered into production at the present time, so I think the right hon. Lady can take it that the position is well known in those circles.
    Mr. C. Hughes: Is the Minister aware that in many cases the British vaccine is being given for the first vaccination and a foreign vaccine for the second? Would he say whether that is approved by his Ministry's experts?
    Mr. Walker-Smith: Oh, yes. I dealt with that in answer to a Question put to me by the hon. Member for Barking (Mr. Hastings) a week or two ago, and

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    the Answer was that it is quite all right, on medical grounds, to vary the type of vaccine between the two injections.
    Dr. Summerskill: I hope the Minister will forgive my pressing this, but both my hon. Friends are trying to extract this information. Can he say why, although he has declared in this House that he is quite prepared to have vaccine from other British firms who can produce it, he has specifically asked only two—Messrs. Glaxo and Burroughs Wellcome?
    Mr. Walker-Smith: I have not specifically asked only two. Orders were placed with those two because they were the only two which were in a position to accept orders and to promise deliveries. As I have already indicated to the right hon. Lady, this third company is now in production, and, if its vaccine passes the M.R.C. tests, I am, of course, fully prepared to consider placing orders with it.
    Mr. Edelmanasked the Minister of Health what percentage of those eligible for immunisation against poliomyelitis were either unvaccinated or had received only one inoculation against poliomyelitis at the latest date for which these figures are available.
    Mr. Walker-Smith: In Great Britain at the end of February, the latest date for which national figures are available, 52 per cent. of those in the eligible groups who had registered were awaiting vaccination and 11 per cent. had had only one injection. Figures for the end of April should become available in a day or two.
    Mr. Edelman: Does not the relatively low figure of registration and inoculation reflect the anxiety of parents at the Minister's grading of imported vaccine as second and third best? Would he not now positively recommend the Salk vaccine with the full confidence that, in the United States, where 17 million people have been safely inoculated, poliomyelitis is now well on the way to being a thing of the past?
    Mr. Walker-Smith: I do not think that the registration figures necessarily reflect what the hon. Gentleman suggests. In any event, as I have already indicated to the House, those figures are only for the end of February, and registration is a
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    continuing process; no doubt, when the figures for the end of April become available in a day or two, we shall see a material increase in the number of those registered.
    It is true that a lot of people have been vaccinated in the United States, but there are still one in four of the 65 million young people under twenty not yet vaccinated, and 40 per cent. of all children under the age of five in the United States have not, in fact, started their vaccination.
    Mr. Snow: Can the right hon. and learned Gentleman say whether the figures he has quoted are in respect of children who come within the direct responsibility of the Ministry of Education, and do they include children educated in the private sector of our educational system?
    Mr. Walker-Smith: The hon. Gentleman is referring, of course, to the earlier British figures. They take in all children, wherever they are educated. They are national figures.
    Mr. Liptonasked the Minister of Health how many children in London now await poliomyelitis vaccination; and how many doses are now available for them.
    Mr. Walker-Smith: The number on 30th April was 146,322, and a further 20,472 were awaiting their second injection. On that date, the county council held 61,195 doses of vaccine; an additional 28,860 doses have since been sent to them; and further substantial supplies should reach them this week and next.
    Mr. Lipton: Does the Minister appreciate that the figure which he has given will go some way towards relieving some of the public uneasiness that exists? Will he give some kind of estimate of how many of the children now registered will still be unvaccinated by the commencement of the poliomyelitis season next month?
    Mr. Walker-Smith: I am obliged to the hon. Gentleman for what he has said. My estimate is that the supplies already issued, together with those about to be distributed, should very soon wipe out the deficit existing at the end of April. But, as I remarked to the hon. Member

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    for Coventry, North (Mr. Edelman), registration is a continuing process and we shall continue to vaccinate the late entrants.
    Mr. Gibson: Will the right hon. and learned Gentleman say whether his estimates are on the basis of two inoculations for each child? If not, the danger of poliomyelitis in London, which increased last year over the year before, I understand, will be very serious.
    Mr. Walker-Smith: I am taking account in that estimate of the necessity to give two injections to each child.
    Mr. Fortasked the Minister of Health when the substantial new supplies of Salk vaccine will become available for use in this country.
    Mr. Walker-Smith: Two million doses of Salk vaccine which have passed their tests and been licensed for issue in America are due to arrive tomorrow, and they will be distributed immediately to local health authorities. Another 1½ million doses of this vaccine are expected next week. In addition, a batch of half a million doses of British tested Salk vaccine is now being distributed, and further supplies are expected as tests are completed.
    Mr. Fort: Would my right hon. and learned Friend tell us what is the estimated percentage of the registrations expected by the end of July which will remain unvaccinated when these and subsequent supplies have been distributed to the medical officers of health?
    Mr. Walker-Smith: We shall be able with these supplies of vaccine to keep the vaccination programme going at full speed. The precise answer to my hon. Friend's question must, of course, depend upon the number of late registrations which are made.
    Mr. Edelman: Will the right hon. and learned Gentleman give an assurance to hesitating parents that this Salk vaccine can be used with full confidence?
    Mr. Walker-Smith: A Circular has been issued to medical officers of health dealing with this matter, and detailed guidance, including the Medical Research Council's Report, has been sent to them. Therefore, I do not think I ought to put
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    a gloss on the expert guidance which has been given to the doctors to whom parents should turn for individual advice.

    Coronary Thrombosis
    Mr. Snowasked the Minister of Health if he is aware of the increase in the death rate due to coronary thrombosis in recent years; and what plans his Department have to inform public opinion and to secure the guidance of recognised research organisations for the benefit of the medical profession and lay public in such matters as diagnosis, treatment and prophylactic measures.
    Mr. Walker-Smith: I am aware of this increase. Research is proceeding into various aspects of the disease and, in accordance with recognised practice, the results will be made known as they become available.
    Mr. Snow: While I am grateful for that answer, is the right hon. and learned Gentleman aware that from statistics in my possession, a copy of which I took the liberty of sending to him, and in accordance with the last Report of the Registrar-General who drew attention to this matter, deaths due to this disease have increased during the past five years by 10,000 in the case of men and by about 6,000 in the case of women? Is the Minister satisfied that information to the lay public on the basis of knowledge already in the possession of the medical profession is being adequately disseminated? If not, could he take adequate steps in this matter?
    Mr. Walker-Smith: As I think the hon. Gentleman is aware, active research into this matter is proceeding at present in hospitals, clinics and associated laboratories, and the Medical Research Council has investigations in progress on special aspects including the incidence, causes and treatment. In accordance with ordinary practice, the results of the research will be made known to medical authorities and, so far as is appropriate, to the lay public.
    Mr. Gough: Is my right hon. Friend aware that certain rather wild statements have been made about the symptoms of this disease, and that in one paper they were set out in such detail as to indicate that they will obviously apply to every hon. Member of this House if he does his

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    job properly? Will my right hon. Friend give an assurance that perhaps some guidance could be given about whether or not these statements are wild or temperate?
    Mr. Walker-Smith: I have not seen the actual statements to which my hon. Friend refers. I am not quite sure about the vulnerability of hon. Members to coronary thrombosis. I believe that it does attack mainly those who have sedentary habits and a fatty diet.

  U.S.S.R. (BRITISH SUBJECTS' RELATIVES)
  Lady Megan Lloyd Georgeasked the Secretary of State for Foreign Affairs what representations have been made by Her Majesty's Embassy in Moscow, on behalf of British subjects who are seeking the admission to this country of relatives resident in the Union of Soviet Socialist Republics; how many such cases have been handled by the embassy; and what results have been achieved.
  The Joint Under-Secretary of State for Foreign Affairs (Mr. Ian Harvey): We have made repeated representations to the Soviet Government during the past eighteen months about those people for whom the entry visas are available and have drawn particular attention to the human considerations involved. Out of the 262 people concerned, with relatives in the United Kingdom or Australia, only 25 have so far been given permission to leave the Soviet Union.
  Lady Megan Lloyd George: Can the Parliamentary Secretary say whether these representations have included the case of Maria Gajlikowska, whose parents in this country lost their only son in a tragic accident in 1956 and are, naturally, most anxious that their daughter should be allowed to rejoin them here?
  Mr. Harvey: Yes, Sir. This is a very sad case in which, as the hon. Lady has said, the parents suffered a very great personal tragedy. At my request, the Soviet Ambassador in London recently called at the Foreign Office to discuss this case, but the Soviet authorities have apparently closed their minds to this essentially human appeal.

  COMMUNIST COUNTRIES (TRADE)
  Mr. Fernyhoughasked the Secretary of State for Foreign Affairs what has been the outcome of the recent discussions in Paris with regard to exports to Russia and China.
  Mr. Ian Harvey: I have nothing to add to the reply which I gave to the hon. Member for Glasgow, Govan (Mr. Rankin) on 5th May.
  Mr. Fernyhough: Since that reply just said nothing, can the hon. Gentleman tell us what is holding up these negotiations? Is he not aware of Britain's great need to expand trade, and is he not also aware of the growing unemployment in this country? Is it not time that we showed a little independence, as Western Germany has already done, and signed our own trade agreements?
  Mr. Harvey: I do not agree that my previous reply said nothing. I indicated that serious discussions were going on. There is no objection to their going on for quite a long time, provided they achieve results; and they are still going on.
  Mr. Rankinasked the Secretary of State for Foreign Affairs if he will instruct our representatives at the meeting of the Co-ordinating Committee on Trade with Communist Countries, now proceeding in Paris, to press for the implementation of the Government's decision to place our trading relations with Russia and China on the same basis.
  Mr. Ian Harvey: The same system and the same considerations of security apply to the export of goods to both China and the Soviet Union.
  Mr. Rankin: Is the Under-Secretary aware that the Foreign Office is beginning to fall behind the level of our industrialists in their outlook on this problem? Is he aware that Sir Greville Maginness, chairman of the British Association of Machine Tool Manufacturers, stated a few days ago that it is time that we wound up the whole paraphernalia of Cocom and got rid of the system of embargoes and, so far as the export of warlike materials is concerned, reverted to the existing system of licensing? What has the hon. Gentleman to say about that point of view?
  Mr. Harvey: I am glad that the hon. Gentleman is now paying such attention to the views of industrialists, which will probably help him. So far as we are concerned, I have clearly stated the position with regard to this Committee.

  SUMMIT CONFERENCE
  Mr. Swinglerasked the Secretary of State for Foreign Affairs (1) if he will now put forward proposals to the United States, Soviet, and French Govenments with a view to fixing a precise date for the commencement of summit talks;
  (2) what proposals Her Majesty's Government have under consideration regarding the composition of the Summit Conference.
  The Secretary of State for Foreign Affairs (Mr. Selwyn Lloyd): The three Western Powers made plain, in their communication of 31st March to the Soviet Government, that they consider that it will be for the Foreign Ministers, when they meet and if they conclude the preparatory work to their satisfaction, to agree on the date, place and composition of the summit meeting. The Soviet Government, in their aide-mémoire of 28th February to the United States Government, also said that the Foreign Ministers should decide these questions.
  Mr. Swingler: Can the Foreign Secretary tell us, from his experience of the N.A.T.O. Conference, whether the Western Governments are now really keen on having summit talks or not? Is he aware of the articles appearing in the Press suggesting that some, at least, of the Western Governments are not really keen to pursue this idea? If they are, how long is this wrangling to go on? Would it not be a good idea to take some new initiative to try to clinch the matter by naming a date?
  Mr. Lloyd: I think it is quite true that many of the Western Governments, and the public in many Western countries also, are perplexed by some of the procedural methods of the Soviet Union. They are disappointed also at what happened recently in the Security Council. Nevertheless, there is still a general desire that we should have summit talks if they are properly prepared.

  ANTARCTICA
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs to what extent it is the policy of Her Majesty's Government to support the recent proposal of President Eisenhower for a 12-Power conference to ensure international co-operation in Antarctica for peaceful purposes.
  Mr. Selwyn Lloyd: Her Majesty's Government welcome President Eisenhower's proposal.
  Mr. Henderson: Can the Foreign Secretary give an assurance that Her Majesty's Government would be in favour of any international organisation which might be established under this treaty being more directly associated with the United Nations? Secondly, would he indicate that, in Her Majesty's Government's view, this region should be open for scientific and other development by all countries, not merely the twelve which are associated with the proposals?
  Mr. Lloyd: The principles which we have already accepted are freedom of scientific exploration and what is called the non-militarisation of the area. Those are the principles we have adopted and which, I think, we should seek to pursue. The method best calculated to achieve those results ought to await the conference itself.
  Mr. Younger: Are we to take it from the Foreign Secretary's answer that, in Her Majesty's Government's view, these discussions, at the moment, at any rate, exclude any questions as to sovereignty? Is it not in fact questions of sovereignty which have so far caused the main trouble, and is it not rather doubtful whether even the limited objectives the Foreign Secretary is talking about can be achieved unless something is done about the quarrels over sovereignty?
  Mr. Lloyd: I think that one might hope to achieve the two principles I have named, leaving the position as to sovereignty frozen. I think that that is one of the matters which will have to be dealt with.
  Mr. Biggs-Davison: Is my right hon. and learned Friend aware that many of us would welcome a treaty which upheld

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  the sovereignty of the United Kingdom, Australia and New Zealand in their respective Antarctic territories.
  Mr. Lloyd: In the action we have taken, we have acted in agreement with the Governments of Australia and New Zealand.

  LAW OF THE SEA (CONFERENCE)
  Sir J. Duncanasked the Secretary of State for Foreign Affairs if he will publish a White Paper giving a full report of the results of the recent Conference on the Law of the Sea.
  Mr. Selwyn Lloyd: Yes, Sir; I am putting in hand the preparation of a White Paper on this Conference.
  Sir J. Duncan: As so much publicity has been given to the unfavourable results of the Conference, will the White Paper clearly state the successful parts of the Conference so that the public may understand that it has not been a total loss?
  Mr. Lloyd: I am glad my hon. Friend as asked that question. A great deal of the work of the Conference has been extremely useful. It was really only one aspect which we found not helpful. I will certainly see that my hon. Friend's suggestion is borne in mind in preparing the White Paper.

  CENTRAL EUROPE (RAPACKI PLAN)
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs to what extent Her Majesty's Government now support the Rapacki Plan for Central Europe.
  Mr. Selwyn Lloyd: I should be grateful if the right hon. and learned Gentleman would put down this Question to me next Monday when I am first for Questions. The reason I am asking for this delay is that I have not yet communicated the views of Her Majesty's Government to the Polish Government. I think it would be more courteous to do that before making a public statement. I do, however, promise the right hon. and learned Gentleman an answer on Monday.

  UNITED NATIONS

    Committee on Public Information
    Mr. Goodhartasked the Secretary of State for Foreign Affairs if he will give details of the composition and terms of reference of the expert Committee set up by the United Nations on Public Information; and if he will state the name and qualifications of the United Kingdom representative on that body.
    Mr. Ian Harvey: Yes, Sir. The decision to set up this Committee was taken at the last Session of the United Nations General Assembly. The Committee consists of six individuals. They were appointed by the Secretary-General of the United Nations after they had been nominated by the Governments of the United Arab Republic, India, the Soviet Union, the United States, the United Kingdom and Uruguay. Their instructions are to undertake a review and appraisal of the work, the methods used and the effectiveness of the results achieved by the Public Information Services of the United Nations with a view to recommending possible modifications designed to ensure maximum effectiveness at the lowest possible cost. The Committee is to report before the Thirteenth Session of the General Assembly opens on 16th September.
    The United Kingdom Member of the Committee is Mr. R. A. Bevan of Messrs. S. H. Benson Limited, advertising agents. My right hon. and learned Friend would like to express his appreciation of Mr. Bevan's willingness to undertake this task to which he brings a high degree of technical experience and professional knowledge.
    Mr. Goodhart: Is my hon. Friend aware that his reply will give satisfaction to those of us who have been anxious about the administration of these funds earmarked for public information?

    Indonesia
    Mr. Zilliacusasked the Secretary of State for Foreign Affairs whether he will call the attention of the Security Council to the fact that United States arms and aeroplanes are reaching the Indonesian rebels from the Philippines and Siam, and that this constitutes a situation which may cause international friction.
    Mr. Selwyn Lloyd: No, Sir. I have no evidence that United States arms and aeroplanes are reaching dissident forces in Indonesia.
    Mr. Zilliacus: In view of the disquiet displayed by various countries in the Far East, would not the Foreign Secretary inquire into this matter, because there is considerable evidence that such is taking place?
    Mr. Lloyd: The President and the Secretary of State of the United States have categorically stated that United States policy is one of careful neutrality.

  PORTUGUESE COLONIES
  Mr. Bennasked the Secretary of State for Foreign Affairs (1) if he will publish the exchange of notes between his late Majesty's Ambassador in Lisbon and Dr. Salazar, dated 16th and 23rd June, 14th September and 4th October, 1943, relating to the use of facilities in the Azores by the Allies, and including the full text of the assurances given at that time by His Majesty's Government regarding the maintenance of Portuguese sovereignty over all Portuguese Colonies after the war;
  (2) how far the assurances given to the Portuguese Government by His Majesty's Government on 16th June and 14th September, 1943, regarding the maintenance of Portuguese sovereignty over all Portuguese Colonies after the war, are still valid or in force; and
  (3) what discussions there have been between Her Majesty's Government and the Portuguese Government since the war regarding the notes of 16th June and 14th September, 1943; if both Governments agree upon their interpretation of the assurances contained in them; and to what extent, arising from these notes, Her Majesty's Government are now in any way committed to the maintenance of Portuguese sovereignty over any Portuguese Colonies.
  Mr. Selwyn Lloyd: I will arrange for copies of the Notes to be available in the Library. As a result of this Exchange of Notes, the Portuguese Government granted to Her Majesty's Government, in the spirit of the ancient Alliance at a critical period of the war, facilities which were of great value to the
  22
  Allied war effort. The assurances to which the honourable 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.
  The second and third parts of the third Question do not, therefore, arise.
  Mr. Benn: While, of course, everybody will recognise the value of the Azores base during the war, is it not highly undesirable that hon. Members should receive the news that Her Majesty's Government had entered into a guarantee over Portuguese Colonies after the war from the Portuguese authorities, that information not having been published in this country? Would he also clear up the ambiguity that still remains since Dr. Salazar still asserts that these guarantees to Portuguese Colonies, including Goa, are still in force? May I thank the right hon. and learned Gentleman for himself now repudiating what appears to be the remaining validity of these guarantees?
  Mr. Lloyd: In answering the hon. Gentleman, I have dealt simply with the exchanges during the war which, by their terms, related to particular circumstances. I have not entered into the wider aspects of the matter at all.
  Mr. G. R. Howard: Would not my right hon. and learned Friend agree that among a large section of the people of this country there is a feeling that the Portuguese came to our rescue at a very critical time, that they are one of our oldest allies and that we should honour our treaty obligations?
  Mr. Lloyd: We were certainly grateful to the Portuguese at that time, and we are grateful to them still. We have every intention of honouring the terms of our ancient Alliance.
  Mr. Younger: Can the Foreign Secretary say what were the implications of his supplementary answer? He did not mean, I trust, that there have been other negotiations since the war in which we did give guarantees of this kind. Would he clarify that? He seemed to suggest that there were discussions on this wider problem not referred to in his previous Answer.
  Mr. Lloyd: I was referring to the terms of our treaties.
  Mr. Dugdale: May I press the right hon. and learned Gentleman, because he has introduced a greater note of ambiguity? May we know whether there are guarantees now, or whether the guarantees made during the war have ceased to be operative?
  Mr. Lloyd: What I made quite clear was that the notes exchanged during the war related, by their terms, to that particular period. We are still bound by our treaties with Portugal.
  Mr. Benn: In view of the fact that the Foreign Office in a letter to me on this subject last week said that the Exchange of Notes had no relevance or validity today, would not the right hon. and learned Gentleman have the courage to repeat that in the House?
  Mr. Lloyd: If the hon. Gentleman will do me the courtesy to study my answer, he will see that I said that the Notes, by their terms, related to a particular period.
  Mr. Benn: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on the Adjournment.

  N.A.T.O. CONFERENCE
  Mr. Zilliacusasked the Secretary of State for Foreign Affairs what decision was taken at the North Atlantic Treaty Organisation Conference relating to the entry of a united Germany into the North Atlantic Treaty Organisation and negotiations on the Rapacki Plan as part of a policy of disengagement in Europe.
  Mr. Selwyn Lloyd: No new decisions were taken on either of these matters.
  Mr. Zilliacus: Would it not be desirable to take a new decision about Germany in relation to an all-European Treaty? Is it not a fact that the policy which has been pursued since 1943 of insisting that a united Germany should be free to enter N.A.T.O. has proved an absolute bar to agreement with the Soviet Union, and will not we modify our position?
  Mr. Lloyd: I think that the alternative proposition, which is a reunited neutralised Germany, would pose much greater problems for the Western world.
  Mr. Healey: Can the Foreign Secretary say whether he protested to the American Secretary of State and to the N.A.T.O. Council about the American Government jumping the gun on this issue on which N.A.T.O. itself so far, according to the Foreign Secretary, has still not made up its mind?
  Mr. Lloyd: Certainly not. Nor do I suggest that N.A.T.O. has not made up its mind. What I have said to the hon. Gentleman is that we have not yet decided what alternative proposals might be put forward.
  Mr. Zilliacusasked the Secretary of State for Foreign Affairs what proposals the North Atlantic Treaty Organisation Conference decided upon or approved for submission to the Summit Conference on the abolition of nuclear tests, disarmament and the lessening of tension in Europe and the Middle East; and whether he will make a statement.
  Mr. Selwyn Lloyd: The North Atlantic Treaty Organisation Foreign Ministers had a full discussion about the kind of proposals which might be considered at a summit Meeting. Proposals to be put forward at such a Conference are being prepared in the Permanent Council of the North Atlantic Treaty Organisation, and those who are engaged in this work will, of course, be guided by the views expressed at the Copenhagen meeting.
  Mr. Zilliacus: Would the right hon. and learned Gentleman bear in mind that, in preparing the final position on this matter, the United States appears to be coming round to the idea of an agreement on tests, apart from a general agreement regarding disarmament, and also bear in mind the accumulating evidence of the danger to health caused by continuing tests?
  Mr. Lloyd: I will certainly bear in mind all relevant factors, without admitting that either of the hon. Gentleman's propositions is accurate or relevant.
  Mr. Paget: May we take it that in the preparations for this conference and the Government's proposals they are not worried about the prospect of anything which they propose being accepted?
  Mr. Lloyd: I assure the hon. and learned Gentleman, if I understand the point of his supplementary question, that we shall only put forward proposals which we should like to be accepted.

  DIPLOMATIC RELATIONS
  Mr. Rankinasked the Secretary of State for Foreign Affairs with what States the United Kingdom does not maintain diplomatic relations.
  Mr. Ian Harvey: Her Majesty's Government do not maintain diplomatic relations with Albania, Saudi Arabia or with the United Arab Republic.
  Mr. Rankin: Is it not the case, as I am assured it is, that we do not maintain diplomatic relations with Eastern Germany? If that is so, is the Under-Secretary aware that the United States, which does not maintain diplomatic relations with Eastern Germany either, nevertheless manages to take 60 per cent. of all the porcelain produced at the Meissen factories? In face of that good example, is there any reason why we should not at least exchange trading missions with East Germany?
  Mr. Harvey: The hon. Gentleman asked me with what States we do not maintain diplomatic relations. We do not recognise the D.D.R.

  AGRICULTURE, FISHERIES AND FOOD

    Ice Cream
    Mr. G. R. Howardasked the Minister of Agriculture, Fisheries and Food what percentage of real cream or milk has to form an ingredient of the foodstuff known as ice cream under his existing regulations.
    The Minister of Agriculture, Fisheries and Food (Mr. John Hare): The Food Standards (Ice Cream) Order, requires ice cream to contain not less than 7½ per cent. milk solids other than fat, and not less than 5 per cent. fat. The fat may be derived from milk or from other sources. As my hon. Friend knows, I am, however, accepting the recommendations of the Food Standards Committee, details of which I announced on 29th April in reply to my hon. Friend the Member for Twickenham (Mr. Gresham Cooke).
    Mr. Howard: In view of the very considerable importance of the milk trade to the small farmers of this country, is my right hon. Friend aware that, as I am sure they will, they will be extremely
    26
    grateful that it is proposed to extend these recommendations that the use of the term "dairy ice cream" should be restricted to ices made exclusively from dairy products? Can my right hon. Friend say what provisions are to be made for milk ices as to what they will contain? Thirdly, will the Milk Marketing Board be able to give its views?
    Mr. Hare: I am grateful to my hon. Friend for what he said in the first part of his supplementary question. Milk ices must contain nothing but a dairy fat content. There must not be vegetable fat content in those. I have agreed that ice cream should continue to be called "ice cream". As the public have so called it for the last seventeen years, I think it would be very difficult for a Minister to impose anything different.
    Mr. de Freitas: Will the right hon. Gentleman not go further and see that substances sold and called ice cream will contain a substantial amount of real cream?
    Mr. Hare: As I have explained, and as I think the hon. Member knows from the Report of the Food Standards Committee, it advised that the commodity known as ice cream, and which has been sold as ice cream for the last seventeen years, whether or not there was dairy content in it, the public regard as ice cream, and it would be unrealistic to call it otherwise. I have, however, stressed the need for a dairy ice cream product, and I wish that product to be pushed as much as possible.

  PENSIONS AND NATIONAL INSURANCE

    Widows
    Mr. Moodyasked the Minister of Pensions and National Insurance the number of 10s. pension widows in the County Borough of Gateshead in receipt of National Assistance benefits; and what percentage that is of these widows.
    The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Miss Edith Pitt): I regret that the information asked for is not available for particular localities.
    Mr. Moody: Is the hon. Lady aware that the position in Gateshead is pretty

    27
    acute, and does she not think it is time that the whole problem of the 10s. widows should be looked at again in a more humane way than it is at present?
    Miss Pitt: While I am unable to give the number at Gateshead, figures have been obtained by the National Assistance Board, as a result of a sample, which show—and I hope this will be some comfort to the hon. Member—that only about 7 per cent. of the 10s. widows have resort to National Assistance, which is less than the proportion of other widows and other pensioners.

  COAL

    Production and Wages
    Lieut.-Colonel Bromley-Davenportasked the Paymaster-General, in view of the fact that in spite of almost total mechanisation the miner today is hewing 14 tons less annually than his predecessor two decades ago, what has been the cost of mechanisation since the nationalisation of the mines and the extra cost in wages since the same period; and if he will represent to the miners the importance of improving and extending our export trade and thus contributing to the well-being of those engaged in the industry both now and in the future.
    The Parliamentary Secretary to the Ministry of Power (Sir Ian Horobin): An accurate figure of expenditure on mechanisation since 1947 is not available. Cash wages per ton of coal were 26s. in September, 1947, and 47s. 6d. in September, 1957 (or 29s. 8d. at 1947 prices). The coal industry is well aware of the importance of exports, and it is not lack of supplies that is holding back this trade.
    Lieut.-Colonel Bromley-Davenport: After pouring all these hundreds of millions into the market to make conditions easier for the miners and to increase production, is not all the thanks the taxpayer has received for this—[HON. MEMBERS: "Reading."] Not at all.
    Mr. Fernyhough: On a point of order. I am quite sure, Mr. Speaker, that if you were to see the hon. and gallant Member as we can from here you would observe that the hon. and gallant Member is reading, despite his protest.
    Mr. Speaker: I did not think that at all. Hon. Members often look as though they are reading even when they are not. I thought that what the hon. and gallant Member was saying was the product of his extempore wit.
    Lieut.-Colonel Bromley-Davenport: After pouring all these hundreds of millions into the market to make conditions easier for the miners and to increase production, is not all the thanks the taxpayer has received worse quality, less production and increased prices? I understand that it is the intention to pour another £1,000 million——
    Mr. Speaker: Order. The hon. and gallant Member should bring his supplementary question to a conclusion.
    Lieut. - Colonel Bromley - Davenport: May I just finish this last part of my supplementary question, Mr. Speaker? This last part has got top spin on it. If it had not been for hon. Gentlemen opposite interrupting I should have finished by now. Is it not intended to spend a further £1,000 million on the mines, and does not my hon. Friend realise that the taxpayer considers this very much like pouring good money after bad?
    Sir I. Horobin: I hope I shall not hit across the spin. The country has undoubtedly received some return for the very large sums of money invested in the mines since the war. Whether it has received as much return as it should have done is too big a question to answer in a reply to a supplementary question.

  MINISTRY OF SUPPLY

    Ordnance Factory, Radway Green
    Mr. Swinglerasked the Minister of Supply why men who have been accepted as fit to serve in the Army are being rejected on medical grounds at Radway Green Royal Ordnance factory.
    The Minister of Supply (Mr. Aubrey Jones): Men seeking employment have to satisfy the factory medical authorities that they are fully fit to do the work which is available. My hon. Friend has already written to the hon. Member about a particular case which he submitted.
    Mr. Swingler: Is the Minister aware that that Answer is most unsatisfactory? Is he aware that I submitted to his hon. Friend the case of a young man, who is considered perfectly fit today, who, after two years' service in the Army, came out most anxious to work in the Ordnance Factory and produced an excellent record of his Army service but was turned down? Is he aware that this is regarded as grossly unfair?
    Mr. Jones: I am aware of that case. The job in question was one on certain machine work. The man was found to have defective eyesight, and the defect could not be cured by glasses. He was therefore considered to be unsuitable for the job which was available.

    R.A.F. Transport Aircraft
    Mr. de Freitasasked the Minister of Supply, in respect of which Royal Air Force transport aircraft there are contracts for spare parts; and in what year each of these types entered squadron service.
    Mr. Aubrey Jones: There are current spare parts contracts for all transport aircraft in service in the Royal Air Force. These aircraft are the Beverley and the Comet which entered squadron service in 1956; the Hastings and the Valetta in 1948; the Viking in 1946; and the Dakota which came into service during the war. In addition, there are spare parts on order for the Britannia which is not yet in service with the Royal Air Force.
    Mr. de Freitas: Is it not a fact that it becomes increasingly expensive to maintain these old transport aircraft, and is it not time that the Minister used his influence with the Air Ministry to see
    30
    that the old, out-of-date aircraft are scrapped and replaced by more modern ones considerably cheaper to maintain?
    Mr. Jones: As I have told the hon. Gentleman on more than one occasion, I have as yet no requirement for a new transport aircraft.

    Aeronautical Research and Development
    Mr. de Freitasasked the Minister of Supply what are his plans for ensuring the progress of research and development into military aviation now that it has become so much more profitable for private firms to concentrate on civil aviation.
    Mr. Aubrey Jones: I must ask the hon. Gentleman to await the statement on the Government's policy on aeronautical research and development which I shall be making very shortly. I can, however, assure him that there will be no neglect of the research and development work necessary to meet military requirements.
    Mr. Beswick: Can the Minister say what he means by "very shortly"? We are told from week to week that a statement is coming; may we have more details about when it is likely to be made?
    Mr. Jones: I believe that there is a Question on the Order Paper for tomorrow.

BUSINESS OF THE HOUSE
Proceedings on Government Business exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House).—[Mr. R. A Butler.]
ORDERS OF THE DAY

  FINANCE BILL
  Order for Second Reading read.
  3.30 p.m.
  The Financial Secretary to the Treasury (Mr. J. E. S. Simon): I beg to move, That the Bill be now read a Second time.
  In the recent Budget debate we had an opportunity to discuss the fiscal proposals of my right hon. Friend the Chancellor of the Exchequer against the general background of the economy. Within the scope that he felt to be available to him my right hon. Friend proposed a number of important reforms in the fiscal system, and those are now embodied in this Finance Bill. The reforms fall into five main groups.
  In the first there are major tax remissions and fiscal improvements. There is the reduction and reform of the Purchase Tax in Clause 1 and the First and Second Schedules; the recasting of Profits Tax in Clauses 20 and 21 and the Seventh Schedule; the increase of initial allowances in Clause 13; the halving of the Entertainments Duty on cinemas and the removal of the distortions inherent in the present structure of the duties on wines.
  Secondly, there are measures to relieve particular hardship. In that category there are the extended benefits to the older members of the community; the relaxation of the expenses rule under Schedule E; the help given to churches and other charities in Clause 15; the relief to estates which at present have to pay two lots of death duties—Estate Duty—simultaneously or in rapid succession, and the remission and reduction of Stamp Duty on small conveyances.
  Thirdly, there is a series of useful administrative reforms, of which the most important are probably the reforms of the vehicle licensing system, the time limits for appeals and claims to relief and the reform of the tithe redemption system, and the most immediately lucrative to the Exchequer, the winding-up of the Treasury Chest Fund.
  Fourthly, there are certain measures for the protection of the Revenue, that is, to prevent one taxpayer obtaining an anomalous or inequitable benefit which has ultimately to be met by the general
  32
  body of taxpayers. These are the proposals to deal with dividend stripping, with revocable settlements and with enlargements of life interests for purposes of Estate Duty.
  Lastly, there are provisions to give clarity to the law where either it has been interpreted in a sense contrary to what Parliament intended, or where doubt has arisen which has called in question the validity of transactions entered into in good faith on an understanding, or misunderstanding, of the law.
  In this class there come the redefinition of "business" for Purchase Tax purposes, the declaration about settlements outside the United Kingdom, in Clause 18 (5), and the validation of the power of life tenants to give a title to property in satisfaction of death duty.
  Although I have grouped my right hon. Friend's proposals in this way, I think that it would be more for the convenience of the House if I went through the Clauses of the Bill consecutively. I know that in a debate on a Finance Bill the House expects the mover to deal with each of the Clauses. But I do not propose to repeat the arguments for the major reforms which my right hon. Friend has proposed, because they were debated at length during the Budget debate. I propose rather to concentrate on those provisions which were not explored at any length at that time, particularly where the Clause may present some difficulty in interpretation.
  There is another reason which leads me to deal with it in that way. During the debate on the Budget last year, the hon. Member for Sowerby (Mr. Houghton) suggested that an explanatory memorandum, or notes on Clauses, of the Finance Bill might be distributed. That suggestion was studied with the care and seriousness which any suggestion from the hon. Gentleman merits, but in the result it was found not to be practicable. But I hope that by dealing with the Bill in the way I have suggested I may be of some assistance to the House in the way indicated by the hon. Gentleman.
  Clause 1 and the First and Second Schedules embody one of the two major fiscal reforms proposed by my right hon. Friend, the simplification and reduction of the Purchase Tax. Except that the exemption for miners' protective boots

  33
  and helmets is restored, as my right hon. Friend stated when the Bill was published, Clause 1 and the First Schedule correspond with his Budget proposals and I do not think that the House will wish to hear any further comment from me at this stage.
  I think, however, that I should draw attention to the Second Schedule, which is the culminating point of the rationalisation carried out by my right hon. Friend in the new Purchase Tax tariff. Apart from the substantive changes by my right hon. Friend, the draftsmen have taken the opportunity to make an improvement in the layout which will, I think, be generally welcomed.
  Mr. Gerald Nabarro: Hear, hear.
  Mr. Simon: At the same time it preserves, as far as possible, continuity between the old tariff and the new. I think that traders will find it convenient that 25 of the 33 groups in the new Schedule are the same number as in the old. My hon. Friend the Member for Kidderminster (Mr. Nabarro), whose voice I think I heard just a moment ago——
  Mr. Ede: It was only sotto voce.
  Mr. Simon: —and who has—I think that we ought to pay him this tribute—persistently campaigned against the anomalies and distortions which we are now mitigating, will, I am afraid, not receive for some time yet the new edition of his favourite bedside reading, Notice No. 78. To allow time for the revision of the Notice, the Second Schedule is not to be operative until 1st October. That is a date convenient for traders, being the beginning of the first quarter after the passing of the Bill.
  Mr. Victor Collins: Does that mean that the new "bedtime story", Notice No. 78, will be published on 1st October? Because, although the new Schedule is a very great improvement, to try to look at Notice No. 78 as it is at present—including all the amendments—is a positive nightmare. We should like to see the new revised Notice No. 78 as soon as possible.
  Mr. Simon: It will be published before 1st October—I hope much before—and will come into effect on 1st October.
  Clause 2 is necessary to resolve the situation which arises out of the judgment of the Scottish Inner Court of Session. This has cast doubts on the previously accepted definition of the term "business in Purchase Tax law and has left it uncertain how far local authorities are amenable to the Purchase Tax law. The matter is particularly important in relation to printing and stationery. The general rule as to the liability of local authorities for indirect taxation is quite clear; they are treated like any other taxpayer. It would, therefore, be a grave anomaly, if, through a weakness in the tax law, they were able to escape payment of Purchase Tax. Not merely would the loss of revenue be serious, but the inequity to commercial interests concerned, particularly printers in this case, would be quite indefensible.
  The Clause will not be exclusively for the benefit of the Exchequer. A person who carries on a business of making non-chargeable goods is entitled to registration for the purpose of securing relief from tax on any chargeable materials used. Some local authorities and noncommercial concerns have availed themselves of this relief provision, and enactment of the Clause will put their title to do so beyond doubt.
  Under the Clause the activities of local authorities and other non-commercial bodies are to be treated in the same way for the purpose of Purchase Tax as the activities of commercial bodies. They will be liable for tax on certain goods which they make for their own use, and they will have the same right to tax relief where they use taxable goods for the manufacture of tax-free goods. The Section is to take effect from 16th April, 1958, and the past situation will be cleared up by decision of the courts.
  Mr. Harold Wilson: If I may interrupt the hon. and learned Gentleman, may I say that it will save the time of the House if he can explain two points while he is dealing with Purchase Tax. First, is it the intention of the Government, when we come to the Committee stage, to take the Schedules with the Purchase Tax? Are we to take both

  35
  Schedules straight away after Clause 1 or after Clause 2?
  Secondly, there is some doubt in the minds of hon. Members, despite his explanation, about the position of the Second Schedule. Are we right in assuming that the Second Schedule is really included for convenience, is a new classification or even codification of the Purchase Tax situation, but does not of itself introduce any tax changes? We are not quite clear what is meant by the phrase "comes into effect on 1st October". Presumably, all the tax rates in it are effective now. If that is not the position, could the hon. and learned Gentleman explain it to the House?
  Mr. Simon: On the first point, subject to the convenience of the Committee it is proposed to take the Schedules with Clause 1. As the right hon. Gentleman surmised, the Second Schedule is consolidation. It is for the convenience of hon. Members, and when it is amplified into Notice No. 78 it is hoped that it will be for the greater convenience of all traders. It is the Notice No. 78 which is the modification which comes into effect on 1st October.
  Mr. Gordon Walker: The change in tax has already taken effect.
  Mr. Simon: As the right hon. Gentleman says, the change in tax has already taken effect.
  Clause 3 deals with the Entertainments Duty on the cinema and provides for the substantial reduction which operates from 4th May and for a simplification in the method of collecting the duty which will come into effect in the autumn. The reduction amounts to more than half the duty and averages £3,500 a year per cinema. The smaller cinemas benefit particularly.
  The reduction averages 58 per cent. over all cinemas, but in the case of a small cinema seating, say, 500 and collecting £175 weekly from a price range of 1s. 3d. to 2s. 3d., the reduction will be worth £30 a week and will amount to 71 per cent. So there is a weighting in favour of the small cinema, and that is also reflected in the changes in the Film Levy, which my right hon. Friend the President of the Board of Trade announced recently.
  36
  Subsections (2) and (3) of Clause 3 provide for a simplified administration of the duty. At present, Entertainments Duty may be paid in one of the two ways. The first is by adhesive Excise stamps, or Government tickets, and the second is on the basis of weekly certified returns. If the second method is used, security has to be given. Over 80 per cent. of exhibitors pay duty on the weekly return basis and probably more would do so were it not for the requirement of security.
  We propose to change the system, providing only for payments on the basis of weekly returns. That will make for a substantial saving in administration, and it is not intended to require security in future save exceptionally where it is necessary for the safety of the Revenue. We propose to consult the trade associations about details of the new arrangements before they are introduced by Statutory Instrument to come into force on 5th October.
  Subsection (4) abolishes the power of the Customs to delegate to local authorities and to the police their duty with respect to Entertainments Duty. It dates from 1916 and I do not believe it has been used since 1920 or thereabouts. In the circumstances, it can probably he repealed without fear of any disastrous repercussions.
  Clauses 4 and 5 and the Third and Fourth Schedules together deal with the reductions in the wine duties. Clause 4 and the Third Schedule relate to imported heavy wines. As my right hon. Friend explained in his Budget speech, the reduction of 2s. a bottle goes some way towards correcting the distinct lack of balance between the duties on light and on heavy wines and the consequent distortions of trade and demand. According to my information, and, indeed, experience, the whole of the 2s. a bottle reduction is being passed on to the consumer. This is certainly the first reduction in the duty on heavy wine in living memory.
  The opportunity has also been taken to consolidate the law relating to wine duties which would otherwise be found partly in the Finance Acts and partly in the Import Duties Act, 1958, where, of course, it does not properly belong.
  Clause 5, and the Fourth Schedule, provide a corollary to the changes in the rate of duty on imported heavy wine, and

  37
  bring about a corresponding reduction for wines produced in this country. I am told that "sweets" is a statutory term which goes back to the seventeenth century. It is used rather than "wine" because it covers fermented drinks made from fruit other than grape and also mead and metheglin. [HON. MEMBERS: "Hear hear."] I gather that many hon. Members are used to rustic drinks.
  Clause 6 exempts methyl alcohol from Spirits Duty. As my right hon. Friend said in his Budget speech, this is a poison. I understand that it only became liable to Spirits Duty because, last century, the rumour went round that a German chemist had found a way of removing the toxicity of methyl alcohol without otherwise impairing its effects. Either the rumour was false, or else the German chemist died with his secret locked in his breast. At any rate, a precautionary measure has remained on the Statute Book to this day without the hopes or fears that were then enjoyed, being fulfilled.
  The bulk of the Spirits Duty is repaid when the substance is used for industrial or scientific purposes. So, from 1st August, when the provision takes effect, both industry and the Customs will gain by the discontinuance of the present system. Perhaps I ought to add that it remains an offence for anyone to offer methyl alcohol as a beverage.
  Clause 7 effects a considerable improvement in the administration of the vehicle Excise licences. It gives the Minister of Transport and Civil Aviation power to prescribe periods that are not tied to the calendar year. New licences will be issued for periods of either four, eight or twelve months, and renewals of existing licences will also be for those periods. That will provide a considerably more elastic licensing system. It will allow the motorist greater freedom of choice of periods of licensing to suit his personal circumstances. It also, of course, spreads the work of the licensing authorities and the Post Offices more evenly over the year, and, therefore, avoids, we hope, the congestion which at present arises at the peak licensing periods.
  Clause 8 is needed to overcome a difficulty which is likely to arise when Sections 1 and 2 of the Road Traffic Act, 1956, are brought into force. These Sections enable the Minister to set up
  38
  a scheme for the compulsory testing of motor vehicles. It may happen that some vehicles for which test certificates must be issued before they can lawfully be used on the roads will not have been used by their owners for some period of time. They may have been laid up in a garage, for example.
  The result may, therefore, be that the owner of a vehicle cannot get an Excise licence unless he can produce a test certificate, he cannot get a test certificate unless he drives the vehicle to the test station and he cannot do that without committing an offence. To overcome this difficulty, Clause 8 provides that a licence shall not be required if the vehicle is being used on a public road merely for the purpose of proceeding to or returning from a test.
  Clause 9 repeals a proviso to Section 6 (4) of the Finance Act, 1908. That Section transferred to the local authorities in England and Wales the power to levy certain local taxation licences, of which only gun, game and dog licences remain. It was provided in the Section that if the rate of licence duty were varied the duty would revert to the Crown. I am advised that the effect of that is to prevent a consolidation of the law in this sphere which is very much needed—it is old and prolix—because two codes of law, one involving the local and the other the national taxation would be required. This effects no substantive change in the law, but is designed merely to make possible the consolidation which is needed.
  I turn to Part III of the Bill, which deals with Income Tax and Surtax. Clauses 10 and 11 are in common form. Clause 10 reimposes Income Tax at the standard rate of 8s. 6d. in the £ for the current year 1958–59 and provides that next year's Finance Bill may fix the rates of Surtax for 1958–59, which will not become payable until January, 1960. Clause 11 fixes the same rates of Surtax for 1957–58, which is payable on 1st January, 1959, in respect of successive slices of a single individual's income over £2,000 as were in force for 1956–57.
  In dealing so shortly with those two Clauses I trust that I shall not be thought to be unmindful of the very heavy burden of tax which bears down on this country.
  Clause 12 contains the three changes in personal taxation which my right hon.

  39
  Friend has felt able to make to assist those in special need. It extends the existing reliefs for old people—that is, the age exemption and the age relief—and the relief for those who help to maintain infirm or elderly relatives. These improvements were explained by my right hon. Friend and myself in the Budget debates, and I need not repeat the explanations which have been given. The improvements have been generally welcomed as worth while and well-directed reliefs.
  Clause 13 is another relief, this time directed to industrial development and, in particular, to those developing concerns which are in the course of acquiring new assets. It increases the rate of initial allowances from 20 per cent. to 25 per cent. for plant and machinery and from 10 per cent. to 12½ per cent. for industrial buildings and expenditure on dredging. My right hon. Friend has already explained that this additional incentive to new capital investment is what he felt was appropriate for the present state of the economy.
  Clauses 14 and 15 are the outcome of the consideration promised in the debates on last year's Finance Bill on proposals for modifying the Schedule E expenses rule and for giving relief to the clergy. Representations on the Schedule E expenses rule have been received during the year from many associations and institutions. My right hon. Friend has considered them carefully. Various forms of general wording have been suggested, but we have not found one which would not either let in expenditure which is inadmissible or create a wide area of doubt.
  In Clause 14 we have embodied one proposal which received much support. Relief will be allowed for annual subscriptions to professional and learned societies with activities related to the employee's work. Subscriptions to associations such as the medical defence associations and the statutory registration fees, which are set out in the Fifth Schedule, paid by such people as architects and dentists as a condition of being allowed to practise, will also be allowed. The Commissioners of Inland Revenue will approve societies for the purpose of allowance of subscriptions by reference to the criteria which are laid down in the body of the Clause and subject, of course, to the usual rights of appeal.
  40
  The general test will be whether a society's activities are wholly or mainly of a professional or learned character. Where such a body also has significant activities of a different kind, such as the prosecution of salary claims, the Clause provides for the deduction of a fairly apportioned part of the subscription.
  We have also examined again various suggestions for giving special tax relief to clergy including proposals for relieving Easter offerings and Church of England parsonages from tax. In the end, most of them have been rejected in view of the general undesirability of discriminatory reliefs from Income Tax, but my right hon. Friend has felt able to bring forward one proposal which should give some relief. It follows a recommendation of the Royal Commission, and is in Clause 15. It removes the anomalous disqualification by which charities, including the Churches, lose their exemption from Schedule A tax if property which they own is lived in by an office holder or employee with an income of £150 a year or more.
  Mr. Ede: There was a long discussion last year about Easter offerings and similar incomes received by Nonconformist ministers. Are we to understand that there was a complete failure to do anything with either of those?
  Mr. Simon: Yes, that is so. It was not found possible to accede to the request to deal with those two matters on a special discriminatory basis.
  Mr. Eric Fletcher: Will the Financial Secretary be good enough to say whether it is intended to deal with subscriptions paid to learned societies by way of covenant? Until recently these had the advantage of enabling learned societies to recover the tax paid. As he knows, a recent decision in the Court of Appeal brought about a different result. Is Clause 14 intended to restore the position in that respect?
  Mr. Simon: Clause 14 does not deal specifically with that matter, although where the institution otherwise qualifies, money paid under the covenant will rank as a deduction. It does not go beyond that.
  Mr. Glenvil Hall: I apologise for interrupting the hon. and learned Gentleman again. Could he tell

  41
  us to what extent Clause 15 helps the clergy? I understood that he linked it with the fact that Easter offerings would not be exempted. How does the Clause help the local minister or incumbent of a parish?
  Mr. Simon: It helps many ministers of religion and many of the Churches which at present, owing to the terms on which they allow incumbents to reside in their property, are penalised. Whether it assists the Church of England is a matter which we are exploring at the moment with the Church of England authorities. This provides an answer for the bulk of the churches which are now caught by the present rule, if I may put it that way.
  I now pass to a very different sort of matter, to Clauses 16 and 17, which are designed to protect the Revenue against avoidance through the device known as dividend stripping. As they are not altogether easy to follow, perhaps the House will be patient with me if I try to explain the mischiefs which they are designed to meet, and the way they do so. The House will remember what is an essential feature common to all forms of dividend stripping. Two things are necessary. The first is a company, company A, which has large liquid reserves built up out of profits or income which have suffered Income Tax at the standard rate. The second is a company or institution, company B, which, for some reason or other, can substantiate a claim to repayment of Income Tax.
  The rule of law on which they proceed is the rule of Income Tax law whereby a dividend paid out of profits or income which has suffered tax is deemed to be a gross dividend from which Income Tax at the standard rate has been deducted to leave the net dividend actually paid. Before the avoidance trick starts, the liquid reserves in the hands of the first company represent, capital of that company's shareholders, and if they take it out on liquidation they cannot, of course, get the Income Tax back.
  The avoidance trick consists of getting shares in company A into the hands of company B and using the liquid reserves of company A to pay a dividend to company B. That, as I have said, is treated by the law as a gross dividend from which Income Tax at 8s. 6d. in the £ has been
  42
  deducted to leave the net dividend actually paid.
  Company B, being in a position to claim repayment of tax, then gets back from the Revenue the tax deemed—I emphasise the word "deemed"—to have been deducted from dividends. The 1955 Finance Act precluded the recoupment of tax in that way by the dividend stripping devices then known, but since then other methods of dividend stripping have been found.
  The first device is a sheer technicality. The House will probably remember that the dividend income arising to company B after the shares have been acquired from company A is caught by the 1955 Act only to the extent that it is not covered by company A's post-acquisition profits. Only the dividend that can have come from nothing but pre-acquisition reserves is caught. If company B interposes an investment-holding company between itself and company A, that intermediary can draw off the reserves from company A and then pass them on, in the form of dividend on its own shares, to company B. This is technically post-acquisition income and the 1955 legislation fails to operate. This is a sort of dividend stripping by proxy and Clause 16 (3) is intended to close that gap.
  The second form tries to get round the requirements of the 1955 legislation that the shares used for a stripping transaction must constitute a holding of at least 10 per cent. of the class of shares in question. For this purpose, under the 1955 Act the Revenue could aggregate the holdings of two or more dealing concerns who were "acting in concert" in buying up shares in company A; but it is doubtful whether that wording, "acting in concert" is adequate where a person acquires a block of shares in company A and makes it his business to peddle those shares out in parcels of less than 10 per cent. to a number of independent dealing concerns. In other words, there would be no demonstrable collusion between the purchasers at the time they made purchases from the pedlar. The House will see that in Clause 16 (2) a formula has been devised to deal with that case.
  Finally, and this is where the most serious inroads are being made upon the Exchequer, dividend stripping has

  43
  been practised on a large and increasing scale by companies with ordinary trade losses available for tax relief by set-off against other income. Sometimes an independent operator acquires the loss making concern and causes it to indulge in dividend stripping, but more frequently the trading concern itself does the stripping. The method is simple. Company B, with trading losses, acquires, say, the whole of the ordinary shares of company A, which has approximately £60,000 worth of liquid taxed reserves. Company A then pays out the reserves to company B by way of dividend, and the tax law treats that as gross dividend of about £100,000 from which £40,000 tax has been deducted. Company B, having made a loss of over £100,000, can claim repayment of tax amounting to the £40,000 which is deemed to have been deducted.
  The House will see that these are not ordinary commercial transactions. This is a serious matter for the Exchequer. The Income Tax code is generous in its treatment of trading losses, but it assumes genuine losses to be set off against genuine income. Here, the income, as I hope I have made clear, is artificially contrived to milk the Exchequer. Clause 17 is designed to prevent the tax on a stripped dividend from being used to support a loss claim. However, if the loss-making company has genuine income available for setting off its losses, the Clause will not prevent recourse to that genuine income. Here, as elsewhere, we will welcome the co-operation of right hon. and hon. Members in Committee to ensure that loopholes have been effectively closed.
  Clause 18 counteracts avoidance of Surtax by remedying a defect in the law relating to revocable settlements which has been revealed by a recent decision of the courts. On the main provisions of the Clause, there is nothing I need add to the explanation which was given by my right hon. Friend in his Budget speech, but I draw the attention of the House to subsection (5). That is designed to remove doubts which have arisen in the minds of the Government's advisers as a result of the form of the 1952 Consolidation Act about the application of parts of the settlement legislation to settlements executed outside the United Kingdom.
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  There is no question that the effect as well as the intention of the pre-consolidation legislation was certainly to cover such settlements and no point has been taken by any taxpayer that that is not still the position. However, as I have said, the Government's advisers have some doubts on the matter and to remove any doubts we thought it right to settle the matter by declaratory provision.
  Clause 19 and the Sixth Schedule give effect to two recommendations of the Royal Commission about time limits for appeals and claims to relief. A uniform period of 30 days is to be the time limit for all appeals in which the time limit is now less than 30 days. For claims to relief and elections of various kinds, the time limits, with only two exceptions to which special considerations apply, will be either six years or, where the taxpayer is given the choice between alternative methods of relief, two years. In no case will existing time limits be reduced.
  I now pass to Part IV of the Bill, which contains one of the most important of my right hon. Friend's reforms—the replacement of the present Profits Tax charged at different rates on distributed and undistributed profits by a single rate tax on total profits. Both my right hon. Friends, the Chancellor of the Exchequer and the Paymaster-General—and, indeed, I myself—dealt at some length in the Budget debate with the economic and administrative advantages of this change, but it might interest the House to glance at Part II of the Ninth Schedule, because that indicates the enormous simplification of the law which is effected by this reform. Perhaps I may once again remind the House that it follows a recommendation of the Royal Commission, and that effect is also being given, in Clause 21, to its recommendations about the treatment of nationalised industries, co-operative societies and building societies.
  It may be of assistance if I now say a word or two about the Seventh Schedule, which contains the transitional provisions. The tax on profits for periods down to 31st March, 1958, which becomes payable this year, will be charged at the old differentiated rates of 3 per cent. and 30 per cent. Without specific transitional provisions it would be open to companies declaring dividends out of those profits after Budget day to allocate them

  45
  artificially 10 later periods, or to reduce them unduly and balance the reduction by a compensating increase for 1958–59 or later years—in other words, at the 10 per cent. as against the 30 per cent. rate. The effect on this year's revenue might be very serious.
  It is a once-for-all problem, and we have sought to achieve reasonable fairness without too great refinement. No special provision is necessary for concerns which maintain the previous rate of dividend, having regard to reduced or increased capital. For concerns that reduce their dividends or allocate them to different periods we propose to introduce a system of "deemed dividends". Those will be based on the dividends paid during a standard period which could not have been influenced by knowledge of this year's Budget.
  There are two safeguards in favour of the taxpayer. First, the total of the deemed dividends will not exceed the maximum amount which could have been distributed out of the profits of the period under consideration, leaving out of account the accumulated profits. Secondly, there is provision for a further review in two years' time to meet the cases where there is a continuing fall in profits, so that lower dividends would be sound commercial practice.
  Finally, in connection with Profits Tax, I think that the House will welcome Clause 22, which provides that, subject to certain exceptions, assessments to Profits Tax and claims for "error or mistake" relief shall not be made more than six years after the end of the period concerned. The new time limit will not begin to operate until the end of this year, as reasonable notice has to be given to the Revenue and the taxpayer.
  Part V or me Bill comes next and contains the Estate Duty provisions which were foreshadowed by my right hon. Friend in his Budget speech. First, in Clause 23 there is a provision designed to prevent avoidance of Estate Duty when a life tenant of settled funds purchases a subsequent interest—that is, an interest in expectancy—in those funds within five years of his death. As the House knows, the general principle of Estate Duty law is that duty is paid on property passing at death, whether it is free estate or settled estate, so that when a life tenant dies Estate Duty is chargeable on the
  46
  value of the property from which his interest arose.
  Earlier devices to avoid this charge very frequently took the form of a sale by a life tenant to the reversioner of his life interest, and those were countered long ago. When such a transaction takes place within five years of the life tenant's death duty on the settled property is payable on that death. But the converse case—the one dealt with in this Clause, where a life tenant of settled property buys a subsequent interest in that property—is not covered, and this position is being exploited and is leading to a considerable loss of revenue.
  May I give an example of what happens? Let us imagine that property is settled to pay the income to A for life, and after his death as to capital and income to B absolutely. If the life tenant A buys out the reversioner B the whole of the settled property is now his and duty is payable on the whole of it at his death. But his estate is depleted by the amount he pays to the reversioner and duty is lost on that amount, even if he dies within five years of the transaction. We propose to close this gap by charging duty in such a case on the consideration paid to the reversioner. All cases are not as simple as that, but perhaps the House would like me to leave to the Committee stage the refinements which are set out later in the Clause.
  I might mention, though, that in some cases there will be an option to the taxpayer to pay duty on the value of the interest purchased instead of on the amount of the consideration paid. That is to enable the taxpayer to take advantage of any special relief which attaches to that interest, such as the 45 per cent. relief for agricultural land.
  Mr. Peter Remnant: Can my hon. and learned Friend clarify this case a little? It appears to me that the Estate Duty Office will get the appropriate rate of duty both on the amount that A pays for the reversionary interest and also on what is purchased by that sum. Does not the Inland Revenue get it twice over?
  Mr. Simon: I do not think so—unless the reversioner also dies within five years. No doubt we can discuss that matter further in Committee.

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  Clauses 24 and 25 give relief in certain cases of what are popularly called "double death duties". The House will remember that there was a distressing case not long ago where a husband and wife were killed simultaneously in a common disaster and the wife, who was the younger of the two, was deemed by a fiction of the law to have survived her husband. The result was that his estate passed to her before passing to their children, and two sets of Estate Duty fell to be paid. The House will remember that my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) brought in a Bill to give relief in such a case. It met with some criticism on drafting grounds, but its object commanded general sympathy and on behalf of my right hon. Friend I undertook that the matter would be dealt with in the Finance Bill.
  Two out of the three possible ways of meeting the case received favourable consideration in the debate. One was simply to say that in the case of simultaneous deaths the rule of law to which I have referred should not have the effect of making Estate Duty payable twice. The other way was to make of general application the provisions of the 1914 Finance Act, which reduce the duty payable on a sliding scale in cases of quick succession but which, under the 1914 Act, are limited to land and family businesses. In the event, my right hon. Friend decided to give both forms of relief, and they are to be found in Clauses 24 and 25 and the Eighth Schedule.
  Clause 26 rectifies an anomaly of the law exempting from Estate Duty the proceeds of the sale of certain works of art to public collections. Since 1896 there has been an exemption from Estate Duty for works of art of exceptional quality, though if the exempt work is sold Estate Duty becomes payable on the proceeds.
  There was considerable concern after the 1914–18 war about the sale or export of important pictures from this country, and as a result it was enacted in the Finance Act, 1921, that the proceeds of the sale of exempt works of art should also be exempt where the sale was to the National Gallery, the British Museum and certain other comparable institutions, or to the National Arts Collection Fund. The object of the Section, which is now in the 1930 Finance Act, was to encourage sales to public collections in Britain.
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  It is obviously an anomaly that this exemption should apply to sales to public collections at auction as well as to sales to them by private treaty. At auction, after all, the vendor is not consciously dealing with a public collection in preference to an overseas or private buyer. He is simply selling to the highest bidder, whoever he may be, but if that bidder happens to represent a public collection the vendor gets the exemption as a fortuitous benefit. Clause 26 therefore confines the exemption to sales by private treaty.
  Clause 27 remedies a recently discovered defect in the powers of certain owners to offer land and chattels in settlement of Estate Duty. Hon. Members know that the Inland Revenue now has considerable powers to accept land, houses and works of art in settlement of duty. These powers have been used to preserve amenity land and historic houses and their contents in the hands of the National Trust and to help the Youth Hostels Association and similar bodies.
  It happens not infrequently that the persons who propose to transfer property to the Inland Revenue in settlement of Estate Duty are not absolute owners, but life tenants or other limited owners. We have recently been advised that a life tenant may have no power under the law to give an absolute title when transferring property in settlement of Estate Duty, even though he has such power in the case of an ordinary sale. Clause 27 seeks to remedy this defect. It does so by giving anyone who has the power to sell property to pay duty, power to transfer it for the same purpose.
  There have, over the years, been several transfers of property by life tenants in settlement of Estate Duty. These properties have gone to the National Trust, the Youth Hostels Association, and so on. It is to protect the titles of these bodies, and, indeed, the rights of all the tenants and others which derive from such bodies, that the Clause has been made to apply to past transactions. This is not done to raise taxation. It is not for the benefit of the Inland Revenue or the Treasury. It is for the benefit of these voluntary bodies and those who may have relied on their title. It is in the nature of an indemnity provision, validating acts by individuals carried out in good faith in ignorance of

  49
  this defect in the law, and in the belief that the law was what this Section would now declare it to be.
  There is one last thing which, perhaps, I should say about Estate Duty, though it is something which is not in the Finance Bill rather than something which is. I know that many hon. Members have looked in the Finance Bill for some provision concerning life assurance policies, in view of the undertaking for review which my predecessor, the hon. Member for Wolverhampton, South-West (Mr. Powell), gave during the debate last year on a new Clause moved by my right hon. and learned Friend the Member for Kensington. South (Sir P. Spens).
  The matter arose out of a decision of the court in a case, In re Hodge, which was about to go to the Court of Appeal at the time; and my predecessor agreed that there would be a strong case for amending the law if the Court of Appeal confirmed the decision of the court below—as in the event it did. This was a case where Estate Duty was held to be chargeable at the death of the assured on a sum of money payable under a policy of assurance, although the policy had become the property of the beneficiary twelve years earlier and was then fully paid up; that is, twelve years before the death of the assured. I think that the House felt generally that Estate Duty ought no: to be charged in that type of case.
  We are reviewing the whole question of the treatment of life assurance policies under the Estate Duty law, but I ought to warn the House that it is extremely complicated, and that we have not as yet been able to find a satisfactory solution to all the problems which arise. We have not, therefore, been in a position to put forward final proposals in this year's Finance Bill, but I am authorised by my right hon. Friend to announce a concession which will cover cases similar to that of Hodge during the period of our examination of the wider problems.
  The concession is this. Where a beneficiary is absolutely and indefeasibly entitled to a policy of assurance for a sum of money payable on the death of another person, no duty will be charged thereon on the death of that person, provided that the beneficiary became so entitled more than five years before the death and the life assured neither
  50
  retained any benefit for himself nor paid any premiums within the five years. Where the other conditions are satisfied, but the life assured paid some premiums in the five years before his death, the claim to duty will be limited to the proportion of the policy moneys corresponding to the ratio between the premiums paid by the life assured during the five-year period and the total premiums. That concession will apply in respect of deaths after Budget Day, 15th April, 1958.
  Mr. E. Fletcher: While I am sure that the House will appreciate that concession, which changes a situation which the judges of the Court of Appeal described as shocking, are we to understand that what he has now announced as a concession will, in fact, be the law, although he has not put it in the Finance Bill?
  Mr. Simon: It is an extra-statutory concession, and we hope to legislate on the wider field next year. There is power under the Income Tax Acts.
  Clause 28 contains the Stamp Duty provisions. It lays down the new, reduced rates of Stamp Duty on house purchase announced by my right hon. Friend in his Budget. This takes a stage further the reductions made in 1952 and again in 1956, and is further evidence of the Government's wish to help those who save by buying their homes. Clause 29 makes a number of miscellaneous relieving changes in the Stamp Duty legislation, with which I need not trouble the House at this stage.
  Clause 30 will carry into effect my right hon. Friend's proposal to extend until 31st August, 1959, the arrangements first introduced in the Finance Act, 1956, for financing the nationalised industries out of the Exchequer. The Clause also increases by £370 million the limit of advances that may be made in this way. I think that the House would prefer to leave these matters to be further discussed in Committee.
  Mr. Nabarro: Will my hon. and learned Friend permit one question? [HON. MEMBERS: "In Committee."] This is an important matter of principle. On the last occasion when this matter was considered, on the Finance Bill in 1956, it was arranged by the Treasury that the discussion should take place at 4 o'clock in the morning. As a very large sum of money was involved and as a quite

  51
  inadequate discussion took place, and many of my hon. Friends and myself were frustrated, will my hon. and learned Friend give us an assurance that when we come to discuss this Clause in Committee ample opportunities will be afforded to my hon. Friends and myself?
  Mr. H. Wilson: Before the hon. and learned Gentleman replies, may I ask him to recall that the debate on that subject came on much earlier than 4 a.m.? It was kept going until 4 a.m. by the exuberance and eloquence of the hon. Member for Kidderminster (Mr. Nabarro) and others. If the hon. Member considers that the matter was not adequately discussed, why did he not object at 5 o'clock, when the first speech was made from this side of the House, by myself, which took the better part of an hour?
  Mr. Nabarro: It started at 4 o'clock.
  Mr. Simon: I hope that no part of this Finance Bill will be discussed at 4 o'clock in the morning.
  Clause 31 implements an assurance given during the passage of the Overseas Service Act, 1958. Pensions payable under that Act are paid by the Colonial Office, but in so far as they relate to overseas service this will, in effect, be met by the overseas Governments concerned. The Clause brings the tax treatment into line with what it would be if the overseas Governments actually paid the nonresident pensioner direct; it exempts so much of any such pension as relates to overseas service if the pensioner is not resident in the United Kingdom.
  Clause 32 is designed to bring about improvements in the operations of the Tithe Redemption Commission. This was set up in 1936 and its operations were intended to be self-financing. Since then rising costs have upset the balance of the scheme. To promote more economic administration, it is now proposed to have annual instead of half-yearly collections of annuities. The compulsory redemption of small annuities has been progressing steadily and redemptions within the existing limit of £1 are now practically complete. The limit is, therefore, under the Clause, to be raised to £3 and power taken to make further increases in the future should these become necessary. These improvements should result in a
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  saving by 1961 of over 100 in the number of officials who administer the scheme at an annual cost of nearly £100,000.
  Finally, Clause 33,
  "the daintiest last that makes the end most sweet",
  provides for the winding up of the Treasury Chest Fund to benefit the Exchequer in the sum of £700,000. Treasury Chests have existed for a century or more in a number of British stations abroad as a means of obtaining local currency for Service pay and other Service expenses. This system is now obsolete and the War Office has taken over the business of providing local currency as part of its ordinary overseas administration. The last surviving Treasury Chests were closed down about a year ago and the Clause enables the balance in the Fund to be transferred to the Exchequer.
  I apologise to the House for the length of time I have taken in explaining the provisions of the Bill, and I am grateful for the patience which has been shown. That is the Finance Bill. It is the implementation of a Budget which placed the stability of prices and the building up of our reserves genuinely as a first priority—which sought to create a sound foundation on which to resume the growth of the economy unattended with the dangers and injustices of the inflationary era. While keeping firmly to these ends, the Bill embodies bold and beneficent fiscal reforms, mitigates a number of hardships and reduces taxation on a wide range of goods.
  4.34 p.m.
  Mr. Harold Wilson: It is no reflection on the Financial Secretary to the Treasury to say that his speech was rather a hotchpotch of a speech, passing from one subject to another. It was about as coherent as reading a page out of the Oxford English Dictionary, or a page out of the London Telephone Directory. That is no reflection on him, because that is the sort of Bill he has been explaining and defending this afternoon.
  For the first time for many years, there is no single theme in this year's Budget. Whatever we may have thought of previous Budgets and Finance Bills, each of the last five Budgets had a theme to it. In 1954 the Lord Privy Seal presented a Budget of which the theme was to encourage investment. In 1955 the

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  same Chancellor presented a Budget in April the theme of which was to win a General Election. In the autumn of the same year he presented a Budget the theme of which was to find the money he had given away in April in order to win the Election.
  In 1956 we had a Budget from the present Prime Minister the theme of which, quite fairly, was to encourage savings. In 1957 we had a Budget and a Finance Bill from the former Chancellor, the right hon. Member for Monmouth (Mr. P. Thorneycroft) which provided incentive to overseas trading companies to emigrate and to Surtax payers to stay at home, but in 1958, this Budget and this Finance Bill have no theme whatsoever, apart from what my right hon. Friend the Member for Battersea. North (Mr. Jay) called "strength through stagnation."
  I should like to say a word or two, not quite so fully nor in such an expert sense as the hon. and learned Gentleman, about one or two of the subjects raised by the Bill before I go on to Clauses dealing with dividend stripping and associated means of tax avoidance and retrospective legislation. The hon. and learned Gentleman's account of various methods of dividend stripping dealt with, or supposedly dealt with, by the Bill, I am bound to say does not suggest any reason why the House should show any undue tenderness to the sharks who have invented those particular practices.
  First, I wish to say a word or two about Purchase Tax, on which we are hoping to have a powerful speech from the hon. Member for Kidderminster (Mr. Nabarro).
  Mr. Nabarro: The right hon. Member will not be disappointed.
  Mr. Wilson: We propose, with or without his help, to examine the proposals very fully on Committee stage. We welcome the streamlining of the system from seven rates to four. There were three under the Labour Government.
  Mr. Nabarro: They were much higher.
  Mr. Wilson: There are many things about Purchase Tax which we feel the Chancellor has done on the wrong lines. We feel that his first priority should have been the elimination of tax on household
  54
  essentials, particularly on those for which it was introduced, or reintroduced, by the Lord Privy Seal in the aforementioned Budget of the autumn of 1955. In fact the Chancellor has extended Purchase Tax to some items which were not previously taxed. We have this chaotic business about miners' helmets and safety boots, which has never been explained to us. Is it true, as the Press says it was given to understand, that that was put in without the Chancellor's knowledge, slipped in through inadvertence?
  There is also the tax on shopping baskets which, as the whole House knows, are to a large extent the product of the Workshops for the Blind. I cannot believe the Chancellor intended that to happen. There was a story that at the time of the 1955 Budget the then Chancellor did not know that these household essentials were to be included, but that when he found they had been included he left them in.
  It is about time the Chancellor looked at what is happening to Purchase Tax arrangements. Does some gremlin in the Department of Customs and Excise slip these things in when he is not looking? Under a properly run system it would be one of the functions of one of his junior Ministers to look into this question. We understand the difficulties of the Chancellor. He has not got an Economic Secretary, and the Financial Secretary at the time of the Budget was obviously far too busy polishing his laboured witticisms about what happened in 1951 to know what was going on behind his back in the Treasury. Apart from this carelessness, I want to assure the right hon. Gentleman that we shall subject this part of the Bill to most careful and constructive scrutiny in Committee. As to the hope of the Financial Secretary that there will be no late sittings on the Finance Bill, I welcome the assurance that the Government intend to provide adequate time for the very thorough examination we propose to give the Bill.
  On Entertainments Duty I shall only say that we welcome the concession. We pressed for substantial relief last year. Most of the points about Customs and Excise and the Inland Revenue Clauses are obviously Committee points. I think I carry the hon. Member for Kidderminster with me on that, but I can promise the Chancellor a thorough

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  examination of those separate Clauses as we go along.
  I would refer briefly to one of two. We think that initial allowances are a very timid gesture in the direction of increasing investment. The Chancellor ought to have reintroduced the investment allowances. This was the very year in which this could have been done. The House will recall that last year I suggested that the then Chancellor should have announced that investment allowances would be restored this year. It is a pity he did not do it, and it is an even greater pity that the present Chancellor has not re-introduced investment allowances this year. We shall move Amendments in Committee, and as far as initial allowances are concerned we shall also move Amendments to provide that the increase in initial allowances shall not apply to private cars owned by business firms.
  I will not make any comment on Clause 15. The hon. and learned Gentleman has referred to the consideration given to the former Chancellor's promise to look at the whole question of Easter offerings and similar issues. When this was raised last year I suggested on behalf of the Opposition that there should be joint inter-party discussions on this matter because it is the sort of thing which we want to keep out of politics, but we have heard nothing from the Chancellor. I am sorry that the Treasury has done this entirely off its own bat. It would have been better if we had had inter-party discussions.
  On the question of building societies, we welcome the fact that the Chancellor has done something for them, though not what the hon. Member for Huddersfield, West (Mr. Wade) and my own party asked for last year. We asked for exemptions or for a very large reduction in the liability to Profits Tax on two grounds. The first ground was that they are not profit-making. In effect, they are a non-profit-making service, to make owner-occupation more widely possible, which all of us would like to see achieved. The second ground was that there is no equity element in the profits and, therefore, no capital gains are possible. They are distinctive in the sense that all building societies' shares are bought from and sold to the building society itself. They are not the subject of Stock Exchange dealings or of any capital appreciation.
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  Indeed, I suggested last year that the Chancellor might like to go wider and, by a Profits Tax concession of some kind, encourage other trading concerns, especially those rendering a service rather than performing an industrial function, to eliminate the equity element and the possibility of unearned capital gains. There is room in our tax system and in our financial system for a very big expansion of this kind of company organisation which rules out the equity element and the possibility of unearned capital gains. We shall certainly want to examine in Committee the method which the Chancellor has proposed, because we are not at all satisfied that he has been sufficiently generous. The 2 per cent. rate levied on a much broader basis is now 10 per cent. levied on a much narrower basis, but I am not at all certain that we shall be satisfied in Committee with what is suggested.
  I turn to the effect of this Clause on the co-operative societies. In a year when the Chancellor has reduced Profits Tax liability by £16 million on private industry, he has more than doubled the Profits Tax liability of the co-operative societies. Indeed, while he has helped private firms to increase their dividends—in fact, fining them if they do not increase their dividends—he is making it harder for co-operative societies even to maintain their present dividends. We must recognise on social grounds that we on this side of the House, at any rate, draw a distinction between dividends paid to the rentier in private business, who often enjoys capital gains as well as dividends, and dividends paid to the housewife on the basis of her purchases. This additional burden, it should be recalled, comes on top of the discrimination two Budgets ago against the savings investment in co-operative societies. The Chancellor can certainly expect to hear from my hon. Friends on these matters when we debate the Amendments in Committee.
  I turn to the subject of Profits Tax. I do not see any reason to change the view that I expressed the day after Budget day when I said that the Chancellor's proposal
  "… rewards the firm which pays high dividends; it penalises the firm which ploughs back profits into productive investment, or even investment in gilt-edged."

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  I quoted the Chancellor's own words in support of that view. I said that the ticker tape showed that on the Stock Exchange the morning after the Budget the more cautious and conservative companies in the matter of dividends were suffering, while those which had a large distribution of profits were being marked up. I asked the Chancellor if he wanted to remove the incentive to plough back company reserves and I asked also if he wanted to create an incentive to dissipate reserves and dividends. I said:
  "Above all, at this time, after all that he and his colleagues are doing and saving about wage restraint and calling for a wages freeze, how can be justify using the tax system to give a positive encouragement to increase dividends?—[OFFICIAL REPORT, 16th April, 1958; Vol. 586, c. 183–4.]
  I said that he must be aware that over the past two years dividends had been increasing much more sharply than wages. If that was true on 16th April, how much more have recent events underlined that fact? Certainly our first assessment of the effect of the tax change on individual companies has been fully justified.
  I would quote only two cases. The City column of the Spectator on 18th April said, referring to the Profits Tax concession:
  "It favours immediately those companies which have distributed up to the hilt, and it will encourage those which have been ploughing back profits heavily to distribute more. It will have a profound influence upon future dividend policy."
  The following Sunday the Observer said in its City column:
  "On the old basis a company distributing a high proportion of profits pays in Profits Tax a good deal more than 10 per cent. of its profits a company distributing only a small part of its profits pays rather less than 10 per cent. The dividing line occurs with companies distributing roughly one-third of their profits in dividends; for them, Profits Tax comes to about 10 per cent. under both systems. These groups of shares, such as breweries, department stores, tobacco manufacturers, shoes and leather, and property companies, which tend to distribute one-half or more of their profits, will benefit. They can pay the same dividend with a smaller tax bill, thereby releasing resources which could be distributed in additional dividends. On the other hand, companies which habitually retain a very high proportion of their earnings (usually to help in financing capital expansion programmes) will have a larger tax bill to pay so that their net profits will he reduced. Chief among these groups are oil, iron and steel, shipping, shipbuilding and chemicals."
  Here we have the distinction. The Chancellor is helping the property companies
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  and the breweries. I do not know whether the House would feel that it is the property companies and the breweries which need most help. Property companies have already had much help from the present Government. The right hon. Gentleman is penalising steel, shipbuilding and chemicals—industries which are basic to the economy.
  I would ask only one question about the Clause which deals with subscriptions to professional societies. It is typical of the Government that they have drawn it in such a way that it allows the lawyers to get their trade union subscriptions paid but that no other trade unions will be eligible. Perhaps we may look at that question when we reach the Committee stage.
  Now I come to the subject of dividend stripping—Clauses 16 and 17—and all the controversy surrounding it. First, let me deal with the Chancellor's decision to solve the problem by the use of retrospective legislation and his surrender to the pressure that was brought to bear upon him. The Chancellor owes the House an explanation. How did he come to put this into the Bill'? Did he not realise that there would be a bit of a row with his own back benches? Was he not warned about it? Had he no idea that there was a feeling in the House about retrospective legislation? Obviously he himself felt strongly. He felt that these sharks, these dividend-stripping gentlemen, needed dealing with. So he put the measure into the Bill. I think he was right to do it. Then the rats got at it and he gave way. We would like to know why he gave way. Did he feel that it was no longer important to deal with it?
  Viscount Hinchingbrooke: Rats?
  Mr. Wilson: I was not referring to any Members of this House. If I had done so, in the first place I would have said "hon. and learned rats", and in the second place I would have been out of order.
  I will say something in a moment about retrospective legislation, but first, perhaps one might spend a minute or two looking at the history of this dividend stripping. Known also as the Indian rope trick, dividend stripping is not

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  new. It was commented on in the Minority Report of the Royal Commission as one of the means of converting income that would be taxable when distributed into a capital gain, which is not taxable. I believe that my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) produced a great deal of evidence about this some years ago.
  Certainly, by late 1954 it was clear that its use was widespread, was rapidly becoming more widespread, and ought to be stopped. It was clear that this device, quite legal but thoroughly unscrupulous, was involving the Treasury in heavy loss of revenue. The then Chancellor of the Exchequer, now the Lord Privy Seal, refused to legislate on this in his Budget of 1955, and for obvious reasons. It was obviously his duty to legislate on it, but he was too keen to get the General Election over and this Government back before they were found out. He included it, therefore, in his autumn Budget, by which time the Treasury had lost probably from £12 million to £15 million a year in revenue.
  In its simplest form, dividend stripping went like this. A privately-owned company might have accumulated liquid profits of, say, £100,000. To distribute those profits would mean a heavy Surtax liability. The owner of the company, therefore, would sell it to another kind of company, perhaps a charity, or a company dealing in securities, and the vendor would thus get his £100,000 tax-free as a capital transaction, while the buyer stripped the company by a massive dividend transaction and then sold it for a small proportion of the price that he had originally paid for it. That was all well known to this House at that time.
  In his autumn Budget, the then Chancellor set out utterly to eliminate this kind of transaction altogether. I want to make that clear, because there have been some arguments as to the coverage of the then Financial Secretary's warning. On Second Reading of the Finance Bill in that year, the Financial Secretary, now the Minister of Housing and Local Government, said:
  "Clause 4 is designed to exterminate the small but ingenious tribe of dividend strippers."
  Exterminate them—by which I understand he meant to put an end to dividend
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  stripping and to this small but ingenious tribe. Later, he said:
  "The Bill will catch and defeat every dividend-stripping operation where the shares are acquired after 26th October, 1955—Budget day. From that date dividend stripping will become unprofitable, and the dividend stripper will be put out of business—will be out or that business, anyway."
  Reading that, I do not see that anyone can suggest that the warning was too narrow to justify the present Chancellor's originally-proposed retrospective legislation.
  I recall, as, perhaps, will other hon. Members, that while the Financial Secretary was moving the Second Reading, I interrupted him, and he very courteously gave way. I asked him why, in Clause 4 of that Bill he did not go boldly for the vendor of the shares—the Surtax avoider—instead of going for the purchaser. I instanced a parallel measure taken in Section 12 of the 1937 Finance Act which dealt with bond washing—collusive cum- and ex-dividend dealing—and I asked him whether his refusal to go for the vendor, which would be much more effective, was due to
  "… a feeling that it would be the thin end of the wedge for a capital gains tax"
  He said:
  "No, Sir. The only reason is that we want to make sure that it is absolutely effective in our object of killing dividend stripping … our purpose in so drafting it is to ensure that the Statute will be effective."—[OFFICIAL REPORT, 8th November, 1955; Vol. 545, c. 1664–6]
  Throughout the Committee stage, and again on Third Reading, the same determination to end dividend stripping was emphasized utterly to destroy this form of tax-dodging. We had that Bill, now an Act, which devoted three pages of Clause 4 and three pages of a Schedule to this purpose. As I have made clear, we feared, and we expressed our fears at the time, that those six pages would be ineffective. I suggested that the attack should be directed against the vendor, and said that the Government's proposal was like an attempt to prohibit burglary by legislation directed, not against the burglar, but only against the receiver of stolen goods, which was quite as ineffective. It was because we feared that the provision could be got round by these ingenious gentlemen, as it has been, that we asked for an undertaking that if new methods were found the Government

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  would bring forward new legislation, retrospective, if necessary. The then Financial Secretary agreed.
  I believe that his pledge was effective in saving the Treasury large sums of revenue. Last January, when I had no idea at all about the Chancellor's intentions or what was going on, I said that three methods of dividend stripping had been devised but had not been put into effect because of the Financial Secretary's threat. It is quite clear that the Chancellor, by now giving way to pressure, has penalised those who were sufficiently scrupulous or fearful not to introduce the new methods, while yielding to those who have not.
  In the past few months, evidence has accumulated about the new methods of dealing in tax losses, to which the Financial Secretary referred, and I hope that he does not feel that he is being comprehensive in mentioning three—there are probably thirty-three, for all we know. However, he mentioned three, and it is interesting to know that of the three he mentioned, two are straight avoidances of the 1955 Act. They are using that Act and, by interposing a holding company, or in some other way, are fiddling with it. Therefore, why there should not be any retrospective legislation I do not know, because such use of the 1955 Act for such a purpose was clearly covered by the Financial Secretary's warning.
  On the third, the House will, perhaps, recall that during the Second Reading of the Finance Bill in 1956 I drew attention to the need to legislate about the use of tax losses. One of the means by which a great deal of this fiddling is being done is by this trade in the shares of more or less dead companies. During the Budget speech in 1956 I said that the trade was rather like the trade in dead Russian serfs described by Gogol in "Dead Souls". A great deal of these transactions have been in the shares of colliery companies. The amounts are very large. I think that the Chancellor's estimate of the costs of this type of transaction are patently absurd and go far beyond the figures that he has in mind. His figures, of course, are based on the tax so far reclaimed, but entirely ignore the tax avoided by this method, which far exceeds the amount of tax reclaimed.
  The first comment I want to make on this story is this. If the Government had
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  taken our advice in 1955, these new practices would have been entirely covered, and the whole controversy about retrospective legislation would have been avoided. Had they gone for the vendor, as we suggested in 1955, we should not have had this problem, and the loss to the Revenue would also have been avoided. Many of those who honestly oppose retrospective legislation fairly say that Parliament's duty is to do its job properly, but the fact is that Parliament's failure then to do the job properly was largely due to the refusal of the Government and of hon. Members opposite to adopt our simple but effective method of dealing with the matter. We attempted to do our duty, but our suggestion was refused.
  My second comment is this. There has been much argument about the extent of the warning. In my view, there is no doubt at all that the then Financial Secretary, and the Chancellor of the Exchequer, intended to eliminate all forms of dividend stripping, and his warning should have been taken as covering all forms of this practice.
  I turn now to the general issue of retrospective legislation. Let me first say that the whole House dislikes it. We on this side certainly do, and I am sure that no hon. Member in any part of the House would for one moment contemplate using retrospective legislation in matters of criminal law. We cannot have anyone on trial for his life for committing an offence that was not a capital offence when it was committed. In taxation, however, there are precedents—tough precedents—mostly with a highly respectable Conservative ancestry. The first case was, I believe, in the 1840s. Mr. Neville Chamberlain, in the Budget speech on 20th April, 1937, said:
  "… if people persisted in devising these ingenious contrivances for defeating the intentions of the Legislature they must not expect to escape retrospective legislation."—[OFFICIAL REPORT, 20th April, 1937; Vol. 322, c. 1610.]
  He went on to invalidate some 11,000 legal trust settlements.
  Sir John Simon on 25th April, 1938, said:
  "These schemes of tax avoidance are so flagrant and are so deliberately devised to get round the legislation … that I shall have no hesitation in recommending that retrospective

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  effect shall be given to them as far as necessary, in accordance with the very clear warning I gave last year."—[OFFICIAL REPORT, 25th April, 1939; Vol. 346, c. 993.]
  We do not seek to base ourselves on Mr. Neville Chamberlain or Sir John Simon—we never have done so—but what we have seen—I hope the House will realise this—is the growth of a highly expert, professionalised, highly paid and thoroughly unscrupulous tax avoidance industry. On the Second Reading of the Finance Act, 1956, I gave many examples of what was being done by this professional tax avoidance industry, most of which has still not been dealt with. Other methods have, in fact, been worked out since then.
  It is nearly two years since I said—I still maintain that I was right to say it—that if all the energy and ingenuity put by the City of London into the job of tax avoidance went into the job of increasing our exports and improving our balance of payments, we should have no gold problem and no balance of payments problem. These people deserve no sympathy. They toil not, neither do they spin. They do nothing to contribute to the invisible earnings on which the City prides itself. They are, in fact, parasites on the body economic, and extremely harmful and costly ones at that. They are, indeed, as useful to our economic system as are moths to wool. At every point where they come into contact with the Board of Inland Revenue, the dice are loaded heavily against the Revenue, and the Revenue needs fortifying in this matter. There was a clear warning. Some of the more scrupulous or more cautious people observed it, but others who were less scrupulous chanced their arm, and as a result of the Chancellor's surrender they have won. They gambled, and they have won.
  Frankly, I respect right hon. and hon. Gentlemen opposite, like the right hon. Member for Blackpool, North (Sir T. Low), who base their arguments on the rule of law as opposed to the rule of Ministerial warning. There is a great deal in the argument, with which the whole House feels a good deal of sympathy, but I think their argument would have been much more impressive if they had produced it in 1955 when the warning was given. At that time, I
  64
  think, the right hon. Member for Blackpool, North was actually a member of the Government.
  However, the spivs gambled on the warning not being implemented. They counted on a big enough pressure lobby developing in the country, and it has been very carefully organised in the columns of the Press. Let there be no misunderstanding about this. I am not referring to the majority of right hon. and hon. Gentlemen opposite, for I am sure they were sincere in the matter, but they are just honest men who have been used by unscrupulous people to pass a bad penny.
  If we are to say that in no circumstances is retrospective legislation to be used—that is the argument of right hon. and hon. Members opposite—I must ask where this will lead. The Chancellor's retreat has encouraged the profession to which I have referred to redouble its effort, to chance its arm still more. For every tax avoidance device which the Chancellor has scotched in the Bill, another ten will be springing up because of the encouragement that he has given.
  It may be said that Parliament must legislate more restrictively. We shall certainly go through Clauses 16 and 17 with very great care. I promise the right hon. Gentleman that he will have the co-operation of some of the best lawyers and financial experts in the House, and that their advice will be given day after day, and if necessary night after night, in order to make the Clauses thorough. However, I am sure the House would wish to avoid getting into the situation that because a minority is anti-social our legislation as a whole must be so restrictive as to hamper legitimate trade and finance. That is the danger into which we are being forced if retrospective legislation is to be outlawed.
  I think I have shown that my hon. Friends and I dislike retrospective legislation as much as hon. Members opposite do. However, we shall have seriously to contemplate one or other alternative sweeping measure to ensure that the Board of Inland Revenue is protected against these people. After all, Parliament has always been concerned to ensure that Her Majesty's coastguards have adequate powers to deal with smugglers. Smuggling does far less harm than tax avoidance, it is far less costly and it is much more romantic. We ought

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  at the same time to ensure that the Inland Revenue has adequate power to deal with the much more vicious crowd of people whose depredations are thousands of times more costly than those of any smugglers who have ever existed.
  One method—let us see where this is leading us—will be to include in our general Income Tax and Profits Tax law the provision which governed E.P.T. legislation in the last war. That provided that where a transaction takes place primarily for motives of tax avoidance, it shall be for tax purposes null and void. That is a very sweeping measure, but even the right hon. Member for Blackpool, North would agree that, since it was in the law of the land, any decisions taken under it were being taken under the rule of law.
  Another alternative which might well be dictated to us by the existence of this organised tax avoidance profession would be—my hon. Friend the Member for Sowerby (Mr. Houghton) has frequently suggested this—that there ought to be an Administration of Taxes Act introduced to deal with various general questions of tax law and a number of recommendations of the Royal Commission. It could clarify and codify many questions of avoidance and other matters. I wonder whether such an Act might not contain a provision which would deal with the problem which arises when there is a sudden emergence of a new form of tax avoidance.
  One of the problems of the Inland Revenue is that suddenly someone hits upon a new way of avoiding the law, and this gets round the City or the Institute of Directors, or wherever it is that these things are passed on. When it gets around, a number of people do it, and before the Treasury can introduce legislation in the next Finance Bill, the Revenue has lost millions. Could not we have a statutory provision so that when the Chancellor found these things happening he would have power to introduce an Order in Council or some other Statutory Instrument, which, on a Resolution of the House, could bring the development within the scope of the taxation law? It would have to be provided that these Orders would be embodied in permanent tax law in the succeeding Finance Act and that otherwise they would fall.
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  This proposal is certainly a sweeping one—it is one that we should have to think about twice before introducing—but it does not involve retrospective legislation. It would certainly be operating under the rule of law and not under the rule of Ministerial warning. In one sense it follows the pattern of the Provisional Collection of Taxes Act, under which taxes can be increased or decreased on a Resolution of the House—as happens every Budget day—subject to ratification within four months by the Finance Bill. It would certainly stop the fleecing of the Revenue by sudden new developments which cannot be dealt with quickly enough by the annual Finance Bill.
  The Government have failed here, and more widely, to deal with all the manifold methods of tax avoidance which are robbing the Treasury of millions of revenue and placing unfair burdens on the other taxpayers. Let us be frank. Before this Bill has even had its Second Reading, I am sure that those gentlemen will have found a dozen methods of getting round the Clause which deals with these matters.
  Before I conclude, I wish to say something about the question of widening the tax base, if only because of the quite deliberate misrepresentation by the Prime Minister of some words that I used during the Budget debate. On that occasion I said:
  "… a socially just Budget means widening the tax base by bringing all, or nearly all, forms of spendable income within the revenue net."
  Addressing the embattled ranks of the Primrose League, the Prime Minister quoted that and suggested that it meant that it was our intention greatly to increase taxation. The right hon. Gentleman entirely failed to quote the next two sentences. I will now quote them:
  "The wider the base the less high the tax rates need be. This means dealing with capital gains, as we propose. It means a determined legislative drive against all the manifold forms of legal tax avoidance. The Chancellor is doing a little in this direction, but he has missed a great opportunity."—[OFFICIAL REPORT, 16th April, 1958; Vol. 586, c. 185–6.]
  That was before he had surrendered, or I should have put it a great deal more strongly. That is the kind of misrepresentation which the Prime Minister is capable of indulging in. We all know that he is in difficulties with his back

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  benchers and that he faces many problems, but I must say that he fell a long way below the standard one would expect of a Prime Minister in, for party purposes, taking one sentence in a speech in this House out of context and putting it to his followers as a piece of party propaganda. I do not think any hon. Gentleman opposite would deny that.
  Mr. John Peyton: How many times has the right hon. Gentleman himself done the same?
  Mr. Wilson: If I have ever done it, I hope that I have been called to account by the hon. Member concerned.
  I want to say a word now about the wider issues raised by the Bill. The theme of the Budget debate, which was a good one, as I am sure hon. Members will agree——
  Mr. Nabarro: Yes.
  Mr. Wilson: I did not realise that the hon. Member for Kidderminster (Mr. Nabarro) had contributed to it.
  As I was saying, the theme of the debate was expansion versus stagnation. This was so clearly the issue that the Paymaster-General, the President of the Board of Trade, and, at the end, the Chancellor himself, devoted a great deal of time to defending the Government's stagnation policy and trying to prove that expansion was a dangerous thing to advocate. I will not weary the House by repeating the contrast between this country and the rest of Europe, where steady expansion has not led to crisis. Right hon. Gentlemen say that we cannot expand this year, or two things will happen: first of all, there will be a boom and a price increase, and, secondly, there will be an import crisis.
  It is a fact, of course, that the cost of living has risen most in this country despite stagnation—indeed, in our view, because of stagnation. I will not repeat either the figures or our arguments to show that stagnation leads to higher and not lower costs. I will put to the Chancellor this question, to which I hope he will reply tonight. If he really believes the argument that expansion will mean crises of the kind he described, what will happen next year if the Government permit expansion then? On their arguments, will we not then suffer the inflation and the higher prices? It is all very well
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  the Chancellor saying, "We would like to swim, but we will not because we might get wet; we will stay on dry land and keep as dry as we can", because, when we do finally dive in, according to his argument, we shall still get wet. How, therefore, does the right hon. Gentleman think that, by waiting, we shall be less likely to run into crises when we do expand?
  Even more ludicrous is the argument about an import crisis. Right hon. Gentlemen say that, with expansion, the demand for imports will shoot up and there will be a balance of payments crisis, to be averted only if we have import controls, raw material allocations, rationing of materials, higher export cost, and so forth. That was the burden of the speech of the Paymaster-General. The trouble is that right hon. Gentlemen opposite are still obsessed by the fate of the Lord Privy Seal. The 1954–55 boom led to an import crisis because it was uncontrolled, but, since then, the basic industries have slowly expanded their capacity and, in my view—I put this to the Chancellor—we could have a 5 per cent. increase this year quite safely without running into a balance of payments crisis. I will give three reasons to show that that is right.
  So far from there being an import problem in steel and coal, we have today a surplus of steel—we hear of steel works going on short time—and there is certainly no question of our having to import coal. We have a surplus of coal and steel, and we have that surplus precisely because of stagnation in the rest of industry. Secondly, in the so-called "Butler" boom, the biggest import demand came from the motor car industry for sheet steel. Today, within stagnation, the motor car industry is booming more now than before, yet there is no crisis in imported sheet steel. I suggest, therefore, that we could expand, especially if we were to expand in terms of investment goods, without having that crisis. My third reason is that, even if more imported materials were needed as a result of expansion—there would obviously be some increase—the very favourable terms of trade would enable us to import 10 per cent. more materials this year than last without adding a penny to our import bill.
  The year 1958, so far from being a dangerous year for expansion, presents the most favourable, uniquely favourable,

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  conditions for it. On the Paymaster-General's argument, we must have stagnation for ever and ever. I utterly repudiate his argument that expansion would lead to crises and import licensing. We do not envisage import licensing, except on dollar goods. We have import licensing on dollar goods now, and it does not lead to all the dreadful consequences outlined by the Paymaster-General. Where he entirely fails to grasp the essential point is in his failure to see the difference between an uncontrolled, "Butler" boom and a planned expansion.
  If we were to take over now, with an economic system a long way below capacity, we would not envisage a rip-roaring free-for-all, consumption boom. The Chancellor is quite right to resist that. We would plan for increasing investment, first, in the public sector, in roads, railways, and so on, and, in the private sector, by investment allowances and other fiscal incentives. Above all, we would encourage, by every means open to a civilised modern State, expansion in those sectors which could do most to help our balance of payments.
  A recent very remarkable book by the City Editor of the Observer, Mr. Shonfield, points out how very backward the shipbuilding industry has been about expanding to meet overseas demand. Help to the ship builders would have been a direct aid to our exports. The same might be said of sections of the machine tool industry. When we were in power, we had a problem with an important section of the building and civil engineering equipment industry, which would not expand until we gave a guarantee that we would purchase any units it could not sell. Those concerned went ahead and expanded. The next time I saw them, so far from wanting us to honour our agreement to buy any units they could not sell, they asked if we could find them a 7 million sq. ft. factory to produce some more. Private enterprise is very often extremely cautious in meeting world demands of that kind.
  Equally, we would plan for expansion in import savers. During the Paymaster-General's speech, I referred to two instances. This was not simply import licensing. We invested in a carbon black factory which saved us from having to import carbon black. We greatly expanded the size of the sulphuric acid
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  industry of this country, using indigenous raw materials in place of imported sulphur. This enabled the chemical and other industries to expand without automatically putting a big strain on our dollar balance of payments. Therefore, expansion does not mean just import licensing and allocations. A planned expansion means making ourselves more independent of imported supplies.
  I hope that the Chancellor will consider expansion again. We have a suspicion that his arguments—I am sure that he would be the first to agree if he thought about them—will not stand up for a moment and they are really a part of a carefully planned strategic manoeuvre. I am sure that the Chancellor is not himself responsible for it; it bears all the marks of the Prime Minister's work. Obviously, he is holding down demand this year and holding down production this year, ready to have a rip-roaring boom in time, next year, for a General Election so that we shall have, as we had in 1955, a boom, full employment, overtime, no short-time working, leaving, the consequences of an uncontrolled boom to be dealt with immediately after the General Election.
  In 1955, of course, having denied during the Election that there was any crisis at all, the Government were faced, on getting back to office, with a crisis which has not ended or even been in suspense during the three years which have followed that Election. After the next General Election—no doubt, this is the policy which they are secretly hugging to their breasts—the mess will have to be cleared up by my right hon. and hon. Friends on this side of the House.
  5.19 p.m.
  Mr. John Peyton: It seems that the word "stagnation", by the efforts of the right hon. Member for Huyton (Mr. H. Wilson) and his right hon. Friend the Leader of the Opposition, has been enshrined in the folklore of the party opposite. After all we have heard, it seems no longer necessary for the right hon. Gentleman to explain exactly what he means by stagnation. All I will say is that, if the right hon. Member for Huyton really believes that he is right in saying that the economy of this country and its investment programme at the moment have the characteristics of stagnation, then he really should look up the meaning of that word.

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  May I say a word about the question of dividend stripping and retrospective legislation? I have no doubt that there are dividend strippers and people, as the right hon. Gentleman says, who get away with it at the expense of other taxpayers; but the right hon. Gentleman must give a little more weight to our dislike for any idea of retrospective legislation, involving as it does government by warning. Oue of our reasons for distrust and doubt is that we do not feel that, if and when the right hon. Gentleman finds himself at the Treasury, he can be relied on very far to pursue the paths of righteousness.
  It is my wish to raise the question of the Merchant Navy, about which I have had a Motion on the Order Paper for some time, which is supported by over 100 of my hon. and right hon. Friends.
  [That this House, while recognising the value of the recent increase in the investment allowance given by Her Majesty's Government to the United Kingdom shipping industry, nevertheless records its extreme concern at the difficulties caused to the industry by the virtual freedom from taxation enjoyed by ships flying certain flags of convenience, and, in view of the unique position of British shipping as the lifeline of an island nation, calls for further measures to strengthen its competitive power.]
  I am profoundly sorry that the Government have not seen fit to allocate a whole day for the discussion of what is one of our most vital industries. Fifty years ago, half the shipping in the world flew the Red Ensign. Today, rather less than one-fifth does so.
  By geography, tradition and interest, we are a maritime nation. It is all very well for us in this House and elsewhere to accept blandly the truism that the Merchant Navy has been our lifeline in war and is the artery of our trade in peace. It is all very well for us to give some acknowledgment from time to time to the contribution made by British shipping to our balance of payments. I never understand the reason why the Treasury approaches that figure in a way which seems to me entirely different from that in which it approaches the earnings of any other industry. I believe I am right in saying that the net contribution made
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  by British shipping to our balance of payments in 1957 was £220 million.
  I sugegst to the Government and the House that it would be madness if we were to continue to shut our eyes to what the Manchester Guardian described the other day as
  "the real danger that the Red Ensign will be swept off the seas within a decade or so."
  The most pressing problem at present undoubtedly is the flags of convenience and the increasing use of those flags. This affords to shipowners immense advantages, and those advantages are reflected very dramatically by the growth which has taken place over the past ten years of an enormous amount of new tonnage which can be and is fairly described as "mushroom fleets".
  May I deal briefly with those advantages? First, there are the operating costs, which offer to a shipowner the chance of operating, for instance, a 10,000-ton Liberty ship at half the cost he would have to pay in the United States. Taxation is only nominal. These owners are obliged to pay tax in only pence or farthings, whereas our shipowners pay in pounds. I do not think anybody would quarrel with the proposition that the man who pays heavy taxation cannot compete with one who does not.
  I hope it will not be suggested that the shipowner can be compared with the manufacturer who goes, say, to Liberia or Panama. The shipowner is in an entirely different position. He has the freedom of the seas, whereas the manufacturer in one of those countries finds himself short of skilled labour and far from his market. That is not the case with shipowners. There is also the consequent advantage that it is very much easier for these shipowners to obtain finance for new building. Lastly, which is a considerable consideration, there is the almost total absence of restrictions.
  Let us consider for a moment the position of the countries who are responsible, or partly responsible, for the growth of the flag of convenience fleets, namely, Panama, Liberia, Honduras and Costa Rica. They require no control to be located within their jurisdiction. They have neither the maritime tradition nor a body of maritime law, nor the courts to enforce such law. They provide no training schemes, although it is easy for

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  owners to take advantage of their better financial position and cream off the personnel of the traditional maritime countries. They have no means of enforcing crew or safety standards. They make no contribution to defence or the maintenance of order on the high seas, and they provide no facilities whatever for world shipping. It is worth noticing in passing that over one-third of the tonnage now laid up in United Kingdom waters flies flags of convenience.
  In short, these countries have enjoyed a unique windfall in shipping over the past twelve years and their owners have been in the happy position of having their cake and eating it.
  May I weary the House for a moment with a few figures which give some illustration of the rapid growth that has taken place in the flags of convenience fleets since the war? Twelve years ago the fleets of the countries which I have mentioned amounted to about 1½ per cent. of the total of world gross registered tonnage. Today that figure is 15 per cent.—in other words, about half of the total world increase which has taken place in that time. In 1949, Liberia was a one-tanker state. It now has the second largest tanker fleet in the world. In one year, from 1956 to 1957, more new tanker tonnage was registered in Liberia than had been registered in the United Kingdom in the whole of the previous ten years.
  It is also worth reminding the House of what was said by one of my hon. Friends on the Front Bench the other day, that the percentage of oil imported into the United Kingdom and carried in British ships has declined between 1954 and 1957 from 41 per cent. to 36 per cent. The rate of growth has been just as constant as it has been rapid. In 1946, these fleets totalled some ¾ million gross tons. In 1950, the figure was 4 million; by 1955, 9 million; and by 1957, 14¼ million.
  That is a very dramatic growth, and the same story is told both by launchings and new tonnage. In three years, the share of the fleets of Panama, Liberia and Honduras in the total world launchings had gone up from 17 per cent. to 25 per cent., whereas ours had gone down during the same period from 18 per cent. to 15 per cent. I wonder if it is really tolerable
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  to this House and to public opinion, and last to the Government, that we should find ourselves, whose dependence upon our maritime trade is unique, in such a decline. Is it possible that we can continue to countenance such a disastrous trend?
  I think I should give one more figure to remind the House that it is not true, as it is sometimes suggested, that these fleets consist simply of old and worthless tonnage. They consist in large part of new tonnage, faster and bigger than our own ships. Of new tonnage, that is, tonnage under five years old, the flags of convenience fleets have 1½ million, whereas we have 900,000 tons. Over half of Liberia's total fleet is under five years old.
  I remind the House of the report of the O.E.E.C. in January of this year which called attention to this very rapid rate of growth on the part of the fleets of the flags of convenience countries and called attention, too, to the consequent diminishing influence of the traditional maritime countries with their well-known standards. It finally produced what is perhaps the most useful message to this House and to the Government when it said that in these circumstances it might well be that the Governments of the maritime countries would feel compelled to take some action so as to enhance the advantages of owning ships under their own flags.
  Successive Governments have taken action in this matter. It is only fair to remind the House that in 1951, when the problem was nothing like so great as it is today, the Labour Government exceptionally retained the initial allowance for shipping, and last year my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft), as Chancellor of the Exchequer, increased the investment allowance to 40 per cent. Both those measures have been helpful in their time; both can be taken as an earnest of the genuine appreciation which we in this House, in both parties, have of the needs and importance of the shipping industry. But the problem is still with us. Shipowners and trade unionists alike have expressed their alarm at the prospects, and the question remains for us as to what steps we should take now.
  I do not believe that a course of flag discrimination would be wise or in the long-term interests of the industry or this

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  country. As the largest trading nation in the world, it must surely be to our interest always to set our face against discrimination of that kind. I do think, however, that there is certainly room for us to go further along the path which has already been taken of discrimination in tax which has as its object the placing of our merchant fleets in a position of parity from which they can compete with this new and quite unprecedented force which has become such a predominant influence on the seas today.
  With any move which may be made for tax concession, there must also be a measure of international discussion, for 80 per cent. of these fleets are owned by Greeks and Americans. The large part of them, I believe, has been financed with American dollars. Expressions of opinion and criticism of America, in American trade union circles, as well as in this country and international trade union circles, have been strong indeed. The other day there was an article in the journal of the Seafarers' International Union charging the United States with
  "encouraging and sustaining a huge scab apparatus to undermine its own fleet and the fleets of its allies."
  I do not believe that it will help us very much if we seek to allay our natural and proper anxieties. I would rather seek to stir those anxieties up and to see this problem aired properly and, as it should be, discussed more regularly in this House and given the prominence in the public Press which it deserves, having, maybe, a very much better advocate than I can be.
  Certainly I would not seek to allay our anxieties by a show of righteous indignation. These owners of ships flying flags of convenience make use of what seems to us can properly and fairly be called a dodge. But they are not in any way breaking the law, and I think that for us to pursue them with abuse would be a waste of time. Nevertheless, upon the shoulders of the Government particularly there rests a responsibility.
  It makes, in my suggestion, a mockery of our defence preparations, of our defence discussions and of our huge defence expenditure if we allow this trend of decline of our Merchant Navy to continue unchecked. I do not believe that the solution can be easily found, or that
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  when it is found it will be in any way simple, but I do think that the Government can most materially help by inviting the representatives of the shipping industry to discuss with them what can now be done and to discuss that against the background of the acceptance by the Government that this disastrous trend cannot be allowed to go on. I do not think that any discussion which proceeds upon the basis of telling an industry of this kind to go away and think out its problems and then come back to the Government with a solution, only then to have the snags in the solution pointed out with some vigour, is particularly helpful. I do not think it a bad idea that Government Departments and even Ministers should discuss these great problems with the industry most intimately concerned with this in mind; so that, having gone through the burden and heat of the discussions, they will be much more coy and shy and far more reluctant to turn down solutions which may have been worked out with great difficulty.
  My hon. and learned Friend has many cares to shoulder. He has put to him regularly, as has his right hon. Friend, the problems of every part of the British economy. I have no interest whatever in the shipping industry. I am not even the representative of a maritime constituency, but none of us is so land-bound as not to face this matter as one of our prime national interests.
  Therefore, it is with a great deal of conviction that I make this appeal. I ask the Government to treat this matter as one of urgency. I ask them to invite the leaders of the shipping industry to join in consultations now, to discuss how the strength of our Merchant Navy can be restored and maintained; and how we may be assured that the interests of our trade—even of our safety—can be safeguarded in the way in which I am sure no one would more readily acknowledge it is his duty to do than would my hon. and learned Friend. I hope he will take careful note of what I have said and convey it to the Chancellor.
  5.43 p.m.
  Mr. Glenvil Hall: The speech with which he opened this debate was the first that the Financial Secretary to the Treasury has delivered to this House in a Second Reading debate on a

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  Finance Bill. I wish to begin, therefore, by congratulating the hon. and learned Gentleman on the lucid way in which he went through the Bill, explaining the meaning of the Clauses. My preference, however, would be for the Treasury to have followed the advice given last year by my hon. Friend the Member for Sowerby (Mr. Houghton) and issued to all hon. Members an explanation of the Clauses in the same way as it issues one to Treasury Ministers during the Committee stage discussions on the Bill. Such a document would have a practical value and assist every hon. Member who takes an interest in the Finance Bill. I imagine, also, that it would shorten some of our discussions.
  So far, we have spent more than two hours on this debate and had only three speeches, so I do not propose to detain the House too long. But I wish to refer to one or two proposals in the Bill to which I am positive we shall have to return at future stages in our discussions. I was disappointed at the meagre result of the review of the Purchase Tax promised us by the previous Chancellor of the Exchequer a year ago. We were told that this tax would be streamlined, tidied up and made more simple to understand. It: is true that there has been a certain amount of streamlining of the Schedules, but we still have four different rates, which is one more than in 1951.
  This tax was a war-time device, and after eighteen years it is still with us in practically the same shape as when it was introduced in the House in 1940. It is a clumsy tax. It takes more from the taxpayer than reaches the Exchequer. It creates, too, many anomalies. It is unsettling to retailers in a large number of different industries; and if it is levied on the wrong things—as occasionally Chancellors do levy it—it adds to the cost of living. Yet I take it that, at the moment anyway, no Chancellor of the Exchequer can do without it. Purchase Tax brings in nearly £500 million a year and it is the third prop to the Revenue, coming just after tobacco and well after Income tax, and its ancillary imposts. Therefore, there is no doubt that, any rate for the time being, some kind of indirect tax of this sort will have to be imposed.
  In years gone by many of us were attracted by the idea of a universal sales
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  tax of modest dimensions. I was impressed by what the Chancellor had to say about such a tax during the Budget debate, but I do not think that we have heard the last of proposals for some sort of similar change or else to streamline the Purchase Tax, as the phrase goes, still further. I am sure that we shall have more discussions about the shape which this tax should take in the future.
  One of the difficulties about Purchase Tax is that in the hands of a non-discerning Chancellor it fails to differentiate between a tax on luxuries and a tax on essentials. To illustrate my point, I will take musical instruments as an example. We discussed the tax on musical instruments during the finance debates last year. Some of us feel that this is a tax which ought not to be levied. It has, of course, now been halved. The Chancellor has reduced it from 60 per cent. to 30 per cent., and undoubtedly that will prove a tremendous help both to the industry and to professional musicians, who are almost alone in suffering a swingeing tax on the tools of their trade. Members of Salvation Army bands, miners' bands and factory bands will welcome this reduction, as will members of village bands all over the country. Youth clubs and schools will also benefit.
  In my constituency we have what is known as the "Four Valleys Youth Festival" where the entries in the musical competitions have grown so much in the last few years that the organisers have wondered whether, in future, they must devote a whole day to this side of the activities. Because music and musical instruments play such a large part in the cultural life of this country, particularly in rural areas, I wish that the Chancellor of the Exchequer could have found it possible to remove this tax altogether. At present it still ranks with jewellery and furs as a luxury, and a luxury it has long since ceased to be. The tax, in fact, is almost the same as when it was imposed in 1940, during the war, when cultural activities had to be damped down. The income from this tax is negligible. The Chancellor has been getting about £¾ million annually. This year he will have about £½ million, and in a full year it will bring in no more than £400,000. But to a youngster trying to buy his own instrument the tax will still be, even at its new rate, a very heavy burden.

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  A tax on a violin will still be about £6, on a trumpet from £3 to £25, on a cornet over £6, and on a saxaphone from £8 to over £22. It may well be said by the Treasury that one of the reasons why the tax must still be levied is that one has to assist the export trade and that there is a fairly large export trade in musical instruments, particularly to America. Recently, however, owing to the American recession, exports there have begun to decrease, and there is now some fear that presently some unemployment may arise in the industry. Already, I understand, overtime has had to be curtailed. The tax on office and garden furniture in the present Budget has been reduced to only 15 per cent. It seems to me that it would have been a proper thing for the Chancellor to do to have brought the tax on musical instruments down, at any rate, to the same level, even if he could not see his way to abolish the tax altogether.
  Let us compare, for example, what has been done here with what the Chancellor proposes to do for heavy wines. One of the changes announced in the Budget speech, which surprised me almost more than any other, was the Chancellor's decision to reduce the tax on heavy wines to 12s. a gallon. The right hon. Gentleman will give away by this reduction £2½ million this year and £3 million in a full year. I can think of a number of directions in which that money could be better employed if the Chancellor has it to give away, particularly when one considers the reason he gave for making this change.
  The right hon. Gentleman said he had come to the conclusion that not enough heavy wines were being drunk compared with light wines. He went on to say, with his usual candour, that he was not quite sure what would be the effect of this, and that it might well be that tastes had changed and that today, anyway, people preferred light wines to heavy ones.
  Mr. John Arbuthnot: Will the right hon. Gentleman allow me to interrupt? I think that the case the Chancellor made was that, in regard to light wines, when the duty was halved the revenue to the Exchequer increased within eighteen months to more than what it was before. If the experience of light wines is repeated in the case of
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  heavy wines, ultimately there may be an increase in duty coming in total to the Exchequer.
  Mr. Glenvil Hall: I take the point made by the hon. Gentleman. What he is saying is that, if the duty is halved, the revenue may go up as a result. We have yet to see, and the Chancellor was certainly not sure that this would happen. In fact, the right hon. Gentleman hazarded a guess that possibly changes in taste have meant that more light wine is being drunk because people prefer it, not because the duty on it is less than that on heavy wines.
  In these days, when there are many demands for assistance by way of tax reduction, it strikes me as surprising that the Chancellor should have picked out this item, of all items, to make a concession which amounts, in a full year, to £3 million. I should have thought, to begin with, that the right hon. Gentleman would have preferred people to drink light wines, particularly when the incidence of drunkenness is going up and, last year, convictions rose to about 62,000. Also, we have to remember that in France this has become a great problem and that there they are taking what steps they can to discourage the drinking of all wines, both light and heavy.
  I, for one, welcome the proposals the Chancellor has made for recognising the plight of the cinemas and reducing the duty by approximately 50 per cent. This, coupled with what was done last year, will undoubtedly go a long way towards assisting the cinema industry through these very difficult times. I see that the Chancellor estimates that the cost to the Exchequer in a full year will be about £14½ million. I do not know how near that estimate will be because, as all hon. Members know, the average attendances at cinemas have been going down year after year for some years now; in fact, average attendances have dropped by one-third during the last seven years.
  On the other hand, costs have risen greatly. Repairs, redecorating and wages have all gone up. I speak here of the wages in cinemas and not of the salaries and payments which the stars get. The reduction, particularly the reduction on the cheaper seats, will help the cinemas in my division considerably, and I am glad to think that the Chancellor has done

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  what he has. It has not come a day too soon.
  Before I sit down, may I refer to the change proposed in the Profits Tax which will be levied on building societies? Last year, as most hon. Members will remember, all-party support was given to a new Clause to last year's Finance Bill moved by the hon. Gentleman the Member for Huddersfield, West (Mr. Wade). I think that only one Member during that debate spoke against the Clause. In all quarters, there was a feeling that building societies should be relieved of the Profits Tax on the surplus that accrues to them.
  We had hoped that the pressure which was brought to bear on the Chancellor at that time would result in the concession being made in this year's Finance Bill. Unfortunately, nothing of the kind has occurred. The Chancellor appears to have accepted the view that building societies are not very different from ordinary trading concerns, whereas right from the beginning it has been accepted by Chancellor of the Exchequer after Chancellor of the Exchequer that there is a great difference between a surplus which accrues to a building society and the profits which are made by an ordinary trading concern.
  When Lord Simon, who was Chancellor of the Exchequer in 1937 was speaking on the National Defence Contribution, which was introduced at that time, he said:
  "Building societies stand in a class by themselves. They are not in competition with retail traders. They are not engaged in ordinary trade activities. They play an important part in the solution and treatment of the housing problem."—[OFFICIAL REPORT, 14th July, 1937; Vol. 326, c. 1298.]
  Corporation Profits Tax had by that time ceased and the second edition of the N.D.C. was being introduced. He proposed that building societies, previously exempted, should pay only 1½ per cent. The point I make is that as far back as 1937 it was recognised by the Treasury that building societies came into a difference category, yet today the Chancellor proposes to charge building societies 10 per cent. on the surplus which accrues to them, which is an increase in this tax of 500 per cent. in a single year.
  It is true that a concession has been made; they are now to be permitted to deduct the interest paid to their investors. Nevertheless, this means an
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  enormous burden on building societies, and, in the view of many of us, an unjust burden. During the Committee stage of the Bill I think it will be necessary for those of us who believe that building societies are being unjustly treated to see what can be done to change this rate.
  One reason that something should be done is that building societies pay no dividends and do not make profits in the ordinary sense of the term. Any surplus which they have is always placed to reserve. One of the difficult problems for building societies today is to build up those reserves. Although their assets have increased considerably over the last five years, the percentage put to reserve has fallen. Those of us who read the financial columns of The Times will have noticed from a report this morning that the reserves of building societies have fallen from 5·2 to 4·5 in the last five years.
  Mr. H. Hynd: May I ask my right hon. Friend, 4·5 of what?
  Mr. Glenvil Hall: It is 4·5 per cent. of the total assets.
  This creates a problem for the societies, particularly at a time when most of their assets, apart from those used for house mortgages, are in gilt-edged securities. Those securities have been falling. If we are anxious to see building societies progress and become a stable centre for savings in the community and a help to potential house owners, we must give this matter our serious attention. When we reach the Committee stage it will be necessary to call attention to this matter and to do what we can to improve on the proposal made by the Chancellor in the Bill.
  6.5 p.m.
  Mr. C. W. Armstrong: I do not want to make any general criticisms of the Bill but would prefer to congratulate my right hon. Friend upon it, and particularly my hon. and learned Friend on his presentation of it this afternoon.
  There is, however, one feature of the Bill which causes great anxiety to us in Northern Ireland. I refer to the effect of the provisions for the alteration of the Profits Tax, which increases from 3 per cent. to 10 per cent. tax payable on profits distributed by American subsidiaries to their parent company in America. I am

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  concerned about the effect that is likely to have on American firms setting up industries in the North of Ireland.
  The American firms which have already come to the North of Ireland no doubt calculated very carefully the tax advantages before they came, but in order to help them the Board of Trade issued a booklet called "Make it in Britain," and on the first page of the booklet is a letter signed by my right hon. Friend the President of the Board of Trade. The letter reads:
  "The object of this booklet is to tell manufacturers in Canada and the United States of America how to set about establishing factories in the United Kingdom, and what advantages lie in their doing so."
  Later it reads:
  "… It has been suggested to me that the facts and figures are not yet sufficiently well known to all those who might wish to study them."
  Dealing with the particular point of Profits Tax, it says:
  "… in the case of subsidiaries of companies managed and controlled in the United States or Canada (or elsewhere abroad), dividends, etc., paid to the parent company are disregarded for this purpose, so that for a wholly-owned subsidiary the rate of Profits Tax would be limited to 3 per cent."
  Calculations of the exact net effect, allowing for relief claimable in America against tax paid in this country, are very intricate, and further complicated because one has to allow for anticipated alterations in the American tax structure; but on any calculation it seems quite clear that this alteration in Profits Tax here is a very substantial discouragement to American firms to come to the United Kingdom. I realise that firms like Woolworths, for instance, which have both a generous dividend policy and also a substantial proportion of their equity shareholders in this country, may suffer no great disadvantage by this alteration, but unfortunately the type of company which comes to the North of Ireland is not of that type. They are wholly-owned American subsidiaries.
  As is well known, unemployment in the North of Ireland is already tragic compared with unemployment in Great Britain, and the position is still deteriorating. One of our main hopes lies in attracting the immigrant manufacturer, and it would be a severe setback to us if he were to be discouraged
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  in this way. It also makes nonsense of the special inducements in the way of factory buildings and capital grants which are offered by the Northern Ireland Government to attract industries of this kind. I hope that my right hon. Friend will find it possible to make some modification to this Profits Tax provision to meet our special difficulties in the North of Ireland.
  6.10 p.m.
  Mr. Eric Fletcher: I am sure that the hon. and learned Gentleman the Financial Secretary will be the first to realise that it is not easy on the Second Reading debate of a Finance Bill to produce a connected discussion. Therefore, I trust that the hon. and learned Gentleman, the hon. Member for Armagh (Mr. Armstrong) and my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) will acquit me of any discourtesy if I do not follow them, or take up the various aspects of the Finance Bill which the hon. and learned Gentleman explained so lucidly.
  It is much better to pick out one theme and to stick to it, and I shall confine my few remarks to what is not only the most important but certainly the most controversial feature of this year's Budget. That is the surprising and unprecedented capitulation which the Chancellor made before the Finance Bill was introduced, his complete change of attitude towards dividend stripping and making it retrospective.
  It is worthwhile analysing the ethics of retrospective legislation, because it is obvious that in this instance the Chancellor has been misled, partly, no doubt, by what he read in the newspapers, partly by what representations were made to him in the City, and partly by his hon. Friends. He is unduly squeamish in not sticking to his original intention of giving effect to the warning uttered in 1955 and making retrospective the provisions against dividend stripping.
  I will try to clear away some of the fog which has been created around retrospective legislation. Hon. Members talk about it as though on all occasions and in all forms it is something so abhorrent that it cannot be tolerated for a moment. I noticed in the correspondence in The

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  Times that several distinguished correspondents referred to the classic exposition on the subject of retrospective legislation pronounced by Mr. Justice Willes in the case of Phillips v. Eyre in 1870 in the Exchequer Chamber, with which the hon. and learned Gentleman is no doubt familiar. It is therefore not a new problem, and it is worth while quoting what Mr. Justice Willes said. He said:
  "Retrospective laws are as a rule of questionable policy and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought to deal with future acts and ought not to change the character of past transactions carried on upon the faith of the then existing law. But to affirm that it is naturally or necessarily unjust to take away a vested right of action by Acts subsequent, is inconsistent both with the common law of England and with the constant practice of legislation."
  It is obvious that a distinction must be made between the three kinds of retrospective legislation, firstly, that dealing with criminal law; secondly, that dealing with civil actions as between one individual and another; and thirdly, financial or fiscal legislation.
  Obviously, to make by ex post facto legislation something that was not a crime when it was committed a criminal offence and to punish the offender for it is something which we now rightly regard as thoroughly barbarous, although there are plenty of precedents for that—all the Acts of Attainder, for instance, were ex post facto in the criminal sphere and a great many of us thought that the Nüremburg trials suffered from the same defect. They purported by ex post facto legislation to introduce something new into international criminal law and to punish an offender for something that had not previously been recognised as punishable.
  Nobody would object to restrospective legislation in criminal law seeking to exonerate somebody who had committed a crime. There are many instances in our Statute Book of indemnity Acts of that kind, which are quite sensible and which have the general concurrence of mankind. They are to indemnify somebody by a subsequent Act of Parliament for what was a crime at the time it was committed. That process has frequently been applied to Members of Parliament.
  Secondly, there are civil actions as between one individual and another. There
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  again there are plenty of precedents. In fact, the case of Phillips v. Eyre was one of them. In that case, as the House may remember, the defendant, who was the Governor of Jamaica in a time of great civil commotion and stress, had taken upon himself the responsibility of taking certain steps for which there was no legal justification. As a result of his action, a great many individuals in Jamaica had undoubted rights of action against hint. The Legislature in Jamaica, a subordinate legislature, tried by ex post facto legislation to take away the rights of civil action that existed against the Governor of Jamaica. It was held, and generally thought to be rightly held, that that was not only a legitimate exercise of the powers of the Jamaican Legislature, but was sensible in the circumstances and in accordance with natural justice.
  In retrospective legislation in fiscal matters, totally different considerations apply. In dealing with fiscal matters, if Parliament acts retrospectively, Parliament is not attempting to lay down that something was legal at the time when it was done is now to be considered illegal. Fiscal laws regulate the incidence of taxation as between the taxpayer and the State. It is pertinent to observe that there is inevitably an inherent element of retrospective legislation in all or nearly all fiscal matters. For instance, in the Finance Bill we are, as we do every year, providing what the Income Tax and Surtax rates will be. Surtax is levied on the incomes which people earn not in the previous year but in the year before that. In other words, except in the case of P.A.Y.E. payers at the time when people earn their incomes they do not know what the rate of tax and Surtax will be. They may calculate that this year's Surtax rate will be at a particular level, but they may find that in two years' time it has been increased and the measure of their spendable income changed accordingly.
  In that sense, there is an element of retrospective legislation in every Finance Bill. The same is true of Estate Duty. People who are lucky enough to be able to build up fortunes—as some still can while we have a system which permits capital gains—are not able to make arrangements about how those fortunes will be spent, because they do not know what the level of Estate Duty will be at

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  the time of their death. Whenever Estate Duty is increased it applies retrospectively to fortunes accumulated down to that date in respect of people who die subsequently.
  If this principle is doubted, I will quote what has been said in favour of it. There have been numerous occasions upon which it has been said that retrospective legislation in fiscal matters is justified. My right hon. Friend has already quoted what Neville Chamberlain said in introducing his Budget in April, 1937, and Sir John Simon, in April, 1939, also referred to it. I will not repeat either of their statements. I will mention what the present Lord Chancellor said on the subject. Speaking in this House in the debate on the Iron and Steel Bill on 28th April, 1949, Sir David Maxwell Fyfe—as he then was—said:
  "However, I put this principle forward as quite unchallengeable; that the justification for retrospective legislation is that a reasonable and definite warning has been given to people likely to practise the matter to be struck at, and they have been given the opportunity to avoid that course."—[OFFICIAL REPORT. 28th April, 1949; Vol. 464, c. 499–500.]
  Perhaps I may also quote from that quintessence of Conservative wisdom and policy—the present Lord President of the Council. What did Mr. Quintin Hogg—as he then was—say in this House on 15th June, 1950? He said:
  "I do not see anything in principle objectionable, if people seek to pick a hole in an Act of Parliament deliberately to defy its purposes and deliberately to get round its provisions, to repair the hole retrospectively. I think they must expect Parliament to protect its own policy in that way, at any rate up to a point."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476, c. 708–9.]
  I do not want to weary the House with quotations. It is, however, not only politicians who have referred to the matter; the judiciary have also made statements about it. What could be more relevant to the subject than what was said by Lord Greene, Master of the Rolls? In 1942, he said:
  "For years a battle of manœuvre has been waged by the Legislature and those who are minded to throw the burden of taxation off their shoulders on to those of their fellow subjects. In that battle the legislature has often been worsted by skill, determination and resourcefulness of its opponents. … It would not shock us"—
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  that is, the judiciary—
  "in the least to find that the Legislature has determined to put an end to the struggle by imposing the severest of penalties. It scarcely lies in the mouth of the taxpayer who plays with fire to complain of burnt fingers—especially after he has been warned."
  It is clear from those quotations and horn debates that we have had upon this subject that the test must be whether a clear warning has been given.
  It is said by those who no doubt influence the Chancellor that in arranging their financial affairs people are entitled to make the best arrangements they can in accordance with the law as it then stands. But that is not the end of the story, because it is now recognised that in making the best arrangements they can, they must also take account of the clear and express warnings that have been given that retrospective legislation may subsequently be introduced. The common element in the subject is the doctrine of legitimate expectation.
  If ever there were a case where a clear and unambiguous warning had been given in this House, it was in this case, in 1955. The warning was given over and over again. My right hon. Friend has quoted the first warning, given by the present Minister of Housing and Local Government when he introduced the Second Reading of the Finance Bill on 8th November, 1955. The matter was ventilated in some detail in Committee. Hon. Members on this side of the Committee pointed out that the relevant Clause in the Bill did not go far enough. We could see the loopholes that would be exploited unless the Amendments that we had put down were accepted.
  The argument for those Amendments was cogently put by my right hon. Friend the present Leader of the Opposition, but they were rejected by the then Economic Secretary—the present Parliamentary Secretary to the Ministry of Education. We thought that he was wrong in rejecting them. He said that he thought it would be contrary to normal precedent to make the Clause retrospective without giving a warning. Hon. Members on this side of the Committee then said, "Well, the Clause will not go far enough. You want to make it watertight. Therefore, please accept our Amendments." My

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  right hon. Friend, the Leader of the Opposition said:
  "I can only hope that should the object"—
  that is, our object in moving Amendments—
  "be defeated in any way, and at some future Committee stage of a Finance Bill it is discussed, we shall not then have the argument put forward that an Amendment from the Opposition is retrospective."
  The Minister then said:
  "I can give that assurance unconditionally."—[OFFICIAL REPORT, 29th November, 1955; Vol 546, c. 2229.]
  During the Third Reading debate the Financial Secretary, who was then in charge, gave this clear warning, in the light of what had taken place in Committee:
  "… the dividend strippers have been given notice to quit. With the authority of my right hon. Friend the Chancellor of the Exchequer, my hon. Friend the Economic Secretary has also put it on record that if clever people should discover ways and means of getting round this legislation, which is squarely directed against dividend stripping, the Government will not hesitate to stop any such loophole by further legislation, and to make such legislation retrospective."—[OFFICIAL REPORT, 13th December, 1955; Vol. 547, c. 1022.]
  Therefore, we say that there is a clear abandonment by the Chancellor of his duty to protect the taxpayer and the Revenue against a group of individuals to whom my right hon. Friend referred as spivs and tax dodgers. But, whatever one may think about the ethics of the matter, if people did not heed the warning given in 1955 and have been able to reap very rich profits and rewards for themselves, the amount which the Inland Revenue has lost is indisputable. My right hon. Friend and others put the sum at over £10 million. The truth is that nobody knows the extent of this loss. It may be more than that.
  Mr. Nabarro: It may be a lot less.
  Mr. Fletcher: It may be less, but whatever it is it is admitted to be a substantial amount.
  Mr. John Diamond: More than £2 million.
  Mr. Fletcher: It is because it is substantial that vested interests have put pressure upon the Chancellor to change his mind.
  It was not very courteous to the House for the Chancellor, having first introduced
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  his Budget speech, to withdraw this aspect of it without having heard what hon. Members had to say about it in this House. If he had second thoughts he should have listened to the arguments put forward in the House before changing his mind. I hope that he will have a further opportunity of changing his mind because, under the terms of the Financial Resolution, we shall be able to put down Amendments to the Finance Bill to give effect to the Chancellor's original intention.
  While I am conscious of the fact that we do not want to get the matter out of perspective——
  Mr. Nabarro: Hear, hear.
  Mr. Fletcher: —and while I myself do not want to get it out of perspective. I feel that, from the noises made by hon. Members opposite, they cannot be aware of the deep feeling of injustice and inequality that would result if the Chancellor abandoned the principles that have already been regarded as good precedents and as sound by his predecessors in taking effective and, if necessary, retrospective steps to protect the taxpayer.
  It seems highly incongruous to me and to a great many of my hon. Friends that we have, on the one hand, a certain amount of industrial unrest, including a bus strike in which the issue between the two sides is not very much—a matter of £1 million or so—and, on the other, a Chancellor of the Exchequer apparently complacently giving up large sums to people with no deserts who have been warned that this device will be stopped, and who have, by calculated design, enriched themselves to an unknown extent at the expense of the general body of taxpayers. I hope that, when we come to the Committee stage, the matter can again be reviewed in the light of what I have said.
  6.32 p.m.
  Mr. Gerald Nabarro: I rise to give a general welcome to the Bill, warmly to congratulate my right hon. Friend the Chancellor of the Exchequer upon the majority of the provisions in it, and to add my congratulations to those that have gone before to my hon. and learned Friend the Financial Secretary to the Treasury upon his admirable speech in opening our debate today.
  Before I deal with the provisions of the Bill, I want to say a few words about

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  the inordinate length of time which the right hon. Member for Huyton (Mr. H. Wilson) and the hon. Member for Islington, East (Mr. E. Fletcher) have devoted to this fascinating topic of dividend stripping. The right hon. Member for Huyton—and I wrote down his words at the time—said that the persons involved were a "small and ingenious tribe". I say, very ingenious and very small.
  Only a few cases have been known in the last few years. There may be others which are unknown, but for the right hon. Gentleman to suggest that £12 million to £15 million of revenue is being lost by this ingenious device is, in my view, a gross exaggeration of the sum entailed.
  Even that figure has been divided by seven times by the hon. Member for Gloucester (Mr. Diamond), who interpolated a moment ago that the sum entailed amounted to £2 million.
  Mr. Diamond rose——
  Mr. Nabarro: I will give way in a moment. A nugatory sum is involved, in comparison with the total national revenue, and while I would not for a moment, in any circumstances, defend the practice of dividend stripping, which is wholly bad, I do wish that hon. Gentlemen on both sides of the House would keep it within proper perspective and recognise that only a relatively small sum of money is entailed.
  Mr. Diamond: I only want to say that my right hon. Friend the Member for Huyton (Mr. H. Wilson) was referring to the provisions of the 1955 Act when he talked about £15 million a year. I did not say it was £2 million. I said that it was definitely more than £2 million. I wish to put it in its proper perspective, and this is the largest item in this Budget so far as an Inland Revenue alteration is concerned.
  Mr. Nabarro: We will argue that in detail in Committee. I take the opposite view.
  As to the ethics of dividend stripping, let us consider here and now matters affecting the Daily Herald's finances, which may be very instructive to hon. Gentlemen opposite. Last year, the trade unions transferred control of the Daily Herald to Odham's Press, Ltd. The object of this transaction was to enable
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  Odham's Press to set off the accumulated losses of the Daily Herald against the large profits which Odham's Press, Ltd. were earning on their other publications. This means that a very considerable proportion of the continuing losses of the Daily Herald are now paid by the Exchequer in the form of loss of taxation receipts arising from the profits of Odham's Press, Ltd.
  Surely this is a most flagrant case of tax avoidance, and might well come under the definition of dividend stripping. Be it in the mouths of hon. Gentlemen opposite to talk about dividend strippers when their official party organisation's principal publication is one of the main offenders in this matter?
  Mr. Diamond: Nonsense.
  Mr. Nabarro: Did the hon. Member say, "Nonsense"? I hope that later he will be able perhaps to satisfy the House that that particular transaction will not come within the purview of Clause 17. In any event, if the right hon. Member for Huyton is to have his way, and the net is cast much wider in regard to all tax avoidance matters, surely it is Odham's Press and the Daily Herald which must first come under the rigorous scrutiny of the Inland Revenue, for they will be found to be principal offenders in this context.
  Mr. Joseph Slater: Will the hon. Gentleman tell us who wrote the statement which he has just quoted to the House?
  Mr. Nabarro: I have taken care to be perfectly truthful. This is a matter of national importance, and I wished to be exactly word-perfect in what I said. It is an irrefutable case, and perhaps the hon. Gentleman, later in our debate, will be able to support my views on the iniquities of the action of Odham's Press and the Daily Herald.
  I wish to say a few words about the Profits Tax. For my part, I am very pleased that my right hon. Friend has adopted the recommendation of the Royal Commission about the amalgamation of the two rates of Profits Tax, the 3 per cent. rate in respect of retained profits and the 30 per cent. rate in respect of distributed profits. We can argue this out in detail in Committee, but there is no doubt whatever that,

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  during the period of differential rates of Profits Tax, there has taken place an extraordinary distortion in the capital structure of companies. That is a matter of importance to the whole of British industry—the gearing of capital used, the amount of debenture capital, the amount of loan capital, and the relationship between one form and type of capital and another, has often been assessed against the background of two greatly differential rates of Profits Tax.
  The Royal Commission was undoubtedly correct in recommending the amalgamation, and although, as my right hon. Friend rightly said, he is relieving industry of £16½ million of Profits Tax in a full year, the flat rate of 10 per cent. which is easily calculable is much to be preferred. He is acting in accord with the Royal Commission recommendation and this will be in the best interests of the expansion of industrial production.
  Secondly, I congratulate my right hon. Friend on what he has done in regard to the Stamp Duty. It is significant that we are now building more than 100,000 houses a year for owner-occupation and that he now proposes to abolish the 2 per cent. Stamp Duty formerly charged. On a house costing £3,000 a sum of £60 previously had to be found by the occupiers, generally young couples, in addition to the cost of setting up their home and buying furniture. It should be noted that the beneficiaries of this tax remission will only be people buying their own houses, and because most of those people pay between £2,000 and £3,000 for the house the abolition of Stamp Duty on houses costing up to £3,500, represents an important concession.
  Mr. E. Fernyhough: What compensation is that for a 6 per cent. Bank Rate?
  Mr. Nabarro: Most of them are Income Tax payers and the slight increase in the Bank Rate is nearly halved by the fact that the increase they pay on the mortgage interest is an allowable charge against their Income Tax.
  In the matter of capital allowances, my right hon. Friend has increased the initial allowance on industrial buildings from 10 per cent. to 12½ per cent. and on plant and machinery from 20 per cent.
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  to 25 per cent. On every former occasion in the last eight or nine years when the initial allowance, or any form of capital allowances, has been changed, I have endeavoured to make the point to successive Chancellors of the Exchequer that I still regard them—and still does the bulk of the business community—as an interest-free loan.
  In the interest of companies which have made adequate provision for their future capital expenditure programmes and have money in reserve, this is very little help. I hope that my right hon. Friend will not suppose that an increase in capital allowances for industry is an effective substitute for a reduction in standard rates of direct taxation, which I regard as infinitely more important and helpful towards the general objective of industrial expansion, than the manipulation of these interest-free loans.
  As to Clause 30, in Part VII of the Bill, my right hon. Friend will know at once that I am extremely critical of his proposal to continue financing the nationalised industries from Exchequer funds. I intervened in the speech of the hon. Member for Huyton to draw attention to what occurred in 1956 when, sadly, my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke), my then hon. Friend the Member for Ealing, South—Mr. Maude—who has since left the House, and myself, were obliged at 4 o'clock in the morning, to move an Amendment to these arrangements for Exchequer financing of certain nationalised industries. The result was that, when everybody was very tired and wanted to go home, we had an attenuated and entirely inconclusive debate. I hope that this year, when we discuss Clause 30, the discussion will be at a reasonable hour. As there are varying opinions on what to hon. Members in all parts of the House is a cardinal issue of economic and financial policy, I hope that it may be discussed at a reasonable hour and more fully than in 1956.
  I shall devote the remainder of my speech to the question of Purchase Tax. My right hon. Friend has taken a short and faltering step in my direction—very short and very faltering. We have seen the end of the 90 per cent. rate, for which I am deeply grateful. We have seen a reduction from seven rates of Purchase Tax to four rates, for which I am deeply

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  grateful. We have seen the rates of Purchase Tax adjusted to 60 per cent., 30 per cent., 15 per cent. and 5 per cent., in place of the pre-Budget arrangements of 90 per cent., 60 per cent., 50 per cent., 30 per cent., 15 per cent., 10 per cent., and 5 per cent. The new arrangements of four rates are infinitely better than where the Socialists left them in 1951.
  Mr. Gordon Walker: There were three rates then.
  Mr. Nabarro: I quite agree. The right hon. Member always sticks his chin out. There were three rates, but they were 33⅓ per cent., 60⅔ per cent., and 100 per cent., which were much greater than the rates my right hon. Friend has now introduced. I say to my right hon. Friend that, while I am grateful to him for the notional—I emphasise notional—reduction of Purchase Tax in the sum of £41 million in a full year, I think that he must readily confess that all he has really done is to anticipate a yield of £490 million from Purchase Tax in the year 1958–59 as compared with a yield of £494 million in the year 1957–58.
  Mr. Fernyhough: What was the yield in 1951?
  Mr. Nabarro: It was less because consumption was a very great deal less, but I shall come to that in a moment. All that my right hon. Friend has done is to reduce the yield of Purchase Tax by £4 million in a total of £494 million, being a reduction of less than 1 per cent.
  Mrs. Jean Mann: When the hon. Member for Kidderminster (Mr. Nabarro) talked about the Socialist Budget of 1951, he omitted to mention a great number of items which were not under Purchase Tax at all, but which were brought under Purchase Tax afterwards when the present Government came into power, namely, the famous pots and pans, the household group.
  Mr. Nabarro: Those are points that I shall readily argue at any necessary length with the hon. Lady during Committee stage, because I think they are Committee points. The plain fact of the matter is that the overall rates of Purchase Tax were infinitely higher when the Socialists left office than they are today.
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  I have conducted a campaign, I readily confess, with the purpose and objective of ridiculing the Treasury's Purchase Tax arrangements. It has gone on for six months and comprised one hundred or more Parliamentary Questions. I propose, when the Finance Bill has obtained a Second Reading, to put down 50 to 60 Amendments to the Schedules. Probably in the next Session I shall put down a further 100 Parliamentary Questions designed to bring out the extraordinary inequalities, anomalies and, indeed, absurdities which still exist in the Purchase Tax Schedules.
  The right hon. Member for Colne Valley (Mr. Glenvil Hall), in typically disingenuous fashion, said earlier that he desired to see the Purchase Tax streamlined. My righ hon. Friend the Chancellor said in his Budget speech:
  "Although I am no lover of the Purchase Tax and recognise its defects …"—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 72.]
  That was before proceeding to announce the changes. To complete the trinity, the President of the Institute of Taxation, in his presidential address on 29th April, said:
  "The regrouping of Purchase Tax brought welcome reliefs in certain directions but I do suggest that Purchase Tax as a whole still contains many anomalies."
  As the right hon. Member for Colne Valley mentioned, we have come to regard Purchase Tax as a sort of sorting of the sheep from the goats on the basis of what are deemed to be luxuries and what are deemed to be essentials. What is a luxury item in time of peace? Can anyone define what a luxury is?
  Mr. Hynd: It is not a clothes basket.
  Mr. Nabarro: I quite agree. The hon. Member would regard that as an essential, but I regard a carpet just as much as an essential. I regard as an essential a television set. I regard as an essential a radio set. [Interruption.] The right hon. Member for Smethwick (Mr. Gordon Walker), who is a Privy Councillor, has some precedence in catching your eye, Mr. Speaker. He might allow me to make my speech in peace and quietness. I am not a Privy Councillor and have no precedence. Does the right hon. Member wish to intervene?
  Mr. Gordon Walker: I just wondered whether the hon. Member regarded a Jaguar as a luxury or not?
  Mr. Nabarro: A Jaguar is an absolute essential to the motor car industry because it is one of the biggest dollar exports that this country has got and, unless there is bulk production both for the home market and for export, competitive prices overseas cannot be maintained.
  There is an argument to be adduced that every article subject to Purchase Tax is essential to one or other sector of the economy. To me, in times of peace and of an expanding economy, a luxury can only be defined as an article which I cannot afford myself. That is all. I cannot regard a mink coat as anything else than a luxury, because I cannot afford to buy my wife one, but there are very many people who, I have no doubt at all, will plead that mink coats with a 30 per cent. rate of Purchase Tax on them are not luxuries and ought to be taxed at a much lower level because of the important contribution they make to the export of furs.
  One can argue endlessly as to what is a luxury and what is an essential. I say that, in time of peace and plenty every manufactured article is equally essential to the economy, and that an equally good case can be made for relieving it of the Purchase Tax or, alternatively, if one should, for increasing Purchase Tax on it. Does my right hon. Friend really claim that motor cars are luxuries, when we know that out of those used in this country between 75 and 80 per cent. are used for business and professional purposes? And when he allows exceptionally preferential rates of depreciation on them for business purposes? And does the Chancellor, or any hon. Gentleman opposite, really suppose that the chassis of a commercial road vehicle is a luxury—the single item of industrial capital equipment that attracts Purchase Tax, and at 30 per cent.? That is truly monstrous.
  The plain fact is that although, in his Budget speech, my right hon. Friend may have said that a retail sales tax was a mirage, as he termed it. I thought that he was a little less than just, a little less generous than he customarily is to the vast body of public opinion in the country today—industrial, commercial and consumer opinion—that shares my view, which I want to impress on the Chancellor this afternoon.
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  I am not pleading for a retail sales tax. I am not pleading for a turnover tax. I am not pleading for the Purchase Tax. I am pleading only for one, uniform, nondiscriminatory rate of indirect taxation on certain consumer manufactured goods. Call it what one may. It may be a purchase tax levied at the point of wholesale, as at present, at a unifom rate of 20 per cent. on certain articles. It may be a retail sales tax collected over the counter in the American fashion—which means that the retailer does not tie up in his stocks any money in respect of tax—at 15 per cent.
  It may be a turnover tax, as practised by the West Germans, at a very low level, and recently advocated, I see, in a journal called The Director, which estimated that a turnover tax applied at the four levels of raw material, manufacture, wholesale and retail would produce cumulatively the same amount as the present Purchase Tax if, at each stage, the rate was 1 per cent.; that is, a cumulative tax of the turnover type.
  The plain fact is that the Purchase Tax was introduced in the war, and maintained after the war for entirely different purposes than those existing today. It was designed to depress consumption of manufactured goods, and, after the war, to free goods for export. Today, we are seeking to expand all manufactures, principally for export but supported by a buoyant home market. I say to the Chancellor that there is a vast body of opinion that supports this need for a single flat rate tax. I repeat, I do not mind whether he calls it a purchase tax, a retail sales tax or a turnover tax, so long as it is uniform and non-discriminatory in character.
  I do not believe that women's cosmetics, or motor cars, or television sets or radio sets, taxed at 60 per cent., are luxuries, any more than a carpet, taxed at 15 per cent. is a luxury, or a commercial motor chassis, taxed at 30 per cent., is a luxury. Nobody in the House, when confronted with a series of articles of that kind, could define which one was more essential than another, which was a luxury and which was not. Therefore, I appeal to him not to dismiss as a mirage a single flat rate tax, but, between this year and next, to examine it objectively, in the interests of the economy as a whole.

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  My right hon. Friend has reduced taxation by a total of £108 million, in a full year, as a result of the financial and taxation proposals now before us. This means that, of the national income in 1958, taxation will take, according to my calculations, very slightly less than 5s. in the £. That is a significant improvement on the position in 1951, when the Socialists left office. Taxation then was about 5s. 9d. in the £ of the national income, and Conservative reductions in this regard are notwithstanding the huge increase in social welfare expenditure.
  I hope that, in the next twelve months, my right hon. Friend will apply himself to the further objectives that I now give him. Next year, there should be very substantial reliefs in taxation. There should be a non-discriminatory, single rate of consumer or indirect taxation to replace the Purchase Tax, and the rate—and I shall explain this in Committee—should, I think, be 15 per cent. There should be 1s, off the standard rate of Income Tax, and the Schedule A tax should be abolished. Thus, the General Election to be fought on 29th October, 1959, will be won by the Tory Party.
  6.55 p.m.
  Mr. M. Philips Price: I hope that the hon. Member for Kidderminster (Mr. Nabarro) will forgive me if I do not follow him in all the intricacies of his speech. He was certainly very stimulating, as usual, and has amused the House quite a lot, but I am inclined to think that he proved a bit too much. I understood him to say that he was in favour of a 20 per cent. tax on all articles. He did not call it a Purchase Tax—I do not know what he did call it, actually—but I think that what he was really saying was that articles bought by poor people—pensioners and the low income groups generally—would pay the same kind of tax as those with higher incomes. That, I think, is what the Chancellor had in mind when he spoke of the idea of this kind of tax as a mirage—
  Mr. Nabarro: I am sure the hon. Gentleman would not wish to misquote me. What I suggested was a single, flat rate of tax applicable to all the articles at present attracting Purchase Tax, to yield the same revenue as the present Purchase Tax—[HON. MEMBERS: "A
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  sales tax."] Let hon. Members call it what they will. It was the Chancellor, in his Budget speech, who said that the rate would have to be 20 per cent.
  Mr. Philips Price: I agree that that would be a simple tax, but it would be an unfair tax, and to us on this side it seems that the Chancellor had similar reservations when he made his Budget speech.
  This Finance Bill aims to distribute £108 million of the Chancellor's surplus. I must confess that the Bill has a certain number of good points, but I am afraid that they are outweighed by the bad ones. For instance, we on this side are glad to see him taking steps to deal with tax evasion by means of dividend stripping. I speak for myself only when I say that here I do not take the view that it would be altogether wise to legislate retrospectively. I feel that it might hardly be worth while. It would put a lot of work on the Revenue officials for what might be a small return. These people who are clever enough to discover these methods of tax evasion will also be clever enough to hide their tracks.
  I was much interested in the suggesgestion made by my right hon. Friend the Member for Huyton (Mr. H. Wilson) to deal with the problem by some interim measure at any time between the passage of the Finance Bill and the next Budget statement. That is the kind of method that one might explore with a view to ascertaining what one can do to stop these clever people who, when the Budget statement is hardly out, immediately look for new ways of avoiding paying tax.
  I think we can all approve of the increase in initial allowances on industrial buildings, plant and machinery. That is a step in the right direction. The hon. Member for Kidderminster said that it would be much better to lower taxes. I do not know whether that is a better way. The reduction of taxation would put money into the hands of industry and no one would know how it would be spent. At present the State keeps control over it, and some assistance can be given to those in the export trade who require to carry out improvements. I should like to know whether the provision will apply to agriculture. Will the landlord or owner occupier who improves his buildings, plant and equipment

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  be eligible for the increased initial allowance? I should like the Chancellor to assure me about that.
  After those two points, I am afraid that the good things of the Budget seem to be exhausted. With regard to the provision in respect of Profits Tax, one can regard it only as a retrograde step. My right hon. Friend the Leader of the Opposition in his 1950 or 1951 Budget used Profits Tax as a means of encouraging the ploughing back of profits into industry and discouraging high dividends. The Chancellor has done the reverse. In his Budget speech, he said that some companies which made lower distributions would pay more Profits Tax and that some making higher distributions would pay less. I should have thought that was the very opposite to what we wanted to do. It may make it easier for the Revenue officials to administer the tax, but it will have a very bad moral effect upon industry generally. How can one go to the leaders of the trade unions and to the workers generally at a time like this and ask them to show restraint if this sort of thing appears in the Finance Bill?
  I do not know when I heard a more Liberal, laissez-faire speech than that of the Paymaster-General on the Budget Resolutions. I am sure that the Liberals of today have much more advanced ideas than the ones we heard expressed in that speech. They reminded me very much of the speeches that I heard when I first became a Member in the Parliament of 1929 to 1931, the sort of speeches which we heard from Mr. Philip Snowden, when Chancellor, advancing the Manchester School free trade ideas, out-liberalising the Liberals of that time—" Everything laissez-faire leave it all to chance."
  The Paymaster-General was defending an economic policy which has resulted in the gross domestic product rising by only 1½ per cent. last year while investment in industry, both public and private, during the last five years has risen 41 per cent. In other words, in investment and improvements industry has done not too badly, having to a considerable extent responded to the call for improvements and efficiency. However, the Government, by their methods—by the high Bank Rate, the credit squeeze and freezing eredit—have prevented those investments from taking full effect. The consequence is that we are getting a very
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  low increase in production, and to a very large extent that is responsible for the continued rise in prices, or, at any rate, the lack of fall in prices. In other words, inflation can be caused just as much by failure to increase production as by lowering purchasing power.
  In this respect I can quote no less an authority than the Economist, which holds very orthodox views. These words appeared in it on 26th April:
  "What is really, and urgently, wanted is the frank recognition that this kind of austerity—the cutting back of investment in 1955; the brake which has been put upon production for three years; the holding-back of investment now, coupled as it is with the paring down of private industrialist's programmes as well—is particularly had for Britain. To say that expansion should be resumed, even if it means 'letting the pound go,' is foolish and irresponsible; but the frame of mind which accepts as axiomatic that expansion cannot be resumed without the pound being devalued is impossibly defeatist, and just as silly."
  Coming from a paper with such authority, that is something which should cause the Government very seriously to reconsider the policy which they are adopting.
  The Paymaster-General argued that increased production would mean increased exports, which would strain the balance of payments. Actually, import prices have been coming down steadily on the world market, and that is very much to our advantage and we could very well afford to risk an increase in imports today so long as our exports remain buoyant. Moreover—this point has to be borne in mind—the increased production would lower the general overhead costs of industry. With a higher output, overheads tend to become a lower percentage. There again, we should have some advantage.
  The Paymaster-General was practically arguing that we must stagnate or the £ will collapse. My right hon. Friend the Member for Huyton today showed that that is an absolutely false premise. Consequently, we say that the Finance Bill, where it is not downright bad, is at least weak and half-hearted. I agree that it should not encourage large rises in home consumption, but it should aim at assisting our export trade, doing more to encourage production for abroad. There ought to be measures in the Finance Bill to make it possible for firms engaged in the export trade to be given top priority in respect of credit, allowances and other help. What is being done in respect of

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  initial allowances is only very small. In other words, the Bill is an example of the Government's policy of laissez-faire.
  A question which any Chancellor ought to consider today is how he can frame the Finance Bill in order to encourage home investment without endangering the value of the £. The Chancellor seemed to understand that, because later in the Budget Resolutions debate he referred to bigger foreign lending to assist our exports. In his opening Budget speech, he said that the problem of world liquidity and of ensuring the strongest possible basis for the trade of the free world was a matter of increasing importance and urgency. I do not believe that it is a question of "either … or", that we must either expand at home and abandon the sterling area or finance the sterling area and stagnate at home. It is not like that. But I believe that we cannot go on as we are going now. We must get help in some form of support for the sterling area.
  I put a Question to the Chancellor some weeks ago in which I asked him if anything could be done to strengthen the International Monetary Fund whereby we might have American assistance in supporting the sterling area. I was glad that the Chancellor pointed out that the United States of America and the Fund frequently discussed the matter of the Fund's reserves. I put a supplementary question to him, and he said:
  "I think that the International Monetary Fund and the International Bank have both done extremely useful work. … It may be that there is still more important work for them in the years ahead."—[OFFICIAL REPORT, 25th March, 1958; Vol. 584, c. 207.]
  Clearly, the Chancellor realises that the situation today is not satisfactory, but we must try still further to keep the sterling area going without stagnating at home. I hope that that is what he is thinking about. It seems to me that we cannot do this without United States assistance via the International Monetary Fund.
  Could not Germany help? Germany now has tremendous reserves of gold and hard currency. Could she not help by credits abroad also to assist in maintaining the sterling area? After all, the sterling area is not maintained particularly for our advantage; we are not running it for our interests alone. It is run in the interests of those countries which
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  find sterling a useful means of banking for their developments at home.
  I do not take the view that, if we expand and push our home trade, we thereby endanger the sterling area. There ought to be some means by which the Commonwealth, and those countries which are not in the Commonwealth but are in the sterling area, could put their reserves into some international bank for the sterling area, which we might then ask the United States to underwrite. It may be said that that is asking too much of the United States, but I believe that it would not be.
  Mr. F. A. Burden: Will the hon. Gentleman not agree that if the European Free Trade Area comes to fruition all these things are likely to come about, but they cannot be done overnight and it is far better, if the European Free Trade Area is to come, that they should be done without any underwriting by the United States?
  Mr. Philips Price: I am, of course, entirely in favour of the Free Trade Area; we ought to try to overcome the difficulties and push ahead with it. But I do not believe that it is entirely the answer. That is why I suggest something else also which, I believe, would really stabilise the situation and make it possible for us to keep the sterling area running and, at the same time, push on with our internal development. I do not, however, see anything in the Finance Bill to indicate that the Chancellor has this in mind for any immediate action. But, as I said, in the statements he has made and the answers he gave to me, he showed, I think, that he recognises the importance of the matter.
  We on this side feel that the Chancellor has missed a great opportunity in the Finance Bill to go forward with the things which I have tried to suggest. We believe that it is a half-hearted Bill generally, in some parts really bad, and good in only a very few.
  7.14 p.m.
  Mr. John Arbuthnot: The House has listened to another speech from the hon. Member for Gloucestershire, West (Mr. Philips Price) delivered with the sincerity which we all appreciate very much. He will not expect me to agree with him, however, in feeling that there is not much good in the Finance Bill.

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  I regard it as an excellent Finance Bill, particularly good in the overhaul of Profits Tax which the hon. Gentleman does not like. One of the great advantages in the rearrangement of Profits Tax and the reduction to 10 per cent. overall is that it will now be the shareholder with an independent mind who will be able to decide where capital can be employed to the best advantage in the national interest. With the excessive discrimination between distribution and non-distribution which has prevailed hitherto, there has been a tendency for companies which might not need capital for their expansion to plough back unnecessarily. The result has been that capital has not been employed with the efficiency in the past that I hope will prevail under the new arrangements.
  This particular aspect of the Budget was referred to by my hon. Friend the Member for Armagh (Mr. Armstrong), who was concerned that the new rates of Profits Tax would militate against foreign capital, American capital in particular, which give employment in Northern Ireland. In my view, he is under a misapprehension. American business thinking of investing in Britain will not be discouraged from doing so because of the flat rate of Profits Tax, since that is in the main offset against American taxation when the profits are returned to the United States. I would go further and say that, if my right hon. Friend the Chancellor were to consider giving discriminatory tax relief to foreign-owned companies in this country, it would be a gross discrimination against British capital. It would be entirely wrong for British enterprise to be discriminated against in that sort of way.
  The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) was in his most ebullient form this afternoon. He suggested—and the hon. Member for Gloucestershire, West echoed the suggestion—that the Budget represented "strength through stagnation". I would much rather have strength through stagnation as in my right hon. Friend's Budget, which remits £108 million in taxation in a full year, than the type of stagnation which occurred in the last Budget of the Leader of the Opposition, who put up the rate of taxation by over £300 million. The right hon. Gentleman seemed to go rather adrift also when he
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  suggested that encouragement to larger distribution under the new rate of Profits Tax was depressing on the Stock Exchange shares of companies which have in the past been parsimonious in their distributions. That seems to be a non sequitur. I should have thought that it would have been much more likely that those companies would have been encouraged to increase their distributions, with the result that they would have been more likely to go up rather than down Stock Exchange-wise.
  I think that I am the first Member to mention it since my hon. and learned Friend the Member for Middlesbrough, West (Mr. Simon), the Financial Secretary, made his concession on the Hodge case. I am grateful for the sympathetic way in which this type of case has been dealt with. Hon. Members on both sides have felt that the Hodge case revealed a state of the law which was grossly unfair and ought to be remedied. I am grateful to my hon. and learned Friend for what he has said. It will be very much appreciated as putting right a serious blemish hitherto in the law.
  I want to congratulate my right hon. Friend the Chancellor on three things that do not appear in the Finance Bill. First, I congratulate him on the fact that there is now no retrospective legislation in the Finance Bill, and I am glad that the hon. Member for Gloucester, West agrees with me in this. Hon. Members on all sides have an instinctive and very proper dislike for retrospective legislation, whether it is in regard to criminal law or taxation law. In my view, retrospective legislation is wrong, and I am glad that my right hon. Friend has concurred in that view and has deleted that retrospective part of his proposals from the Bill. Nonetheless, I welcome the proposal that my right hon. Friend has made to stop dividend stripping, of which nobody approves in any shape or form.
  The second thing that I am glad to see is not in the Finance Bill is the proposal in the Budget to tax miners' helmets and protective clothing. As I think I represent more miners than any other Tory in the House, that is particularly welcome to me, and I was very glad my right hon. Friend removed that from his proposals. Despite anything that may be said by my hon. Friend

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  the Member for Kidderminster (Mr. Nabarro), who may suggest that this introduces an anomaly, I think that it is an anomaly which is well worth introducing.
  The third thing that I am glad has not appeared in the Finance Bill or in any of the speeches on the Budget is that no exhortations have been made—no exhortations to play the game, no exhortations to patriotism and so on. My right hon. Friend the Member for Flint, West (Mr. Birch), in a notable speech in the Budget debate, drew attention to the possible causes that might lead to inflation. He said that inflation might be caused through increased demand and one industry calling in labour from other firms at higher wages in order to expand itself and to earn larger profits. That he described as the demand-pull inflation.
  The other cause of inflation was the cost-push inflation, where the trade unions demand more wages with the possible result that profits went down. He concluded that during the greater part of the period since 1950 it had been the demand-pull pattern of inflation that had prevailed and it was only latterly that the cost-push pattern came into prominence in our economic affairs. The fundamental thing is that whether inflation is due to cost-push or demand-pull, it can be cured by Government control over the volume of money and credit. It follows that the main theme upon which the Finance Bill must be and is in fact based is the essential need to guard the value of the £ and to stop inflation.
  I am convinced that my right hon. Friend was right to limit the remission in taxation to £108 million in a full year. If we are to limit the amount of money to a figure which corresponds with production, it is important that we should step up production so that the national prosperity can increase. The Chancellor took one step towards increasing production when he raised the initial allowances in Clause 13 of the Bill. I suggest to him that there are further steps that may be taken, perhaps if not in this Finance Bill, then I trust in the next one.
  I believe that production is held back by two things. First, it is held back
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  because of inadequate capital equipment. We know that in the United States the capital equipment behind each working man is three times the amount behind the British workman. Our production is also held back because inadequate use is made of our existing capital equipment.
  If possible, I should like to see some means to encourage the greater use of the capital equipment and machinery that is already available to us—some form of tax incentive to persuade manufacturers to use their machinery right round the clock and not merely during one shift or, in a specialised case, a part of a shift during the day. Capital equipment is valuable. This machinery should be used to the full in order to increase production.
  Whereas my right hon. Friend in the Finance Bill has raised the initial allowances, his ultimate aim ought to be to go considerably further and to allow industry to depreciate its capital equipment at any rate that it likes. The total amount that the Exchequer will have to bear will remain exactly the same over the full life of the equipment. If an industry decides to depreciate a particular piece of plant or machinery in one year, then there will be no further depreciation to come in future years during which depreciation is allowed at the present moment. The only safeguard that would be necessary would be to ensure that if industry does decide to depreciate for tax purposes it must also depreciate at the same rate in its own accounts. In this way the use of machinery to the full would be encouraged. I would rather see the problem dealt with in that way rather than by introducing investment allowances.
  We want more capital plant and equipment. If we are to have them it is essential that we should have more savings. I should like to see my right hon. Friend give greater encouragement to personal savings, because I think that personal savings, particularly if put into equity investment in industry, will lead directly to greater capital equipment, greater efficiency and greater productivity. There has been a considerable increase already in the amount of personal savings each year. In 1950, they amounted to £158 million. In 1956, that figure had increased tenfold and is now £1,504 million.

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  I believe that there is scope for further encouragement in investment. Equity investment in industry is still in far too few hands. We have to try to encourage more people to hold industrial equity stocks. We have already ironed out the extremes in income, but now our task is to make sure that everyone becomes a shareholder and plays his part through his savings as well as through his work in boosting Britain's prosperity. What we need is not so much a redistribution of old wealth as the creation of new wealth by increased savings from those in whom the vast majority of current incomes are concentrated.
  What can the Chancellor do about this? I would suggest that, as in Clause 28 of the Bill my right hon. Friend is giving remissions in Stamp Duty on house property, he ought to do something on the same lines for share transactions. The Stamp Duty on share transactions is still at the figure of 2 per cent. at which the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) left it.
  I would suggest also that my right hon. Friend should give a concession on, say, the first £15 income from equity investment in industry, just in the same way as he now gives a concession for investment in certain Government securities.
  I would suggest that there is an urgent need for the Government to convene a conference. If we really want to see people investing more in industry, if we really want to see investment wider spread, with everybody becoming a shareholder, I feel that one of the ways in which it can be brought about is by the Government convening a conference. Its members should comprise the Government, the Stock Exchange, the banks, insurance companies, investment trusts, unit trusts and pension funds, and people of that kind. We have reached a position today where saving is almost as important as earning. If earning merits encouragement by tax concessions, personal savings ought to do the same. If personal saving can be further encouraged it will strengthen the value of the £, it will enable taxation to be reduced, it will increase productivity and exports, and will raise the standard of living of all the people in the country.
  7.32 p.m.
  Mr. A. E. Oram: This Finance Bill is a Bill of bits and pieces without a theme, as my right hon.
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  Friend the Member for Huyton (Mr. H. Wilson) rightly said, and therefore it is a little difficult to establish a theme in a speech, and one is faced with the choice between doing as the hon. Member for Dover (Mr. Arbuthnot) did and touching lightly on a great variety of topics, or selecting one or two items in the Bill upon which one has a contribution especially to make. I propose to take the second of those courses.
  That is the reason why I shall not be commenting on the speech of the hon. Member for Dover to which we have just listened, beyond saying that I was most interested in the hon. Gentleman's view of the desirability of everyone being a shareholder. I am particularly interested in what he had to say since a good deal of what I shall say later has relation to the Co-operative movement. I would commend to the hon. Gentleman a study of the movement and its principles as the most practical way in which everyone can become a shareholder, because 12 million of us are shareholders in the easiest possible way in that great Co-operative movement. I hope that we shall have his support at a later stage when, as I think may be necessary, we move Amendments to the Bill in protection of the Co-operative movement.
  The two topics which I have chosen for particular attention arc, firstly, the Purchase Tax and, secondly, the Profits Tax. The Purchase Tax has been called to the attention of the House in an unusual way recently at Question Time. We have had the threat put before us today that the process will be continued. The Questions by which we have been sometimes amused but more often, I think, a little bored, have been designed to call attention to minor and pernickety anomalies in the administration of Purchase Tax. I am more concerned to call attention to major anomalies, as I see them, in the present structure and application of the tax.
  The first major anomaly is that any essential household articles should be subject to tax at all. In a Budget which makes possible considerable reductions in Purchase Tax—which I very much welcome—it ought surely to be possible to find the necessary reliefs for absolutely essential articles of domestic furniture. I refer particularly to domestic textiles and bedding and linoleum, which are absolutely essential in any home. It seems to

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  me that the Chancellor ought to have been able to relieve such articles from tax altogether.
  Two other anomalies of a different kind are equally important. The first is that it is completely an anomaly, it seems to me, that traders are required by law, by hygiene regulations, to put into their shops equipment—refrigerators, hot water equipment and the like—and by another part of the law are obliged to pay Purchase Tax on it. I ask the Chancellor to look into that question to see if a scheme can be devised whereby items of that kind are relieved of Purchase Tax.
  The other anomaly, which, I know, has been aired in this House on many occasions, is that when there are reductions in Purchase Tax such as are occurring this year, and which we welcome, there is an unwelcome feature in that retailers who hold stocks of the commodities have to bear a loss, because they have already paid tax on them. I know there are difficulties, but it ought to be possible to do something about that. The objection is always advanced that it is not easy to identify articles upon which tax has been paid by the retailer, but I suggest that in the instances we are particularly considering in this Bill the most important items upon which there are to be reliefs, such as refrigerators, washing machines and cameras—another important category—are just those items which can be identified. Therefore, it seems to me that the Bill provides an opportunity to introduce some pilot scheme whereby these longstanding complaints can at last be remedied.
  The second major problem to which I would call the attention of the House is that of Profits Tax and the new proposals for merging the two rates into one. The hon. Member for Dover welcomed that merging. I cannot follow him in that at all. I echo the general objections which have already been expressed from this side of the House about this new proposal. The objection is that the new tax will fail to discriminate between the purposes for which the profits are used. By treating profits which are ploughed back in the same way, and subjecting them to the same rate of tax, as profits which are distributed, it seems to me the Chancellor is adding an inflationary factor to the economy
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  and also—and this is more important—is depriving himself of an important instrument of financial control which my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) instituted in his Budget of 1947.
  My particular criticism is somewhat narrower. This proposed merger of the two rates is, in my opinion, open to criticism because it fails to distinguish sufficiently between the nature of the enterprises to which the tax is applied. The proposal in the Finance Bill is to have a uniform rate and to apply that to ordinary companies, nationalised industries, building societies and Co-operative societies, without any regard to the justice of the new arrangement as between the different categories which I have mentioned. I wish to offer evidence which I consider proves that this will lead to injustices, particularly to Co-operative societies.
  In his Budget speech the Chancellor of the Exchequer said—quite fairly as it then appeared—
  "Some that make lower distributions will pay rather more Profits Tax than hitherto. Some that make higher distributions will pay less. Only a few will break exactly even."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 65.]
  As I say, this sounded perfectly fair when those words were spoken. One can readily accept the general proposition that when a major change in the structure of a tax is brought about, not everyone will fare in precisely the same way. Some will lose on the swings and others will gain on the roundabouts. But what has emerged since the Budget speech, and what concerns me and a number of my hon. Friends, is that all Co-operative societies will lose. It is not the case that some will be worse off and some better off. All the Co-operative societies will be worse off, and many will be considerably worse off.
  While the whole range of the Profits Tax payers will be relieved of about £16 million of tax, the Co-operative movement—we had the answer in this House a week or two ago—will find itself paying £1⅓ million more. Was that the intention when this Budget was framed? Was it the intention that a whole class of Profits Tax payers should pay more in this way while other taxpayers in general would pay less? I will give, as an example, the Co-operative society with which I am

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  most familiar, the Brighton society. I understand that the rise in Profits Tax payment for that society will be from something less than £3,000 to over £6,000, or double the amount which was formerly paid. There are plenty of similar illustrations which could be given. I want to know whether the phrase of the Chancellor about some paying "rather more" adequately covers cases where considerably more than double the previous amount is being paid.
  The Chancellor of the Exchequer was recently Minister of Agriculture, Fisheries and Food, and he knows, therefore, that during the post-war years there have been interesting and welcome developments regarding farmers' co-operative societies. Having checked up with their recently-formed organisation, I understand that it is expected that in many cases double the amount of tax will be paid by the societies. When the Chancellor was Minister of Agriculture, Fisheries and Food he encouraged agricultural co-operation, and one wonders why he has changed his tune now that he is Chancellor, and proposes to harm the organisation which he encouraged previously.
  Mr. Simon: The hon. Gentleman is always so fair in debate that I know he would not wish to do an injustice to my right hon. Friend. He has suggested that in his Budget statement my right hon. Friend did not give a warning about the way in which the Co-operative movement would be treated. In point of fact, my right hon. Friend dealt specifically with the concessions made to Co-operative societies and then went on to say those concessions having been made, that the societies would now pay a flat rate of 10 per cent.
  Mr. Oram: Yes, but the right hon. Gentleman did not give any indication of what would be the financial outcome in terms of millions of pounds. Listening to him making his Budget speech, one had no idea at all that it would be so one-sided in its effect on the movement.
  How does the injustice come about? I maintain that it is through the effort to apply a uniform formula to types of organisations which are very different from one another. It is like taking a cow and a horse, putting identical harness on them and linking them to a cart, and then putting a milk pail beneath
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  each of them and expecting to get the same amount of drawing power and the same amount of milk from each animal, on the ground that they are both large domestic animals. A Co-operative society is a very different animal from an ordinary company. It has a different structure and serves different purposes. Its financial structure and purpose is different. I suggest that it is impossible to apply uniform treatment to such different organisations and expect justice to be done.
  The main difference between a Co-operative society and an ordinary company is in the way in which the surpluses are distributed at the end of a trading period. As my right hon. Friend the Member for Huyton pointed out, the main distribution of the Co-operative society is in proportion to the purchases made, and not the capital held. There are secondary distributions of interest on shares but they are made at a low and a fixed rate. The Royal Commission on Taxation of Profits and Income recognised that that made this distribution of profits comparable with loan interest in the case of other commercial institutions. The concession to which the Financial Secretary referred is that of allowing Co-operative societies to deduct this share interest distribution as expenses before Profits Tax is charged.
  I have no quarrel about what is distributed. I quarrel with the treatment of the reserves of a Co-operative society as capable of being regarded as on all fours with the retained profits of an ordinary company. The sources and nature of capital for the Co-operative societies are very different from those of an ordinary company. The ploughing back of reserves is a far more important financial exercise to a Co-operative society than to a company. By and large, the Co-operative society shareholders comprise the wage-earning section of the community and not the investing public in the ordinary sense of that term. The average shareholding in a Co-operative society is a little more than £20.
  The rate of interest paid on those shares is, by one of our fundamental principles, kept at a low level; it is fixed, and bears no relation to the current prosperity or otherwise of the Co-operative society. More important still perhaps, as my right hon. Friend the Member for

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  Huyton pointed out in the case of building societies, is the fact that the shares are not negotiable on the Stock Exchange. In other words, there is no element of capital appreciation. They are withdrawable, they can be paid for only to the society and they can be withdrawn only from the society. Therefore, they are always at par. This means that they are completely different in their nature from the equity capital of privately-owned companies.
  Therefore, they do not, and are not intended to, attract equity capital from the investing public in the ordinary sense. To a very large extent we are a small thrift organisation of working people. Because the shareholders of Co-operative societies regard their pass books in the societies as a small savings bank, and exercise the freedom to withdraw their money at almost a moment's notice, the building up of collectively owned reserves in a Co-operative society is a very important financial operation. That is why it is wrong to put the reserves of a Co-operative society on all fours with the reserves of an ordinary company and to tax them in the same way. It is my contention that this new Profits Tax arrangement will hit at Co-operative societies in terms of the amount of money they will pay—with that I have dealt already—and also it will hamper their development by discouraging them from building their essential reserves.
  Here again I come back to the position of the agricultural co-operative societies. Only a few weeks ago I had the opportunity, with a number of my hon. Friends, of visiting some of these societies in the south-west of England. I understand that a number of hon. Members opposite paid a similar visit to a group in another part of the country. Therefore, whatever one may think about the ordinary consumer retail society, certainly as regards the agricultural co-operatives, this ought not to be a party dispute, because there is a common interest in the fortunes of these organisations. We were told during our visit that their fundamental problem was one of capital, of getting together sufficient resources to do the things which it would appear from their protestations the Government are only too anxious that farmers should do, namely, help themselves co-operatively. Yet the way in
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  which this tax will affect Co-operative societies of all kinds will militate against them helping themselves.
  This is why the Minister will not be surprised when I give him fair warning that if this injustice is not rectified by Amendments submitted from the Treasury Bench, as I hope they will be, my hon. Friends and I will seek to move Amendments to put the matter right. We feel that an injustice is being done and we shall exercise every opportunity to see that it is righted.
  7.54 p.m.
  Mr. John Hall: The House will have listened with a great deal of interest to the very skilful, if I may say so, special pleading on behalf of the Co-operative organisations to which we have just listened. I heard with particular interest the analogy of the cow and the horse. Had the hon. Gentleman the Member for East Ham, South (Mr. Oram) used the analogy of a cow and a mare, perhaps it might have been more in favour of the Chancellor, because one could get milk from both. Indeed, in parts of India they are often used as draught animals, both pulling together.
  I was also interested to hear the hon. Member say that the capital structure of the Co-operative organisations is unlike that of the ordinary public companies. I agree with that, but he went on to say that there is no possible element of capital appreciation. I am not sure that that is correct, because I think I am right in saying that the dividend which the customers of a Co-operative society receive on their purchases comes into their hands free of tax and is in that sense a form of capital gain.
  Mr. Oram: The hon. Gentleman may be aware that this point was investigated by impartial committees years ago and that the position is that the "divi" on purchases, which must be distinguished in its very nature from the dividend on shares of a company, is a deferred price reduction, and is, therefore, in no sense liable to be taxed.
  Mr. Hall: Whichever way one looks at it, it arrives in the hands of the recipient as a tax-free emolument which they would not get from any other shop or organisation.
  Mrs. Mann: May I interrupt the hon. Gentleman, as one who purchases a great deal from the Co-operative societies? I receive a dividend of sometimes 2s. in the £ but often, when I analyse it, I find I have paid 3s. in the £ for the goods for which I get only 2s. afterwards, and even then my 2s. in the is subject to Income Tax.
  Mr. Hall: I do not think that the last part of the hon. Lady's intervention is correct, but I am interested to hear that people have to pay more for their goods in the Co-operative stores than if they are bought elsewhere.
  Now may I touch briefly on the question of Profits Tax? I support fully the Chancellor in his action in imposing one rate of tax instead of the two which have existed previously. As a result of the two rates of tax from which we have suffered for some years, we have been getting a rigidity in commerce and industry which was resulting in an accumulation of money in existing hands. The result has been great difficulty in starting new enterprises and developments because capital has been locked up in existing companies.
  Furthermore, this has been resulting in an accumulation of liability to taxation when a company perhaps wanted to make a distribution or was to be reorganised or wound up. In some cases this was reaching astronomical proportions. For those reasons alone, I support strongly my right hon. Friend's action in reducing this tax to one flat tax.
  Mr. Frank Beswick: If the hon. Gentleman is so keen upon expansion, would he agree it is a pity that in this case the Chancellor's action will have the result of encouraging Co-operative societies to distribute their reserves almost entirely as dividends, instead of using them for the expansion of their business? Also, contrary to what my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) said, inaccurately, money distributed by way of dividend is not liable to taxation.
  Mr. Hall: I agree with the last remark; indeed, I said so earlier. Now I want to deal with one or two other matters before coming to my main point. I will refer briefly to what has been said about dividend stripping.
  There seems to be a difference of opinion between the right hon. Gentleman
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  the Member for Huyton (Mr. H. Wilson) and his hon. Friend the Member for Islington, East (Mr. E. Fletcher), who spoke on the same subject. As I understood, the right hon. Member for Huyton was agreeing with right hon. and hon. Members on this side of the House in saying that he thought it was wrong that we should have rule by Ministerial warning rather than rule by law, a view that was expressed by my right hon. Friend the Member for Blackpool, North (Sir T. Low).
  On the other hand, the hon. Member for Islington, East seemed to think that rule by Ministerial warning was the right way. I do not want to go over the arguments for and against retrospective legislation, but if we are to have retrospective legislation for fiscal matters only—because the hon. Member for Islington, East exempted criminal law except in the case of giving an advantage to somebody previously unjustly penalised—then the advantage should not always be to the Treasury.
  Most retrospective legislation which I have heard mooted in the House has been to right what has been an attempt by taxpayers to evade taxation and to recover that lost taxation in one form or another. If we are to do that we must also do it to restore to the taxpayer money unjustly taken from him. I will quote two examples. In the 1955 Budget we put right an existing injustice whereby it was possible for a taxpayer, through Surtax and Estate Duty added together, to pay more than 20s. in the £ in respect of legacies left to him.
  I have a case in my constituency which, unfortunately, was assessed before the change in the law and in which my constituent is expected to pay 24s. 6d. in the £ on the legacy left to her. That is a gross injustice, and it was described as such during the debate. If we are to have retrospective legislation we should have it for cases of that kind in order that taxpayers unjustly mulcted of their money should have it repaid to them.
  There is a provision in this Bill dealing with double Estate Duty; it deals with the case in which a couple have died simultaneously but the estate has been liable to pay duty twice. There have been cases of this in the past and there was a particular case which caused this change in the legislation, but there has

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  been no suggestion that the duty should be repaid. If we are to have retrospective legislation it must be in the taxpayers' favour, too; we cannot always have it in favour of the Treasury and never in favour of the taxpayer.
  There are so many problems in opening up old assessments—and I am sure that the right hon. Member for Huyton agrees—that to have retrospective legislation in favour of the taxpayer is almost as impossible as to have it in favour of the Treasury. Perhaps that is one of the reasons why we cannot push the question of retrospective legislation too far.
  A number of hon. Members have referred to Purchase Tax, and I want to thank the Chancellor very much for reducing the Purchase Tax on office and particularly on hall furniture, for which I pressed last year.
  Mr. H. Hynd: Hall furniture?
  Mr. Hall: Yes. I was glad that my right hon. Friend also reduced the tax on garden furniture to 15 per cent. but I wish he had gone the whole way and made the tax 5 per cent. in all cases. I am sorry that he did not think fit to take the tax off furniture altogether and I agree with the hon. Member who suggested that household necessities should be free of tax.
  Mr. Hynd: Is that special pleading?
  Mr. Hall: We are all allowed a little special pleading now and again. There is no doubt that furniture is a household necessity, and I think that the time has come when we ought to consider leaving it outside the Purchase Tax range altogether.
  I draw my right hon. and hon. Friends' attention to the fact that there has been a slackening of activity in the furniture industry which has been very noticeable for a long time in certain parts of the country, particularly London. Fortunately, in my constituency, Wycombe, where the best furniture is made, this effect effect has been noticeable only recently, but the time is coming when it will not be quite as easy to keep furniture factories in full production, as I am sure the hon. Member for Shoreditch and Finsbury (Mr. Collins) will agree.
  I therefore hope that it will be possible before the next Budget to reconsider
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  the whole question of the taxation of furniture and the possible removal of even the 5 per cent. which remains. In any case, although it may not be possible to do very much about Purchase Tax at the moment, I hope that the Chancellor will consider the credit squeeze and other restrictions, including the hire-purchase restrictions and the difficulty of having the add-to agreement. That would help the industry a lot.
  Mr. Hynd: If we put down Amendments on those subjects, will the hon. Member vote for them?
  Mr. Hall: I hope to put down an Amendment of my own, and I shall vote for that.
  There is a small item in the Purchase Tax schedules which is bearing Purchase Tax for the first time in many years. It is a small item, but it is important in my constituency and, no doubt, in many country constituencies. I refer to the Purchase Tax on oil heaters. It is a retrograde step to bring something into Purchase Tax for the first time. Hon. Members will recall that the tax was taken off oil heaters after the war because they were regarded as filling an essential need.
  While coal is still rationed, many families have oil as their only alternative source of heat, and in country constituencies, in particular, many people who would like to be able to use the alternative gas or electrical appliances are unable to do so because those facilities do not exist. They are forced to depend on oil heaters. The family living in the country already suffers many inconveniences in lack of transport facilities and in amenities, and it will be a little hard for them if we impose this extra burden.
  Mr. Nabarro: My hon. Friend will agree that I pleaded this case in detail on 26th March and drew the Treasury's attention to the fact that gas and electricity space and water heaters carried Purchase Tax at 60 per cent., although they used indigenous, home-produced fuel, whereas oil heaters, using imported fuel, attracted no Purchase Tax at all. That was exactly the wrong way around, and surely my right hon. Friend is right in levelling Purchase Tax on gas, electricity and oil space and water heaters all at 30 per cent.
  Mr. Hall: The fact that my right hon. Friend accepted my hon. Friend's suggestion does not make me think that he was right. I do not agree with my hon. Friend in this respect. It is a matter which we can thrash out in Committee, and I will not pursue it further now.
  I am sorry that my hon. and learned Friend had not more time to spend on Clauses 10 and 11, which deal with Income Tax and Surtax. I know that it has not been possible to make concessions to Income Tax or Surtax payers this year, but a few facts of interest are worth pointing out. I am the first to agree that the Government have done a great deal towards reducing direct taxation, As a result of measures taken in previous Budgets, 25 per cent. of the working population pay no Income Tax at all and a further 55 per cent. of the working population pay no more than up to 2s. in each £ of income earned. The greater part of the tax is borne by a very few people. In fact, 10 per cent. of income earners, including a man and his wife as one income earner for tax purposes, pay nearly 60 per cent. of the taxes. That is a heavy burden on a few people.
  If hon. Members want some practical illustrations of the difficulties of those people who are supposed to be in what are laughingly called the higher income groups, they can perhaps get some pleasure, if they are masochistically minded, by comparing the purchasing value of incomes between 1938 and today. A man who was earning £1,000 in 1938 must earn £3,621 to get the same purchasing value today, after he has paid Income Tax and Surtax. If a man were earning £2,000 before the war, which is the level at which Surtax started then and starts today, he must earn £10,208 today to have the same purchasing value after Income Tax and Surtax. A man earning £3,000 before the war would have to earn £31,961 today.
  A man earning £1,000 before the war was not regarded as particularly wealthy. He may have been moderately comfort- ably off, but he was not regarded as a wealthy man on whom we imposed a swingeing tax. He had to earn twice that amount before paying Surtax. It is readily accepted on both sides of the House that a sliding scale of taxation, whether of Surtax or Estate Duty, or any other tax, which does not take inflation
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  into account must rapidly result in hardship and injustice.
  I was somewhat disappointed that there have not been some other changes in Estate Duty. I am always grateful for changes which improve matters, but I had hoped that something would have been done about the penal and confiscatory nature of Estate Duty as it exists today. To quote a few examples, values of estates today to equal in purchasing power, after Estate Duty has been paid, the net yields obtainable in 1938 have increased by the most extraordinary amounts. A small estate worth £5,000 in 1938 would have to be worth £14,900 today to give the same yield after Estate Duty.
  To jump to £10,000 in 1938, today one would have to leave £34,000 to give one's legatees the same yield. An estate worth £25,000 before the war would have to be worth £128,000 today, five times as much, to give the same yield. In what is regarded as the bigger estates, an estate worth £50,000 before the war would today have to be worth £346,000, nearly seven times as much, to produce the same yield.
  One can perhaps tolerate, if with ill grace, the idea of confiscatory Estate Duty if one feels that the money so taken by the liquidation of capital in the hands of previous owners is being used by the Government for capital purposes. However, it is used as revenue for expenditure purposes, and capital throughout the country is being destroyed as a result of the present system of Estate Duty.
  I much prefer the system which we used to have. I noticed with interest when I was in Germany last year that it is the system used by East Germany, a Communist State. It is the system of legacy duty. I had hoped that we were to have something like that reintroduced. Perhaps there is still time for the Chancellor to have thoughts about this matter before his next Budget, even though that means putting it off for a year.
  The relief in Stamp Duty on house purchase is a very welcome relief and will be of great value, but I still feel that the greatest benefit to those trying to buy their own houses would have been a reduction in the rates of interest. It is not strictly true that the increase in interest rates is more or less halved by

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  the fact that there is a tax relief on interest, because, by and large, young couples buying their own houses are probably not paying the full standard rate of Income Tax.
  Mr. Douglas Glover: I am sure that my hon. Friend will realise that that situation has very largely resulted from the amount by which Conservative Governments in successive Budgets have reduced the amount of tax which married couples with children have to pay.
  Mr. Hall: I agree, and that shows how even one's good actions can result in hardship in special cases. Through the steady reduction of taxation under Conservative Governments, young couples often find that they do not get that taxation relief in the buying of their house which they had expected. I should have liked to have seen a greater effort to help those who are trying to buy their own houses. It is an essential social activity and there is no doubt that high interest rates have acted as a deterrent in many cases. That has had the temporary result of preventing many young married couples from owning their own homes and has affected the plans of some who had started to negotiate for purchase.
  Having made those comments on the Bill, I congratulate my right hon. Friend on his Budget and on the Finance Bill which has resulted from it. Within the very narrow limits which he had for manœuvre, he has manœuvred effectively, and, by and large, the Finance Bill is another example of the good, sound financial policy which has been consistently followed by the Government and which, I hope, they will continue to follow.
  8.14 p.m.
  Mr. Donald Wade: I will not attempt to refer to every Clause in the Bill, or to those provisions which I would have liked to have seen in the Bill. I can summarise the attitude of my hon. Friends and myself by quoting from a speech of my hon. Friend the Member for Orkney and Shetland (Mr. Grimond) in the Budget debate on 16th April, when he said:
  "I have no particular quarrel with a great deal of what is proposed in the Budget. It
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  is the omissions which have caused anxiety."—[OFFICIAL REPORT, 16th April, 1958; Vol. 586, c. 249.]
  I do not know whether there will be a Division at the conclusion of the debate. It has been very peaceful, but in case there is a Division I ought to clarify the views of my hon. Friends and myself.
  If the issue had been whether Britain should be an independent nuclear, military Power, or whether the level of Government expenditure was too high, or whether the total burden of taxation was too heavy, I have no doubt we should have voted against the Government. If we were debating the failure of the Government to reduce the tax on petrol and diesel oil, we should vote against the Government. Although those matters are relevant, the precise issue on which we shall be asked to vote is whether the Bill should have a Second Reading, I am not entirely satisfied with the Bill, but it has some good points. My hon. Friends and I propose to put down several Amendments, and since the first stage is to give the Bill a Second Reading, we shall, therefore, vote for it.
  On one occasion, after speaking for an hour, Mr. Gladstone paused and said, "Gentlemen, that was my preface", and then proceeded to speak for another hour. I do not propose to follow him in that respect, but I will say that that was my preface.
  I welcome those Clauses which provide relief, for example, the relief given to those over 65, but there are several reliefs for which we asked a year ago and which are not included. I regret that the recommendations of the Institute of Chartered Accountants on the Schedule E expenses rule have not been accepted. The Government might have seen their way to accept those proposals. I do not think that Clause 14 will go very far to help professional people of modest means.
  I shall confine myself to referring only to Purchase Tax and Profits Tax, still a formidable task. In his Budget speech, the Chancellor made a very convincing case against a sales tax, but I have never heard anyone make a convincing case for Purchase Tax. So long as Purchase Tax continues, there are bound to be anomalies and injustices and the most we can do is to try to reduce those to the minimum.

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  I want to take one example. Reference has already been made to shopping baskets and I want to refer to clogs and other wooden-soled footwear. It was somewhat inconsistent to take protective footwear out of the tax range while leaving clogs, especially safety clogs, within it. The wearing of clogs is rare in my constituency, but clogs are made there and I have some knowledge of the subject. Only about half a dozen to a dozen firms in the entire country make clogs.
  The others are all below the level of turnover which would bring them into liability to Purchase Tax. The result is that some clogs will be subject to tax and others will not. Furthermore, the type of clogs which are particularly recommended are known as safety clogs and have to satisfy the very high standards set by the British Standards Institution. We therefore have the curious state of affairs that safety boots are exempt, but safety clogs are included in sufficient numbers to make them liable to tax.
  There seems to be no rhyme or reason for this, except that on the Thursday following the Budget speech, 20 Questions were put down upon the subject of protective boots and only one in respect of safety clogs. I hope that the Chancellor has not assumed from that that the case for exempting protective boots is twenty times as strong as that for exempting safety clogs. However, I have had some correspondence with him on this subject, and I hope that the door is still open. He is a reasonable man, and I hope that he is, therefore, open to reason. It remains true that so long as Purchase Tax continues there are bound to be injustices, and the least we can do is to try to avoid unnecessary ones.
  Turning to Profits Tax, I accept the general proposition put forward by the Royal Commission that the discrimination between distributed and undistributed profits should not be retained, but 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 stronger position in introducing a flat rate if, when doing so, he dealt sympathetically with these special cases.
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  I shall not mention the Co-operative societies, because they have already been mentioned, but I agree that they come into a special category. I want to give two examples. The first involves only a small amount of revenue, and I must declare an interest in it. I am a director of a small denominational insurance company. It is a limited liability company and its main functions are twofold. One is to insure chapels and manses against fire and other risks, and the other is, out of the profits from the insurance business to make grants to denominational charities. The beneficiaries are all recognised as charities by the Inland Revenue authorities for Income Tax purposes.
  I should point out that there are only a few ordinary shareholders, and that an infinitesimal sum is paid by way of dividend. I am not raising the question of the imposition of Profits Tax upon the profits distributed to the shareholders. I do not think that one could question that. In the case that I mention the amount distributed to the shareholders is only £120, so there is nothing in it. The problem arises in connection with the grants to charities. These grants are not deductible in calculating liability to Profits Tax, and the rate will now be increased from 3 per sent. to 10 per cent. This will result in a substantial reduction in the amount available for charities.
  Mr. Simon: I do not know the scale of operation of the company to which the hon. Member refers, but he has probably noticed that the exemption and abatement provisions of the existing Profits Tax have not been disturbed.
  Mr. Wade: At present, the rate is 3 per cent. As I understand, it will be increased to 10 per cent. Perhaps the hon. and learned Member will be good enough to look into the matter. We might be able to discuss it in Committee. The facts that I have given will illustrate the problem.
  In the case of the Methodist Insurance Company, which is a similar company, it is estimated that the sum available for charities will be reduced by about £4,000, while in the case of the Ecclesiastical Insurance Office a larger sum is involved. According to the estimate that I have been given the charities which receive grants from this body will suffer to the extent of £12,000 in one year. This is the amount which the Revenue will

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  take in additional Profits Tax. The effect of the Bill is, therefore, to deprive certain charities of considerable sums. I do not think that the Chancellor could have intended this, and I hope that the point will be looked into in Committee.
  My second example involves a somewhat larger amount of revenue. It has already been referred to, and concerns the special circumstances of building societies. We had quite a battle over building societies last year, and I do not propose to go over the same ground again. It has been mentioned by the right hon. Member for Huyton (Mr. H. Wilson) and the right hon. Member for Colne Valley (Mr. Glenvil Hall). I welcome the decision of the Chancellor to allow interest paid to depositors to be deducted before calculating Profits Tax. Unfortunately, this has been offset by the abolition of the concessional rate and the consequent increase from 2 per cent. to 10 per cent.
  There are four points to which I want to draw the attention of the Chancellor in this connection. First, the fact that building societies are subject to Profits Tax is largely fortuitous. It arose from the fact that they contributed to the National Defence Contribution in 1937. Secondly, building societies are not engaged in ordinary trading activities. As the late Lord Simon pointed out, in 1937, building societies stand in a class by themselves. Thirdly, building societies have no equity shareholders, and no one to whom they could pay profits if they made any. Fourthly, and perhaps most important, building societies surpluses are placed to reserves and by Statute these reserves must be invested in Government securities or first mortgages.
  It is most important that the appropriate ratio of reserves should be retained. The building societies have had a very difficult time as a result of the high interest rates, and they have endeavoured not to follow the rise in the Bank Rate, but the Chancellor will be adding to their difficulties if Profits Tax is charged at 10 per cent. Already, for some years, the ratio of reserves to total assets has been falling and, as I understand, it will continue to fall even with the changes made by the Bill. Building societies have always contended that they should not suffer Profits Tax at all. There seems
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  to be a strong case either for abolishing the tax in their case or continuing the concessionary rate of 2 per cent.
  These are exceptional cases, which call for special consideration, but in my view—I know that the Opposition do not agree with me here—they do not weaken the general principle that a flat rate is preferable to a rate which distinguishes between distributed and undistributed profits. So long as there has to be a Profits Tax there is much to be said for the flat rate. I agree with the observations of the report of the Royal Commission on this subject. In page 159 it says:
  "Whether the company's retained profits are actually invested in the business depends on wide considerations affecting the economic prospect as a whole, including such inducements as may be offered by other tax measures not forming part of the Profits Tax itself. The mere retention of profits cannot be rated as an economic advantage."
  I think that that is correct. It appears to me that many of the criticisms levelled against the proposed change in Profits Tax have been misdirected.
  There are a number of criticisms which should and could be made against the distribution of ownership and of dividends in the post-war years. Some ordinary shareholders have undoubtedly gained more than the rest of the community both from high dividends and from capital appreciation, but I do not think that the retention of a special rate for distributed profits is the appropriate remedy. I would suggest that there are four valid criticisms that could be made about the distribution of both ownership and dividends.
  First, inflation has in many cases resulted in ordinary shares appreciating in value, as compared with cash or National Savings. The remedy for this is to check inflation. Secondly, there have been a number of cases of substantial capital accumulations being built up, leading to tempting take-over bids. This has been encouraged by the discrimination against distributed profits, and the retention of the distributed Profits Tax rate would not provide the remedy, if a remedy is necessary. Thirdly, there are cases where substantial profits have been made, and where the benefits have not been passed on to the consumer by reduced prices.
  I was interested in some observations made recently by Mr. L. E. Laycock,

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  President of the Leeds Chamber of Commerce, at Huddersfield, on 21st March this year, and reported in the Huddersfield Examiner the following day. Indeed, I actually heard him making these remarks. Mr. Laycock said that some prices had been put up unjustifiably, and the report of his speech continues:
  "Asserting that profits had gone up out of all proportion during the last four years, Mr. Laycock said that production had gone up by 15 per cent. It would have been reasonable if profits had gone up by a similar amount, but the increase was 43 per cent. When you think of some industries—like wool textiles, where the profits have gone down by 28 per cent., and cottons, where they have gone down 50 per cent.—some of the others must have put up their prices quite unreasonably."
  Undoubtedly, profits in the wool textile industry have gone down and the industry is having a difficult time. It is not only the cotton industry which is suffering.
  On the other hand, profits have been high in certain other industries, and are still high, and I think that the reason is that these latter industries have been far too sheltered, either by tariffs or by restrictive trade agreements. The remedy for this is not to impose a restrictive Profits Tax but a policy of ensuring a reasonable degree of genuine competition.
  Fourthly—and I think this last line of criticism is fully justified—I would point out that the ownership of ordinary shares in industry is very uneven. A small minority of people hold the majority of the share capital, and the remedy for this is to create a much more widespread ownership of equity shares. I welcome what some hon. Members have said in this debate on that subject.
  This brings me to my last comment on the Bill. My colleagues and I believe that one of the ways whereby the ownership of shares in industry could be more widely spread would be by encouraging employee shareholders. I am disappointed that there is nothing in the Bill to remove the obstacles which tend to impede the development of employee shareholding schemes. I think that that is one of the ways whereby we could bring about a very much more widespread ownership of equity shares, and I regret that nothing has been done about it. I do not think that the Government quite appreciate that, by showing so little concern about the distribution of ownership in industry, they are playing into the hands of the "Victory for Socialism"
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  movement, which I imagine they would not wish to do.
  We have raised this subject in the past, and we hope to have the opportunity of advocating further developments in tax reform during the Committee stage of the Bill. So far, we have not succeeded in persuading the Government that these reforms are essential if employee shareholding is to receive the encouragement which it deserves. I hope that the Chancellor will be more sympathetic and more forthcoming than some of his predecessors.
  8.34 p.m.
  Mr. F. A. Burden: When the hon. Member for Huddersfield, West (Mr. Wade) made his opening remarks, I thought the Government were in for a blistering attack on the Budget, but all he did was just a little chipping here and there. I feel that the hon. Gentleman and the Liberal Party generally, find themselves in very considerable difficulty over criticisms of this Bill, as do hon. Members of the Labour Opposition. Of course the Liberals are in a very difficult position because at the moment—I use the word without disrespect—they are rather like political chameleons.
  On some days they are with us, and I must say they are mostly of that colour; but occasionally they feel they can get a little credit out of it without having to bear responsibility, and then they are as happy with the colour of the party opposite.
  Mr. Diamond: Is not the hon. Member being unfair to the Liberal Party? On many occasions they vote with both sides on the same day.
  Mr. Burden: That does occur——
  Mr. Roderic Bowen: Will the hon. Member for Gillingham (Mr. Burden) agree that the hon. Member for Gloucester (Mr. Diamond) is particularly inaccurate in his observations in that respect?
  Mr. Burden: I think it has been known for hon. Members of the Liberal Party to go into both Lobbies on some occasions. [HON. MEMBERS: "When?"] That merely shows their impartiality at certain times. Hon. Members in the Labour Party also find this rather difficult. We have had phrases describing this Budget as a "mouse of a Budget", and today there

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  has been a statement by a right hon. Member opposite that it was a hotchpotch of a Budget. There have been questions about certain Purchase Tax measures in relation to household commodities and other commodities have been singled out, but it is only by comparison that we can really tell how this Budget compares with others.
  I wish to refer to the Budget Statement of the present Leader of the Opposition when he was Chancellor of the Exchequer in 1951. I think this should be remembered. Referring to the difficulty about selecting articles for Purchase Tax, the right hon. Gentleman said:
  "I must confess that, having studied the Schedules pretty carefully, I have come to the conclusion that there is no clear-cut distinction between articles which may properly be taxed and those which should not."—[OFFICIAL REPORT' 10th April, 1951; Vol. 486, c. 860.]
  I think all Chancellors have found that difficulty. I think that fundamentally all hon. Members intensely dislike Purchase Tax because it is a tax which artificially inflates the cost of an article before it goes to the public.
  I propose to confine my remarks mostly to Purchase Tax. Some hon. Members opposite have referred to the small results expected from the alterations in Purchase Tax made by the Chancellor. In fact, of course, those results will be very considerable. If we compare the Purchase Tax changes that have been made on this occasion with those introduced in the last Budget of the party opposite, we find there has been a very considerable reduction. These changes affect some of the household equipment and appliances which have been referred to today. In 1951 the party opposite raised Purchase Tax on cars, wireless sets, television and gas and electrically operated domestic appliances from 33⅓ per cent. to 66⅔ per cent. They also raised Income Tax by 6d. They also raised the tax on school meals by 1d.
  Mr. H. Hynd: It was war time.
  Mr. J. T. Price: The Korean War.
  Mr. Burden: I am quite prepared to accept that but, if hon. Gentlemen opposite say that, they must agree that, whether by the actions of this Government or not, since 1951 the easement in the lot of the people has been very considerable.
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  If hon. Members care to look at the Budget proposals of Sir Stafford Cripps they will see that he gave a warning of what the country and industry have had to engage in since 1951—a very considerable increase in competition in the export markets of the world.
  The position has changed—of course it has—but it is by comparison that we arrive at a true assessment of that position. Indeed, if this is a "mouse of a Budget", if, with concessions of over £100 million it is a "hotchpotch" of a Budget, it is far more desirable than that presented to the country by the party opposite on the last occasion that it had the opportunity.
  There is a growing speculation and concern in industry as to whether Purchase Tax changes are now to be made only at the time of the Budget, because the Budget is presented in April, at a time when it is usual for stocks to be very high to cope with the summer buying demands of the public.
  Ever since I have been in this House, and that is now eight years, I have consistently spoken on questions of Purchase Tax. It was because of the concern that grew up after 1953 about the impact on industry generally, and the losses that were then incurred as a result of changes in this tax, that representations were made to the Chancellor that, whenever possible, Purchase Tax changes should take place when stocks wer normally at a low level. The Chancellor was, therefore, empowered to alter the rates by Statutory Instrument, and that was a very desirable and very proper course. In the years that have since passed, there has not been the pre-Budget anxiety about changes in the Purchase Tax that then existed and which had a very harmful effect on normal trading.
  What makes things additionally difficult is that at no time is there any guarantee that any changes made, whether up or down, will not be changed again very soon afterwards if the Government think it essential or advisable that an attempt should be made, by such an alteration, to conform to new economic circumstances. Is this really a wise use of the Purchase Tax? I certainly do not think so. These changes do not affect merely the articles that are subject to the changes. They have very significant side effects on the general pattern of spending.

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  For instance, the imposition of a high rate on a particular article will not necessarily cut down the total demand. Some part of the money will be diverted either to a substitute of lower quality carrying lower tax or to the purchase of other articles and commodities. When the Purchase Tax is used in this way, it is quite impossible for the industrial community to forecast the variation, or to make allowances before the changes actually occur.
  The variations and distortions thus created affect production plans, close down production lines and interfere with normal buying programmes. They make it extremely difficult for the planned financing of stocks, and they inevitably render the cost of production and distribution higher than would otherwise be the case.
  Surely, so long as Purchase Tax is retained for budgetary reasons, it should be conducted on Revenue considerations and not employed as an economic instrument, because that is causing considerable anxiety in the business world and will affect production very seriously in future. The abrupt change of rates of tax as a whole or on one specific classification, for example, is the sort of thing that creates difficulties.
  I believe—here I join my hon. Friend the Member for Kidderminster (Mr. Nabarro), who has found a great deal to say about anomalies, big and small, over a long time—that the Chancellor made a very good move in reducing the categories from seven to four, but it would be much more convenient and better and would encourage trade and industry generally if it were known that at last the tax had been levelled off into something more or less static by the introduction of one general rate. Only so can we be assured that there will be no significant changes which are likely to cause a pre-Budget boom and slump. We want that to be eliminated.
  As to the recent concessions—excellent though they are and welcome though the general clearing up may be—there is considerable apprehension now because of the very great losses suffered by some firms as a result of them.
  It is unfortunate that the Budget is introduced at a time when retail stocks, carrying full Purchase Tax, have been
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  built up. It is obvious that the Chancellor likes to bring major Purchase Tax alterations into his Budget proposals. However, I ask him seriously to consider whether it would be better to ensure no upset in industry by making the changes at an earlier date. If that is not possible, could he announce in January that, say, the following January certain alterations in basic rates would be made? That would ensure a levelling off of production and consumption, and Parliament could debate the subject in full during the Budget discussions. It is the sudden radical change which causes so much concern.
  I am told that the recent alterations have led to a loss of between £6 million and £8 million on current stocks in retail stores. One large store in London alone, as a result of the Purchase Tax concession announced in the Chancellor's statement, has lost £35,000 on tax already paid. That is just one firm in London. It is not to be wondered at when, over the range of goods finding their way into a store, the total concession—this is a measure of what the Chancellor has done for the housewife—shows a tax reduction of 10 per cent. That is quite considerable, as I think even right hon. and hon. Gentlemen opposite will agree, whatever they may say about this being a "mouse of a Budget."
  I am glad that the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) is present. I am sure she will forgive me if I offer some criticism of what she has said on this subject. I have a great regard for the hon. Lady. Indeed, I spent a very happy ten days on the Continent with her on one occasion.
  Mrs. Jean Mann: Really?
  Mr. Burden: Of course. It was a pleasant occasion; we were members of a Parliamentary delegation. I then found the hon. Lady extremely pleasant company, and, if I may say so, a very good shopper. I think that she was wrong, however, to suggest that my hon. Friend the Parliamentary Secretary to the Board of Trade should have gone shopping with her. I would have accepted the invitation with alacrity because I know her ability, but I think that she was wrong in her reasons for asking my hon. Friend to go. She said that the Purchase Tax

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  reductions announced by my right hon. Friend the Chancellor had not been reflected in the prices in the shops. But, of course, statutorily, there was no obligation on any retailer to reduce his prices, because, on the date when my right hon. Friend made his statement, every article in the shops subject to Purchase Tax had had the tax paid upon it and there was no question of a rebate or that the retailers could get it back.
  I suggest that it was very much to the credit of retailers throughout the country that, immediately my right hon. Friend made his announcement, they did reflect the effect of it in the prices of goods on which they had already paid Purchase Tax.
  Mrs. Mann indicated dissent.
  Mr. Burden: I would be very glad to give way to the hon. Lady, because I am sure she is under a misapprehension.
  Mrs. Mann: I hope to follow the hon. Member for Gillingham (Mr. Burden) and have the opportunity to deal with the argument then.
  Mr. Burden: If there is any question whatever about it, I have no doubt that my right hon. Friend will clarify the matter. I assure the hon. Lady that Purchase Tax is paid when the goods pass from the wholesaler to the retailer. I am sorry that the hon. Lady is misinformed. I happen to be a trader in goods subject to Purchase Tax and I know that there is a very great deal of misunderstanding on this subject.
  Mrs. Mann: The hon. Gentleman is talking about honest traders. The dishonest traders are not passing the reductions on, and they are getting away with it.
  Mr. Burden: The hon. Lady is quite wrong. There is no question of dishonesty about it. If a trader has already paid Purchase Tax on an article, he is legally entitled to recover that Purchase Tax from the retailer customer. The goods going into the shop with the new rate of Purchase Tax did not start to arrive in the shops until after 16th April. Everything in the shops on the date my right hon. Friend made his alterations in Purchase Tax had already been subject to tax at the higher rates and the tax had been paid. It is to the credit of the
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  traders of the country that they were prepared to accept the loss, which was very considerable, and ensure that the public enjoyed the lower rate of tax on goods on which they had already paid a higher tax.
  Indeed, the hon. Member for Cardiff, West (Mr. G. Thomas) questioned my right hon. Friend the President of the Board of Trade on this subject last week. He asked whether my right hon. Friend would introduce legislation to ensure that wholesalers passed on Purchase Tax reductions to the consuming public. My right hon. Friend said that he would not. This is how the misconception arises. There is no question of passing on at all. Purchase Tax is paid by the wholesaler to the Government and by the retailer to the wholesaler. If goods have already appeared in the shops at the higher rate of tax, then retailers are legally entitled to continue to charge the old rate of Purchase Tax until all the goods in stock have been disposed of. But they have not done that. They have given concessions immediately the Chancellor has announced them.
  There is another aspect, which I hope my right hon. Friend will appreciate. Whereas many of the big firms can afford to carry tax losses, these latest changes, welcome though they are, have hit very hard the small privately-owned shop which sells things like televisions, washing-machines, electric irons, and so on, because there has been quite a big tax reduction on those goods. I am told that many small shops have suffered losses of £700, £800 or £900 on the goods that they have in stock, because they have also passed on concessions.
  There are two ways by which the damage that may result from these very desirable Purchase Tax reductions can be repaired. One I have already indicated, which is to ensure, wherever possible, that alterations in Purchase Tax rates are made when stocks are low. Of course, the best time is after the Christmas spending and before stocks start to accumulate in Late winter for the spring trade, which is January. The other one is whether some rebate scheme can be introduced. I do not think that that is feasible or possible. I think that the difficulties would be absolutely insurmountable. Therefore, I ask my right hon. Friend to inquire into the possibility

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  of making Purchase Tax changes when stocks are low.
  There is another danger, which I feel sure my right hon. Friend has already considered. Times have changed rapidly from the days when there was such a buying urge that Purchase Tax changes did not matter very much. Even then, when it was assumed year by year that changes would be made in the Budget, there was a hold-off in buying and stocks accumulated at the manufacturers and wholesalers. That was all right and the impact was not so great when there was an enormous consumer demand as it was certain that retailers would ultimately take delivery. But today the position is rather different. Today there is, even in ordinary times, a cutting back of production in a very considerable number of industries which are affected by Purchase Tax, and if we are to have the added problem of firms holding off because they are fearful of building up their stocks at around Budget time then I foresee that the very act of introducing Purchase Tax cuts, which we all so much desire, may increase unemployment in certain industries.
  I have here a notice by the Commissioners of Customs and Excise on Purchase Tax, "Revision of the tax schedule". In paragraph 8 I find this:
  "Goods delivered before 16th April by a registered person under a taxable sale (e.g. to his unregistered customers)"—
  and if the hon. Lady thinks I am wrong, this will make it clear to her that I was quite right in what I was saying about Purchase Tax—
  "and goods appropriated before that date by a registered person to retail trade or other taxable purposes (e.g. office use or hire purchase are not affected by the tax alterations."
  Here is the point I want to make:
  "But goods previously sent out on 'sale or return' and similar terms are liable to the new rates of tax unless they have been resold or the transaction has otherwise been adopted by the retailer before 16th April."
  While there is the danger of a continued, heavy fluctuation in rates of Purchase Tax, it will bear most heavily upon the small manufacturer, for it will mean that, instead of paying and taking actual delivery of goods ordered when ready, many of the firms, in order to try to evade Purchase Tax losses, will ask that these goods shall be sent to them on sale or return, and they will be invoiced
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  only after the Budget statement has been made and when it has been seen there have been no Purchase Tax reductions. That means that the whole onus of carrying stocks for a long period will be on the manufacturers, and in many cases will be on the smaller manufacturers whose capital and general set up will not enable them to carry this responsibility. They will be forced out of business. In that paragraph is highlighted the danger to which I have been bringing the notice of my right hon. Friend for the last twenty minutes.
  I think all of us are happy that there have been Purchase Tax reductions. I think that any movement which brings about a lowering in taxation is welcome in all parts of this House. I do not think that this is a hotchpotch of a Budget. I do not think it is a mouse of a Budget. Compared with the last Budget of the party opposite, it is a very substantial Budget which gives some very adequate concessions.
  9.3 p.m.
  Mrs. Jean Mann: I am sorry that my time to reply to the hon. Member for Gillingham (Mr. Burden) is so limited. I will as quickly as possible summarise the situation he has presented to us by pointing out that this year the Budget tax concessions amount to £30 million, next year to £41 million, but from the consumers' point of view the £41 million may go to the Surtax payers, for we have no guarantee whatever that any of it will be passed to the consumers.
  From my investigations, I would say that the honest dealers, manufacturers and retailers who are passing on the benefit and who are suffering losses are 30 per cent. and those who are paying not the slightest heed are 70 per cent.
  Mr. Burden rose——
  Mrs. Mann: I have not the time to be interrupted. The hon. Gentleman took too much of my time and left me very little in which to reply.
  I would refer him to the reply of the President of the Board of Trade on 24th April, when I asked him what steps he would take to see that Purchase Tax relief was not offset by further price increases

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  at a later date. He said then that Purchase Tax is just one factor in the makeup of a retail price. On the same occasion, when he was asked what legislative steps he would take to see that manufacturers did not increase their prices appropriate to the Budget reduction, he said, none. So they have carte blanche to use that £41 million to swell their profits. That cannot be denied.
  I know that firms say that they are selling their old stock. When I brought that to the notice of the President, he said that he hoped that when the firms had finished selling their old stock they would pass on the relief. He only hoped; he will take no steps to see that they do. When this Budget was introduced, I thought and said that it was a good Budget it was a housewives' Budget; it was a woman's Budget. There was a reduction in the tax on cosmetics and on greeting cards—and who but "Mum" sends greeting cards, "Get well quickly" or "Your birthday remembered"? Although he is a bachelor, the right hon. Gentleman actually remembered the babies' dusting powder and reduced the tax on that by 30 per cent. Then I found myself disillusioned. Like all women of my age who dare to trust bachelors, sooner or later they find themselves disillusioned.
  When I went round a big retail store, I found that articles in Group 12 had been increased in price on 31st March in an intelligent anticipation of a tax reduction in the Budget. Another store reduced everything at once. That was an honest firm. The reduction on hats was supposed to be 10 per cent., but whether one had a hat priced at three guineas, four guineas or 30s. one was told that it was 6d. on every hat. In another very big retail store not far from this House specialising in all the articles in Group 12 and Group 6, I found that there was no intimation of the amount of Purchase Tax reduction. I paid 6s. 9d. for an article, and when I asked, "How much Purchase Tax reduction is in this 6s. 9d.?" the young lady said, "What?" I said, "How much Purchase Tax relief in this 6s. 9d.?" and she said, "Purchase Tax?—never heard of it."
  Some of my friends went to the Electricity Board and found several items there—Frigidaire, Hotpoint, Goblin—
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  none of them bearing any indication of Purchase Tax relief. One of my friends got a letter from the Frigidaire people saying that they had wanted for a long while to raise their prices and surely my friend would agree that the best time to raise prices was just as the Chancellor gave the tax relief. Does the Chancellor agree with that? I hope he will tell us. When I went to the other electricity and gas boards, whilst they pointed out the three in which the Purchase Tax relief had been quickly offset the following morning by increased prices, they told me that for the others their agreements would not be renewed until after three months.
  I meant to speak to the Chancellor about the iniquitous taxes he is still taking on safety gadgets, such as electric lighters, gas lighters, the Crayleigh safety device on cookers, and so on, but I have no more time. I must say in conclusion that whilst I started by thinking the Chancellor was a kind gentleman, considerate to all the ladies, I then found that he had actually taxed our shopping baskets. That is a tax which is to be imposed, but he should decide and define who is to get the £41 million relief. Is it the shopper or is it the Surtax payer?
  9.11 p.m.
  Mr. Gordon Walker: If he were here, I would like to congratulate the Financial Secretary on the lucidity and pertinacity of his exposition of this complicated Bill. I think that there is a lot in what was said by my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) about the desirability of having a fairly simple resume of the Finance Bill which we could all understand and which would enable the hon. and learned Gentleman to make a more lively speech.
  On Part I of the Bill, on Purchase Tax, a number of my hon. Friends spoke, including my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann), in a racy and brief speech, my right hon. Friend the Member for Colne Valley and my hon. Friend the Member for East Ham, South (Mr. Oram). They all made criticisms and proposals concerning the changes in the Purchase Tax, as did a number of hon. Gentlemen on the opposite side of the House, including the hon. Member for Kidderminster (Mr. Nabarro),

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  who, it seemed to me, although I may well have been wrong, tended to exaggerate his own weight and importance in our councils.
  All these things show that there will be a great deal of material for discussion in Committee on Purchase Tax and the Purchase Tax schedules. Indeed, a good deal of the Bill will provide much material for the Committee stage. This is a very complex, disconnected Bill and if we all do our duty by it, on all sides of the House, I do not see how it can pass through all its stages very quickly.
  In Part III we come to a very important matter of principle which has been raised in these debates and is a very proper point for a Second Reading debate, namely, the anti avoidance Clauses 16 and 17, which raise the question of retrospection and tax avoidance. This has been a difficult question which has exercised minds on both sides of the House. It has led to some rather disingenuous special pleading, what my hon. Friend the Member for Islington, East (Mr. E. Fletcher) called the fog that has been created around this issue.
  The Chancellor never proposed at any time retrospective legislation in the ordinary and normal sense in which that word is used. We must be clear what he was proposing in the first place. The right hon. Gentleman was proposing to compel a number of slippery and unscrupulous gentlemen to pay taxes which they ought to have paid in the first place. That is what the right hon. Gentleman was setting out to do. We must never forget that these slick and artificial devices for dodging tax are used at the expense of the ordinary body of taxpayers. What these clever men do makes honest men pay more in taxes than they would otherwise have to pay.
  Nor can we forget that the Chancellor has quietly given these people, whom he himself roundly condemned in his Budget speech, an uncovenanted present of £2 million, a sum of money so casually given away which would do a good deal to help to settle the bus and other industrial troubles which we now face. The Chancellor's ignominous retreat over this has made things worse than they would have been had he never pretended to be courageous in the first place, by crumpling under the pressure he has undermined confidence in clear Government undertakings.
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  The right hon. Gentleman described this undertaking as a clear warning which was given two years ago—he said that in his Budget speech—and now he has run away from it and has undermined confidence in that sort of statement by the Government in this and other matters. He has given us yet one more example of what is becoming the habitual divorce between his fine words and his deeds.
  I said that there had been much disingenuous special pleading on the question of retrospection, because if we stop retrospection without taking any alternative action to prevent tax avoidance we play into the hands of the tax avoiders. If we merely denounce retrospection without proposing some other method, this is putting ourselves on the side of tax avoidance.
  The root of our trouble is that under the present system the counter-measures which we take are so slow that in practice they become ineffective. The present method, which has been used for a long time, is to insert one or two Clauses in an already overcrowded Finance Bill, and it is notorious how difficult it is to get anti-avoidance Clauses into Finance Bills because Chancellors, naturally, do not want to overcrowd them. These anti-avoidance Clauses are inserted only when the leakage of the revenue tends to reach scandalous proportions.
  We must remember, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) reminded us, that these tax avoiders employ highly skilled experts. They always have fresh schemes ready. The avoiders can, therefore, count under the present system on a fair, or rather an unfair, run for each new device after the previous device has been stopped up. As things stand they are always one jump ahead of the Revenue, and, in practice, we therefore have a system of continuous, interrupted cheating of the Treasury. Directly one method is blocked up, another is used. We have an example in this very Bill. A loophole was stopped up in 1955, but they very quickly found ways round it.
  Now the Chancellor has removed the only worry of these tax evaders under the present system—namely, the worry that retrospective action may from time to time take their ill-gotten gains from them. What we bitterly criticise the Chancellor for in this respect is running

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  away from his first position and putting nothing whatever in its place to deal with this problem of tax avoidance. By this vacillation, first standing up and then falling down, he has given a green light to tax dodgers. They know that they need not fear the one thing which they feared in the past—occasional retrospective action.
  If we are to stop tax avoidance without retrospective action, we must drop this hopeless method of trying to put a few belated Clauses into the Finance Bill. We must have specific anti-avoidance legislation distinct from the Finance Bill. The simplest method is that proposed by my right hon. Friend this afternoon, a system by which the Government can issue orders to stop avoidance, particular avoidance measures, just as Purchase Tax changes can now be made by Statutory Instrument. Any Order would, of course, have to be validated by affirmative Resolution, or in the next Finance Bill.
  However, the essential thing is that we should be able to act promptly and quickly, instead of retrospectively, directly a tax avoidance device of importance became apparent and was of a kind that was obviously against the intention of Parliament. I doubt whether many Orders would be needed, because if we could stop these tax avoidances quickly the game would cease to be worth the candle and people would not trouble to employ the experts if the Government could step in very quickly after the device had been discovered.
  I hope that hon. Members like the right hon. Member for Blackpool, North (Sir T. Low), and newspapers like The Times, people who have proclaimed their equal abhorrence of retrospective action and tax avoidance, will support this sort of idea. I cannot find any other way in which we can reach both desirable objectives. It is very easy to denounce retrospective legislation and leave it there, but we all know that if that is all we do, there will be a great deal of tax avoidance.
  We remain unalterably opposed to Part IV of the Bill, which deals with the Profits Tax changes and the abolition of the tax on distributed profits. It introduces a number of anomalous discriminations, especially against Co-operative societies, as my hon. Friend the Member for East Ham, South pointed out. He
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  showed that the change resulted in grave inequities for Co-operative societies and it will be necessary to put the matter right when the Bill goes to Committee.
  Apart from the anomalies which are created by the change and which can be put right in Committee, our major objection to the new proposals is that they positively encourage the distribution of dividends and do that at a time when the Government are trying to keep down wages. The timing of the change is extraordinary. It will unquestionably increase dividends and it coincides with a great campaign by the Government to hold down wages.
  I do not know whether hon. Members who praised and cheered the change, this creation of undifferentiated Profits Tax, realise that the change has greatly strengthened the case for a capital gains tax. The minority Report of the Royal Commission on the Taxation of Profits and Income showed conclusively that a capital gains or capital Profits Tax was a logical adjunct of an undifferentiated Profits Tax because, as dividends rise, as they will as a result of the change, Stock Exchange values will automatically increase—the two being closely linked—and thus there will be a great shift in wealth in favour of the rentiers and rich people and against the poorer people.
  The introduction of a single Profits Tax like this will have the effect of increasing capital gains, so the case for taxing them becomes even stronger than it was before. That is something which will be taken into account in future Budgets which are not produced by the party opposite.
  We are strongly opposed to many things in the Bill, but one cannot judge a Finance Bill in isolation. As the Financial Secretary said, one has to take it as an expression of economic policy. The combination of the bad things in the Bill and its total failure as an expression of economic policy, its omissions and defects, certainly thoroughly justify dividing the House against its Second Reading. Above all, we are against the fact that the Budget and the Bill do nothing at all to get away from economic stagnation and, indeed, deliberately continue that policy. The signs are multiplying that this policy of stagnation is now being taken so far that it is beginning to produce an economic decline.

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  There has been fresh and very disturbing evidence, even since the Budget, that we are now beginning to enter upon an economic decline. The tonnage of laid-up British shipping has trebled since the beginning of the year. In this connection, I should like to say that hon. Members on both sides of the House listened with great interest and sympathy to the hon. Member for Yeovil (Mr. Peyton), who spoke about the need to do something to preserve the British merchant fleet. Although there is a limit to the extent to which the State can give a subsidy to any sort of private enterprise, I agree broadly with the case that he made.
  Unemployment rose by 2 per cent. last month—at a time of year when it should be falling. This is, therefore, a very much greater increase than it looks on the face of it. What I regard as the most important and disturbing sign of all, however, is that in the fourth quarter of last year—as we have only just discovered—the rate of growth of industrial investment fell, for the first time since figures have been kept. This is extremely grave. The shrinkage of industrial investment means that the source of our future expansion and wealth is drying up. This is an alarming sign, and gives us a very different picture from the one painted by the Paymaster-General in the Budget debate, when he told us of the continued expansion of investment. He must have known that these figures would come out the very day after he spoke.
  This policy of economic stagnation lies at the root of our industrial troubles. It is incontestable—it is shown in the Economic Survey, in Table 7—that if production is held down productivity will be held down with it. If productivity is held down, wage increases become inflationary. It is an automatic consequence. If productivity is held down, it is not possible to get a natural increase of wages, and, at the same time, stagnation pushes up prices. Hon. Members opposite seem to forget that prices rose last year by 3½ per cent., and that when they are asking for wages to be frozen they are really asking for the standard of living of the men concerned to be cut by 3½ per cent.
  The current experience in the United States controverts the theory lying at the root of the economic doctrine of the right hon. Member for Monmouth (Mr. P. Thorneycroft) that stagnation must
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  bring about a fall in prices. That theory also lies at the root of the policy of his successor. They feel that if there is enough economic stagnation prices must come down, but in the United States at this moment the cost of living is rising rapidly. In the midst of a very grave recession, with very heavy unemployment and all that stagnation and going backwards, prices are not falling, because the economic recession and stagnation themselves push up prices by producing shorter runs and an insufficient spread of overheads. In these conditions, to hold down wages while prices are going up is bound to bring about industrial tension, disputes and trouble.
  The Government are taking to very harsh and inflexible extremes a policy based on a doctrinaire economic theory which is so rigid and so abstract that it takes no account of the psychological and human reactions which are bound to follow upon it. There are many examples of this. Right hon. Gentlemen opposite seem to be quite oblivious to the psychological link between rising dividends and wage demands. There is a clear, psychological link which they seem wholly to ignore. They also ignore all the consequences of creating the very widely held impression that the Government's general strategy is to have a showdown with the trade unions, and that their tactic is to isolate the Transport and General Workers' Union. The consequences of creating that impression are appalling for industrial relations both between employees and management and between trade unions and the Government.
  A few days ago the Minister of Labour was making a lot of not being able to conceal his scorn and contempt. I would say that I cannot conceal my recognition of the skill, adroitness and foresight with which he is carrying out his tactical campaign to isolate one union. Nor can I conceal my amazement that he has so far departed from the great traditions of his office.
  Another example of the way in which the Government ignore the human consequences that must flow from their economic policy is the idea that their whole aim is to save the £. I have no doubt that the Chancellor, when he replies, will be saying that to us again, but I must point out to him that there is more than one way of endangering the £. If we

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  have economic policies which either deliberately or, if we prefer it, inevitably, produce industrial strife in the country on a very large scale, that also must endanger the £. The trouble with this policy of economic stagnation is that it is creating social conditions in which it is almost impossible for the Government to achieve the ends at which they are aiming, and particular economic measures produce human reactions which counter the policy and frustrate it.
  The very grave problem which my right hon. Friend the Member for Blyth (Mr. Robens) discussed in his excellent speech the other day only begin to be possible of solution if we resume the controlled, selective expansion of our economy. As long as we have stagnation in our economy, these great problems are not capable of solution at all, because it produces these secondary human and psychological reactions which defeat the purposes which are being pursued. It is our case that the Government, having taken over abstract theories, regardless of their impact on the people of the country, have bungled and mismanaged our affairs long enough. In every election, and in every possible way, the people continue to make their verdict clear that it is time for a change.
  9.33 p.m.
  The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): No doubt, the right hon. Member for Smethwick (Mr. Gordon Walker) feels better for letting off a little steam. We have had a calm and sensible debate. Many of the points made, inevitably on the Second Reading of a Finance Bill, are really appropriate to the Committee stage. I have no doubt that on all the points that have been raised, and nearly every point raised today has been relevant to this Bill, we shall have a useful discussion when we come to the Committee stage.
  The right hon. Member for Huyton (Mr. H. Wilson) said that it seemed to him that there was no identifiable theme in this Bill. I cannot speak for the right hon. Gentleman, but there is a theme running through this Bill. I have described it as the consolidation of the recent economic progress that we have been achieving, the practical reform of our complex tax system and a flexible and forward look to the future. Whatever the right hon. Gentleman may feel,
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  these themes have been widely recognised throughout the country.
  I know that it is customary for the Opposition, on the occasion of a Finance Bill, to pretend that the Bill is scarcely bearable. It reminds me of the farmer who gave a free barrel of cider to his workers. When he went round and asked them how they liked it, they said that it was just right. He asked what that meant, and one old chap replied, "If it had been any better, we should not have got it, and if it had been any worse, we could not have drunk it." All I can say is that the legislative cider I have issued on this occasion seems greatly to people's liking.
  In my Budget statement I said that the future weather was particularly difficult to forecast. Nearly a month has elapsed since then and some further figures have become available to us. We have had revised estimates of recent industrial production. Those revisions are slightly in an upward direction, I am glad to say. It now appears that industrial production has not, as in my Budget speech I indicated it might have done, dropped slowly, but has remained unchanged up to the latest moment.
  I now want to refer to the latest investment figures, for the last quarter of 1957, to which the right hon. Gentleman referred. It is true that there was a 5 per cent. fall in private investment in manufacturing industry in that quarter as compared with a year before, but the total figures for private investment, excluding housing, for that quarter were 3 per cent. up on the previous year. That included all private investment except for housing. I foresee the same pattern of investment for 1958 with total private investment fairly well maintained during the year. In other words, I have no reason to change the estimate I gave in my Budget speech.
  It is true that the April unemployment figures show a slight further increase on the month, but the total is still 2 per cent. of the total labour force. In the United States recession there are no positive signs there of recovery yet, although it does not at the moment seem to be going significantly deeper. There has been another satisfactory gain in the gold and dollar reserves in April, bringing the total to £1,041 million, a far greater increase in recent months than was estimated by the fresh borrowing last year

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  and it has now reached a higher figure than has been reached since the autumn of 1954.
  I think all those figures taken together pretty well confirm the general picture of our economic situation which I gave a month ago, although I want to say once again that we are at the moment at a very favourable conjunction of certain economic circumstances. The fall in import prices is helping to give us a favourable balance of payments at the present time. At the same time, we have not yet met with a reduced demand for our exports, nor have we lost any of the reserves as a result of the trading difficulties that certain parts of the sterling area are meeting. I wish to repeat, once again, that we must use this favourable period to establish definite stability and confidence in our currency before we embark on other tasks. Then we shall be able to withstand whatever stresses may eventually come to us if world trade and production should slacken.
  The right hon. Member for Huyton asked, if we could not encourage expansion now, when could we? I think that was the substance of his question. I wish to give him this answer. We shall welcome and actively encourage a resumption of expansion just as soon and just as fast as that can take place without an increase in prices and without danger to our balance of payments. The sooner those circumstances are with us and we are able to do that, the better we shall be pleased.
  The right hon. Gentleman also recommended planned expansion. That all depends on what is meant by "planned expansion." If planning of the detailed kind, with the multifarious controls that were attempted by the right hon. Gentleman and his colleagues between 1945 and 1951 is the kind of thing of which he is thinking, I would venture to say that that is not the kind of expansion that would be in the interests of the country.
  Hon. Gentlemen opposite have expressed strong opinions against the merging of the two rates of Profits Tax, but I think that they are rather isolated in their view, as this merging has been welcomed generally not only in this House but throughout the country. I can understand the first thoughts of someone who is faced with this issue, but I am con-
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  vinced that anyone who remains of the opinion, after full consideration, that the merging is a mistake, is wrong.
  When I was in industry myself, I used to advocate retaining in the business as high a proportion of profits, when we could earn them, as was feasible, so I came to a consideration of this problem with, I think, a bias in favour of the differential rate. As I studied the problem, however, I was convinced that it was by no means as simple as one might be inclined to think at first sight. That was certainly the view of both the majority and minority Reports of the Royal Commission.
  In these matters the object of us all is, I think, the same; to arrange Profits Tax so that it shall bear as lightly as is practicable on the financial needs of expanding industry. But we must look at this very carefully. The Royal Commission thought that the differential rate was not, on balance, justified on that ground, and it is significant that bodies representing industrial management, including the National Union of Manufacturers—which has large numbers of medium and smaller industrialists among its members—had asked for the merging and has welcomed the proposal made in the Budget.
  It is true that, in the long term, the differential rates do tend, as, I think, my hon. Friend the Member for Kidderminster (Mr. Nabarro) said, to distort the financial structure of British industry. If that is so, it must mean that it tends to weaken its competitiveness. Nevertheless, the majority even of those smaller firms that may have to pay rather more tax seem to welcome this proposal, because it eliminates for them the contingent liability for which they were feeling growing anxiety.
  If I thought that this proposal would lead to an all-round and general increase in dividends then, on balance, I would not now have introduced it, but I do not think that it will lead to such a general increase. In the more competitive climate of today and tomorrow, industrial concerns are likely to find it by no means easy to earn profits on a scale that would make excessive dividends likely or feasible, even if they were desired.
  I should like now to refer to two particular points raised in connection with this Profits Tax. Several hon

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  Members, including, I think, the right hon. Gentleman the Member for Huyton, referred to the effect that this change in Profits Tax will have on building societies and Co-operative societies. I should remind the House that the provisions of the Bill in each case produce exactly the effect recommended by the Royal Commission. The Bill treats these bodies on precisely the same principle as it treats other corporate bodies. I cannot see how one can complain of that treatment.
  The hon. Member for East Ham, South (Mr. Oram) made a thoughtful speech. I always listen to his remarks with interest. However, I think that that is the answer that I would give him. It puts these bodies on precisely the same basis as other bodies. In the case of the Co-operatives, dividends paid to their customers and interest paid on their capital will be deductible before Profits Tax is assessed.
  The second point was the effect of Profits Tax changes on subsidiaries in this country of American and other foreign companies. Apprehension was expressed that it might have a discouraging effect on such companies coming to this country. I cannot see any ground on which we could relieve foreign companies and their subsidiaries here of a burden of corporate taxation which falls on all concerns trading in this country.
  I am sorry that I was not here, because of an engagement which I could not miss, to hear the speech of my hon. Friend the Member for Armagh (Mr. Armstrong). I understand that he put his case in moderate and cogent terms. Certainly we do not want to do anything to aggravate the very difficult employment situation in Northern Ireland, but I do not believe that this factor is of sufficient weight compared with other far more important considerations to sway the decision of foreign investors. After all, this is a tax on company profits. British companies trading abroad have to pay tax to foreign Governments on the profits which they earn there, and I am sure we should not be justified in relieving foreign companies trading here of the effects of a uniform tax which falls on all our own concerns. To do that would put them into a preferential position.
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  I must refer again to the matter of retrospection in relation to dividend stripping because it was referred to by the right hon. Member for Huyton and the right hon. Member for Smethwick. The right hon. Member for Huyton asked me again why I had changed my mind. The reason is very simple, and I have already given it once. When I first considered this matter I was of the opinion that the strict wording given in 1955 justified the exceptional action of retrospection in this case. Subsequently I listened to the arguments that were put forward in the House and from many quarters elsewhere that the warnings might be held not to cover all the new methods which have been adopted since then.
  Bearing in mind the strong arguments against retrospection as a general principle, I decided to give the benefit of the doubt—not to the taxpayer, for that would be the wrong word in this instance, although I have no sympathy whatever with the exponents of this practice—to those who put themselves in this position. Because of the importance of the principle I have felt that it would be right to give the benefit of the doubt and to forgo the amount of Revenue involved. I have no regrets for having changed my mind on that important matter.
  Mr. H. Wilson: Since the right hon. Gentleman says he has done it because of doubts about the warnings, has he taken into account the evidence produced this afternoon, first, that the then Financial Secretary said that it was his intention to eliminate all dividend stripping, and, secondly, that of the three examples given by the Financial Secretary this afternoon two were clearly within the terms of Section 4 of the 1955 Act?
  Mr. Amory: I have considered that, and I listened with interest to what was said. Those are precisely the points I took into consideration. I read the words that the Financial Secretary used at the time, and, as I say, on consideration of all the factors, I am not altogether satisfied that it covers all the new cases which have been introduced since. We shall have the opportunity of discussing the matter further later on.
  The Purchase Tax has been mentioned by a number of hon. Members. It is gratifying that the reductions proposed have been generally welcomed. In my

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  Budget speech, I spent a certain amount of time, not too long, I hope, in explaining in some detail why I did not think that it would be practicable to change over to a retail sales tax. My impression is that the explanation I gave has been generally accepted as conclusive, but I hope that I made it clear also in my Budget speech that we ought not to turn our backs on the principle underlying most of these suggestions for a sales tax, the principle of levying indirect taxation at as low a rate as practicable on a wide range of articles.
  I found myself generally in agreement with many of the remarks made by the hon. Member for Gillingham (Mr. Burden) on this matter. The object of Purchase Tax is primarily to raise revenue, not to discriminate between one article and another. The reason we have not found it possible to reduce the Purchase Tax on cars is not that we regard cars as luxuries but that the revenue which arises from them is, in present circumstances, essential to the Exchequer. I think that many, if not most, hon. Members broadly agree with the principle I have mentioned. If they do, I hope that they will keep it well in mind when we come to discuss this matter during the Committee stage. Hon. Members cannot, logically, ask to widen the tax base in this respect, in the phrase of the right hon. Member for Huyton, and at the same time press for the exemption of whatever objects they or their constituents happen to be most interested in, whether it be pots and pans, shopping baskets, musical instruments, mentioned by the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall), or the piggy banks dear to the heart of my hon. Friend the Member for Kidderminster.
  The right hon. Member for Huyton asked why I put in my original proposal to tax miners' safety helmets and boots at the same rate as other helmets and boots. The answer is that there was, and is, a strong case for removing the anomaly which was represented by these particular exemptions. It was a trifling anomaly, the difference in the case of a helmet being less than 6d. an article. I decided to drop this proposal from the Bill because a fairly large number of hon. Members in the House thought that it was just a pity to include it and that it was a minor blot on an otherwise very good
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  Budget. Various other points about the Purchase Tax which have been mentioned will be discussed in Committee. No doubt, my hon. Friend the Member for Kidderminster will again be in very good voice. All I will say at this stage is that the reliefs total £32 million this year and £40 million in a full year, and that they will benefit people of all incomes.
  If I may, I will now refer to the remarks made by the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann). Regarding Purchase Tax, she made complaints that some shopkeepers had not reduced their prices as soon as these proposals were made. I would remind her, as my hon. Friend the Member for Gillingham has already mentioned, that there is no inherent obligation on a trader to reduce the prices when the tax has been paid. But the forces of competition achieve a great deal in this direction. In fact, there have been few complaints that shopkeepers have not reduced prices promptly.
  Mrs. Mann: It is not the shopkeepers; it is the wholesalers.
  Mr. Amory: The hon. Lady thanked me for doing the right thing about babies' dusting powder. If the hon. Lady ever hears any harsh criticism of me as Chancellor of the Exchequer, I hope that she will say, "At any rate, he did the right thing on babies' dusting powder".
  Mrs. Mann: May I inform the right hon. Gentleman that the babies and the rest of the public are quite unaware of the reductions?
  Mr. Amory: I hope that they become aware of it as soon as possible. The hon. Lady said that she had started thinking well of me, but was becoming disappointed in me. That is very sad indeed for one who has always tried to be nice to ladies, but still finds himself a bachelor at the age of 58. I should like to assure the hon. Lady, because she asked me this question, that my intentions were, and are, honourable.
  My hon. Friend the Member for Yeovil (Mr. Peyton) made a most interesting and moving speech about the shipping industry. As he himself said, I think, as far as taxation is concerned the industry does receive the benefit of the exceptional investment allowance of 40 per cent. We recognise the vital importance

  155
  of that industry to the country. Its importance is absolutely unquestioned, and I think always will be, and we shall always try to see that its welfare receives the fullest consideration. If there are any special problems that he would like to put before me, I should be very glad to consider them.
  My hon. Friend the Member for Dover (Mr. Arbuthnot) made a speech which I was particularly sorry to miss. I am told that it was a most excellent speech, the kind of speech that one has come to expect from him.
  I am rather surprised that right hon. and hon. Gentlemen opposite have decided to divide against the Bill. It really looks as if they may be pretty hard up to find something to vote against on the Government's policies and actions if they vote against this Bill. It is all very well for right hon. Gentlemen opposite to say that they are dividing because they disapprove of the Profits Tax proposal and the absence of any retrospective applications of the provisions for dividend stripping; but surely the point of a Second Reading debate is to enable the House to express a view whether the Bill is, broadly speaking, a good or bad Bill. What the Opposition are doing, therefore, is saying that this Finance Bill is a bad Bill.
  The country can hardly be blamed if it concludes from this vote that the party opposite disapproves of the proposals to reform our tax system in several important directions in accordance with the recommendations of the Royal Commis-
  sion; to reduce the Entertainments Duty; to increase the allowance for depreciation on industrial buildings and plant; to give further tax reliefs to elderly people with small means and generally to reduce taxation by about £50 million this year and over £100 million in a full year.
  It is, perhaps, this last feature that right hon. and hon. Members opposite find completely out of line with their idea of a good, sound, Socialist Finance Bill. Certainly, if it had increased taxation instead of reducing taxation by £108 million, or even by £500 million, it would have been more in line with the kind of Finance Bill which the right hon. Member for Huyton would have to introduce to make any sense at all of the financial policies which his party has recently been recommending. The country generally will, I fancy, form its own conclusions from the Opposition's attitude to this Bill.
  The Budget which I introduced a few weeks ago has, I believe, been regarded by people generally as a sound Budget and fair to all sections of the nation. The nation generally seems to approve of our decision to put the safeguarding of the value of our money, externally and internally, first among our aims. I am content to be judged in this matter by public opinion, and I am confident that this House will endorse this judgment by giving the Bill its wholehearted approval.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 315. Noes 247.

  Division No. 119.]

  AYES

  [10.2 p.m

  Agnew, Sir Peter

  Biggs-Davison, J. A.

  Cary, Sir Robert

  Aitken, W. T.

  Bingham, R. M.

  Channon, Sir Henry

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

  Birch, Rt. Hon. Nigel

  Chichester-Clark, R.

  Alport, C. J. M.

  Bishop, F. P.

  Clarke, Brig. Terence (Portsmth, W.)

  Amery, Julian (Preston, N.)

  Black, C. W.

  Cole, Norman

  Amory, Rt. Hn. Heathcoat (Tiverton)

  Body, R. F.

  Conant, Maj. Sir Roger

  Arbuthnot, John

  Bonham Carter, Mark

  Cooke, Robert

  Armstrong, C. W.

  Boothby, Sir Robert

  Cooper, A. E.

  Ashton, H.

  Bossom, Sir Alfred

  Cordeaux, Lt.-Col. J. K.

  Astor, Hon. J. J.

  Bowen, E. R. (Cardigan)

  Corfield, Capt. F. V.

  Atkins, H. E.

  Braine, B. R.

  Craddock, Beresford (Spelthorne)

  Baldock, Lt.-Cmdr. J. M.

  Braithwaite, Sir Albert (Harrow, W.)

  Crosthwaite-Eyre, Col. O. E.

  Baldwin, A. E.

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

  Crowder, Sir John (Finchley)

  Balniel, Lord

  Brooke, Rt. Hon. Henry

  Crowder, Petre (Ruislip—Northwood)

  Barlow, Sir John

  Brooman-White, R. C.

  Cunningham, Knox

  Barter, John

  Browne, J. Nixon (Craigton)

  Currie, G. B. H.

  Baxter, Sir Beverley

  Bryan, P.

  Dance, J. C. G.

  Beamish, Col. Tufton

  Bullus, Wing Commander E. E.

  Davidson, Viscountess

  Bell, Philip (Bolton, E.)

  Burden, F. F. A.

  Davies, Rt. Hn. Clement (Montgomery)

  Bell, Ronald (Bucks, S.)

  Butcher, Sir Herbert

  D'Avigdor-Goldsmid, Sir Henry

  Bennett, F. M. (Torquay)

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

  Deedes, W. F.

  Bennett, Dr. Reginald

  Campbell, Sir David

  Digby, Simon Wingfield

  Bevins, J. R. (Toxteth)

  Carr, Robert

  Dodds-Parker, A. D.

  Donaldson, Cmdr. C. E. McA.

  Hutchison, Sir James (Scotstoun)

  Pannell, N. A. (Kirkdale)

  Doughty, C. J. A.

  Hyde, Montgomery

  Partridge, E.

  Drayson, G. B.

  Hylton-Foster, Rt. Hon. Sir Harry

  Peel, W. J.

  du Cann, E. D. L.

  Iremonger, T. L.

  Peyton, J. W. W.

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

  Irvine, Bryant Godman (Rye)

  Pickthorn, K. W. M.

  Duncan, Sir James

  Jenkins, Robert (Dulwich)

  Pike, Miss Mervyn

  Duthie, W. S.

  Jennings, J. C. (Burton)

  Pilkington, Capt. R. A.

  Eden, J. B. (Bournemouth, West)

  Jennings, Sir Roland (Hallam)

  Pitman, I. J.

  Elliott, R. W. (Ne'castleupon Tyne, N.)

  Johnson, Dr. Donald (Carlisle)

  Pitt, Miss E. M.

  Emmet, Hon. Mrs. Evelyn

  Johnson, Eric (Blackley)

  Powell, J. Enoch

  Errington, Sir Eric

  Johnson, Howard (Kemptown)

  Price, David (Eastleigh)

  Erroll, F. J.

  Jones, Rt. Hon. Aubrey (Hall Green)

  Price, Henry (Lewisham, W.)

  Farey-Jones, F. W.

  Joseph, Sir Keith

  Prior-Palmer, Brig. O. L.

  Fell, A.

  Joynson-Hicks, Hon. Sir Lancelot

  Ramsden, J. E.

  Finlay, Graeme

  Kaberry, D.

  Rawlinson, Peter

  Fisher, Nigel

  Keegan, D.

  Redmayne, M.

  Fletcher-Cooke, C.

  Kerby, Capt. H. B.

  Remnant, Hon. P.

  Forrest, G.

  Kerr, Sir Hamilton

  Renton, D. L. M.

  Kimball, M.

  Ridsdale, J. E.

  Fort, R.

  Kirk, P. M.

  Rippon, A. G. F.

  Foster, John

  Lagden, G. W.

  Robertson, Sir David

  Fraser, Hon. Hugh (Stone)

  Lambton, Viscount

  Robinson, Sir Roland (Blackpool, S.)

  Fraser, Sir Ian (M'cmbe & Lonsdale)

  Lancaster, Col. C. G.

  Robson Brown, Sir William

  Freeth, Denzil

  Langford-Holt, J. A.

  Rodgers, John (Sevenoaks)

  Gammans, Lady

  Leather, E. H. C.

  Roper, Sir Harold

  Garner-Evans, E. H.

  Leavey, J. A.

  Ropner, Col. Sir Leonard

  George, J. C. (Pollok)

  Leburn, W. G.

  Russell, R. S.

  Gibson-Watt, D.

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

  Sandys, Rt. Hon. D.

  Glover, D.

  Legh, Hon. Peter (Petersfield)

  Scott-Miller, Cmdr. R.

  Glyn, Col. Richard H.

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

  Sharples, R. C.

  Godber, J. B.

  Lindsay, Hon. James (Devon, N.)

  Shepherd, William

  Goodhart, Philip

  Lindsay, Martin (Solihull)

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

  Gough, C. F. H.

  Linstead, Sir H. N.

  Smithers, Peter (Winchester)

  Gower, H. R.

  Llewellyn, D. T.

  Smyth, Brig. Sir John (Norwood)

  Graham, Sir Fergus

  Lloyd, Rt. Hon. G. (Sutton Coldfield)

  Soames, Rt. Hon. Christopher

  Grant, W. (Woodside)

  Lloyd, Rt. Hon. Selwyn (Wirral)

  Spearman, Sir Alexander

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

  Longden, Gilbert

  Speir, R. M.

  Green, A.

  Low, Rt. Hon. Sir Toby

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

  Gresham Cooke, R.

  Lucas, Sir Jocelyn (Portsmouth, S.)

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

  Grimond, J.

  Lucas, P. B. (Brentford & Chiswick)

  Stanley, Capt. Hon. Richard

  Grimston, Hon. John (St. Albans)

  Lucas-Tooth, Sir Hugh

  Stevens, Geoffrey

  Grimston, Sir Robert (Westbury)

  McAdden, S. J.

  Steward, Harold (Stocport, S.)

  Grosvenor, Lt.-Col. R. G.

  Macdonald, Sir Peter

  Steward, Sir William (Woolwich, W.)

  Gurden, Harold

  Mackeson, Brig. Sir Harry

  Stoddart-Scott, Col. Sir Malcolm

  Hall, John (Wycombe)

  McKibbin, Alan

  Storey, S.

  Hare, Rt. Hon. J. H.

  Mackie, J. H. (Galloway)

  Stuart, Rt. Hon. James (Moray)

  Harris, Frederic (Croydon, N. W.)

  McLaughlin, Mrs. P.

  Studholme, Sir Henry

  Harris, Reader (Heston)

  Maclay, Rt. Hon. John

  Summers, Sir Spencer

  Harrison, A. B. C. (Maldon)

  Maclean, Sir Fitzroy (Lancaster)

  Sumner, W. D. M. (Orpington)

  Harrison, Col. J. H. (Eye)

  McLean, Neil (Inverness)

  Taylor, Sir Charles (Eastbourne)

  Harvey, Sir Arthur Vere (Macclesf'd)

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

  Taylor, William (Bradford, N.)

  Harvey, Ian (Harrow, E.)

  MacLeod, John (Ross & Cromarty)

  Teeling, W.

  Harvey, John (Walthamstow, E.)

  Macmillan, Maurice (Halifax)

  Temple, John M.

  Harvie-Watt, Sir George

  Macpherson, Niall (Dumfries)

  Thomas, Leslie (Canterbury)

  Maddan, Martin

  Thomas, P. J. M. (Conway)

  Hay, John

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

  Thompson, Kenneth (Walton)

  Head, Rt. Hon. A. H.

  Manningham-Buller, Rt. Hn. Sir R.

  Thompson, R. (Croydon, S.)

  Heald, Rt. Hon. Sir Lionel

  Marlowe, A. A. H.

  Thorneycroft, Rt. Hon. P.

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

  Marples, Rt. Hon. A. E.

  Thornton-Kemsley, Sir Colin

  Henderson, John (Cathcart)

  Marshall, Douglas

  Tiley, A. (Bradford, W.)

  Henderson-Stewart, Sir James

  Mathew, R.

  Tilney, John (Wavertree)

  Hicks-Beach, Maj. W. W.

  Maudling, Rt. Hon. R.

  Turner, H. F. L.

  Hill, Rt. Hon. Charles (Luton)

  Mawby, R. L.

  Turton, Rt. Hon. R. H.

  Hill, Mrs. E. (Wythenshawe)

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

  Tweedsmuir, Lady

  Hirst, Geoffrey

  Medlicott, Sir Frank

  Vane, W. M. F.

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

  Milligan, Rt. Hon. W. R.

  Vaughan-Morgan, J. K.

  Holland-Martin, C. J.

  Moore, Sir Thomas

  Vickers, Miss Joan

  Holt, A. F.

  Morrison, John (Salisbury)

  Wade, D. W.

  Hope, Lord John

  Mott-Radclyffe, Sir Charles

  Wakefield, Edward (Derbyshire, W.)

  Hornby, R. P.

  Nabarro C. D. N.

  Walker-Smith, Rt. Hon. Derek

  Hornsby-Smith, Miss M. P.

  Nairn, D. L. S.

  Wall, Patrick

  Horobin, Sir Ian

  Neave, Airey

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

  Horsbrugh, Rt. Hon. Dame Florence

  Nicholls, Harmar

  Ward, Dame Irene (Tynemouth)

  Howard, Gerald (Cambridgeshire)

  Nicholson, Sir Godfrey (Farnham)

  Watkinson, Rt. Hon. Harold

  Howard, Hon. Greville (St. Ives)

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

  Webbe, Sir H.

  Howard, John (Test)

  Noble, Comdr. Rt. Hon. Allan

  Whitelaw, W. S. I.

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

  Nugent, G. R. H.

  Williams, Paul (Sunderland, S.)

  Hughes Hallett, Vice-Admiral J.

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

  Wilson, Geoffrey (Truro)

  Hughes-Young, M. H. C.

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

  Wood, Hon. R.

  Hulbert, Sir Norman

  Orr, Capt. L. P. S.

  Woollam, John Victor

  Hurd, A. R.

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

  Yates, William (The Wrekin)

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

  Osborne, C.

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

  Page, R. G.

  TELLERS FOR THE AYES:

  Mr. Oakshott and Mr. Willis

  158

  159

  NOES

  Ainsley, J. W.

  Griffiths, William (Exchange)

  O'Brien, Sir Thomas

  Albu, A. H.

  Hale, Leslie

  Oliver, G. H.

  Allaun, Frank (Salford, E.)

  Hall, Rt. Hn. Glenvil (Colne Valley)

  Oram, A. E.

  Allen, Arthur (Bosworth)

  Hamilton, W. W.

  Orbach, M.

  Allen, Scholefield (Crewe)

  Hannan, W.

  Oswald, T.

  Awbery, S. S.

  Harrison J. (Nottingham, N.)

  Owen, W. J.

  Bacon, Miss Alice

  Hastings, S.

  Padley, W. E.

  Baird, J.

  Hayman, F. H.

  Paget, R. T.

  Balfour, A.

  Healey, Denis

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

  Bellenger, Rt. Hon. F. J.

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

  Paling, Will T. (Dewsbury)

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

  Herbison, Miss M.

  Palmer, A. M. F.

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

  Hewitson, Capt. M.

  Pannell, Charles (Leeds, W.)

  Benson, Sir George

  Hobson, C. R. (Keighley)

  Pargiter, G. A.

  Beswick, Frank

  Holman, P.

  Parker, J.

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

  Parkin, B. T.

  Blackburn, F.

  Holmes, Horace

  Paton, John

  Boardman, H.

  Houghton, Douglas

  Peart, T. F.

  Bottomley, Rt. Hon. A. G.

  Howell, Charles (Perry Barr)

  Pentland, N.

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

  Howell, Denis (All Saints)

  Prentice, R. E.

  Bowles, F. G.

  Hoy, J. H.

  Price, J. T. (Westhoughton)

  Boyd, T. C.

  Hubbard, T. F.

  Price, Philips (Gloucestershire, W.)

  Braddock, Mrs. Elizabeth

  Hughes, Cledwyn (Anglesey)

  Probert, A. R.

  Brockway, A. F.

  Hughes, Emrys (S. Ayrshire)

  Proctor, W. T.

  Broughton, Dr. A. D. D.

  Hughes, Hector (Aberdeen, N.)

  Pursey, Cmdr. H.

  Brown, Rt. Hon. George (Belper)

  Hunter, A. E.

  Rankin, John

  Brown, Thomas (Ince)

  Hynd, H. (Accrington)

  Redhead, E. C.

  Burke, W. A.

  Hynd, J. B. (Attercliffe)

  Reeves, J.

  Burton, Miss F. E.

  Irvine, A. J. (Edge Hill)

  Reid, William

  Butler, Herbert (Hackney, C.)

  Irving, Sydney (Dartford)

  Rhodes, H.

  Butler, Mrs. Joyce (Wood Green)

  Isaacs, Rt. Hon. G. A.

  Robens, Rt. Hon. A.

  Callaghan, L. J.

  Janner, B.

  Roberts, Albert (Normanton)

  Carmichael, J.

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

  Roberts, Goronwy (Caernarvon)

  Castle, Mrs. B. A.

  Jeger, George (Goole)

  Robinson, Kenneth (St. Pancras, N.)

  Champion, A. J.

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

  Rogers, George (Kensington, N.)

  Chapman, W. D.

  Jenkins, Roy (Stechford)

  Ross, William

  Chetwynd, G. R.

  Johnston, Douglas (Paisley)

  Royle, C.

  Clunie, J.

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

  Shinwell, Rt. Hon. E.

  Coldrick, W.

  Jones, David (The Hartlepools)

  Short, E. W.

  Collick, P. H. (Birkenhead)

  Jones, Elwyn (W. Ham, S.)

  Silverman, Julius (Aston)

  Collins, V. J. (Shoreditch & Finsbury)

  Jones, J. Idwal (Wrexham)

  Silverman, Sydney (Nelson)

  Corbet, Mrs. Freda

  Jones, T. W. (Merioneth)

  Simmons, C. J. (Brierley Hill)

  Cove, W. G.

  Kenyon, C.

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

  Craddock, George (Bradford, S.)

  Key, Rt. Hon. C. W.

  Slater, J. (Sedgefield)

  Cronin, J. D.

  King, Dr. H. M.

  Snow, J. W.

  Crossman, R. H. S.

  Lawson, G. M.

  Sorensen, R. W.

  Cullen, Mrs. A.

  Ledger, R. J.

  Soskice, Rt. Hon. Sir Frank

  Darling, George (Hillsborough)

  Lee, Frederick (Newton)

  Sparks, J. A.

  Davies, Ernest (Enfield, E.)

  Lee, Miss Jennie (Cannock)

  Stones, W. (Consett)

  Davies, Stephen (Merthyr)

  Lewis, Arthur

  Strachey, Rt. Hon. J.

  Deer, G.

  Lipton, Marcus

  Strauss, Rt. Hon. George (Vauxhall)

  de Freitas, Geoffrey

  Logan, D. G.

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

  Delargy, H. J.

  Mabon, Dr. J. Dickson

  Summerskill, Rt. Hon. E.

  Diamond, John

  McAlister, Mrs. Mary

  Swingler, S. T.

  Dodds, N. N.

  McCann, J.

  Sylvester, G. O.

  Donnelly, D. L.

  MacColl, J. E.

  Taylor, Bernard (Mansfield)

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

  MacDermot, Niall

  Dye, S.

  McGhee, H. G.

  Taylor, John (West Lothian)

  Ede, Rt. Hon. J. C.

  McInnes, J.

  Thomas, George (Cardiff)

  Edelman, M.

  McKay, John (Wallsend)

  Thomas, Iorwerth (Rhondda, W.)

  Edwards, Rt. Hon. John (Brighouse)

  McLeavy, Frank

  Thomson, George (Dundee, E.)

  Edwards, Rt. Hon. Ness (Caerphilly)

  MacMillan, M. K. (Western Isles)

  Thornton, E.

  Edwards, Robert (Bilston)

  MacPherson, Malcolm (Stirling)

  Timmons, J.

  Edwards, W. J. (Stepney)

  Mahon, Simon

  Tomney, F.

  Evans, Albert (Islington, S. W.)

  Mallalieu, E. L. (Brigg)

  Ungoed-Thomas, Sir Lynn

  Evans, Edward (Lowestoft)

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

  Usborne, H. C.

  Fernyhough, E.

  Mann, Mrs. Jean

  Viant, S. P.

  Finch, H. J.

  Mason, Roy

  Watkins, T. E.

  Fletcher, Eric

  Mayhew, C. P.

  Weitzman, D.

  Foot, D. M.

  Mellish, R. J.

  Wells, Percy (Faversham)

  Forman, J. C.

  Messer, Sir F.

  Wells, William (Walsall, N.)

  Fraser, Thomas (Hamilton)

  Mitchison, G. R.

  West, D. G.

  Monslow, W.

  Wheeldon, W. E.

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

  Moody, A. S.

  White, Mrs. Eirene (E. Flint)

  George, Lady Megan Lloyd (Car'then)

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

  Wigg, George

  Gibson, C. W.

  Mort, D. L.

  Wilkins, W. A.

  Gordon Walker, Rt. Hon. P. C.

  Moss, R.

  Willey, Frederick

  Greenwood, Anthony

  Moyle, A.

  Williams, David (Neath)

  Grenfell, Rt. Hon. D. R.

  Mulley, F. W.

  Williams, Rev. Llywelyn (Ab'tillery)

  Grey, C. F.

  Neal, Harold (Bolsover)

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

  Griffiths, David (Rother Valley)

  Noel-Baker, Francis (Swindon)

  Williams, W. T. (Barons Court)

  Griffiths, Rt. Hon. James (Llanelly)

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

  Willis, Eustace (Edinburgh, E.)

  160

  161

  Wilson, Rt. Hon. Harold (Huyton)

  Woof, R. E.

  Zilliacus, K.

  Winterbottom, Richard

  Yates, V. (Ladywood)

  Woodburn, Rt. Hon. A.

  Younger, Rt. Hon. K.

  TELLERS FOR THE NOES:

  Mr. Popplewell and Mr. Pearson

  Bill accordingly read a Second time, and committed to a Committee of the whole House.
  Committee Tomorrow.

  LOCAL GOVERNMENT AND MISCELLANEOUS FINANCIAL PROVISIONS (SCOTLAND) BILL (BUSINESS COMMITTEE)
  Report [7th May] of the Business Committee to be considered forthwith.—[Mr. R. A. Butler.]
  Resolved,
  That this House doth agree with the Committee in the said Report.—[Mr. R. A. Butler.]

  CHRISTMAS ISLAND BILL
  Order for Second Reading read.
  The Secretary of State for the Colonies (Mr. Alan Lennox-Boyd): I have it, Sir, in Command from Her Majesty the Queen to acquaint the House that Her Majesty places Her prerogative and interests, so far as they are concerned with the matters dealt with by this Bill, at the disposal of Parliament.
  10.16 p.m.
  The Under-Secretary of State for Commonwealth Relations (Mr. C. J. M. Alport): I beg to move, That the Bill be now read a Second time.
  I should perhaps begin by explaining that the Christmas Island to which the Bill refers is that situated in the Indian Ocean about 200 miles south of Java. It should not be confused with the other Christmas Island, which in recent times has been the scene of certain atomic and nuclear tests.
  The island with which the House is concerned tonight was first sighted by a certain Captain Mynors in his ship the "Royal Mary" in 1643. It remained uninhabited until the end of the nineteenth century, when it was discovered, as a result of a visit, I think by the Royal Navy who brought back certain specimens of the rocks, that there were large deposits of almost pure phosphate of lime. As a result, Chinese labourers were brought to the island, and in 1900 the first phosphates were exported.
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  In 1949 the Governments of Australia and New Zealand bought the Christmas Island Phosphate Company, and at the same time the lease of the whole island, which had previously belonged to the Company, was transferred to those two Governments. The production of phosphates has recently been running at the rate of about 350,000 tons a year and the island supplies about one-third of the phosphate requirements of Australia. In those circumstances, the House will recognise that the island is important to the economy of the Commonwealth of Australia.
  In the past the island has been associated for administrative purposes with Singapore, which is situated about 800 miles to the north. There is, however, no natural link between the island and Singapore, and in view of the new constitutional arrangements which are now proposed for Singapore it was not felt appropriate some months ago, when the matter was considered, to continue the administrative link. Australia was logically regarded as the natural territory to administer an island in which it already had such considerable economic interests. The decision that this should be the future of the administration of the island was announced in the House in June last year, and with effect from 1st January of this year the island has been severed from Singapore and has been administered as a separate dependency of the United Kingdom.
  Her Majesty's Government in the United Kingdom have made an ex gratia payment of £2,300,000 to the Government of Singapore to compensate them for the loss of revenue which they formerly enjoyed in respect of the phosphate exports from the island and we have in turn been reimbursed for this expenditure by the Governments of Australia and New Zealand.
  In accordance with precedents set at the time of the transfer of the Cocos Islands, we have had to go through a rather elaborate constitutional procedure. The Australian Parliament has already passed an Act requesting and consenting to this Bill, and the object of the Bill is to enable the transfer by Order in Council of the island to the Commonwealth of

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  Australia. As the House will recognise, the Bill closely resembles the pattern set when the Cocos Islands were similarly transferred some time ago.
  There is one point which, in the case of a constitutional change of this sort, is always of particular concern to hon. Members on both sides of the House. That is to ensure that there is in no case, as the result of legislative action taken by this House, any loss of citizenship rights to any of the inhabitants of the territory concerned. The House will wish to know, therefore, how the future of the islanders is affected by this transfer.
  There are no indigenous inhabitants in the normal sense of the word. All the persons who are resident in the island at present are there by reason of the operation of the Australia and New Zealand Phosphate Commission and in one way or another are closely connected with either mining the phosphate and its processing, or with some of the administrative requirements of the small community of some 2,400 persons there.
  The transfer of the island will not affect the citizenship of the persons now on the island. They are for the most part emigrants or people who have been brought from Singapore. The Government of Singapore have given an assurance that, subject to the laws in force in Singapore from time to time, those on the island will be admitted to Singapore either permanently or on visits.
  The Australian Government have given precisly the same assurances about the future position of the islanders in relation to Australia as they gave to the Cocos Islanders at the time of the transfer of that group of islands. Residents of the island at the time of the handing over to the administration of the Commonwealth of Australia will be given the option of becoming Australian citizens, and persons born on the island after that date will be Australian citizens by operation of the law. The Australian Government have said that they will consider sympathetically any application from the islanders to go to Australia.
  Mr. B. T. Parkin: Do we understand that this will be a second-grade Australian citizenship? If
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  an inhabitant of the island is to get Australian citizenship, has he not the same automatic right to go to Australia as he would have to come here if he were a British citizen?
  Mr. Alport: It is not true that they will be second-class citizens in any way. The majority of the people concerned are those whose home is in Singapore and to the north and they will retain their rights in respect of Singapore. As I have said, any application which they may wish to make to go to Australia will be sympathetically considered by the Australian Government. That is exactly the same position in respect of Christmas Island as it is in the case of the Cocos Islands.
  The following legal arrangements will be needed for the transfer of this island. When this enabling Bill has been passed, the Australian Government will then have to pass an Act accepting the island and undertaking responsibility for its future Government. Subsequently, an Order in Council will be made to provide for the actual transfer of the island.
  The House will see that to all intents and purposes this is a single Clause Bill. The Preamble identifies the island and states that the Commonwealth of Australia has requested and consented to the Act, when it is passed. Clause 1 gives authority by Order in Council to make the transfer and deals with certain matters which arise therefrom. Clause 2 simply gives the Bill its Short Title.
  This, as the House will realise, is one of those rather strange responsibilities that have come to us in the past as a result of the spirit of adventure of men and women of this country. Until relatively recently the island was uninhabited. The community at present living there is to some extent a merely temporary one, in so far as it has been the custom for a great many of the people to return after a period to the places of their origin. But there is no doubt that there is every logic for the island becoming the responsibility of the Government of the Commonwealth of Australia.
  I am sure that the House will have noted the way in which similar responsibilities have been carried out in respect of the Cocos Islands and will feel satisfied with the proposal we are now putting before the House.
  10.26 p.m.
  Mr. A. G. Bottomley: The Bill was introduced in another place, and the official Opposition there gave a welcome to it, but the Government live in such anxious times that until a moment ago they found it necessary to have both the Leader of the House and the Chief Whip present. I do not want to add to their difficulties tonight. The facts as stated by the Minister are correct, but there are one or two points that I want to put to him.
  I imagine that many of us, like the Minister, at one stage thought that this Christmas Island was the Christmas Island where the hydrogen tests were taking place. We now know that it is not. It is a very small island—about half the size of the Isle of Wight—with two or three thousand inhabitants. To illustrate the difference between the way in which we used to approach matters and our present-day approach, I would point out that the Royal Navy was responsible for locating this island, and that in those days the Navy was bent not upon warlike purposes; it used to carry out peaceful pursuits.
  As a result of exploration it discovered these very rich phosphate deposits. At the time a Conservative Government were in power, and instead of those phosphates being worked for the good of the community as a whole they were handed over to private enterprise. It was not until the Australian and New Zealand Governments saw the wisdom of public ownership that they bought out this private company. We therefore find that if we transfer this power to Australia we are passing over power to Governments who have nationalised industry. We are glad to find that in this respect a Conservative Government supports this movement.
  At the moment, the island is a Colonial Office responsibility. When Singapore accepted responsibility it was very difficult for it to administer an island which was 600 miles away. I believe that it was on 1st January of this year that administrative responsibility passed from the Singapore Government to the Colonial Office—and if it was difficult for Singapore to administer this island, which was 600 miles away, it must be extremely difficult for us to administer it, when it is many more hundreds of miles away. Therefore, it seems to be logical to entrust the re-
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  sponsibility to a sister country in the Commonwealth.
  In this respect I think that it is right that Parliament should examine the matter very seriously. As the Minister has said, it has been a very complicated procedure. We do not want lightly to transfer territory from one Commonwealth country to another unless we are absolutely certain that the peoples of the territories concerned are in favour, and that the Governments concerned are in complete agreement. This happens to be the case, and the procedure that has been followed—because of the Statute of Westminster—is such that we in this Parliament have an opportunity of looking at the matter carefully, considering all the facts, and passing the Bill, which later becomes an Act of Parliament.
  Likewise, a responsibility lies upon the Commonwealth Government to do a similar thing, so that before the transfer is completed both Parliaments will have an opportunity of testing the executive decision to make sure that the transfer is the right thing to do.
  For the Opposition I should like to pursue the point made by my hon. Friend the Member for Paddington, North (Mr. Parkin), which I had intended to develop. It is important that the rights of the people, whatever the territory, Should be safeguarded. I understand that originally Chinese labourers were transferred from Singapore and elsewhere to be employed on the island in the phosphates industry. They spend a few years there and then go back. To the extent that they are Singapore citizens they have a right to go back. I understand the Singapore Government will sympathetically consider those who wish to go back. The situation is similar in the case of Australia, and claims for Australian citizenship and opportunities to go to Australia will be sympathetically considered.
  We do well to remember that under the British Nationality Act, although the Indians and ourselves were anxious to do the right thing for the inhabitants of India, nevertheless it happened that many Indians were left stateless. We do not want a position in which citizens of Christmas Island find themselves stateless. I do not think the Minister has given a complete assurance, but I hope he will give one, that there will be no

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  stateless persons whatever. I do not know whether it is now possible to continue the position in which there will be Singapore citizens, Australian citizens and United Kingdom and colonial citizens. If that could be considered we could be absolutely certain that all the citizens had their rights. We can take comfort in the fact that, whatever the situation, all will be British citizens and to that extent have the opportunity to came to this country.
  It is possible that the island might be used as a base for one purpose or another. In these days of development of the helicopter and other means of transport islands which at one time seemed to be of no significance now prove to be important. The Cocos Islands were transferred last year and only recently Queen Elizabeth, the Queen Mother, when going to Australia found it necessary to alight from an aircraft on one of the islands. I hope there will be similar opportunities whereby this island could be so used if necessary.
  I have no doubt that the arrangement with the Australian Government will be carried out in the usual spirit of harmony and co-operation. On behalf of the Opposition, I welcome the transfer to a sister country of responsibility for this island.
  10.34 p.m.
  Mr. Brian Harrison: I welcome this Bill for one reason in particular, which I shall mention in a moment. I should like to take up what was said by the right hon. Member for Rochester and Chatham (Mr. Bottomley) on the subject of phosphate deposits and the like. He said that the Australian Government had nationalised. I suggest that he study the problem a little more closely. He will find that the nationalisation as done by the Phosphates Commission is something very different from the awful organisation we know in this country in the nationalised industries.
  Mr. Bottomley: The hon. Member will admit that it is not private enterprise?
  Mr. Harrison: It is a very sound combination of the two.
  The reason I welcome the Bill is that think this and the previous Bill dealing with the Cocos Islands highlights something which must be pursued with great force. I refer to the effort to disperse the Commonwealth's responsibilities
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  throughout the Commonwealth. It is because this small Bill makes another Commonwealth country responsible for a part of the very far-flung Commonwealth that I particularly welcome it.
  I should like my hon. Friend to make sure that before this Measure is enacted the citizens of this island will at least have equal status with the Australian citizens of, say, New Guinea, otherwise I think that we will be storing up a certain amount of trouble and setting a rather bad precedent. As I say, it is because a Commonwealth country is taking over responsibility for this place that I sincerely welcome the Bill. I hope that it is the forerunner of many others, including similar Measures for the Solomon Islands, and many other territories in the Pacific as well as in the Indian Ocean.
  10.36 p.m.
  Mr. Arthur Creech Jones: It is a matter of some interest that we should find not only a Conservative Member but a Conservative Government urging on us the further dismemberment of the British Empire——
  Mr. B. Harrison: No, no.
  Mr. Creech Jones: When some of us were eagerly pursuing a course of transferring Empire to Commonwealth we were subjected to a great deal of criticism. However, I welcome this Bill. The proposal is the natural thing to do, and I believe that the administration of the island will probably be better under the Australian Government than it can possibly be under that of the United Kingdom or Singapore.
  I suppose I should know the answers to the questions that I want to put to the Minister, but I just do not. When this transfer is effected, I take it that, should they apply for it, the inhabitants of Christmas Island will authomatically receive Australian citizenship. I take it, too, that the island will be administered under Australian law, and not under that of either the United Kingdom or of Singapore.
  I should like to know—because the Minister has not so far enlightened us on this—how far the inhabitants themselves had been consulted about this transfer of sovereignty. This is a very important principle, and although it may have only a limited application in this case, the Minister should make perfectly clear to the House tonight whether or

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  not such consultation has taken place. It is not a question of whether these inhabitants had their origin in Singapore or elsewhere, but that they are now bona fide inhabitants of a particular territory. It is a sound principle that at least some degree of consultation should take place when a transfer of this, or of any other kind takes place.
  A further matter which, again, has not been mentioned, relates to royalties from phosphates. I am not clear what part of the royalties, or of the taxation on the industry was shared by the local inhabitants.
  It will be recalled that in the case of the other famous phosphate island in the Pacific there is a specific welfare fund derived from the royalties on phosphates which is used for the well-being of the local inhabitants and the inhabitants of the neighbouring islands. Therefore, I should like to know whether any provision will be made by the Australian Government in respect of the welfare and happiness of the inhabitants.
  These are just a few queries which I put to the Minister because in passing the Bill, which seems to me to be perfectly sound in its practical objective, we ought to be satisfied that the normal principles in respect of transfer have been observed.
  10.41 p.m.
  Mr. Maurice Orbach: We have had an exercise in geography and history which I have found extremely interesting. However, when the Under-Secretary touched on the constitutional procedure he seemed to be rather ambiguous, and I have no clear picture in my mind about exactly what is taking place.
  I reiterate the questions asked by my right hon. Friend the Member for Wakefield (Mr. Creech Jones). I should also like to know why as a result of the transfer of the sovereignty of the island from Singapore to Australia we are paying £2 million in compensation. It seems that the economic benefits from the mining of phosphates went to a certain company under the administration of the New Zealand and Australian Governments. Therefore, I cannot see what revenue Singapore is losing. Why are we paying £2 million to Singapore as a result of the transfer.
  Mr. Alport: Perhaps the hon. Gentleman did not hear the words that I added, that we are reimbursed for the expenditure of £2,300,000 by the Governments of New Zealand and Australia, so that there is no cost to the United Kingdom.
  Mr. Orbach: Then I cannot question it at any great length, but it still seems to me to get muddier and muddier. Why are the Australians paying that money? But perhaps I ought not to pursue that subject. Someone in Canberra may ask the same question.
  I am not happy that the 2,400 inhabitants of the island do not appear to have been consulted about their future. The Under-Secretary made it clear that, while these people, who had originally come from Singapore, could opt to return to Singapore or could apply for Australian naturalisation on Australia's taking over the island, they would not necessarily be allowed to visit Australia. I understand the reason for that—Australia has a white Australian policy—and I think the Under-Secretary ought to explain it to the House and make it clear that we are by this act participating in a discrimination that none of us would favour elsewhere.
  Mr. Alport indicated dissent.
  Mr. Orbach: The hon. Gentleman shakes his head. He must answer this question. Are the 2,400 inhabitants of the island who may become Australian citizens to be given all the rights of Australian citizens, which would include the right not only to visit the Australian mainland, if they so wished, but the right to participate, by becoming part of a constituency of Australia, in the federal elections in Australia or in any of the state elections? It is important that we should know the answer.
  I do not want to delay the passing of the Bill, but I could never vote for any Measure which took away from any people within the Commonwealth rights which they now enjoy or ought to enjoy by an Act of the United Kingdom Government. Unless the Minister satisfies us to the contrary, I feel that we might be participating in discrimination which I should not be prepared to support.
  10.45 p.m.
  Mr. E. Fernyhough: I am grateful to the Under-Secretary of State for Commonwealth Relations for introducing the Bill. I am bound to confess

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  that I have learned a little geography. In my ignorance, I thought that there was only one Christmas Island; I was not aware that there are two, and I thought that this Christmas Island was the one about which we have heard a great deal. I am quite sure that the passage of the Bill would have been a little less smooth had it been that Christmas Island rather than the one mentioned in the Preamble to the Bill.
  I share some of the misgivings expressed by my hon. Friend the Member for Willesden, East (Mr. Orbach). This island has been populated over the years substantially by what the Under-Secretary referred to as Chinese labourers. I do not know whether they were ever allowed to bring their women folk with them when they returned, or whether their women folk were allowed to come with them; but if they did, it is obvious that there will be on the island, living in the British Commonwealth, what we look upon as coloured people.
  For reasons best known to themselves, the Australian Government, we know, maintain a somewhat rigid colour bar. It would be very unfortunate if, in 1958, when all kinds of people are prepared to create difficulties for Her Majesty's Government whenever they can seize an issue of this kind, we were to hand over some 2,400 people to another Government, not assuring them of the same rights under that other Government that they now possess under Her Majesty's Government and Britain herself.
  It is desirable that we should be given some information about these things. The Parliamentary Secretary should try to give us some breakdown of the figure of 2,400. What are the respective nationalities of these people? We do not want to see arise in any part of the Commonwealth the difficulties which have arisen in some territories in the past as a result of a colour bar. These things will become more and more important as the years go by. It would be well for us to safeguard ourselves from trouble in the future, so far as we can, in making provisions of this kind.
  10.47 p.m.
  Mr. B. T. Parkin: I am sorry that the Minister did not find time to answer more fully the question I put to him when he was good
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  enough to give way to me. Although I appreciate that he was keeping his speech short, I thought it was a most unfortunate phrase to use in speaking of Christmas Island to say that it had no natural links with Singapore, in view of the fact that nearly all the people living and working there come from Singapore. It seems a singularly heartless way of approaching a problem of colonial administration to speak as if one were dealing with nothing but the top layer of a sort of oceanic volcano which the seagulls had left. I would be grateful if the hon. Gentleman could give us a little further explanation.
  I should like particularly to know how the Australians propose to administer the island. It was said on this side of the House as well as on the other that it would be easier to administer from Australia. Yet Australia is the one country in the Pacific which has not the slightest knowledge or experience of administering the affairs of Chinese citizens. The Australians are a people who have excluded themselves for a long period from any opportunity of getting such experience.
  Surely, if there are any Chinese citizens whose customs must be extremely complex they are the Chinese citizens of Singapore. What will happen, for instance, to the marriage and property laws, as administered at present in Singapore, in relation to the affairs of these Singapore citizens now working in Christmas Island? I believe there is a special concession in Singapore to acknowledge the status of what are called secondary wives in the old-fashioned Chinese structure of society. The secondary wives have the same rights for themselves and their children as the primary wives. It is to be assumed that the administration of Singapore knows all about this sort of thing, and that there are no difficulties in the case of death and of legacies for the support of survivors. Now we are to give to our enthusiastic Australian relatives an entirely new problem. Where are the Australian administrators to be trained? Will they be seconded to Singapore for a special course in the social habits, and the legal interpretation of those habits, as practised in Christmas Island?
  I think this raises a really serious problem, because somebody is going to be very disgruntled about this if I rightly

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  gathered what the Under-Secretary of State said, that the Australians will kindly consider sympathetically the request if anyone who has Australian citizenship has the temerity to want to set foot in Australia. That is not good enough. I think it would be better if Australian citizenship were not conferred, and if it were said straight out, "This is the purchase of a phosphate island and the people who come to work in the island must make their own arrangements with Australia," than to pretend they are Australians.
  I am certainly not as dazzled as my right hon. Friend the Member for Rochester and Chatham (Mr. Bottomley) by the prospects of this wonderful nationalised industry. It seems to me that if this is the sort of thing hon. Gentlemen opposite can compare favourably with our own nationalised industries, then indeed this is an illumination of the Conservatives' notion of how nationalised industries are operated. Here is an island owned, lock, stock and barrel and mineral content, by one Government, and where all the work is done by people who come from another country; who are hired, but have no say in the administration of the island, and who have one employer. I do not know whether they have a trade union. If they should fall out of work, or if they should be a little awkward about conditions, what happens? It does not seem to me that there are any specially satisfactory conditions in working in a nationalised industry owned by a foreign country if there are no means of redress if difficulties such as I have indicated should arise. What happens?
  Mr. Bottomley: That would be like a Communist industry.
  Mr. Parkin: It may well be that under totalitarian arrangements, and where there is only one employer, that result would be produced. I suppose the building of the Pyramids was an example of a nationalised industry in those circumstances, where foreign labour was available. However, I must not be tempted by my right hon. Friend to cover the whole range of such State enterprises throughout history.
  In this case we are entitled to some rather fuller reassurance, and I hope that we shall get it tonight. Then I hope that the further stages of the Bill will not be unduly protracted.
  10.53 p.m.
  Mr. Alport: By leave of the House, I will try to answer some of the points raised by the right hon. Gentleman the Member for Rochester and Chatham (Mr. Bottomley) and his colleagues. I think that perhaps the hon. Member for Paddington, North (Mr. Parkin) is unaware of the fact that Australia is responsible for the administration of New Guinea, and has been for some years past. In New Guinea there is a substantial Chinese community and, therefore, the Australians have plenty of experience of dealing with the administrative problems of the Chinese.
  The right hon. Member for Rochester and Chatham asked whether any of the inhabitants of Christmas Island would be rendered stateless. I can assure him straight away that in no case will the existing and previous status of the inhabitants be affected. Indeed, their citizenship rights will, in many cases, be extended by this transfer. Those already there will have the right to apply for registration as Australian citizens, and those born subsequently will become Australian citizens by right of birth.
  For instance, suppose a child born between 1st January of this year and the date of the transfer were the son of a man having a Singapore citizenship, that child would be entitled to treble citizenship. He would be entitled to citizenship of the United Kingdom and Colonies by birth; to citizenship of Singapore by descent, and he would be entitled to apply for registration as a citizen of Australia under the law which would come into force when the transfer takes place.
  Regarding the consent of the inhabitants, I would remind the right hon. Gentleman that that question was answered by the Under-Secretary of State for the Colonies in August of last year, when he said that we are not dealing with an indigenous population of long standing but with a population which has come specifically as a result of the operations of the Phosphate Commission, and in many cases their work there has been of a comparatively short duration. For those reasons, Her Majesty's Government did not think it necessary to consult them before deciding on this transfer.
  The right hon. Gentleman asked about the rights which would remain with the United Kingdom regarding defence and facilities for a civil air line. The

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  Australian Government have made clear that they would co-operate fully with the United Kingdom Government to ensure that the facilities which might be available on the island were made available to us, if the necessity arose.
  The right hon. Gentleman asked about the treatment of the community from the point of view of welfare. If the nationalised industry is as good as he claims, it is clear, since practically all those living on the island are the employees of the nationalised industry—at any rate, they are the employees of the Phosphate Commission—that the right hon. Gentleman can with confidence leave that to the industry. It has a good history in the matter of looking after its employees.
  I was asked how the Australian Government propose to administer the island. That is not a question which should be put to me and not one which I would answer. The experience which that Government have had and their great success in administering dependencies for which they have been responsible for years past shows that we need have no worries on that score.
  Mr. Fernyhough: The hon. Gentleman has said that the population was 2,400 and that the Government did not think it was necessary to consult them because the vast majority were only temporary residents. Can he tell us what number are temporary residents?
  Mr. Alport: I cannot tell the hon. Gentleman the number who would be regarded as permanent residents. There are a few adults who were born there and have grown up there, but the number is limited.
  With the answers I have given, I hope that the right hon. Gentleman and his hon. Friends will feel assured that the decision represented by this Bill is one which is not only in the best interests of Australia, New Zealand and the United Kingdom, but also of this small and distant outpost of the Commonwealth and Empire.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to the Committee of the whole House.—[Mr. Oakshott.]
  Committee Tomorrow.

  GLOVES (IMPORTS FROM HONG KONG)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Oakshott.]
  11.0 p.m.
  Mr. John Peyton: I feel that, first, Mr. Deputy-Speaker, I should apologise to you and the House for inflicting myself upon you for the second time in one day.
  The problem of the imports of gloves from Hong Kong is one which dates from 1952. It has as a background the tragic spectacle of many thousands of refugees in a very small Colony on the opposite side of the globe—a Colony on which we have only the most tenuous of holds. I do not think that anyone, either in the gloving industry or speaking on its behalf, wishes to minimise the problems which face the Government in Hong Kong, and I do not think that it would be right for anyone in my position to fail to express his deep sympathy with and understanding of the problems which exist there.
  Because of the tremendous influx of refugees, the labour costs are so low that we in this country cannot hope to compete with them. The problem has arisen only during the past five or six years. In 1956, imports of gloves from Hong Kong reached a peak of 1,628,884 dozen pairs. It is true that the figure fell slightly in 1957, but the entire output in this country of both leather and fabric gloves has been dropping since 1955, and knitted gloves have taken the most severe blow of all.
  I ask my hon. Friend and the Government to recall a fact which they seem to find only too easy to overlook—that this is an old craft industry. If it is dealt a death blow, if it finds itself facing a severe decline, it will not be easy for anyone to resuscitate the skill upon which it depends. I remind my hon. Friend that there are many small firms in this industry and that it depends in large part for the work which is done upon out-workers, whose unemployment is never registered with the Ministry of Labour. Over the six years a great many approaches have been made to the Board of Trade. I have accompanied deputations from the industry, which have been received with the utmost courtesy by my

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  right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft), when he was President of the Board of Trade and my right hon. Friend the Member for Blackpool, North (Sir T. Low), when he was Minister of State, Board of Trade.
  I thought that the needs and problems of the industry were well understood by the Government. The industry had been given to understand—and I think it largely accepted, although with a good deal of disquiet—that in the Government's view the right of free entry of goods from a Colony was an unassailable principle which in no circumstances were the Government prepared to qualify in any way.
  I do not want in any way to disguise the disappointment with which in the circumstances I heard the comparatively casual announcement made by my right hon. Friend the President of the Board of Trade on 3rd April. All he had to say was:
  "I am aware of the difficulties of the glove industry, because it has factories in my constituency. The facts are that the imports from Hong Kong were less last year than the year before and we have not thought it right to extend this kind of arrangement to made-up goods."—[OFFICIAL REPORT, 3rd April, 1958; Vol. 585, c. 1367.]
  The arrangement mentioned was a new suggestion, rather surprising to us, that the Board of Trade was considering the possibility of some form of voluntary limitation on imports of cotton cloth from Hong Kong.
  That assailed the principle upon which the Government had rested for so long. I am bound to say that I took it ill that in making that announcement my right hon. Friend the President of the Board of Trade did not appear to be aware of the fact—until reminded of it—that his announcement would naturally cause a good deal of disappointment to people engaged in the gloving industry, who, faced with many difficulties over the years, had over those years pressed for just such an arrangement to be applied to their industry.
  I do not wish to press the point too hard tonight, but I ask my hon. Friend to give serious consideration to the problems of this small industry, which does not cry, alas, with such a loud voice as that possessed by the greater textile industry of Lancashire. However, I ask him to give it his careful attention and to remind
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  his right hon. Friend that there are those in the House who consider it right and, indeed, their duty to stand up in their places and speak out on behalf of an industry which has been very hard pressed over the years and which, despite possible good will from the Government, has not been able to get any help from that quarter.
  11.8 p.m.
  Mr. F. Blackburn: I support the plea of the hon. Member for Yeovil (Mr. Peyton) because I have a constituency interest. In fact, imports from Hong Kong deal my constituency a double blow. Mine is a textile constituency as well as having one or two glove factories. I cross swords with the hon. Member when he says that the glove industry cannot speak with as loud a voice as can the cotton industry, because although the cotton industry may have been making its plea for a long time, it has so far met with very little success.
  One of our complaints of the Government is that they have been very dilatory in trying to deal with this very serious problem, and I hope that tonight the Parliamentary Secretary will be able to give some comfort to the glove industry and, at the same time, be able to mention what is happening to the cotton industry.
  11.9 p.m.
  Mr. Brian Harrison: I am grateful to my hon. Friend the Member for Yeovil (Mr. Peyton) for raising this problem of the glove industry. I know that he has been that industry's standard bearer in the House for a long time and I hope that he will continue to carry that standard.
  There is a very big glove exporting and manufacturing business in my constituency and it is because of that and the problem that the imports of Hong Kong gloves have caused that I intervene briefly in the debate.
  I do not think that any of us wants to stop Hong Kong having a fair share of the market, because it has a tremendous refugee problem, and the way in which it has tackled it is something af which it has a right to be proud, but we must expect fair trading practices from it. I have seen examples of packages being almost exact copies of those which a firm in my constituency produces. This firm, which has a worldwide reputation, has suffered because of

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  it. Everything in the packages that I am thinking of was identical, except that the gloves had the word "Piccadilly" on them, whereas those made by the firm in my constituency bore the work "Pink-hams". The printing and everything else was identical. I hope that my hon. Friend and the Government will watch this matter very carefully.
  Secondly, I hope that the Government will ensure that all gloves which come into this country as having been made in Hong Kong have, in fact, been made there, and have not been floated down the river or come across from Japan to be marketed from Hong Kong. I do not think that any of us is prepared to give concessions to manufacturers in those two markets.
  Thirdly, I would make a plea for some form of temporary limitation, such as Sir Frank Lee is endeavouring to negotiate out there at present, because with labour as cheap as it is in these Colonies gloves can be landed in this country at about 43s. per dozen pairs—and that includes the complete labour content which the British manufacturer has to put in. I hope that my hon. Friend will look very sympathetically at the possibility of some temporary limitation of imports to this country from Hong Kong.
  11.12 p.m.
  Mr. Barnett Janner: I have one or two words to add to the opinions which have already been expressed by hon. Members on both sides of the House. It is important to recognise that this matter is not confined to one area. I felt it my duty to say that what I have been pressing for for some time is still of importance to a small industry in Leicester. I hope that the Minister will appreciate the point made by the hon. Member for Yeovil (Mr. Peyton) about the necessity of keeping a small industry of this sort alive. It is of considerable importance to the company concerned.
  It is true that there is not much of a knitted glove industry in Leicester, but the fact remains that it is not right to say, "Yes, that is all very well, but you need not worry. Nobody will be unemployed, because there are other industries in the town." That is no answer to give in respect of an industry of this
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  nature. It is not fair to say that there is no unemployment. It may be that the same number of people are employed, but many are employed part-time, and it is this kind of industry that is losing ground.
  The people who want to maintain the industry in Leicester are those who, for many years, have endeavoured to keep on the map something which is very well made, and an industry which requires a considerable amount of training. I hope that the Minister will consider the pleas which have been made to him and do something effective to protect the industry.
  11.15 p.m.
  Mr. Edward du Cann: I am very glad to have this opportunity of speaking extremely shortly on this most important subject. I congratulate my hon. Friend the Member for Yeovil (Mr. Peyton) on raising this matter, and upon his pertinacity and the consistently fair way in which he has led the defence on behalf of the people in the West Country who have traditionally earned their living and found employment in this important industry.
  Those who get their living in this industry wish to be reasonable in this matter. They absolutely understand that most important questions of Commonwealth and world trade are involved in this matter, but they feel that the principle by which we should judge our trade is that the British manufacturer should get the first place, with the Empire producer coming second, and letting the foreigner be third.
  This matter goes wider than gloves. Shirts also come into this story, and it not only affects Hong Kong, but also products from other countries like Italy. We do, therefore, hope for some reassurance because I can tell my hon. Friend the Parliamentary Secretary that this is a matter viewed with increasing concern by those of us who have factories and outworkers in our constituencies, people who are not having an easy time at present.
  11.16 p.m.
  The Parliamentary Secretary to the Board of Trade (Mr. F. J. Erroll): The House would, I am sure, like to congratulate my hon. Friend the Member for Yeovil (Mr. Peyton) on having secured the Adjournment tonight and of

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  having given the opportunity of allowing a number of other hon. Members to participate in this short debate on the prospects for this small, but very important, United Kingdom industry.
  I should say at the outset that the glove industry is fortunate in having in him such an excellent spokesman, and I should like him to know that in the Board of Trade we study most carefully what he has to say in this matter both in this Chamber and elsewhere. Of course, I do not want other hon. Members to think that we listen only to my hon. Friend; we listen to what all hon. Gentleman have to tell us about this industry, and particularly when they have interests in their own constituencies.
  I would like to say straight away that I am sorry that my hon. Friend did, however, imply that the President of the Board of Trade seemed to be casual in his approach to the industry's problems. I assure him that nothing is farther from the truth. My right hon. Friend the President pays very close attention to the fortunes of this industry and considers most carefully, for example, the questions which would undoubtedly arise when he made the announcement to which my hon. Friend the Member for Yeovil referred.
  The President of the Board of Trade recognised full well that the glove industry would say that what was good for the cotton industry was also good for the glove industry. My hon. Friend interpreted my right hon. Friend's remarks as careless and offhand, but I do want to assure the House that there was nothing farther from my right hon. Friend's mind. He certainly did not wish to appear that he had given a reply which was casual or offhand in any way at all.
  In view of the importance of this subject, I think that I should spend a couple of minutes by describing the factual background. It is important to trace its history in recent times if we are to understand its present problems. There is no doubt that imports from Hong Kong represent a real problem for the industry in this country, but the impact of these imports is probably as much due to change in taste, and, therefore, in the pattern of demand, as to their volume.
  Before the war, gloves were traditionally an important United Kingdom import. The bulk of imports was in leather and fabric gloves, with imports of
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  knitted gloves running at about half of the United Kingdom production. In those days, virtually all "fashion' gloves were of leather and, therefore, demand could absorb both the high quantity of imports, and the home production of leather gloves. In those days, fabric gloves were stigmatised as rather cheap and nasty, and although they filled a gap at the lower end of the trade they did not displace high quality United Kingdom production of leather gloves.
  Since the war, improvements in the construction of gloving fabrics and increased attention to styling and finish have brought fabric gloves into the high fashion range. Their relative cheapness compared with leather gloves has added to their popularity, and these factors, combined with a reduction of imports as a result of import controls, and the disorganisation of the glove industry in the pre-war exporting countries, led in the immediate post-war years to the development of what is virtually a new industry in Britain—the fabric glove industry.
  Since the same techniques are used for the making of fabric gloves as for leather gloves, production has tended to be undertaken by the leather glove manufacturers or in leather glove areas where trained workers are available, Production of fabric gloves grew from 13 million pairs in 1949 to a peak of over 24 million pairs in 1955, against a prewar figure of over 5 million pairs. Since 1955, it has declined, but it is still running at the high rate of over 19 million pairs.
  The demand for knitted gloves has also increased. Apart from the traditional wool and string types, the newer synthetic fibres have led to a fashion in what are called knitted nylon and stretch nylon gloves. In the early post-war years the United Kingdom production of this sort of gloves increased to about 9·78 million pairs in 1950 against about 7 million pairs pre-war, and to 11 million in 1951, but fell back to 9·5 million pairs in 1952. Since then it has steadily declined.
  That is why I wanted to give this factual background, to show where production is running well and where it has declined. It is now running at a little under pre-war level for knitted gloves. Imports of knitted gloves from Hong Kong, on the other hand, steadily increased from 1953, 3 million pairs, to

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  1956, 13·3 million pairs, although there has been a slight fall last year to 11·73 million pairs.
  Leather glove production, on the other hand, has remained fairly constant since the war at about, or slightly above, the pre-war level. For the first time, in 1957, there was an appreciable drop from 17·85 million pairs in 1956 to 15·81 million pairs. Imports in total and from Hong Kong are still negligible and the leather glove manufacturers cannot argue that they are directly affected by imports from Hong Kong.
  Briefly, the position is one of changing pattern of imports and production. United Kingdom total production at 41·5 million pairs is considerably above the pre-war level, although it has fallen sharply from the post-war peak of 50·45 million pairs in 1955. The actual level of imports at 25·35 million pairs is only slightly up, on the pre-war figure of 24·5 million pairs.
  The industry has undoubtedly had its promising post-war expansion checked by imports from Hong Kong. The knitted glove sector may be faced with greater difficulties than the rest of the industry, although the 1957 figures suggest that these imports are no longer on the increase. In that knitted glove production is fairly specialist, and has no affinities with other glove making techniques, there may have to be some cutting back if imports continue at their present level. Nevertheless, we are far from a position where the industry is faced with destruction as a result of Hong Kong competition.
  Several hon. Members suggested that gloves should receive the same treatment as cotton in regard to imports from Hong Kong. The situation as I have tried to point out is not as serious in the glove industry as in the cotton industry. Indeed, the two situations are very far from being similar. The cotton industry is faced with severe competition from India and Pakistan, as well as from Hong Kong, on a very big scale. My right hon. Friend the President of the Board of Trade has emphasised that the Government have regarded cotton—and quite rightly—as a unique case, and he made it clear that Sir Frank Lee's talks in Hong Kong were confined to cotton Cloth; that cotton presented entirely special problems, and that Her Majesty's
  184
  Government did not intend to sponsor similar arrangements in respect of other exports from Hong Kong, nor, indeed, in respect of made up goods.
  I must emphasise that the cotton discussions that took place last week were between the industries of the countries concerned, and that the British Government have said only that they would be prepared to co-operate in the operation of a voluntary agreement arrived at between the industries concerned. I do not think that the glove industry should entertain any hope of similar arrangements coming into being in respect of glove imports. Whether the United Kingdom glove industry should endeavour to reach some agreement with Hong Kong exporters is a matter for the industry itself to decide.
  My hon. Friend the Member for Maldon (Mr. B. Harrison) referred to gloves coming from Hong Kong which might be of either Japanese or Chinese origin. He referred to gloves coming down the river, or from across the ocean. Some United Kingdom manufacturers have alleged that gloves made in Japan or made of Japanese fabrics are being imparted into the United Kingdom from Hong Kong. Inquiries that we have made have produced no evidence to support such claims.
  Her Majesty's Customs and Excise already exercise a very strict control in determining whether goods satisfy the conditions of Imperial Preference. The first requirement is that goods shall have been manufactured in the Commonwealth. They must also have a specified Commonwealth content of 25 per cent. by value.
  The real test is to examine the figures. Figues for imports of gloves into Hong Kong from Japan bear out the contention that it is unlikely that Japanese gloves are being passed off as of Hong Kong origin. In 1957, imports of gloves of all types, except rubber, into Hong Kong from Japan were only about 10,000 dozen pairs. Imports into Hong Kong of Chinese gloves amounted to only about 53,000 dozen pairs in 1957. But imports of gloves into the United Kingdom from Hong Kong in that year amounted to about 1½ million dozen pairs. So, even if the gloves sent into Hong Kong from China and Japan were then sent to this country, they would not account for more

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  than about 3 per cent. of the total quantity of gloves from Hong Kong. I think, therefore, that there is no justification for alleging that large quantities of Japanese and Chinese gloves are coming here via Hong Kong.
  With regard to the point made by my hon. Friend the Member for Maldon about design, the change of the name from "Pinkhams" to "Piccadilly" is a significant one, and without looking at the case more closely I would not like to say whether or not there has been an infringement. However, British registration of designs is effective in Hong Kong,
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  and where there is any evidence the authorities there make strenuous efforts to stop the practice. If my hon. Friend will give me details, I will be very glad to look into the matter on his behalf.
  In this short reply I cannot outline the whole of the United Kingdom's commercial policy, which would be necessary if I were to do full justice to the strength of the Government's case for maintaining matters as they stand at present.
  Question put and agreed to.
  Adjourned accordingly at twenty-nine minutes past Eleven o'clock.

MINISTRY OF HEALTH
  Consultants (Merit Awards)
  Consultants (Merit Awards)
  Tropical Medicine
  Tropical Medicine
  Transistor Hearing Aids
  Transistor Hearing Aids
HOSPITALS
  X-Ray Examinations (Radiation Hazards)
  X-Ray Examinations (Radiation Hazards)
  Medical Staffing Structure (Working Party)
  Medical Staffing Structure (Working Party)
  Hammersmith Hospital (Heart Operations)
  Hammersmith Hospital (Heart Operations)
  SUEZ CANAL COMPANY (PILOTS)
  SUEZ CANAL COMPANY (PILOTS)
  UNITED STATES OF AMERICA (McMAHON ACT)
  UNITED STATES OF AMERICA (McMAHON ACT)
AGRICULTURE, FISHERIES AND FOOD
  New Zealand Produce (Imports)
  New Zealand Produce (Imports)
  Public Information
  Public Information
  Grain Sacks
  Grain Sacks
PENSIONS AND NATIONAL INSURANCE
  Widows
  Widows
  "Everybody's Guide to National Insurance"
  "Everybody's Guide to National Insurance"
  Unemployment Benefit
  Unemployment Benefit
COAL
  Pit Props (Shipping)
  Pit Props (Shipping)
  Hungarian Miners
  Hungarian Miners
  Retail Costs (Newcastle-upon-Tyne and Cornwall)
  Retail Costs (Newcastle-upon-Tyne and Cornwall)
MINISTRY OF SUPPLY
  Helicopters (Development)
  Helicopters (Development)
  Departmental Employees (Sandwich Courses)
  Departmental Employees (Sandwich Courses)
NORTHERN RHODESIA AND NYASALAND
  Education
  Education
MAURITIUS
  Election Arrangements
  Election Arrangements
LOCAL GOVERNMENT
  Council Houses, Cardiff (Soil Pipes)
  Council Houses, Cardiff (Soil Pipes)
ROYAL AIR FORCE
  Catering, Cooking and Mess Service (Experiment)
  Catering, Cooking and Mess Service (Experiment)
TELEPHONE SERVICE
  Kiosks (Initial Cost and Annual Receipts)
  Kiosks (Initial Cost and Annual Receipts)
ROADS
  Grendon, Warwickshire
  Grendon, Warwickshire
Preamble
The House met at half past two of the clock, The LORD TERRINGTON on the Woolsack.
Prayers

  JUDGES' NON-JUDICIAL WORK
  2.35 p.m.
  LORD SILKIN: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
  [The Question was as follows:
  To ask Her Majesty's Government (a) what statutes provide for the appointment of High Court Judges for non-judicial functions; (b) how many and which Judges are at present acting either under a statute or otherwise for the whole or part of their time.]
  LORD CHESHAM: My Lords, the answers to both parts of the noble Lord's question depend on what precisely he means by "non-judicial". I hope I am interpreting the noble Lord correctly in assuming that he does not wish me to refer to those Judges who serve on the various Rule Committees which make rules of procedure for the courts or on law reform committees. I shall also exclude the functions of my noble and learned friend, the Lord Chancellor, though he is a High Court Judge; on the other hand, I shall include the Lords of Appeal in Ordinary and the Judges of the Court of Appeal, though strictly speaking they are not all High Court Judges. With these limitations I shall do my best to answer.
  First, the relevant Statutes are: The Public Record Office Act, 1838, by virtue of which the Master of the Rolls exercises—but will shortly cease to exercise—supervision over the Public Record Office; the Solicitors Act, 1957, under which the Lord Chief Justice and the Master of the Rolls have certain responsibilities (some of which may be delegated to another Judge) for the rules governing the admission and remuneration of solicitors. I should also mention the Restrictive Trade Practices Act, 1956, and the Representation of the People Act, 1949, which requires Election Petitions to be heard by two High Court Judges, though
  160
  the view of Her Majesty's Government is that the Judges who are members of the Courts set up under these Statutes act in a strictly judicial capacity.
  With regard to the second part of the Question, the Judges at present engaged on non-judicial work are the noble and learned Lords, Lord Radcliffe, Lord Tucker and Lord Cohen, who are sitting on the Monetary and Credit Policy Committee, the Committee on the Publication of Reports and Proceedings before Examining Justices, and the Council on Prices, Productivity and Incomes respectively. Mr. Justice Wynn-Parry is Chairman of the Prison Officers' Committee. I should like also to tell the noble Lord that my noble and learned friend the Lord Chancellor, hopes that High Court Judges will serve on the Committees on Artificial Insemination and the Administration of Justice at Assizes and Quarter Sessions which my right honourable friend, the Home Secretary, intends to set up. Although these Committees will not be confined to considering changes in the law or in legal procedure, the latter will of course form an important feature of their inquiries. If the noble Lord would like a fuller list of Committee work currently being undertaken by Judges, my noble and learned friend will certainly let him have one.
  LORD SILKIN: My Lords, I am much obliged for the information. The noble Lord has correctly interpreted what I had in mind.

  CORPORATION OF THE SONS OF THE CLERGY CHARITIES' SCHEME CONFIRMATION BILL
  2.40 p.m.
  Order of the Day for the Second Reading read.
  LORD AMULREE: My Lords, the Corporation of the Sons of the Clergy administer some twenty-four charities in all, some of which go back as far as 1670 though some are as recent as 1940. The purpose of these charities is to benefit widows and children of clergymen and, in some instances, the clergymen themselves. The founders of these charities, however, made their bequests so mixed that it is impossible to find any standard way of applying the benefits. Uniform administration methods have therefore been impossible. It was felt desirable that certain

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  specific funds should be allocated to the predominating objects—namely, for the widows and daughters, a reserve fund for widows and daughters, and for sons and clergy themselves. The terms of the new scheme have been published and have met with no opposition from any quarter, but it was felt advisable to embody them in a Bill before Parliament. I beg to move that the Bill be read a second time.
  Moved, That the Bill be now read 2a.—(Lord Amulree.)
  On Question, Bill read 2a; Committee negatived.

  READING ALMSHOUSE AND MUNICIPAL CHARITIES SCHEME CONFIRMATION BILL
  Order of the Day for the Second Reading read.
  LORD AMULREE: My Lords, there have for some time been two groups of almshouses in Reading which were originally administered by the Reading Corporation. The two groups consist of the municipal Church charities and the municipal general charities. The general charities are almost entirely for the poor and almshouses, whereas the Church charities include a certain amount of money for schools and various other purposes. Since 1866, there have been twenty-two general almshouses and ten Church almshouses built on a common site, but these have been now proved to be far below modern standards. Whereas, however, the general body of trustees have enough money to carry out modernisation work, most of the Church trustees have not enough to carry out this work. To avoid there being some good buildings and some bad buildings on the same site, therefore, it is proposed to amalgamate the two bodies under a single body of trustees, of which the Church trustees will continue to nominate three people. At the same time, some of the Church work is being safeguarded by the fact that ten of the people in the combined almshouses shall be members of the Church of England. The scheme has been published and has met with no opposition. I beg to move that the Bill be now read a second time.
  Moved. That the Bill be now read 2a.—(Lord Amulree.)
  On Question, Bill read 2a; Committee negatived.

  ROYAL INSTITUTION OF GREAT BRITAIN CHARITY SCHEME CONFIRMATION BILL
  Order of the Day for the Second Reading read.
  LORD AMULREE: My Lords, the Royal Institution of Great Britain was founded by George III in 1800, and the Bill before you contains provisions to modify certain provisions of the Act under which it was founded. The terms of the foundation were that the managers and visitors of the Institution should be elected annually from members who were neither managers nor visitors in the preceding year. There should be statutory meetings in January, on the first Monday of February, March, April, May, June, July, August, November and December, and the election of the various officers should take place at a meeting in May. The proposal at present before the House is that the managers and visitors should be elected, instead of for one year, for a term of three years, with one-third of them retiring each year, and for the members of the Institution, if they so wish, to make a by-law to the effect that the balloting shall be done by post. The Bill also provides that the meeting which normally had to be held in August shall be postponed to October, as most people do not wish to come to a meeting in London in August. The scheme which I propose has been advertised and given wide publicity in the Royal Institution, and has aroused no opposition. I beg to move that the Bill be read a second time.
  Moved, That the Bill be now read 2a;—(Lord Amulree.)
  On Question, Bill read 2a; Committee negatived.

  ST. JAMES'S DWELLINGS CHARITY SCHEME CONFIRMATION BILL
  Order of the Day for Second Reading read.
  LORD AMULREE: My Lords, I must apologise for rising to speak to you a fourth time. This Bill concerns a Charity which is administered by the Westminster City Council. It consists of buildings which were built during the 19th century in a tiny court in Soho called Silver Place. The buildings, which were intended for female piece workers and others of the

  163
  labouring classes, have now become dilapidated. They are in the form of tenements. The lease does not expire until 1963, when, we are informed, the people who have the freehold do not wish to extend the lease. The accumulated funds for rebuilding are not enough to carry out a proper scheme; so the Council wish to build new blocks of flats for the people who are living there. They have a site in mind, and they propose that the rooms on the ground floor should be let for commercial purposes, thus bringing some money into the Charity, whereas the beneficiaries should live on the first and possibly the second floor if such is built.
  There is some doubt in the Charity Commissioners' minds whether the funds of the Charity can be applied for letting, even though this would bring in more money for the Charity, and whether the preference given
  "to those who reside or have resided in the area of the Ancient Parish of St. James, Westminster"
  is a permissible variation; hence the Bill. The Bill has been published in the Parish of St. James and in the City of Westminster and there has been no opposition. I beg to move the Bill be read a second time.
  Moved, That the Bill be now read 2a.—(Lord Amulree.)
  On Question, Bill read 2a; Committee negatived.

  IMPORTED LIVESTOCK ORDER, 1958
  2.50 p.m.
  THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL ST. ALDWYN)THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL ST. ALDWYN) rose to move, That the Imported Livestock Order, 1958, be approved. The noble Earl said: My Lords, this is chiefly a consolidation Order dealing with the importation of livestock into the United Kingdom. It brings together the provisions of the Livestock (Import from Eire and the Isle of Man) Regulations, 1945, and the Imported Livestock (Marking) Order, 1954. It also ends our reliance on emergency legislation for this particular purpose. It has been the policy of successive Governments since before the war to give the livestock industry the
  164
  maximum help and encouragement. During the war and till 1954 we had the Government's purchase arrangements. Now we have the guarantee payments under the Agriculture Acts of 1947 and 1957.
  These support arrangements not only apply to stock fattened in the United Kingdom but give recognition to our traditional dependence upon the supply of store animals, especially cattle from the Irish Republic, imports of which last year accounted for nearly 25 per cent. of the beef produced in this country. The present fatstock guarantee arrangements specially provide for guarantees to be paid on cattle and sheep which are bred outside, but are fattened or finished within, the United Kingdom provided they are of the right kind and have been in the United Kingdom for at least three months. To ensure the proper payment of subsidy, such cattle and sheep are marked as they enter the country, and for this reason we have to prescribe the times and places at which they may come in. To support these import controls we also need powers of seizure and forfeiture.
  So much for the background. And now a few words about how the new Order differs from its predecessor. First, we have made provision for imports from the Channel Islands, which since 1954 have been covered by the provisions of the Defence Regulations Marking Order. Secondly, there has been a change in the definition of livestock, which now includes the carcases of pigs in Northern Ireland. This is to avoid the danger that they may be imported and entered for certification and payment of guarantee to which they are not entitled. Finally, there are the seizure and forfeiture arrangements. Previously these applied only to the animals themselves. The present Order applies them also to the vehicles and containers used to convey or conceal illegally imported livestock. The present high rates of subsidy are an increased incentive to illegal importation and we feel that more stringent measures are needed to deal with this situation. In general these preventive provisions will be used, as in the past, in Northern Ireland, where the land border with the Irish Republic presents special problems.
  There are one or two minor purely procedural changes, designed mainly to bring these procedures, as far as possible,

  165
  into line with those used by H.M. Customs and Excise in similar cases. I commend this measure to your Lordships therefore as being necessary for the continued well-being of our very important livestock industry and for the proper safeguarding of public money. My Lords, I beg to move.
  Moved, That the Imported Livestock Order, 1958, be approved.—(Earl St. Aldwyn.)
  2.55 p.m.
  LORD WISE: My Lords, there are one or two matters which I should like to raise in regard to this Order. I realise how important it is for the Order to come into operation and to ensure that money is not paid for guarantees, on cattle or other animals, to which the owners or the sellers are not entitled. The information which I should like the Minister to give to the House, if he can do so, is this. He mentioned previous legislation in regard to the importation of cattle from Ireland and elsewhere. I am wondering what has been the past experience as to the number of cattle that have crept through without being earmarked or recognised in any way. If great numbers have crept through illegally, then of course we, as a nation, have had to pay guarantees to which there was no entitlement. I should like to know, also, what difficulties have arisen in the past in regard to that particular matter, and whether any stock of any sort has crept into Britain under the guise of being pedigree stock or stock for breeding. It is specifically mentioned in the Order that that class of stock is not liable to be earmarked. I am wondering, therefore, whether in the past any stock which should not have come through as breeding or pedigree stock has come into this country.
  There is one rather interesting point which I think I should mention in regard to the particular procedure which has been adopted in carrying this Order through from the time it was made. On reference to the relevant dates I find that the Order was signed by the Minister of Agriculture, Fisheries and Food on March 27; it was also signed by the Secretary of State for Scotland on March 28, and was then signed by the Secretary of State for the Home Department on March 31, which was the date on which the Order was made. It was laid before another place on April 2 and
  166
  was not discussed by them for over a month. It was approved in another place on May 7, and came before the Special Orders Committee of this House on April 30. According to my information, which I think is correct. this Order should pass through both Houses of Parliament within forty days of being made. From March 31 forty days have now passed, and I am wondering whether we are out of order, or the Order is out of order, by reason of its not having been passed through this House within the statutory period of forty days. This may be a small point, but what I am concerned about is that the Order has been held up for such a long time. In fact it came into operation on April 14, long before it was discussed in another place or in this House. I am anxious that we should not be regarded merely as rubber stamps to approve these Orders, which have, in effect, become the law of the land before ever they are discussed, as they should be discussed, in another place or in your Lordships' House.
  2.58 p.m.
  EARL ST. ALDWYN: My Lords, I hasten to assure the noble Lord that there is no intention of making this House or another place into any form of a rubber stamp. If I may, I will deal first with the last point he mentioned, because until I have cleared this up I should almost be out of order in dealing with the others. The noble Lord says that this Order has in fact been laid for more than forty days. But Section 7 (1) of the Statutory Instruments Act, 1946, says that where the House stands adjourned for more than four days that period is not counted—in other words, in this case we do not count the Easter Recess. So I can assure the noble Lord that we are within the forty days.
  The noble Lord asked me how many cattle had been illegally imported. I am afraid I cannot tell him the number that have been illegally imported, because they have gone through. The only thing I can tell him is the number that we were successful in intercepting on their way through. I could give the noble Lord a great many figures, but those I will give him now are the figures of actual seizures. It does not necessarily mean that all the animals which I mention were in fact forfeited, as some of the stock was released when some of the cases came before the courts. The figures of

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  actual seizures in 1957 were: cattle, 359 cases involving 2,207 head of cattle; sheep, 78 cases, involving 1,873 sheep; pits, 80 cases, involving 1,499 pigs. The figures for pigs were considerably lower than in the year before because of swine fever restrictions.
  The noble Lord also asked me whether animals which were being imported as pedigree animals could secure the guarantee without being earmarked. The position is that unless, first, they are registered pedigree stock, and earmarked as such, and, secondly, they are being imported at prices which officials consider reasonable, they would not be allowed to come through as pedigree stock. So I do not think there is any serious danger in that direction.
  On Question, Motion agreed to.

  OPTICIANS BILL
  3.2 p.m.
  Order of the Day for the Second Reading read.
  LORD AMHERST OF HACKNEY: My Lords, I am pleased to move the Second Reading of this Bill which, I hope and believe, will serve a very useful purpose. It was piloted successfully through another place by Mr. Ronald Russell and was there supported on all sides. During its passage it was considerably amended, and I will mention later one or two of those Amendments which I believe were important. The object of the Bill is to provide recognised status for opticians by providing for their registration, to promote a high standard of professional education and conduct among opticians and, by doing so, to protect the public against untrained persons posing as opticians.
  Not all of your Lordships may know that anybody can call himself an optician, test eyes, prescribe or make spectacles, and that there is nothing that the law can do against anyone who does so. There have been numerous cases of this happening and especially of such people going round calling from door to door. I have here a great number of newspaper cuttings dealing with this matter, and though I do not propose to weary your Lordships with many of them, there are just one or two to which I should
  168
  like to refer. Here is one from the Star for Friday, November 15, 1957:
  "' Quacks ' dupe housewives. They ask fancy price for spectacles. Doorstep quacks are duping housewives into buying spectacles for much more than they are worth. A leading Chester ophthalmic optician told the Star: 'Several women have come into my shop saying they have paid seven or eight guineas for glasses. The spectacles have not been worth a fraction of that amount. It is just plain fraud, nothing else. I have been amazed at some of the rubbish these people have been turning out. It is time somebody did something about it'."
  Here is one other quotation, rather older, from the Daily Dispatch, dated October, 1954:
  "Spec spivs sell old folk £7 trash. An old couple in South Riding who paid £7 each for spectacles which were so bad that they could not wear them were only two victims of bogus eye specialists who are touring the Castleford and Pontefract districts."
  There are a great many other reports, with which I will not weary your Lordships this afternoon. And, as I have said, in posing as opticians these people at the moment commit no offence. There is one other practice which I believe this Bill may stop. There are certain stores where people can go and test their own eyes and buy spectacles. It is felt that that is a dangerous practice which should be stopped; and this Bill tries to do that.
  Although spectacles have been worn since the thirteenth century and the first Charter to the Worshipful Company of Spectacle Makers was given in 1629, it is only during the last sixty years that various examining bodies and protective organisations for controlling the optical profession have come into being. The first was the British Optical Association, established in 1895; and the first Bill introduced in Parliament to bring in registration for opticians was the Optical Practitioners' Registration Bill, which was brought in in 1927. But at that time, I am afraid, it did not get a Second Reading.
  In 1949 an Inter-departmental Committee was set up, under the chairmanship of the noble Lord, Lord Crook, composed of ophthalmic and dispensing opticians and members of the medical profession. Its task was to advise on a system of registration for opticians, on the assumption that this was in the national interest. The Committee reported unanimously in

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  1952 that it was. As the noble Lord, Lord Crook, is here and is to speak, I shall not say very much about that Report. Since then, there have been various discussions between the Ministry and the profession, and I believe the position at the moment is that the profession have gone as far as they can, without legislation, to put their own house in order. This Bill follows very closely the recommendations of the Crook Report. I shall not go into it in any great detail but will merely make one or two observations on some of its clauses.
  Clause 1 sets up a General Optical Council with the object of promoting high standards of professional education and conduct. The composition of that Council is set out in the Schedule. I will not go through that in any detail, because it follows the recommendations of the Crook Committee's Report, except that it provides for three additional members—making twenty-four in all—whereas the Report recommended that the Council should consist of twenty-one members. One extra has been added for education; there is one extra medical representative, and a further member to be appointed by the Governor of Northern Ireland. When the Crook Committee considered this matter they were not considering the inclusion of Northern Ireland.
  Clause 2 imposes on the General Optical Council a duty to establish three registers: two of ophthalmic opticians and one of dispensing opticians. The first register will comprise those who merely test sight; the second register those who test sight and dispense glasses, while the third register will be of dispensing opticians. This follows the recommendation made by the Report of the Crook Committee, but was not in the Bill as it was first introduced into another place. The Committee recommended that the General Optical Council should have the power to close one of these lists, because they felt that the people who both tested eyes and dispensed would gradually drop out, and that people would be either ophthalmic opticians or dispensing opticians. It was felt that this would not take place for a long time, and, obviously, if a list was closed too soon it would create hardship. It was felt that if any of these lists was to be closed it should be done by Act of Parliament.
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  Clause 3 deals with the qualifications for registration. I do not think I need go into that. Clause 4 deals with registration of firms. There are to be two lists: one, again, of firms who are ophthalmic opticians and one of those who are dispensing opticians. I think I am right in saying that the Crook Report foresaw that those firms of ophthalmic opticians who were already in existence would continue, but that there would be no new firms, or there should not be new firms, coming in, although there would continue to be firms of dispensing opticians. In this Bill we do not try to prevent new firms from being set up, provided that they comply with various provisions of the Bill—for instance, that a majority of directors are opticians, or, in the case of a firm which deals mainly in other things and has just one department dealing with optical business, that that department is under the management of a qualified optician.
  Clause 5 gives the General Optical Council power to authorise training institutions and to approve qualifications and to publish lists; and there are various forms of appeal. Clause 6 merely gives the power to inspect those institutions and to inspect examinations. Clauses 7 and 8 deal purely with the machinery of publishing the lists. Clauses 9 to 16 are disciplinary clauses, and they follow very closely the procedure laid down in the Medical Act, 1956, and the Dentists Act, 1957. I do not propose to deal in any detail with these clauses, but if any questions of detail are raised I will try to answer them at the end of the debate. Clauses 17 and 18 allow the General Optical Council to set up an education committee and a committee to deal with the special problems of firms. Clause 19 merely allows them to set up any other committees, provided that two-thirds of the members are members of the Council.
  Clause 20 is important. It was introduced in another place and makes it an offence, punishable summarily with a fine of £100, and on indictment with a fine of £250, for anybody who is unqualified to test anybody else's sight. The testing of sight is defined later in the Bill as:
  "Testing with a view to correcting any defects of vision by spectacles."
  It would not stop, say, a nurse testing the sight of children at school to ascertain whether they should go to an optician or to an oculist; or, in a business, the

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  testing of a person's sight to ascertain whether he was suitable to do a certain job. It prohibits only the testing of sight with a view to correcting it by spectacles. There are certain exceptions, into which I shall not go to-day.
  Clause 21 also is important. It prohibits the sale of optical appliances other than by a medical practitioner or a registered optician. This is the clause which should prohibit both people buying spectacles, where they have tested their own sight, at certain chain stores, and also the selling of spectacles by intinerant vendors. Optical appliances are later defined as:
  "Appliances to remedy defects of vision."
  So this clause would not prohibit the sale of such things as sun glasses or field glasses, or just a magnifying glass for reading; but if the glasses were tinted glasses, with a lens to correct vision, then they would be included. Here again, there are also various exceptions.
  Clause 23 allows for the carrying on of a business for a certain period after the death of a registered optician until a successor can be found, although the provisions relating to the testing of sight and the sale of glasses will, of course, still apply. Clause 25 enables the General Optical Council to make rules on matters affecting the profession, such as advertising. It enables the Council to prohibit advertising or to regulate advertising, though it cannot prevent a dispensing optician from having a shop window with some glasses in it. Otherwise, it can prohibit advertising and, judging from the many newspaper cuttings I have here, showing the most lurid and misleading advertisements which have been put in the Press to encourage people to go to the opticians, I think that this is certainly a sound provision. Clauses 27, 28 and 29 deal with machinery, and Clause 30 is the Interpretation Clause. I have already mentioned the most important definition, that of sight testing, and there is also the important definition of "optical appliances".
  My Lords, I have tried to run briefly through some of the main points of the Bill. It is a long Bill—it has thirty clauses—and obviously I should have wearied your Lordships even more had I gone through them in detail. I think that it is a Bill which is in the public interest and which would, if passed, give a status to
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  opticians and be a protection to the public. I very much hope that your Lordships will give the Bill a Second Reading. I beg to move that the Bill be now read a second time.
  Moved, That the Bill be now read 2a.—(Lord Amherst of Hackney.)
  3.23 p.m.
  LORD HADEN-GUEST: My Lords, may I say a word on this matter? As a doctor I had a good deal to do with eye testing, especially when I was a member of the London County Council staff. It is important that the scheme embodied in the Bill should go off without a hitch and that there should be a clear decision on what is to be done and what is not to be done. It should be made clear that in future no one who has not had a thorough training may dispense or prescribe spectacles, because there is nothing more dangerous than to allow these important adjuncts to health to be provided by people who do not understand optics and sold merely for the purpose of making a profit. That may be all right in its way, but it is not the medical way and it is not the right way to treat the public. I hope that we shall see this practice disappear altogether during the next few years.
  In my view, there should be no possibility of anyone who is not a trained specialist in eyesight, and in all the difficulties that beset eyesight, through different causes in different individuals, carrying out this work in the future, as has occurred in the past. Only to-day, as I came into your Lordships' House, I was talking to a Member of another place who had his own eyes seriously damaged by having wrong treatment given to him. This was not a case of lack of money or lack of opportunity of getting advice. I think we should lay down clearly and rigidly the means of protecting and controlling the prescribing, the dispensing and the issuing of glasses, to see that they are the right kind, since otherwise they may do more harm than good.
  3.25 p.m.
  LORD CROOK: My Lords, I rise to associate noble Lords on these Benches with the Bill which the noble Lord, Lord Amherst of Hackney, has moved so well. It is no easy task to move so complicated a Bill, with so many clauses, in such a way that your Lordships can have a clear picture of what we are discussing. May I

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  say how glad I am to associate these Benches with a Bill moved from the other side of the House, because this, of all things, is a matter which should engender no political thoughts? By that, I mean not only no Party political thoughts in your Lordships' House, but also no politics in the optical world between opticians and the medical profession.
  I confess that this Bill seems to me to be the end of a long period of disagreement. When, in 1948, at the time of my noble friend Lord Attlee's Government, I was asked to consider becoming the Chairman of this Committee, I asked to see some of the facts; and I found that there were a number of what the noble Earl, Lord Woolton, was subsequently to call in your Lordships' House, "historically warring factions". I found that for years the various groups of opticians had not agreed amongst themselves; they all, in turn, had not agreed with the doctors, and the doctors had not agreed with them; and it was not at all clear whether the educational people had agreed with any of them.
  As the noble Lord has said, twenty-five years ago there was a Bill in another place, which did not obtain the approval of that House, and there had been the appointment of a Select Committee, which again ended in disagreement. But in 1949 a Committee was appointed which contained in its membership representatives of the optical organisations and the medical profession, and professors, politicians; and others who contributed both the educational and the general public outlook to all the suggestions that came in front of the Committee. In 1952, after two and a half years' hard work in taking evidence, these gentlemen were able to sign a unanimous Report. And one of the reasons why I wish to speak on this Bill is to pay tribute to all of those, whose names are not even mentioned on an occasion such as this, who gave of their time voluntarily, at great discomfort in travelling and at great difficulty because of their own professions, so that the country could have the benefit of their knowledge and advice to try to help solve this problem. I think it would be wrong not to say something about it on this occasion.
  The Report of the Committee first of all gave the facts—facts which show, as the noble Lord said, that there was no legislation, no control and no provision
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  for even a minimum standard of training. From 1895 onwards, there had been established some five different organisations within the profession, every one doing its best to set up what legislation did not provide—standards of education and professional qualifications, and rules of ethics and professional conduct for those who practised to follow. Having reviewed the whole of the evidence, I think it only right to say that over the period of years they did a wonderful job of work, even though they disagreed among themselves as to the ways in which matters should go ahead. They did it at their own expense in time and money—it is true, aiming at something better for themselves, but in the main doing a job in the public interest which Governments and Government Departments had never done. They suffered from one of the things from which all of us who are connected with organisations suffer: that the very people who did not join the organisation, to be subjected to ethical standards and control, were the very people they were anxious to deal with. The whole time there has been this limited number of people who have made it easier for slack standards to be inflicted on the public.
  I cannot conceive that it is the right way for the eyes of the people of this country to be treated that a man who spends 90 per cent. of his time as a watchmaker or a radio technician can spend the other 10 per cent. of his time behind a red curtain at the back of his shop as an optician. Nor do I think the huckster who stands on a booth in a county square—and I have seen this myself—can be the man to whom to entrust God's precious gift of eyesight in these modern days. For all our legislation and all our desires to establish a modern National Health Service, we have never bothered ourselves, until this Bill, with anything dealing with the standard of our eyes.
  The Committee to which I have referred realised from the evidence given both by the medical and the optical organisations what was needed in the public interest. But I should not pretend that the Report presented in recommendations was what was 100 per cent. desired by any one of those who gave evidence; indeed it would not be true to say that every member of the Committee found in the report 100 per cent. of what he would like as an ideal. What

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  was found was the ability to produce in the public interest a Report which was workable and could form the basis of legislation such as the noble Lord has invited us to support to-day; and, more important than anything else, perhaps, the medical and optical professions were together, lined up on a common work.
  When the Report was received, in turn, it did not receive unanimous support, obviously because it did not go 100 per cent. this way or that way. But that did not deter the Government who looked at the Report. By this time it was not the Government of my noble friend Lord Attlee but the Conservative Government, and they proceeded to actuate work inside the appropriate Ministry to try to secure that something was done. The noble Earl, Lord Woolton, when he dealt with this matter in the debate on registration in 1954, was good enough to tell us something to which I think it is well worth while to pay regard in respect of many other Reports. He said [OFFICIAL REPORT, Vol. 188, col. 494]:
  "It rather alarms me sometimes to hear of the long period for which Committees, consisting of all sorts of people, sit on these problems, produce Reports; then, when they have been duly considered and forgotten, another Committee is appointed, with the advanced knowledge of the times, to go through the same process."
  The noble Earl was good enough to say that, perhaps in his lifetime—and that is in my own—there might be some form of legislation as a result of the work that had been done; and this Bill, I am glad to say, is well within the span of my lifetime. It means that we should pay tribute to those who have co-operated with the present Government to make this possible.
  The noble Earl, Lord Woolton, said on that occasion that, while the Government were anxious to advance with legislation, there was always the question of priorities and finding Parliamentary time in days of a heavy legislative programme. So the Bill was missing from Queen's Speeches until last November, in the ballot for Private Members' measures in another place, Mr. Ronald Russell found a place in the ballot and was good enough to put down this Bill. I think it would be wrong of me to stand here without saying how much I appreciate—as I know the noble Lord who moved the Second Reading of this Bill does but, from a
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  modesty point of view, would not say—what Mr. Russell has done in undertaking a complex Bill, of great length, as a Private Member's measure and piloting it through the other place, thus making it possible for the noble Lord to move it here this afternoon. I think it a tribute not only to other people, but to our Parliamentary traditions in general, that he was able to assemble around him a dozen people of all three Parties in the other place, including two ex-Ministers of Health, one from the Labour and one from the Conservative side, and with their hearty co-operation and much work to model the Bill into the form in which it is to-day.
  They did not spare themselves as a team in meeting those who had legitimate complaints about the original draft; and, as the noble Lord said, in three days of Standing Committee C in the other place they did not hesitate to accept agreed Amendments to put the Bill in front of this House as one which is in the public interest and one which has been agreed by those persons who ought to agree these things as facts before Parliament is asked to give too much time to them. Finally, after a long Report stage of nearly five hours the Third Reading was reached, and we have the Bill here; and I hope that this House will speed it in the next few weeks with that same thought for the public interest that has been in everybody's mind and everybody's action in the period from November to date in the other place. Some of us have said on many occasions that we are a wonderful people, in that we can have our violent and bitter political conflict but we can find it possible among ourselves all the time, without Party rancour, to do those things which are not in Party interest but are in the general interest of the public—those things which are necessary if the people of this country are to go on improving from time to time as we desire. I commend this Bill as one of those Bills which fits in with that highest tradition of the model of Parliaments to which we are proud to belong.
  3.39 p.m.
  LORD AMULREE: My Lords, on behalf of noble Lords on these Benches I should like to join the noble Lord, Lord Crook, in giving the Bill a warm welcome in your Lordships' House. I shall not take up a great deal of your Lordships' time, but there are one or two

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  points of importance to which I should like to refer. The first is that I am sure the value to the optical profession of the series of registers will be very great indeed. One has seen what good has come from that, first of all in the medical profession, and secondly, in the dental profession; and now, by this Bill, we shall see it in the optical profession.
  There are two clauses of the Bill to which I should like to refer briefly—Clause 20 and Clause 25. Clause 20 defines those people who should be allowed to test eyes and to prescribe. I should like to reinforce what was said by the noble Lord, Lord Haden-Guest, as to the great danger that occurs to people who get the wrong kind of treatment of their eyes and do not realise that a mistake may have been made. The point about Clause 25 is that there should be some control of advertising. We do not want to do away with it completely, but we do want control of some sort, and I think that this Bill gives it. I should like to express my pleasure that the long discussions which members of my profession and the promoters of this Bill have had about the membership of the General Optical Council should have been finally settled in a way which appears to be pleasing to both sides. That is a great thing, because I know that my profession tries to jump in rather firmly, whereas I think these optical people should be able to control their own personnel.
  I should like to mention one other point about which I am afraid I did not give the noble Lord notice. I must say that the noble Lord, Lord Crook, has been lucky to find a Private Member to introduce his Bill, because whereas Lord Crook's Committee reported in 1952, there is another Committee, the Cope Committee on Medical Auxiliaries (in which I have an interest as President of the Occupational Therapists) who reported in 1951, and there is no sign of a Bill coming along at all. Although I should have preferred the Opticians Bill to be a Government measure, the fact that the noble Lord, Lord Crook, has managed to find a Private Member to introduce it, and that the Bill has come along so quickly, is something that may cause the Cope Committee to think along similar lines. I associate myself wish other noble Lords in giving this Bill a warm welcome.
  THE MINISTER OF STATE, SCOTTISH OFFICE (LORD SCOTTISH OFFICE (LORD STRATHCLYDE): My Lords, it might be for the convenience of the House if I were to indicate at this stage the Government's attitude to the Bill. Since it is not a Government Bill it does not, of course, fall to me to justify it to your Lordships' House. Indeed, your Lordships might think it rather superfluous if I were to attempt to do so, in view of the very full and effective manner in which my noble friend Lord Amherst of Hackney has explained it to the House. The Government's interest in the Bill, and in any Bill of this nature, is that it should be in the general interest of the health and well-being of the people, and that it should at the same time safeguard the rights of practitioners who will be affected by it. I am able to inform your Lordships that the Government are satisfied with the provisions of the Bill on both these grounds. Moreover, it is a Bill which will maintain and raise the standards of what is a most vital profession; and, therefore, I have no hesitation whatsoever in commending it to your Lordships.
  Before I sit down, I wish to express the most sincere appreciation and gratitude to those who, under the chairmanship of the noble Lord, Lord Crook, devoted themselves for some two and a half years to examining the situation with which the Bill deals, and for producing that highly comprehensive and unanimous Report that has made the Bill possible. I am sure that all noble Lords would join with me in tendering thanks to the noble Lord and his Committee.
  LORD MILNER OF LEEDS: My Lords, having regard to all that has been said, I do not need to detain your Lordships for more than a moment or two. First, I should like to pay a tribute, as has been done so fully by the noble Lord, the Minister of State for Scotland, to my noble friend Lord Crook. We all know the responsibility which rests upon the Chairman of a Committee of this kind, and our thanks are due in great measure to him in addition to all those who have already been mentioned. We know that this Bill is a non-Party Bill. It has the support of all ophthalmic practitioners, if I may call them such, and will undoubtedly serve a useful purpose. I venture to express the hope that the

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  Optical Council which is to be set up under this Bill will have as its primary consideration the interests of the consumer or the patient. The noble Lord, Lord Amherst of Hackney, has given us instances where great harm has been done by unqualified practitioners, and I venture to hope that that is one of the principal matters to which the Council, when formed, will give attention. I cordially support the Bill.
  LORD AMHERST OF HACKNEY: My Lords, I should like to thank all noble Lords who have given the Bill such a warm welcome, and also to associate myself with the tributes the noble Lord, Lord Crook, paid to all those who have worked to make the Bill a possibility. I should also like to associate myself with the thanks to him for the amount of work that he has done over many years.
  On Question, Bill read 2a, and committed to a Committee of the Whole House.

  INDUSTRIAL ASSURANCE AND FRIENDLY SOCIETIES ACT, 1948 (AMENDMENT) BILL
  3.47 p.m.
  Order of the Day for the Second Reading read.
  LORD MILNER OF LEEDS: My Lords, this also is a Private Member's Bill, and it was introduced into another place by Mr. Mulley, the Member for the Park Division of Sheffield. It passed through all its stages in another place without opposition. It is a simple Bill, designed for a very limited purpose—namely, that of permitting a small increase to be made in the amount of insurance on the life of a parent or grandparent which can be effected through an industrial assurance company or a friendly society. As your Lordships will be aware, the present permitted maximum under the principal Act of 1948 is £20. The present Bill proposes to increase that maximum to £30. The increase is roughly equivalent to the increase in the cost of living between 1948 and the present time. It is also roughly equivalent, apparently, to the cost of dying, because the cost of funerals—and, of course, this insurance is intended primarily to enable provision to be made for the cost of funerals—has also considerably increased. The present average cost
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  of a funeral is between £50 and £60—that is including all the incidentals, if I may call them such, though in fairness to the Association of Funeral Directors I ought to say that they have an agreement with the Board of Trade for a minimum cost of £25, which I imagine is almost always exceeded.
  As your Lordships are also aware, the National Insurance Act originally provided a death benefit of £20, which is now £25; therefore £25 added to the permissible assurance under this Bill if, as I hope, your Lordships pass it, will enable a sum of £55 to be available to those who have to carry through the task of burying a loved one. Having regard to the limited purpose of the Bill and the advantages, which I think are obvious, I venture to hope that your Lordships will pass it through this House. I beg to move.
  Moved, That the Bill be now read 2a.—(Lord Milner of Leeds.)
  THE MARQUESS OF LANSDOWNE: My Lords, on the suggestion of the Treasury, this Bill was amended in another place. The increased limit of £35 proposed in the Bill originally presented there was reduced to £30 in Committee. In its present form the Bill is acceptable to Her Majesty's Government and is recommended to your Lordships' approval.
  On Question, Bill read 2a, and committed to a Committee of the Whole House.

  MATRIMONIAL PROCEEDINGS (CHILDREN) BILL
  3.50 p.m.
  Order of the Day for the Second Reading read.
  LORD OGMORE: My Lords, I rise to move the Second Reading of this Bill, which is one to which I feel sure your Lordships will give the most sympathetic consideration. It has been through another place where it was warmly welcomed on all sides of the House. Quite briefly, the object of the Bill is to give effect, with minor exceptions, to the recommendations in Part V of the Report of the Royal Commission on Marriage and Divorce with reference to the welfare of children in matrimonial proceedings in the High Court in England and Wales and the corresponding courts in Scotland.

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  The Bill will extend the jurisdiction of the court to further classes of children. It will require the court to be satisfied as to the arrangements proposed for the care and upbringing of children under sixteen before making absolute a decree nisi of divorce or nullity or pronouncing a decree of judicial separation. It will enable the court to require a local authority to receive a child into its care. It will enable the court to place a child under the supervision of a court welfare officer or officer of a local authority. And lastly it gives the court power to make an order for custody of children where it refuses a decree of divorce, nullity or judicial separation or makes an order for maintenance under proceedings brought for that purpose under Section 23 of the Matrimonial Causes Act, 1950.
  As your Lordships will remember, the Royal Commission on Marriage and Divorce was appointed in 1951 under the chairmanship of the noble and learned Lord, Lord Morton of Henryton. Its Report, published in 1956, contained 149 recommendations relating to England and Wales and 81 recommendations relating to Scotland. Many of those recommendations have already been put into operation by Rules of Court or by administrative action, but among those requiring legislation are the recommendations relating to children which the present Bill is designed to implement. The Royal Commission said, in paragraphs 360 and 362 of their Report:
  "Of the problems resulting from the dissolution of marriage none is more serious than that of trying to ensure the future welfare of the children … where divorce takes place it is therefore essential that everything which is possible in the circumstances should be done to mitigate the effects upon the child of the disruption of family life."
  The Royal Commission's recommendations were made with this object in view, and in the debate on the Commission's Report which took place in your Lordships' House on October 24, 1956, the then Archbishop of York said (col. 1001) that if paragraph 373 of the Report (which deals with the postponement of the decree absolute until the court is satisfied with the arrangements proposed for the children) were translated into legislation it would "be held to be a children's charter". The noble Lord, Lord Merthyr, who is now sitting on the Woolsack, said in the course of the debate that he and those who felt like him would harry the
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  noble Lord, Lord Mancroft, until something was done about it. Well, my Lords, here it is: something is being done about it.
  Whatever may be the effect of divorce on the parties, the impact on the children affected by the divorce must be extremely serious. The family group of a child, consisting as it does of father, mother and the other children, must be the bedrock of existence; and divorce which shatters this bedrock must destroy to some extent their foundations of security and confidence. Nothing, of course, can restore those foundations, but the provisions of this Bill go some way to avert some of the worst consequences.
  Clauses 1 and 2 are the most important clauses of the Bill. The object of Clause 1 is to extend the classes of children for whom the High Court may make provision in proceedings for divorce, nullity or judicial separation. The court's jurisdiction in such cases is confined by Section 26, subsection (1) of the Matrimonial Causes Act, 1950 to children
  "the marriage of whose parents is the subject of the proceedings."
  The Royal Commission recommended, in paragraph 393 of their Report, that the following additional classes of children should also be included: first, illegitimate children of the two spouses; secondly, children of either spouse (including a child adopted by either spouse), if living in family at the time when the home broke up; thirdly, illegitimate children of either spouse, if living in family at the time when the home broke up; and fourthly, other children—excluding, of course, boarded out children—who were living in family with the spouses and maintained by one or both of them at the time when the home broke up. The present clause brings children in categories two and three within the jurisdiction. It does not touch the children in category four; and children in category one were already held, by the decision in Galloway v. Galloway, to come within the jurisdiction of the Matrimonial Causes Act. So we can now say that, of the four classes of children who the Royal Commission recommended should be included, one is already included, two are included in this particular Bill, and there is still a fourth which, for various reasons, it is not proposed to include.
  Subsection (1) of Clause 1 extends Section 26 of the Matrimonial Causes Act to

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  any child (including an illegitimate or adopted child) of one party to the marriage who has been accepted as one of the family by the other party. The effect of this is that the children concerned will be brought within the ambit of Clause 2 of the Bill, so that the court will be required to satisfy itself about the arrangements for their care and upbringing before making a decree absolute or pronouncing a decree of judicial separation. The court will be able to make such provision as it thinks just with respect to the custody, maintenance and education of any such child, and will be able to make an order committing the child to the care of a local authority, under Clause 5 of the Bill, or to make a supervision order, under Clause 6. The test of jurisdiction under subsection (1) is whether the child has been accepted as one of the family, irrespective of whether the party who is not its parent has contributed to its maintenance. That is the first important provision. They are all important, but the first two clauses are the most important.
  The object of Clause 2 is to give effect to Recommendation 32, in the Summary of Recommendations, on page 314 of the Commission's Report, by requiring the High Court to satisfy itself as to the arrangements proposed for the children before making a final decree in matrimonial proceedings. The Commission thought that this requirement was necessary in order to ensure, first, that the parents themselves gave full consideration to the question of their children's welfare, and, secondly, to enable the court's control over the welfare of the children to be made more effective than it is under the existing procedure. Subsection (1) accordingly provides that the High Court shall not make absolute any decree for divorce or nullity of marriage, nor pronounce a decree of judicial separation, until the court is satisfied that arrangements have been made for the care and upbringing of every child under sixteen in respect of whom the court has jurisdiction and that those arrangements are satisfactory or the best that can be devised in the circumstances. Under Section 26(1) of the Matrimonial Causes Act the court has, in such proceedings, jurisdiction in respect of any child "the marriage of whose parents is the subject of proceedings." As I have said, Clause 1 of
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  the Bill extends the jurisdiction to the legitimate or illegitimate children of one of the spouses.
  My Lords, Clause 3 gives effect to the first part of Recommendation 39 of the Royal Commission by enabling the Divorce Court to make orders for the custody, maintenance and education of the children where a matrimonial petition is dismissed. Subsection (1) of this clause accordingly provides that where proceedings for divorce, nullity of marriage or judicial separation are dismissed, the court shall have the same power to make provision for the custody, maintenance and education of the children as it would have had if the proceedings were still before the court. Clause 4 carries out the second part of Recommendation 39 by enabling the Divorce Court to make provision for the custody of the children where it has made an order for maintenance under Section 23 of the Matrimonial Causes Act, 1950. An order for maintenance may be made under Section 23 where a husband has been guilty of wilful neglect to provide reasonable maintenance for his wife or the infant children of the marriage.
  Clause 5 implements Recommendation 37 of the Commission's Report by enabling the Divorce Court to require a local authority to receive a child into its care. In the framing of this clause the precedent of the Children Act, 1948, has been followed as closely as possible. Clause 6 gives effect to Recommendation 38 by enabling the Divorce Court, after making an order for the custody of a child, to place it under the supervision of a welfare officer or an officer of a local authority's children service.
  Then, my Lords, we come to the case of Scotland. Part II of the Bill deals with the Scottish law and the amendment of it in order to carry out the purposes of the Bill. Part II deals with the jurisdiction of the Scottish courts in the matters to which I have been referring and is intended to achieve broadly the same position as will be reached in England and Wales under Part 1. In this respect it follows the Morton Commission's recommendations for Scotland which, with a few exceptions and differences of detail, paralleled the English recommendations. With these reservations, and bearing in mind the drafting differences that are necessary because of

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  the differing powers, practice and language of the Scottish courts, it can be said that Clauses 7, 8, 9, 10 and 12 correspond in their intention to the English clauses in Part 1. Clauses 10 and 12, which among other things enable the court, in actions for divorce, nullity of marriage or separation, to place a child in the care or under the supervision of a local authority's children's committee, have been drafted after consultation with the associations of Scottish local authorities, and with due regard to their interests.
  Clause 11 has no counterpart among the English clauses. It provides for a system of reporting officer on whom the courts can call—though they are not obliged to—for a report on the circumstances of a child in an action of this kind and on the arrangements proposed for its future. In England, of course, the courts already have a court welfare officer on whom they can call for this purpose. This clause, too, has been drafted in the light of consultations with the associations of Scottish local authorities and also, in this case, after consultation with the representatives of the legal profession in Scotland. Clause 13 also has no counterpart among the English clauses. This clause gives the court power, on the application of either party, to grant an interim interdict prohibiting the removal of a child outside Scotland or out of the control of the person in whose custody the child is. This provision implements one of the recommendations of the Morton Commission. At present it is possible for one of the spouses—or indeed a third party—in an action for divorce, nullity of marriage or separation to remove the children concerned out of the jurisdiction of the court or the control of the person in whose charge they are so long as the court has not made an order for their custody; and the Morton Commission recommended that this should be remedied. The corresponding English recommendation has already been implemented by Rules of Court.
  Clause 14, which also has no English counterpart, contains general provisions which ensure that the Court of Session has a number of general powers as to the making, revoking and varying of orders for the custody, maintenance and education of children which are neces-
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  sary to implement the various recommendations of the Morton Commission. Clause 15 deals with the interpretation of the Scottish clauses; Clause 16 deals with the expenses of local authorities, and Clause 17 with the Short Title, extent and commencement of the Act. My Lords, I have every confidence that your Lordships will give this Bill a warm welcome, and I beg to move the Second Reading.
  Moved, That the Bill be now read 2a. (Lord Ogmore.)
  House adjourned during pleasure and resumed by the Lord Chancellor.
  4.6 p.m.
  LORD GLYN: My Lords, this is a most important Bill, and I think Parliament owes a debt to Mr. Arthur Moyle for having introduced this Bill under a Private Member's Motion. Not for the first time was he successful, and the Bill now comes to your Lordships' House. The noble Lord who has moved it has gone through the clauses, and it is not necessary for me to do more than try and fill in the background. For some time I had to do with Borstal institutions, and I believe that this Bill is going to do more than almost any other measure to help overcome the difficulties which the Borstal institutions have tried to meet.
  This sounds a dull Bill, when one goes through it clause by clause, but in fact it is a very human attempt to try to provide some alternative to the broken homes that result from this increase in divorce. Noble Lords probably know that there are 20,000 children a year who, as a result of divorce proceedings, find themselves without a home or without care. Surely it is obvious that child delinquency, the juvenile crimes with which we are confronted and which the reports of the chief constables indicate are on the increase, mean that we must tackle this problem at its source—that is, a broken home. If you have too many broken homes there is bound to be a great increase in juvenile crime.
  I believe that this Bill is unique in one way. Ever since the Act of Union there has always been a feeling that no legislation should be passed unless the intricacies of Scottish law were recognised. I speak as one who was once a Scottish Member. The sponsors of this Bill have taken infinite trouble to go

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  into that aspect and, as the noble Lord has explained, the Solicitor General for Scotland stated publicly, as did the Attorney General, that this Bill has Government support. Therefore, I believe it to be a measure of tremendous importance at this time, and I hope that your Lordships will not only give it a Second Reading but, if possible, will expedite its progress through the House. It has been delayed far too long. If you talk to the welfare officers appointed to the courts they will all tell you of the enormous scope that exists—and they are the people who come most in touch with the individuals concerned.
  I am sure that the system set up under the Act which the noble and learned Earl, Lord Jowitt, when he was Lord Chancellor (I think I am correct in saying that it was due to him that court welfare officers were appointed) did more than almost anybody else to press forward the work they have done. It has been of outstanding merit, and I believe that if this Bill goes through all its stages quickly it will encourage all those who work in the courts, or as probation officers, or in any other capacity to try to deal with the human problem which at the present moment is baffling; and which I believe is the disastrous inhuman consequence of divorce, whereby boys and girls are thrown on their own resources without sufficient help to guide and correct them. I believe judges in the courts feel that this Bill has been long required, and I hope that those who are interested in the welfare of youth, youth clubs and all the rest of it, will realise that although those things are of importance the most important thing is to get some control at the time when parents are divorcing, at a moment when a gap is left which nothing can fill. I hope, therefore, that this Bill may pass rapidly through this House and become the law of the land in order that we can deal effectively with this problem.
  4.11 p.m.
  LORD CHESHAM: My Lords, in welcoming this Bill on behalf of Her Majesty's Government I have little to do but to endorse what has already been said by noble Lords on both sides of the House. It is a most desirable measure which will ensure that in matrimonial
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  proceedings in the High Court the future welfare of the children of the parties is given the careful consideration that it deserves. I would go all the way with the noble Lord, Lord Ogmore, in his remarks on this aspect and I know that the achievement of this particular object—looking after the children—will be a great relief to many noble Lords on all sides.
  The noble Lord, Lord Ogmore, drew our attention to the fact that many of the recommendations which resulted from the valuable work of the Morton Commission have already been carried out by administrative action. In this connection I would stress particularly that the arrangements whereby judges in London are enabled to call for a report from a court welfare officer before deciding questions of custody have now been extended to the whole country. If the additional powers proposed by this Bill are conferred upon the judges it will enable them to secure that, so far as is humanly possible, proper arrangements are made for the care and upbringing of the children before the marriage of their parents is ended.
  The noble Lord explained how, again consistently with the recommendations, in addition to making orders in respect of the custody and maintenance of the children judges will be able, in appropriate cases, to place them under the supervision of a court welfare officer or commit them to the care of a local authority. Though it would seem that these powers would be used only in exceptional cases, they will undoubtedly form a valuable addition to the existing jurisdiction of the court and I believe will be welcomed by Her Majesty's judges.
  It is quite unnecessary for me to say anything more about the Bill. The noble Lord who introduced it did so ably, in lucid and detailed terms, and I am sure I am speaking for all of us when I express our appreciation of his having done so. The noble Lord also referred to the debate in which the most reverend Primate the then Archbishop of York referred to the recommendations as a "Children's Charter"; and the most reverend Primate at that time also hoped that Her Majesty's Government would be able to legislate on the recommendations as soon as possible. We have not been able to do so but we have done the next best thing, which was to give full facilities and all the assistance in our power in the preparation and

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  presentation of the Bill. I believe that it will go a long way towards improving the lot of unfortunate children who are so often the innocent victims of many divorce cases, and I too, hope that it will have a speedy passage into law.
  4.16 p.m.
  THE LORD CHANCELLOR (VISCOUNT KILMUIR): My Lords, I rise only for a moment, with the indulgence of the House, to ask the forgiveness of the noble Lord, Lord Ogmore, for my absence when he moved this Bill. As I believe he knows, I was sitting judicially and it was impossible for me to be here. May I say, therefore, that I agree with everything that has been said by my noble friend Lord Chesham, and I should like to underwrite the gratitude which he has expressed towards the noble Lord, Lord Ogmore, for taking charge of and introducing the Bill, and to wish it well.
  4.17 p.m.
  LORD MERRIMAN: My Lords, the noble Lords, Lord Glyn and Lord Chesham, have both said they believed that this Bill would be welcomed by Her Majesty's Judges. On their behalf I rise quite shortly to say that such is the case. We believe that this is a most admirable Bill and are very glad that it has succeeded in getting through another place and has been introduced in this House. I am not going to speak in detail about it, for the noble Lord, Lord Ogmore, has already explained its details fully and clearly.
  The real and essential point of the Bill is this. As your Lordships know, Her Majesty's Judges at present have jurisdiction to deal with custody and maintenance of children, but can do so, of course, only after those matters are introduced before us by the parties themselves. We Judges have no power to initiate proceedings either for custody or for the maintenance of children, and, in my opinion, it is a wholly good thing that, by being obliged to withhold the final decree in a suit, we should be given power of ensuring that proper arrangements are made for the custody, upbringing and maintenance of children.
  I should like to say a word on one other aspect on which the noble Lord, Lord Ogmore, did not enlarge although he mentioned it—the power given to Her Majesty's Judges under Clause 3 of the Bill. At present if a petition is dismissed
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  there is an end of our power to deal with the children; so as things stand at present we can make interim orders while a suit is in progress but if the suit is dismissed there is an end of the matter. Now, in the nature of things, if a suit is dismissed it is more than likely to have been dismissed after a fierce contest with both parties represented before the court; and it is just in those cases where the court has heard the whole story that it is so valuable for the court to be able to deal with the children.
  I know perfectly well that magistrates are in the same difficulty in this sense; and that it is only if the wife proves her complaint of the particular offence (whatever the offence may be) that they have power to make a custody order, and that, therefore, if the charge is not proved, their powers under the Married Women Act go. What actually happens in practice before the magistrates is that if the complaint fails a summons under the Guardianship of Infants Act is taken out then and there before the same court who have heard the whole story, and an order is made for one or other of the spouses, who is able, to look after the children, with arrangements for access and all the rest. Theoretically, of course, that is true of the High Court; but it is only theoretically, because when we have finished with a case in the Divorce Division we cannot take out a guardianship summons before us. The matter would have to go to the Chancellery Judge and begin all over again before a different judge who knows nothing about the circumstances. That, I think, in itself is a most valuable power. I only wish to add that we will do our best to ensure that the useful provisions of this Bill are fully implemented.
  4.21 p.m.
  LORD HAWKE: My Lords, divorce is always a tragedy. My noble friend Lord Glyn has stressed this aspect in regard to juvenile delinquency, but one meets instability in every walk of society. I meet it through being chairman of a child emigration society. But it is not only there; one meets it in the children who ought to be in the best homes in the country. One meets it in one's own home, from children in boarding school who speak of little children crying themselves to sleep because they have heard that their father or mother is contemplating divorce. Once the parents are set

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  on divorce the damage is done. The court can make arrangements, but they can never be the same as a home. A child wants a father and a mother, and I hope that by stressing the importance of the future of the children it may deter some of the parents from pushing their divorce suit through to the bitter end, because, after all, in more cases than not it is selfishness by one or both parties that creates divorce.
  4.23 p.m.
  LORD OGMORE: My Lords, with the leave of the House, I should like to say that I am grateful to all the noble Lords who have supported me in my recommendation that your Lordships should pass the Second Reading. I am particularly grateful to the Lord Chancellor and his Department for the assistance they have given me in preparing my speech for to-day. I join with the noble Lord, Lord Glyn, in congratulating Mr. Arthur Moyle, who has worked so hard to bring this Bill to the Statute Book. He has given of his time and of his trouble for years past over this matter, and it must be a great day for him that this Bill has completed yet another stage on its way to the Statute Book. I can assure noble Lords who asked the question that, so far as I am concerned, there will be no undue delay. I am sure we have all been very much impressed by the speech of the noble Lord, Lord Merriman, who was able to give us the views of the High Court Judges on this subject.
  On Question, Bill read 2a, and committed to a Committee of the Whole House.

  HOUSE OF COMMONS (REDISTRIBUTION OF SEATS) BILL
  4.25 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 Chesham.)
  On Question, Motion agreed to.
  House in Committee accordingly.
  [The LORD MERTHYR in the Chair]
  Clause 1 [Constitution of Boundary Commissions]:
  On Question, Whether Clause 1 shall stand part of the Bill?
  LORD SILKIN: I rise to continue the point that I made when the Bill was before your Lordships on the Second Reading and following the reply given to the Question which I put to the Government this afternoon. I still feel, having had the Answer to the Question I put, that on the whole we are a little misguided in making it essential that the Deputy Chairman of the Commission referred to in Clause 1 must always be a High Court Judge. The last thing I want to do is to make an attack on our Judiciary—that is not in my mind—but we are, it strikes me, making a rather excessive use of the Judiciary for lay purposes: purposes for which they were never appointed.
  The reply to my Question this afternoon was that there were something like ten Judges—it was not easy to follow the reply, but I think it was ten Judges—who were, in one capacity or another, being used for purposes which were not directly associated with their particular functions. If this Bill is passed into law there will be two more. I would not tie myself to the exact figure, but the number is quite substantial. This seems to me a grave practice. Of course, it is very understandable that we should want to make use of Judges for all sorts of purposes, because they are men of great wisdom and understanding, and no doubt can render great service to any Committee to which they are appointed or over which they preside. I had the privilege recently of serving with a Lord Justice of Appeal, and I can testify to the great value that he was to the work of the Franks Committee; and I would have said that that was a perfectly legitimate use of a judge, as judicial questions were very closely involved. But in other questions, in lay questions, I doubt whether it is desirable to employ Judges to the extent that they are being used.
  If we take this Bill, I wonder whether it is essential that a Judge of the High Court should be appointed as Deputy Chairman of a Boundary Commission. I realise the purpose of appointing a Judge—namely, his complete impartiality and the confidence he gives to all political Parties. I believe, as a matter of fact, that my own Party were somewhat instrumental in getting this provision into the Bill. Nevertheless, this is not a political question at all. We are all free to have different views about it, and I do not

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  suppose that my Party would be dogmatic about our having only Judges; at any rate, whether they are or not, I feel that it is a matter which ought to be ventilated. I could find for the noble and learned Viscount any number of people who could do this job with complete impartiality and ability, some of whom are in this House at this moment, and I wonder why it is really necessary to go outside the ordinary public and limit the appointments to Judges.
  I have not moved an Amendment, and I do not propose to do so, because I do not think it is a matter suitable for Amendment, but I wish the Government would reconsider this matter. I would not necessarily exclude Judges, but I feel that other people would be equally capable of carrying out the task. There might be special cases where it would be necessary to have a Judge, but I would not limit the appointment to Judges. If the Government were prepared to reconsider the matter, that would be a very satisfactory outcome indeed. I would not press them to do so, but I thought it right that this point should be ventilated because there is this grave practice. The noble and learned Viscount will know better than anyone else that to take nine, ten or twelve Judges from the Bench and divert them to other purposes is not helping our Judiciary to any great extent, and in the long run it means appointing more Judges.
  4.30 p.m.
  THE LORD CHANCELLOR: My Lords, the noble Lord, Lord Silkin, has raised an important point on which I feel very strongly, but at the same time I am in great difficulty. I should like to deal first with the general situation which confronts the Government. As the noble Lord knows, it is necessary constantly to find for various bodies chairmen who will have the complete confidence of the public. That is essential, and it must be a confidence which transcends Party differences and differences of creed and outlook. It is my experience—I do not know whether the noble Lord would agree with it from his experience in his Ministerial time—that this is of particular difficulty to-day, because the men we are looking for if we want somebody to do a difficult job are men in their sixties, largely in their early sixties, and it is a sad fact—I say it with a very full heart—that we are still suffering from the gap
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  caused by the casualties of the First World War. The number of those men, irrespective of their position, who would command universal confidence is limited by a reason which is not at all a dishonourable one. I say no more.
  Therefore, we come to rely on those who command confidence from their position and status, and it is one of the features of our country, of which I am proud, that those who occupy high judicial office command that general confidence from the fact that they are Judges. That is why, when we are looking for someone who must be entirely impartial, there is a great demand for Judges. I do not think that it has anything to do with one Government more than another. I think that every one of my predecessors did his utmost, as I do my utmost, to prevent the demand from being too great. But that is the situation with which we are faced and I put it frankly before your Lordships.
  As to the immediate problem, in this case the Commission has to sift evidence and act impartially; so, although its function is not strictly that of a court, it has a certain judicial character, and undoubtedly the experience of a High Court Judge would be valuable. There is this one more cheerful aspect: that although on occasions when a general review is taking place the Deputy Chairman may have to spend a considerable time on the work of the Commission and may have to be temporarily relieved of his ordinary judicial duties, the Bill, as the noble Lord will have seen, by general consent considerably lengthens the intervals between these reviews to a minimum of ten years. Therefore the lost judicial time will not be so great.
  With that frankness which the House expects from him, the noble Lord has referred to the fact that his Party had been anxious that this step should be taken. That is so, and, of course, although it does not acquit Her Majesty's Government of responsibility, I think he would agree with me that, in electoral matters particularly, it is desirable to proceed by Party agreement where that can be done. That was an additional reason why I felt that I ought to accede to this request. The other reason, as I think the noble Lord is aware, is that in Scotland a Judge has discharged this duty since 1917 and that appears to have worked well.

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  Out of courtesy to the noble Lord, I wanted to answer his general and particular points, but I should not like him to think that because I have answered them and given him the reasons I am complacent about the withdrawal of judicial manpower. I am not. I am very anxious that it should be fully deployed on its proper work—which is deciding the differences between subject and subject and between subject and the State—and I shall take reinforcement from what the noble Lord has said to-day to stand even more firmly to my guns.
  On Question, Clause 1 agreed to.
  Remaining clauses and Schedule agreed to.
  House resumed: Bill reported without amendment.

  DRAMATIC AND MUSICAL PERFORMERS' PROTECTION BILL [H.L.]
  4.37 p.m.
  Read 3a (according to Order), and passed, and sent to the Commons.

  CHILDREN BILL [H.L.]
  4.38 p.m.
  Amendments reported (according to Order).
  Clause 2:
  Meaning of "foster child"
  (3) A child is not a foster child within the meaning of this Part of this Act while he is in the care of any person—
  (a) in premises in which any parent, relative or guardian of his is for the time being residing;,
  (6) For the purposes of this Part of this Act a person undertaking the care and maintenance of a child shall be deemed to do so for reward if he receives any payment or gift of money or money's worth or any promise of such a payment or gift in connection therewith irrespective of whether he makes a profit or intends to make a profit.
  THE LORD CHANCELLOR: My Lords, this Amendment is little more than drafting. It seeks to insert the word "adult" after the word "parent" and makes clear that a child, who is in the care of any person in premises in which a relative of his is residing, is excluded
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  from the definition of "foster child" only if that relative is an adult. Without this Amendment it would be possible for a child to be outside the definition and thus exempt from supervision by virtue of the residence in the same premises of a relative who was also a child. I think that this is obviously a sensible Amendment. I beg to move.
  Amendment moved—
  Page 2, line 3, after "parent" insert "adult".—(The Lord Chancellor.)
  LORD SILKIN: My Lords, I agree that this is a sensible Amendment but I am a little doubtful about the position in which the word "adult" is being inserted. As I read it originally it seemed to me that it was "parent, adult relative or guardian.…"I now understand it to mean a relative who is an adult. I think that, to avoid any doubt, it would be wiser to say so. It would read "adult relative", but it could equally mean, unless you rely on the comma, which I did not, an adult relative living by himself. Perhaps the noble and learned Viscount can look at it. I do not want to press the point, because I agree with what is intended.
  THE LORD CHANCELLOR: My Lords, I speak again only with the leave of the House. I had not appreciated the difficulty, but I will look at it and communicate with the noble Lord.
  On Question, Amendment agreed to.
  THE LORD CHANCELLOR THE LORD CHANCELLOR moved to add to subsection (6)
  ", but where two persons arrange for each to undertake the care and maintenance of a child normally cared for and maintained by the other the care and maintenance so undertaken shall be treated for the purposes of this subsection as not being a gift of money's worth."
  The noble and learned Viscount said: My Lords, this Amendment excludes au pair arrangements from the definition of undertaking "for reward". I am not going into this in detail. We discussed it thoroughly at the instance of my noble friend Lord Hawke and, as I understand it, there is no objection to the exclusion of au pair arrangements. Everyone agreed that there should be exchanges of children in various countries, and we have tried to meet my noble friend. I beg to move.
  Amendment moved—
  Page 3, line 3, at end insert the said words.—(The Lord Chancellor.)
  LORD HAWKE: My Lords, I am grateful to my noble and learned friend. Can he categorically assure me that, after the passage of this Bill with this Amendment, there will be no question of having to notify the local authority of au pair arrangements?
  THE LORD CHANCELLOR: My Lords, I can give my noble friend as categorical an assurance as this imperfect life allows.
  LORD HAWKE: My Lords, my noble friend has amply carried out the admirable sentiments he expressed on the Committee stage, when he said [OFFICIAL REPORT, Vol. 208 (No. 53), col. 638]:
  "One really must make the Bill not only fit the facts of life, but remove from people irritations and annoyances which appear unreasonable. If one does not do that, there are two dangers: one, that people will be annoyed unnecessarily; and the other, that they will become unwitting breakers of the law."
  I believe that at the moment they are unwitting breakers of the law.
  On Question, Amendment agreed to.
  Clause 3:
  Duty of persons maintaining foster children to notify local authority
  (5) A person maintaining or proposing to maintain a foster child is not required to give a notice—

  (a) under subsection (4) of this section in respect of the removal of the child from his care if the child ceases to be a foster child on the removal;

  (b) under subsection (1) of this section, if he has previously maintained the child as a foster child and the child last ceased to be a foster child while in his care or on removal from his care.

  (6) A local authority may exempt any person from the duty of giving notices under this section, and any such exemption may be granted as regards all or any such notices and for a specified period or indefinitely and may be revoked at any time by notice in writing served on that person.
  LORD LATHAM LORD LATHAM moved to leave out subsection (5). The noble Lord said: My Lords, this Amendment proposes to delete from the Bill the provision which in certain eases would grant foster parents exemption from the duty to give notice of the removal of foster children. It received a somewhat lengthy consideration on the Committee stage, a consideration which I think the importance of the matter justified. The Amendment was withdrawn on the undertaking that the noble and
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  learned Viscount on the Woolsack would consider the matter with a view to seeing whether the points made could be satisfactorily met. I am sure that we on this side, and indeed all your Lordships, are indebted to the Lord Chancellor for having so done, as is witnessed by the appearance on the Marshalled List of Amendments of an Amendment in his name. In point of fact, Amendments Nos. 3, 4 and 5 really deal with the same matter; and, with the permission of your Lordships, I think it may be convenient if I allow my remarks to range over those three Amendments.
  Frankly, I consider that the Amendment standing in the name of the Lord Chancellor is not satisfactory, and does not meet the situation which will exist, even under the provisions of his Amendment, as regards the local authorities and the absence of information as to the removal of a foster child. I do not say that, as I am sure the noble and learned Viscount will accept, in any sense of being unappreciative of his efforts or from any desire to be pernickety or obtuse. The local authorities are strongly pressing, for reasons which I think are sound and which I will do my best to indicate, that subsection (5) of Clause 3 should be deleted and that the present position should be allowed to remain. The Lord Chancellor's Amendment would not, in point of fact, meet the difficulties which local authorities, as those largely responsible for the administration of the provisions of this Bill have to face.
  The main defect in his Amendment is the wide gap which would exist by reason of the absence of notice. The Amendment, in short, would mean that foster parents would not need to give notice of removal if the child were no longer a foster child; that is to say, if a child goes home, or goes to hospital or goes to a relative. There are, the local authorities contend, many circumstances in which a local authority wants a reassurance that the child has in fact safely arrived at the new address to which it is said to have gone. It is the practice sometimes to check through officials, such as health visitors, school inquiry officers and the like, that the child has in fact arrived. This service, under the present arrangement, is a kind of alerted service as soon as notice of the child's removal is received. Under the Lord Chancellor's Amendment it

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  would not be possible to do this until the next time the official visitor happened to call at the foster house to see the child. She will then be told that he left x weeks ago; her inquiries about the missing child will, therefore, be x weeks late, and in some cases may be too late. Moreover, if the foster parents need not give any notice of removal of foster children, in certain circumstances it will be much more difficult for local authorities to keep a check on the numbers of foster children in any one house at any one time. Those are, generally, the objections to the Lord Chancellor's Amendment.
  I should like to stress to your Lordships that what the Government are proposing to do in subsection (5) of Clause 3 is to lessen the existing requirements. It is not that this Amendment would alter the existing law; it is the case that the proposal in subsection (5) of Clause 3 would alter the law, because at the present time there is upon the foster parents an obligation to give notice of removal even though the removal is of a temporary order. For instance, Section 207 (3) of the Public Health Act, 1936, provides as follows:
  "If a foster child dies, or is removed"—
  Or removes himself—
  "from the care of the person who has undertaken his nursing and maintenance, that person shall, within twenty-four hours thereof, give to the welfare authority and to the person from whom the child was received notice in writing of the death or removal and, in a case of removal, the notice shall also state the name and address of the person"—
  if any—
  "to whose care the child has been transferred."
  That is the present law. Under the proposals contained in this Bill that requirement will, in certain cases, go. I should like to point out this other difference, which is not unimportant: that whereas, as I have indicated, the notice under the present Public Health Act, 1936, must be given within twenty-four hours of the removal, under this Bill, Clause 3 (3), the notice can be not less than two weeks before the removal and not later than one week after. In any case the situation is likely, in the minds of the local authorities who are responsible, to be seriously altered, in a way which may prove to be detrimental and harmful to the foster children.
  I understand that the present arrangements work satisfactorily. Notices are not frivolously demanded, and, like the local authorities, I therefore find it difficult to understand why it is proposed to make the change. Why weaken, in a Children Bill, if you please, the powers and tie the hands of local authorities in the discharge of their duty of looking after these unfortunate children? What is the mischief against which these proposals are put forward and which they purport to cure? Is it not proper that local authorities, who have the responsibility for the care and protection of children in this field, as well as in many other important fields, should have notice and be kept informed? I cannot for the life of me understand why this change in the law is persisted in. I think there must be some persons who have an over-weaning consideration for the foster parents to the detriment of the foster children.
  The purpose of this Bill is to strengthen the means for care and protection of children—not to weaken it. as this clause does. After all, as I have said, the local authority carries a great responsibility for the welfare of children. Clause 1 of this very Bill reaffirms that duty and that responsibility; and yet in the same Bill it is proposed to impede and impair the local authority's ability to discharge those responsibilities. It cannot discharge its duties unless it knows without a break what happens to the foster child when it happens—at once, and not only when, adventitiously, by accident, the officer of the local authority on a visit finds out that the child has been removed to another place. Why should the local authorities have to search for cases of removal and never know definitely whether a foster child is where it is understood to be? Why, I ask, should this alteration be made in a Bill designed to strengthen the ability to provide care and protection for these children?
  At the Committee stage, I referred to three sets of circumstances where failure to give notice could, and would, work to the detriment of the child. Let me give your Lordships two types of cases which are illustrative of what can happen, and indeed does happen at the present time, even though notice is required. It happens because certain foster parents have acted in breach of the law and in

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  defiance of the requirements to give notice. This is one of the typical cases which I use to illustrate the position. A week-old baby was privately placed by a mother with a foster mother for reward. The baby's condition at first was not satisfactory, and a course of medical treatment was provided and was continued, via the midwife and the health officer, in the foster home, as part of the child's supervision. Without warning or notice the baby was transferred elsewhere for adoption. The foster mother and the mother would not say where the baby had gone. The fact of the baby's removal would not have been known quickly but for the fortuitous circumstance that an official visited the foster home.
  If Clause 3 (5) stands, the foster mother would be exempted from giving any notice at all; and whilst, of course, a number of cases happen now in breach of the law, as I have indicated, if there were no such requirement it is quite clear that the number of cases in which no notice would be given, or where things could happen to the detriment of the child within the period of notice as now proposed, would be greatly increased. If this requirement to give notice goes, then, in the view of the local authorities, the situation will be very serious. This is almost a gift of encouragement to those who would. for quite unworthy reasons—and there ore such—want to evade the requirements to give notice when children are removed from one place to another. I emphasise again, my Lords, that this is a children's Bill and not a foster parents' Bill, In this connection, the interests of the foster children should be paramount, and there is no real case for altering the present law, which requires that, even in cases of temporary removal, notice should be given to the local authority.
  It will be seen that in addition to the Amendment of the Lord Chancellor there is another Amendment, Amendment No. 5, which stands in the name of my noble friend Lord Silkin and myself. That is designed, as it were, to minimise the disadvantages, serious as they may be, which would flow from the rejection of Amendment No. 3. There it is suggested that a local authority may exempt any person from the duty of giving notices under the clause in accordance with the regulations to be made in that behalf by a local authority, provided that the regulations are approved by the Secretary of
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  State for the Home Department or the Secretary of State for Scotland. On further reflection, I think it is only fair that I should say this. If each local authority were to make regulations governing the terms upon which they would require notice from foster parents, it might result in a confusion of different regulations as between local authorities, who from time to time have to exchange children and have to be in co-operative activity, the one with the other, in connection with foster children. It might be better, and might serve the interests of administrative tidiness, if the regulations were not made by each local authority but were made by the Secretary of State for the Home Department, and as regards Scotland the Secretary of State for Scotland, in consultation, and I hope in agreement, with the local authorities. It might be provided that no notice should be required in respect of temporary absences of a duration of, say, not longer than seven days. I personally think that seven days should be the maximum.
  May I conclude by saying that the local authorities, the County Councils Association, the Association of Municipal Corporations, and the London County Council, all of whom are, or represent, welfare authorities charged with the care and protection of children, are strongly in support of the proposal in the first Amendment, namely, Amendment No. 3, that subsection (5) should be omitted from the Bill. I beg to move.
  Amendment moved—
  Page 4, line 4, leave out subsection (5).—(Lord Latham.)
  5.5 p.m.
  LORD SILKIN: My Lords, I beg to second the Amendment. I do not think, after the full explanation of the purpose of this Amendment, that there is much I can usefully add. But I should like to emphasise that this Bill is intended to implement the Hurst Committee's Report. That Committee was set up because it was thought necessary that children should have further protection. In this particular clause a form of protection, a very important form of protection, is being taken away—the protection that when a child is moved from a foster parent the authority should be informed of it at the earliest possible moment. That protection exists to-day, but Clause 3, subsection (5) takes it away. We fail

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  to understand why it should be so. What is the need for it? The local authorities themselves are unanimous—it is not often that we find them unanimous: the Association of Municipal Corporations, the County Councils Association and the London County Council—that this protection should remain and that subsection (5) of Clause 3 should be deleted.
  The Amendment of the noble and learned Viscount the Lord Chancellor, which is intended to go some way, does not go far enough, because it provides that the local authorities may request information as to the whereabouts of the child and all the information they are at present by law entitled to have. But very often the local authority does not know that the child is moved. The whole purpose of the existing law is that the local authority should be kept informed of the movements of the foster child. That requirement is being taken away, and it is said that they may request information. But they might never find out that the child has been moved. My noble friend says that inspectors may fortuitously discover that the child has been moved. But, of course, they may not; the inspector may not get round for months. In the meantime, the mischief has been done; the authority does not know the whereabouts of the child. He may have been removed to a wholly undesirable place, and the whole purpose of the existing legislation, and of this legislation which is designed to improve on it, has been frustrated.
  I do not know why the Government are so pig-headed about this matter: why they are so insistent that the existing protection should be taken away. I do hope—whether they like our form of wording, or prefer to do it in some other way—that they will have another try. Quite obviously, what we said on the Committee stage made some impression, because the Lord Chancellor undertook to look at the point again. He has looked at it again and he has produced another Amendment; but it does not really meet the point at all. I am sorry he is not here now, but I quite understand the reason, and I am sure the noble Lord, Lord Chesham, will make a very good deputy for him. But I think he ought to understand that his Amendment does not meet the point that was made, and which the Lord Chancellor undertook to look
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  into. I hope that the result of this discussion will be that further consideration will be given to the point so that the position of the foster child is at least not worsened under the Bill as compared with the position as it is to-day.
  5.10 p.m.
  LORD CHESHAM: My Lords, with due respect to the noble Lord, Lord Latham, before I begin to try to give the noble Lord, Lord Silkin, some of the explanation for which he asked I will, if I may, reply more or less only to Amendments Nos. 3 and 4, and to No. 5 only in so far as it may be covered by any generality on the other, because so far as Amendment No. 5 is concerned another matter arises which I think does not arise on the first two. It is perfectly right, as was pointed out by the noble Lord, Lord Silkin, that this Amendment was moved during the Committee stage and was withdrawn, if I remember correctly, after my noble and learned friend had invited the noble Lord, Lord Latham, to make some specific proposal, if he could, that would provide for exemptions from the need to give notice in respect of temporary absences, for example, at school or in hospital, and would at the same time avoid the real difficulties which, as was pointed out in the discussion, could arise from the subsection as drafted. My noble and learned friend also undertook to consider the matter himself, which he did.
  LORD LATHAM: May I interrupt the noble Lord? I have no recollection of having made the offer to which the noble Lord refers, that I would seek to devise a form of words. My memory may be at fault. The Lord Chancellor said that he would consider the matter.
  LORD CHESHAM: I did not accuse the noble Lord of having offered to do that. I thought I was correct, but naturally I apologise if I am wrong. I said that I thought that my noble and learned friend the Lord Chancellor had invited the noble Lord to make a specific proposal. But, be that as it may, nothing has happened in the meantime, and my noble and learned friend has done his best to find a suitable form of words, as he said he would, and has put it down by way of the Amendment standing in his name on the Marshalled List. This Amendment has two objects. It tries as far as possible to meet the criticism which was made of the existing sub-

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  section (5)—the criticism which was expressed on a previous occasion and has been expressed most eloquently by the noble Lord, Lord Latham, to-day—basically, that it permits abuse by an unscrupulous person who could evade supervision.
  LORD LATHAM: If I may say so, it permits of the absence of notice by the scrupulous, because there is no obligation to give the notice.
  LORD CHESHAM: I am coming to that—I may be a little slow, for which I apologise. It must be remembered, too, that it retains the exemption from the necessity to give notice when a child leaves the foster home for short temporary periods. This is, I think, where the noble Lord, Lord Latham, and I part company a little. He sees in this, as he has explained to us, a considerable possibility of detriment to the child. He mentioned such words as "weakening", "impeding" and "impairing" the protection which, without any question of Party or argument, I am certain it is true to say we are all anxious to provide. The exemption in Clause 3 (5) is there as much as anything to avoid putting people in the position of committing offences inadvertently. If I am going to be accused of saying that this is a foster parents' charter and not a children's charter, I would only say that I shall in a moment show how the matter applies to the child. Foster parents certainly would commit offences inadvertently if every short absence, to school, to hospital, for a week-end with their real parents or something like that, called for notice of removal and notice of return.
  LORD LATHAM: As it does at present.
  LORD CHESHAM: If that is so, I do not think it can be an answer to say that the local authority will not prosecute except when there is a bad case. I do not think the Bill should put people in peril unnecessarily, and I certainly do not consider that they should be dependent on the benevolence of local authorities to escape prosecution. This is the real point. I do not see how a high proportion of contraventions without prosecution will do anything but bring the law into disrepute; and if the law is brought into disrepute on this subject it cannot be for the welfare and protection of the children.
  LORD LATHAM: This is very important. May I ask the noble Lord whether the Department has any evidence at all that the law of the Public Health Act, 1936, has been brought into disrepute because it insisted on, and provides for, a notice within twenty-four hours of the removal of a foster child?
  LORD CHESHAM: I am unable to tell the noble Lord exactly what evidence is available.
  LORD LATHAM: Well, I can tell the noble Lord, The local authorities have no such information.
  LORD CHESHAM: I do not know in what position the noble Lord stands to have available evidence that I have not got; therefore I must accept what he says for what it is worth. In short, I should have thought that the noble Lord's argument was something of an exaggeration. I should have thought that if there was not some easing of these constant notices for no particular reason, it would be to the detriment of the child and would lead to a mass of unnecessary work.
  LORD SILKIN: I do not want to interrupt the noble Lord, because I appreciate that he is labouring under great difficulties. I am speaking to him, but really speaking at somebody else. Suppose the noble Lord is right that a lot of unnecessary notices for temporary absences and so on, are being given at the present time and that people are in danger of being prosecuted but are not being prosecuted because of the good sense of local authorities. Suppose that that is right—I would not dispute it. The answer to that is, not in all circumstances to exempt everybody from giving notice, whether the child is being removed temporarily or permanently. Surely the answer is to design an Amendment or a provision which would exempt people in regard to short absences but would not exempt them in regard to a permanent removal or for a long absence. This is not what is being done.
  LORD CHESHAM: I thought I had been trying to say—perhaps I did not say it very well—that that was the object of my noble friend's Amendment. I should have thought that that is what would have been achieved by the Amendment which is down in the name of my noble and learned friend. I must admit that I am in some difficulty in this matter, and if

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  noble Lords opposite will permit me to say so with the greatest friendliness, one of those difficulties is that I have as yet hardly completed a single point.
  I come now to the case cited by the noble Lord, Lord Latham, to show how badly it would work if the Amendment were adopted. The case which the noble Lord gave rather harrowingly, sounded terrible; but surely there the foster mother would have been required to notify the local authority under the provisions of the First Schedule to the Bill. A child which is placed in the care and possession of somebody not a parent by an agent becomes a protected child and therefore subject to the provisions which I have mentioned.
  If, on the other hand, the noble Lord's argument is that, no matter what provision is made, somebody is going to break the law, then I do not quite know what he expects me to do. We are trying merely to make these arrangements work as well as we can. The new subsection still exempts a person from the duty to give notice of the child's removal if on removal the child ceases to be a foster child; but, as the noble Lord rather critically pointed out, it requires the person who was maintaining the child to tell the local authority, when they require it, where the child has gone. Having regard to the provisions of the clause I cannot see how the "months and months" to which the noble Lord, Lord Silkin, has referred can arise.
  LORD SILKIN: Why not?
  LORD CHESHAM: My Lords, if the noble Lord will look at the second part of the proposed Amendment I believe he will see that it covers the matter. In addition, and while one may not like added penalties introduced into the law, there is a quite severe penalty involved here which I should have thought would deter even the most unscrupulous of people. Dealing with the point of absence of more than six months to which the Amendment refers, I should explain that that gives rise to a new transaction; the matter has to be started all over again, and that requirement puts a positive limit on the period involved.
  LORD LATHAM: My Lords, serious things can happen to a child in six months. Are we to regard that with complacency?
  LORD CHESHAM: My Lords, I thought it had been generally agreed during the debate at the Committee stage that some provision was necessary for exemption for temporary absence, and I and my noble and learned friend thought this Amendment a reasonable compromise. The noble Lord, Lord Latham, does not agree with me, but I hope I have said enough to persuade your Lordships that that is so.
  On Question, Amendment negatived.
  LORD CHESHAM: My Lords, after what has been said, I believe it is not necessary for me to go to great length in discussing this Amendment. I beg to move.
  Amendment moved—
  Page 4 line 4, leave out subsection (5) and Insert:
  "(5) Where a foster child ceases to be a foster child on his removal from the care of the person maintaining him, that person need not give a notice under subsection (4) of this section but shall at the request of the local authority give them the same particulars as would have been required to be stated in the notice; and a person who maintains or proposes to maintain a foster child need not give a notice under subsection (1) of this section if the child has within the last six months been maintained by him as a foster child but ceased to be a foster child while in his care or on removal from his care."—(Lord Chesham.)
  On Question, Amendment agreed to.
  5.26 p.m.
  LORD LATHAM LORD LATHAM moved to leave out subsection (6) and to insert:
  "() A local authority may exempt any person from the duty of giving notices under this section in accordance with regulations to be made in that behalf by a local authority:
  Provided always that such regulations shall first be approved by the Secretary of State for the Home Department (or, as regards Scotland, the Secretary of State for Scotland)."
  The noble Lord said: My Lords, I beg to move this Amendment. Subsection (6) purports to give a local authority power to exempt any person from the duty of giving notices. It will be recalled that at the Committee stage my noble friend Lord Silkin raised the question of whether it was altogether wise to give such carte blanche right and power of exemption to local authorities, most of whom no doubt would operate it properly and wisely, but some of whom, through lack of material or other circumstances, might do the contrary.
  It was therefore sought in this Amendment to link the power of a local authority

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  to give exemption with the matter of the foster parents being themselves exempt from giving notice on removal of a foster child. The proposal in the Amendment is that the local authority shall be able to give exemption as regards these notices in accordance with regulations to be made in that behalf by any local authority—subject, of course, and as is stated, to the regulations being first approved by the respective Secretaries of State. That is the Amendment on the Paper. I should like to answer in advance, as I have already done, the point that it would be better for regulations to be made by the respective Secretaries of State. With that view I entirely agree; but the other part of the Amendment meets in some measure the important point raised by the first Amendment that I have mentioned—Amendment No. 3. It is to be hoped that Her Majesty's Government may see their way to accept this Amendment with the modification concerning by whom regulations shall be made.
  Amendment moved—
  Page 4, line 13, leave out subsection (6) and insert the said new subsection.—(Lord Latham.)
  LORD SILKIN: My Lords, I beg to second this Amendment. Subsection (6) gives the local authority power to exempt persons from giving notices. It is completely at large. They are under no obligation to apply any particular principle. It can apply to individuals, to groups of individuals and to any kind of circumstances or conditions. There is no restriction whatever on the discretion of the local authority to exempt people from giving notices. We believe that that is wrong and not in the best interests of the child. We have therefore sought to restrict the matter by requiring the local authority to make regulations as to the class of cases to which they will give exemption.
  My noble friend who has moved this Amendment feels, as I do on reflection, that it should not be open to each local authority to make its own regulations, but that these regulations should be made by the Home Secretary. That is not stated in the Amendment—it is an afterthought; but I hope the noble Lord will not be embarrassed by my having second thoughts. If he would accept the principle, that would be good enough for our purposes.
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  At the same time it is rather an answer to the last speech that he made, because if these regulations were made they could be made to apply to temporary absences, and to all sorts of conditions which at the moment may be regarded as causing unnecessary annoyance to people who are foster parents. The requirements can be considered; and where it is thought to be unnecessary that notice should be given, that fact could be incorporated in the rules. We feel that, apart altogether from these frivolous cases, as I might call them, it is desirable that there should be regulations under which exemption can be given; and we also think that subsection (6) as it stands is much too wide and needs some restriction. It is for these reasons that I beg to support the Amendment.
  LORD CHESHAM: My Lords, at the outset I should like to make it absolutely clear—I tried to make it clear before, but I should like to say it again—that neither of the noble Lords opposite who have spoken should think that, if I resist their Amendments, I in any way think that their ideas of protecting children are not completely sincere. But, so far as this Amendment is concerned, the main anxiety might almost be said to have been expressed in the points made on the previous two Amendments; and it might almost be said that the children's interests could be completely—or if not completely, very greatly—affected by the wholesale use of this provision in subsection (6) and that regulations would help.
  However, if the Amendment were adopted, such regulations as proposed, while satisfying either of the Secretaries of State, might vary from authority to authority. There was also the suggestion that a local authority perhaps failing in its duty might seek to contract out of it, by means of subsection (6), to which the noble Lords object. But it must be remembered that Clause 1 of the present Bill imposes a duty on every local authority to ensure the wellbeing of foster children in their area. Clause 3 deals only with notices—that is to say, with part of the machinery that enables local authorities to carry out their duty. However they may decide to dispense with that machinery, they can in no way lawfully abdicate the duty imposed on them under Clause 1.

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  I think that a certain latitude must be permitted in this matter, because exemption surely must be either granted or withheld according to the particular merits of individual cases. There might well be a home which was regularly visited by officers of the local authority in which foster children were frequently arriving or leaving. If the local authority wanted notice in respect of each child, they could have it, but if, because of the frequent visits paid by their officer the local authority regarded separate notices as superfluous, it could grant an exemption. Regulations in this matter seem to me rather unnecessary and inappropriate. Regulations made by the local authority, even if approved by the Secretaries of State, would in no way add to the legal burden on the authority to do their duty, and therefore I think that the Amendment is unnecessary.
  On Question, Amendment negatived.
  Clause 5:
  Appeal to juvenile court against requirement or prohibition imposed under section four
  5.—(1) Any person aggrieved by any requirement or prohibition imposed under section four of this Act may, within fourteen days from the date on which he is notified of the requirement or prohibition, appeal to a juvenile court, and the requirement or prohibition shall not have effect while such an appeal is pending.
  LORD CHESHAM LORD CHESHAM moved in subsection (1), to leave out all words after "and", and to insert instead:
  "where the appeal is against such a requirement the requirement shall not have effect while the appeal is pending. "
  The noble Lord said: My Lords, this Amendment is a result of a partial acceptance by the Government of a suggestion by the noble Lord, Lord Latham, on the Committee stage, that a requirement or a prohibition imposed by a local authority under Clause 4 should take effect at once, even if the person concerned lodged an appeal. We accepted that suggestion in part, and this Amendment is the result. It leaves unchanged the provision that a requirement imposed under Clause 4 (2), for example to provide more accommodation or equipment, shall not have effect while an appeal against it is pending, but if the Amendment is made a prohibition against the keeping of a foster child, under subsection (3), it will have effect at once. I do not think we
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  could go very much further than that. I hope that the noble Lord will find this satisfactory and can accept this Amendment.
  Amendment moved—
  Page 5, line 28, leave out from ("and") to end of line 30 and insert "where the appeal is against such a requirement the requirement shall not have effect while the appeal is pending."—(Lord Chesham.)
  LORD LATHAM: My Lords, the Amendment is entirely satisfactory and, minimum though it may be, we are grateful for it.
  On Question, Amendment agreed to.
  Clause 18:
  Consents to adoption
  (3) If upon application for an adoption order the court is satisfied that any person whose consent is required under section two of the principal Act as parent or guardian of the infant has persistently failed without reasonable cause to discharge the obligations of a parent or guardian of the infant, and that the failure is likely to continue if the order is not made, the court may dispense with the consent of that person whether or not it is satisfied of the matters specified in paragraph (a) or paragraph (c) of subsection (1) of section three of the principal Act.
  5.39 p.m.
  LORD LATHAM LORD LATHAM moved, in subsection (3), to leave out "and that the failure is likely to continue if the order is not made,". The noble Lord said: My Lords, in the unavoidable absence of my noble friend Lord Silkin, who has another public engagement which he must keep, I rise to move Amendment No. 9, which stands in the name of my noble friend and myself. As I said in the debate on the Committee stage, this clause and this Amendment raise in its stark reality the fundamental issue as to whose interests shall prevail, the interests of the child or the interests of a neglectful, unnatural and often inhuman parent. On Committee stage we sought to leave out the words
  "and that the failure is likely to continue if the order is not made."
  Let us examine the situation. Here we have a parent who has admittedly persistently failed, without any reasonable cause, to discharge the obligations of a parent or of a guardian, and, notwithstanding that, as the Bill now stands the court cannot dispense with the consent of that person unless it is also satisfied that the failure is likely to

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  continue if the order is not made. The noble and learned Viscount was good enough to say that he would give the matter consideration between Committee stage and this stage and I am obliged to him for having done so, as is clear from the Amendment on the Marshalled List in his name; but here again I am sorry to say that I do not think that the noble and learned Viscount's Amendment meets the requirement of the case. It still introduces the word "likely". It still casts upon the court the responsibility of appraising and assessing what is likely to happen in future from a miscreant who has failed to discharge the ordinary duties of a decent, honest, upright man or woman.
  The present legal situation is that under two decisions of the High Court in 1952, when the court is considering the matter of dispensing with parental consent the main factor to be considered is not the welfare of the child but the parent's right as a parent to give or withhold consent. Frankly, we on this side say that that is wrong. A parent who has persistently neglected his own child for no reasonable cause is not a parent who possesses rights, is not a parent whose interests ought to be permitted to stand in the way of the care and protection of his own child. The future life and happiness of the child ought not to be in continuing jeopardy and prejudice merely to serve the interests of a notional parent who has stripped himself of all rights of parenthood by his complete neglect of the discharge of the duties of parenthood. It is under the influence of this rule of law, decided as recently as 1952, as I have said, that we have re-submitted this Amendment, I hope for the favourable consideration of the Government.
  Local authorities are disturbed at the wording of this clause and they are no less disturbed when they consider the wording of the clause as it would be if the noble and learned Viscount's Amendment were incorporated in it. It still leaves the bias of consideration in favour of the parent and not in favour of the child. I know that the noble and learned Viscount, who is not present for reasons we appreciate and understand, does not accept the proposition that in all cases the welfare of a child should be paramount. I take that view. But clearly, whatever the circumstances may be when
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  the paramountcy of the child ought not to prevail to the exclusion of proper consideration for the rights of the parents, it cannot be a case where the child has been persistently neglected and where the parent has persistently failed for no reasonable cause to discharge his or her duty as a parent. I hope, as do the local authorities, all of them, that the Government will see their way to accept this Amendment.
  With regard to the noble and learned Viscount's Amendment, I must say frankly, I assure the House without any disrespect to the learning and wisdom of the noble Viscount, that I think it is a distinction without a difference, whereas in the Amendment to the noble and learned Viscount's Amendment there is the added strength (if that is the proper phrase to use) that the court must go somewhat beyond the matter "appearing to be" and must be satisfied "having regard to the future welfare of the child," which words are to be introduced to-day in a manuscript Amendment which I gather is available. I shall be prepared to speak on that Amendment at a later stage. For the present, I beg to move.
  Amendment moved—
  Page 10, line 43, leave out "and that the failure is likely to continue if the order is not made,".—(Lord Latham.)
  LORD CHESHAM: My Lords, if I may, I will reply to Amendments Nos. 9 and 10 and we shall come to the manuscript Amendment to the Amendment printed on the Marshalled List afterwards. My noble and learned friend appreciated the force of what was put to him during the discussion on the Committee stage about the possible effect of the words "and that the failure is likely to continue if the order is not made" and he undertook to consider the matter again. The rather unexpectedly long gap between Committee stage and to-day has allowed time for him to do so fully, and the Amendment standing in his name is as far as we think it right to go.
  The effect of the Amendment put down by the noble Lords, Lord Silkin and Lord Latham, would be to enable the court to dispense with the consent of a parent who had been neglectful in the past but who had reformed at the time of the hearing and was likely to discharge his or her responsibilities in the future, if given the opportunity. To us it seems wrong in a

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  matter as final as legal adoption to provide that a mother—even a neglectful mother—may be deprived of her child without any regard for what she might be likely to do in the future if the order were not granted.
  The noble Lord, Lord Latham, made a considerable point of parents' having stripped themselves of the right to be considered, and of their rights to and over the child, and he referred to the child's welfare being in jeopardy. But when he says that the Amendment does not afford the required protection to the child, and is in favour of a parent who has no right to consideration, I think he has overlooked one thing. Section 5 (1) (b) of the principal Act requires the court, before making an adoption order, to be satisfied that the order, if made, will be for the welfare of the child. Therefore, I should have thought that the natural rights of even a neglectful parent should not be capable of being extinguished without regard to his probable future behaviour, which may be more important than his past deficiencies.
  It is by no means impossible—the possibility can seldom be ruled out—that a neglectful parent who may have refused consent to an adoption order may have come, belatedly may be, to a sense of responsibility, perhaps because of the realisation that he is in danger of losing his child permanently, or perhaps by a change in his circumstances. In all or almost all cases the child will have been for some time in the care and possession of someone other than the parent at the time when the application for adoption is made, and the parent may during this period have so conducted himself as to establish the likelihood that he will discharge his obligations in the future. Bearing in mind the fact that the duty is clearly laid on the court to be satisfied that the order, if made, will be for the welfare of the child, I do not think the wording of the Amendment standing in the name of my noble and learned friend can be improved upon. Therefore, I hope the noble Lord, Lord Latham, will accept that, and will not press his Amendment.
  On Question, Amendment negatived.
  5.56 p.m.
  LORD CHESHAM: My Lords, in view of what I have just said, I think any further discussion on this Amendment is unnecessary. I beg to move.
  Amendment moved—
  Page 10, line 43, leave out ("and that the failure is likely to continue if the order is not made") and insert ("then, unless it appears to the court likely that, if the order is not made, that person will discharge those obligations").—(Lord Chesham.)
  LORD LATHAM LORD LATHAM moved, as an Amendment to the Amendment to leave out "it appears to the court likely" and insert:
  "the court is satisfied having regard to the future welfare of the child."
  The noble Lord said: My Lords, in the absence of my noble friend Lord Silkin, I beg to move this Amendment to the Amendment. The noble Lord, Lord Chesham, entered a plea for the neglectful parent who had reformed, or who it was thought might have reformed, or (to use the word in the Lord Chancellor's Amendment, and the word originally in the Bill) who was "likely" to have reformed and repented, and to have come to the stool of repentance. The noble Lord admitted that that might he belated. I should certainly hesitate to rest the future of a child upon the belated penitence of a parent who had neglected his own child in the manner in which it is done, as the evidence in the possession of local authorities all too unhappily shows. But if there has been—as is possible—a miscarriage of justice, and if the court has given a wrong decision, then Clause 21 provides a right of appeal against the decision to make an adoption order without the consent of the parents. I should have thought that a parent who came within this subsection for persistent refusal to discharge his responsibilities was not entitled to any greater protection than that appeal provision.
  The noble Lord referred to Section 5 of the principal Act. I have not that Act with me, and I do not suppose I have ever seen it. But, taking as correct what the noble Lord said, Section 5 of that Act requires that if an order is made it shall be for the welfare of the child. No one disputes that; but it has no relevance to the point we are discussing. An order cannot be made until either the parent consents, or the court decides that his or her consent can be dispensed with. So whatever Section 5 says about the welfare of the child when an adoption

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  order is made is irrelevant to the question we are now considering, as to the conditions in which the court should be able to make an adoption order, notwithstanding the refusal of a parent or parents to consent. It is with that aspect of the matter that we are concerned, and it is to that aspect of the matter that this Amendment to the Amendment is put down.
  We see an appreciable difference between the effect on the court of the words, "unless it appears to the court likely" and that of the words, "unless the court is satisfied, having regard to the future welfare of the child." "To be satisfied", I think, is a stronger provision than merely "appears to the court likely." I cannot understand even our excellent draftsmen showing so much fondness in this connection for this word "likely." Nothing is more uncertain in the world of construction than the word "likely." What does it comprehend? What kind of appreciation must the court have? What kind of powers of prophecy and of determining the future are these lay magistrates who are administering the law expected to possess, in order that they may determine whether it is likely that the penitent will come to the stool of repentance and be a decent upright citizen as regards his own offspring? It seems to reduce the law to something—I almost said approaching a farce. So we submit, we hope for the favourable consideration of Her Majesty's Government, these words "the court is satisfied having regard to the future welfare of the child."
  Late as the alteration to this Amendment to the Amendment came along, for reasons which can if necessary be explained, we attach great importance to those words being in this subsection. They will be a guide, I do not say a direction—and it would be wrong that they should be a direction—but they will be a guide to the magistrates in determining whether they are prepared to dispense with the consent of the parents. It will be a guide that the dominant—and I use the word "dominant" advisedly and with intent—motive ought to be and, as I submit to your Lordships, must be, the future welfare, the future life and the future happiness of the child. The child has done nothing to deserve this persistent neglect. Why should we visit upon the child the possible lamentable
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  results of accepting the view that the neglectful parent of yesterday is the reformed parent of to-morrow, or is "likely" to be the reformed parent of to-morrow?
  It is for those reasons that we have put down this Amendment to the Amendment, and I hope most sincerely that the Government will be able to accept it. The local authorities are unanimous in their support, and I am quite sure that any person of good will and of heart who loves children would wish to see that, in such unworthy and discreditable circumstances as a parent disowning and neglecting his own child, when it came to the issue as between the interest of the child and the interest of the parent the interest of the child should, without peradventure or question, prevail. I beg to move.
  Amendment to Amendment moved—
  Line leave out ("it appears to the court likely") and insert ("the court is satisfied having regard to the future welfare of the child").—(Lord Latham.)
  6.6 p.m.
  LORD CONESFORD: My Lords, it is admittedly a very difficult question with which we are concerned in this clause, as appears from the debate on this occasion and, indeed, on previous occasions. There is the problem of the bad parent, but there is also the important legal effect of depriving a natural parent for ever of the parental relationship with her own child when she may, in fact, at the time the order is made, be intending to be a good parent. The problem is admittedly difficult. Some adverse criticism has been made about the draftsman. Let me say, using such legal knowledge as I possess, that I think I can construe without much difficulty the clause as it originally stood in the Bill. I think I can construe it, also, if my noble and learned friend's Amendment is adopted, as I think it should be. I think I can construe it if it is adopted as amended by the Amendment to the Amendment of the noble Lord, Lord Latham, as that Amendment stood on the Marshalled List. But I am wholly unable to construe it as it will stand if the noble Lord's Manuscript Amendment to the Amendment is adopted. That seems to me to introduce something that will completely muddle the court. The noble Lord said that the court must be satisfied, and satisfied on a question of fact. That question of

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  fact, on which, according to his own Amendment, they have to be satisfied, has nothing to do with the interests of the child. Simply introducing the words in his Manuscript Amendment at that point will, I think, make nonsense of the clause as it will then stand.
  I think that the Amendment of my noble and learned friend the Lord Chancellor, turning the emphasis of what is at present in the Bill, is a good Amendment, and meets points rightly raised in various quarters of the House at this and earlier stages. I think one can exaggerate the difference that the Amendment of the noble Lord, Lord Latham, would make (I am speaking now of his Amendment as it stands on the Marshalled List), but I am certain it would be impossible, if we wish this thing to be clear, to adopt his Amendment as it will exist if the wording of his Manuscript Amendment is added to it. This is not an unfamiliar thing in Acts of Parliament: the expression "if it appears to the court to be probable" or "it appears to the court to be likely". The court is not unaccustomed to dealing with the sort of problem those words pose. I quite agree that it may be rather stronger to say "is satisfied". But the degree of satisfaction raises difficult problems; the court is not dealing with certainties.
  I think the noble Lord, Lord Latham, whose detailed concern with this Bill I appreciate (he has drawn our attention to many valuable points in the course of our discussion), over-simplifies the problem when he suggests that this is a simple question of deciding between the interests of a parent and the interests of the child. It is not nearly as simple as that. As my noble and learned friend the Lord Chancellor said on an earlier occasion, when you are taking a step so tremendous as depriving a natural mother of future maternal relationship with her own child, it is not true that you should consider only the interests of the child; certainly you should consider the interests of the child, but not exclusively. I do not wish to weary the House. My own view is that the Amendment of my noble and learned friend the Lord Chancellor is a good one, that the Amendment to the Amendment as printed is, on the whole, not a good one, though it is a possible one, but that the Amendment to the
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  Amendment with the manuscript addition makes nonsense.
  LORD CHESHAM: I am obliged to the noble Lord, Lord Conesford, for what he has said, much of which he has saved me from saying. I am bound to agree with a good deal of it, and I will add only one or two further remarks. As for the Manuscript Amendment to the Amendment, which would add the words "having regard to the future welfare of the child", I must say that I had not thought very much about whether they made legal sense or not. But one thing I would say: the words are in any case superfluous, because, as I pointed out a few moments ago, the court will always have the welfare of the child in mind. It needs no further injunction to do so; it already has the duty that I mentioned laid upon it by the principal Act.
  LORD LATHAM: If I may say so, only with the consent of the parents. It has not an absolute right to make an adoption order, even though it be in the interests of the welfare of the child, except the parent consents; that is the crucial thing.
  LORD CHESHAM: The noble Lord objects to the use of the word "likely" in my noble and learned friend's Amendment. He says that for the court to decide that a natural parent might be likely or not to discharge his obligations is impossible; the court would have to be prophetic, to see into the future, and it would be very difficult for it to make up its mind. He said, very movingly, that bad parents have no rights; the child comes first. I would be disposed to agree with him, but I do not believe that every parent who withholds his consent is the brutal, low type that his moving descriptions have been calling to our minds. I believe we can think of other reasons why people may fall into the classification of "not very good parents".
  LORD LATHAM: My Lords, I really must interpose now. This subsection is concerned only with that type of person—not with the decent parents, but with the neglectful parents.
  LORD CHESHAM: This subsection is concerned with the question of when a court may make an order without the parent's consent. I submit it is perfectly

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  reasonable that the court can consider whether a hitherto neglectful parent is likely to make a good parent in future. I think the court is entitled to give that its consideration, bearing in mind the fact that it must have regard to the future welfare of the child as a primary consideration under the law as it is now.
  Finally, my noble and learned friend has already explained on a previous occasion that the court has to satisfy itself as to the likelihood of what will happen in fact and not what is the probable intention of what may be some feckless parent. With those words, I hope I have said enough to show that my noble and learned friend's Amendment is the one that should be accepted.
  On Question, Amendment to the Amendment negatived.
  On Question, Amendment agreed to.
  Clause 19:
  Other conditions of adoption
  (5) In determining for the purposes of paragraph (b) of subsection (1) of section five of the principal Act whether an adoption order if made will be for the welfare of the infant, the court shall have regard (among other things) to the health of the applicant.
  6.18 p.m.
  LORD LATHAM LORD LATHAM moved to add to subsection (5):
  "who if the court so decides shall undergo a medical examination by a doctor appointed by the court and remunerated from public funds."
  The noble Lord said: This Amendment relates to Clause 19. On the Committee stage I raised the question of requiring the medical examination of every applicant. The Amendment does not go as far as that; it goes only so far as those whom the court think should undergo a medical examination. The noble and learned Viscount the Lord Chancellor, in replying to the debate on the Committee stage on this proposal, said that the court would have a dossier, but, as the Hurst Committee said, the dossier, if it exists, would be based upon limited information, which the Hurst Committee went on to say was not satisfactory. Apart from the dossier, which, as I have said, is not exhaustive, the court must rely upon replies made no doubt to questions put to the applicant—and those replies will be based upon the memory of the applicant, and not all of us are very exact in our memories about our own illnesses
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  even—or by the appearance of the applicant in court when the application is being made.
  What is in issue here? The thing that is in issue is whether the applicant, from the point of view of his health, is such as should be entrusted with the child of another—a young child, very often a child which may be in not too good physical condition itself from prior neglect by its own parent. Surely it is the case that no insurance company would insure a life for more than about £100 without having a medical examination of the assured. Is this child's life and future and happiness any less important than a modest insurance policy? Is it not also the case that in an ever-enlarging field of employment—not very high employment, not very skilled or technical employment—a medical examination is required, and often recurrent medical examinations are required?
  The Hurst Committee recommended quite definitely, without any question, that the applicant should undergo a medical examination by a doctor appointed by the court, and that the cost of it should be defrayed out of public funds. This Amendment does not go quite so far as that; it limits the obligation to an applicant "who if the court so decides," and goes on to say that the doctor shall be appointed by the court and shall be remunerated from public funds. If an applicant sincerely wants to adopt a child I do not think that he would boggle or object to undergoing what is now a normal circumstance, a medical examination. Fifty years ago, when the health of this nation was much lower and different from what it is now, people hesitated to have a medical examination because they feared what might be disclosed by it. That is not the case in these days—medical examinations are common things, and I do not think that the applicant would decline. If he did decline for no more convincing reason than that he did not want to undergo a medical examination, it would, first, show that his desire to adopt a child was pretty slender, and secondly, put one on notice that there might be something wrong with his or her health, and that he or she was not a person to whom a child should be entrusted.
  May I give just two illustrations of the difficulties which can arise in connection with the absence of any sufficient

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  knowledge of the health of applicants? This was the case of a third party, a gynæcologist who knew the prospective adoptive mother and knew that she could not have a family. The statutory seven days' notice was received, and the first visit was paid before the baby arrived. The child welfare officer, at once anxious concerning the woman's health, began inquiries and asked that the baby should not be handed over until all these were completed. The hospital was anxious for the baby to be discharged, and the child went to the prospective adopters not in fact before the statutory seven days. Two weeks after the baby was placed the adoptive mother was removed to hospital with an incurable disease from which she has since died. In another case, an application made to the council for a child for adoption was turned down on the advice of a chest clinic. The prospective adoptive mother, still under supervision for a known tuberculosis condition, was advised by the tuberculosis officer to wait for another year. Three months later she took a baby for adoption direct from a woman whom she had met in the park. Those are illustrations of the difficulties which a medical examination would avoid, and the number of cases and evidence otherwise submitted to the Hurst Committee convinced that Committee that it was essential that the applicant should undergo a medical examination. I therefore beg to move the Amendment standing in my name.
  Amendment moved—
  Page 12, line 12, after ("applicant") insert the said words.—(Lord Latham.)
  LORD SHEPHERD: My Lords, I should like to support the Amendment just moved by my noble friend Lord Latham. At the same time, I should like to express my admiration—I think the House would agree with me in this—of the tenacity with which Lord Latham has tried to improve this Bill on many occasions in spite of great disappointments. We have heard repeatedly that this Bill is for the protection of children. I should have thought that this Amendment would not have been necessary. I should have thought myself that it was essential that there should be provision in the Bill that foster parents would be healthy in all respects. I cannot see how any public authority or any court can
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  know that the parents are healthy unless there has been a medical examination. For that reason, I beg to support the Amendment.
  LORD MILNER OF LEEDS: My Lords, I, too, should like to support this Amendment. It seems to me that it is purely permissive and is entirely in the hands of the court, and that therefore the Government should see their way to accept it. I should have thought that it was quite impossible for a court to have regard to, or to know, the position regarding the health of an applicant unless there were a medical examination. How can the court decide whether a man or woman has consumption, perhaps, in the family, or something of that sort, unless there is a medical examination? It seems to me an essential concomitant to this clause, and that in order to make the clause work it is essential that the court should have a permissive power, which it can use when it is in doubt, in regard to the medical examination of any applicant. Therefore I hope the House will support my noble friend in his Amendment.
  LORD CONESFORD: My Lords, I think the position is that with the words as they stand, without the Amendment, the court has to have regard to the health of the applicant, and therefore might require evidence before it made an order. Naturally, I wish to hear what the Minister will say on this, but I think the House would like to avoid the implication that the evidence of a man's own doctor should never be considered sufficient. At present, I think, the court often concerns itself a good deal with the health of the applicant; in fact, I believe my noble and learned friend the Lord Chancellor assured us on a previous occasion that that was the case; and while I do not profess to have formed a concluded view on the merits of this Amendment, I do not think the House would wish by implication to suggest that there was necessarily anything insufficient about the evidence of the man's own doctor.
  LORD CHESHAM: My Lords. I think I find myself in agreement with the noble Lord. Lord Shepherd, when he said that he thought this Amendment was unnecessary. I, too, think it is.
  LORD SHEPHERD: Excuse me, but I said it was unnecessary only because I

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  thought it should have been included in the Bill in any case.
  LORD CHESHAM: My Lords, I was going on to say "for a different reason", but I still agree with the noble Lord that, so far as that goes, it is unnecessary. As Lord Latham explained, the Amendment would empower courts at their discretion to require an applicant to undergo a medical examination by a doctor appointed by the court. That is exactly the point. But the arguments of the noble Lord in favour of this Amendment can hardly be said to have supported it. Had his Amendment sought to provide that all applicants should be required to undergo a medical examination, I could have understood it; but, the noble Lord, having put forward those arguments, then says by his Amendment that this is to be at the discretion of the court—which would appear to defeat the whole object of his argument. In any case, it is already within the power of the court under the existing law to ask for a medical report in respect of an applicant and to refuse the application if the applicant does not provide the report.
  Clause 19 (5) of the Bill draws the attention of the court to the importance of the health of applicants for adoption orders and requires the court to consider this point on each occasion. That part of the Amendment which refers to medical examinations at a court's discretion would therefore seem unnecessary. That part, however, which provides for payment from public funds of the cost of a medical examination where that is required raises a point of substance. Under the existing arrangements an applicant for an adoption order must be prepared to meet some expense. Thus the law already provides, in the Rules of Court relating to adoption, that the court may order an applicant to pay first, out of pocket expenses incurred by the guardian ad litein, and also expenses incurred in attending court by any respondent or whatever part of those expenses the court thinks proper. The registered adoption societies are required by the Rules to consider the adopter's state of health before delivering a child into his care, and some societies discharge their obligation by requiring an applicant to undergo a special medical examination at his own expense. In many cases courts may well be satisfied if the report
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  of this examination is put before them; and in that event there would be no additional expenditure. I would only add this: if it had been found that the expenses which already fall on applicants had deterred prospective adopters from applying for adoption orders, Her Majesty's Government would certainly wish to consider the situation again but I have no evidence that they have been so deterred, and, therefore, there do not seem sufficient grounds for singling out the particular item with which the Amendment deals for payment from public funds.
  On Question, Amendment negatived.
  6.34 p.m.
  LORD LATHAM LORD LATHAM moved, after Clause 21, to insert the following new clause:
  Parties to applications for adoption orders.
  ("22. Rules made under section eight of the principal Act shall provide that on an application for an adoption order any person not being a parent or guardian of the child who takes part in the arrangements for the adoption shall be a respondent to the application.")
  The noble Lord said: My Lords, the purpose of this Amendment is to carry out another of the recommendations of the Hurst Committee. The continuing bane of local authorities, adoption societies and other bona fide bodies concerning themselves with foster children or adopted children is the third parties and the direct placings. Local authorities and the societies to which I have referred are very disturbed about the activities of these third parties.
  Nor is this a new trouble or anxiety, for the Curtis Committee, which was presided over by Dame Myra Curtis, reported, in paragraph 455 of their Report:
  "There is … nothing to prevent 'third parties' who are in a special position in relation to infant children—e.g., a matron of a nursing home—making a business of arranging adoptions without proper inquiry as to the home to which the child is sent and without any security that an adoption order will be applied for. There may be nominally no fee for the service but there appears sometimes to be a concealed fee—e.g., in the form of work by the mother of the child given before and after the birth or as a part of the overall payment made for the confinement. There may even be an illegal payment by the persons receiving the child which would be very difficult to discover."
  The Committee went on:
  "We think that private persons should be prohibited from arranging adoptions in the sense of inviting applications and handing over the children direct to the adopters."

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  As I have said, the Hurst Committee, which had some additional impressive evidence before it, did not go so far as the recommendation of the Curtis Committee. However, they did recommend that the third parties should be made respondents to the application.
  The measure of the problem dealt with in the Report of the Curtis Committee and facing local authorities and others acting bona fide and interested in this matter will be understood when I say that, according to the Hurst Committee, no less than one-third of the adoption orders made annually (that was in the year 1954) were in respect of children placed outside their own families, either directly or by third parties. It was because of the evidence submitted to the Hurst Committee that that Committee came to the conclusion and recommended that third parties should be made respondents to applications for adoption. The Committee went further and said that third parties
  "will then be served with notice of the application, and be interviewed by the guardian ad litem; they may also be required to attend the hearing. In order to assist the guardian ad litem in tracing any persons who may have acted as a third party, we recommend that the form of consent should include a statement by the parent of how he or she heard of the adopters".
  I am not suggesting in my Amendment that we should go as far as that, although I believe it has much to commend it; but I am asking your Lordships to approve the proposition that third parties should be made respondents.
  May I give your Lordships just two illustrations of the kind of case which local authorities meet from time to time? There was the case of a Mr. and Mrs. S., who received a child by means of a third party. The material conditions were found to be adequate, and the child was placed. It was subsequently discovered that the male applicant had been in prison, and the woman under police observation for entertaining foreign troops during her husband's absence in the Services. An adoption order was refused by the court, but at the mother's request the child remained in the care of the applicants. The other case is of Mr. and Mrs. M., aged over 50, and in poor health, who received a child through a third party, and who were quite unaware of the legal obligations to notify the local authority. The applicants lived in two
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  filthy, dark, airless basement rooms, with a male lodger. After much discussion the applicants allowed the child to be received into the care of the local authority, under the Children Act. He had been with the applicants some months and it was a great shock to him to have to be separated. I think, from the evidence tendered to the Curtis Committee and the recommendations which that Committee made, and the evidence tendered to the Hurst Committee and the definite recommendation which the Hurst Committee made, that I may hope your Lordships will accept the Amendment so that the parties may henceforth be respondent to applications for an adoption order. I beg to move.
  Amendment moved—
  After Clause 21 insert the said new clause.—(Lord Latham.)
  LORD CHESHAM: My Lords, I am sorry to keep appearing resistant to the noble Lord's eloquence.
  LORD LATHAM: I am getting used to it.
  LORD CHESHAM: So am I, my Lords. But on this occasion his Amendment proposes the making of Rules; and, while a provision in an empowering enactment requiring the making of Rules on a specified point is not without precedent, it is somewhat unusual. In this case, moreover, it seems a little unnecessary, apart from the merits, because the rule-making power is already wide enough to enable my noble and learned friend the Lord Chancellor to make Rules in the sense proposed.
  LORD LATHAM: My Lords, if the noble Lord will give an assurance that the Government will make a Rule to this effect I will withdraw the Amendment straight away.
  LORD CHESHAM: My Lords, perhaps it would be for noble Lords' convenience if I finished what I was going to say.
  LORD LATHAM: I do not want to let the offer go.
  LORD CHESHAM: My Lords, it is not going. It is true to say that the Amendment would implement a recommendation of the Hurst Committee, but it is a recommendation that we think goes rather too far. The Committee recommended that all third parties should be

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  made respondents so that they would be served with notice of the application and be interviewed by the guardian ad litem. If that is what they want, that agents are seen by the guardian ad litem, that can be made a direct provision without any necessity for joining them as respondents; and that is what it is proposed my noble and learned friend the Lord Chancellor should provide by Rules. The Rules already provide that anyone who has a legitimate interest in the outcome of an application can be made a respondent at the court's discretion. If the court requires the presence of any agent who is not a respondent, it can insist on his being called as a witness.
  It would appear that the noble Lord is putting forward the views of the Curtis Committee on discouraging agents from arranging adoptions by means of putting them to inconvenience. If that is the intention, I am afraid that I have to tell him that a provision with that object would he a misuse of the courts.
  LORD LATHAM: My Lords, of course, I cannot say what was the intention of the Curtis Committee, but it certainly was not my intention to use this evidence in the way suggested by the noble Lord.
  LORD CHESHAM: I am sorry if I have misunderstood the noble Lord. I understood him to say that he wanted it made difficult for agents to arrange adoptions, and that this method would discourage them from doing so. All I can say (I will not answer the point about whether agents are or are not desirable) is that this provision would be a misuse of the courts for that purpose, and therefore I hope he will not press his Amendment.
  LORD LATHAM: So there is no offer?
  6.44 p.m.
  THE LORD CHANCELLOR: My Lords, I would have replied, but I did not like replying when I had not heard the Mover's speech. However, I have had an opportunity to pick it up. My noble friend Lord Chesham made clear the position on the two real points of the Amendment. First, there is the endeavour to ensure that agents are seen by the guardian ad litem. That can be made a direct provision without any need for joining them as respondents, and it is proposed that I should so provide by Rules. That is what we intend to do. On
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  the other point, the Rules already provide that anyone who has a legitimate interest can be made respondent at the court's discretion; so that if the court requires the attendance of any agent who is not a respondent it can so insist. I do not think the noble Lord need be too despondent. We are meeting his points, but not in exactly the same way.
  LORD LATHAM: And, if I may say so to the noble and learned Viscount, not to the same extent. I thought there was a considerable margin between the point the noble and learned Viscount has been good enough to indicate and the recommendation of the Hurst Committee that all bodies should be respondent.
  LORD MILNER OF LEEDS: My Lords, may I ask how the court should ascertain, on an application for an adoption order, what person or persons, not being parent or guardian, take part in the arrangement? How do they ascertain that—by making an inquiry from the person or people concerned? It may be that the identity of many people who have an indirect arrangement of some kind might well not be ascertained unless there is some procedure for doing that.
  THE LORD CHANCELLOR: My Lords, if the House will allow me to say so, the idea is that the court makes full inquiries and that the background generally becomes apparent. But if that were not so, then the court would inquire into this point, because, as I have said, and as my noble friend Lord Chesham said, it is possible for the court to act. I hope that the noble Lord, Lord Latham, will not press his Amendment, in view of what has been said. I have tried very hard to treat this Bill as being, as I said, something in which we are trying to get at the best results; and I think that the noble Lord, Lord Latham, will agree—I do not want to throw bouquets at myself—that I have tried to help him all along by explaining exactly what we had in mind. In these circumstances, perhaps he might be content with what we are giving.
  LORD LATHAM: My Lords, for those reasons and also because for me not to withdraw the Amendment would, as it were, change the tune I have had to follow this afternoon, I agree to withdraw it.
  Amendment, by leave, withdrawn.
  Clause 23 [Adoption by persons domiciled but not ordinarily resident in Great Britain]:
  THE LORD CHANCELLOR: My Lords, this Amendment removes an inconsistency in the provisions about joint applicants who are ordinarily resident abroad and those concerning a sole applicant who is resident abroad. The subsection as drafted provides that joint applicants must live together with the infant for a specified period, either in England or in Scotland, but if they cross the Border, a fresh start must be made in calculating the qualifying period. No such restriction applies to a sole applicant, nor do I think that there are sufficient grounds for imposing the restriction on the joint applicants. It is simply a matter of straightening out, and I hope your Lordships will agree to it. I beg to move.
  Amendment moved—
  Page 14, line 23, leave out "England or Scotland, as the case may be" and insert "Great Britain".—(The Lord Chancellor.)
  LORD LATHAM: My Lords, may I ask the noble and learned Viscount whether any significance is to be attached to the summary departure of the Minister of State for Scotland immediately the noble and learned Viscount commenced to move this Amendment?
  THE LORD CHANCELLOR: My Lords, after the noble Lord's long and wide experience of political life, I invite him to draw his own conclusions.
  On Question, Amendment agreed to.
  Clause 24 [Provisional adoption by persons domiciled outside Great Britain]:
  6.52 p.m.
  THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after subsection (4) to insert:
  "(5) In relation to a provisional adoption order subsection (6) of section two of the principal Act shall have effect as if for the word 'three' both where it occurs in paragraph (a) and where it occurs in paragraph (b), there were substituted the word 'six'."
  The noble and learned Viscount said: My Lords, this Amendment provides that an applicant for a provisional adoption order (who will be a person not domiciled in England or Scotland), must have had the infant continuously in his care and possession for at least six consecutive months immediately preceding the date of the order and must have given the local authority notice of his intention to apply for an order at least six months
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  before the order is granted. The period in respect of applications for ordinary adoption orders is three months in each case. This change was suggested by the noble Lord, Lord Silkin, on the Committee stage, and your Lordships may remember that I said that I felt it was in accord with the general feeling of the House and promised to take action on it, and I have done so. I beg to move.
  Amendment moved—
  Page 15, line 12, at end insert the said subsection.—(The Lord Chancellor.)
  LORD LATHAM: My Lords, I should like to express the gratitude of my noble friend Lord Silkin and myself for the way in which the noble and learned Viscount has met us with regard to this matter of the extension of the period to six months. I am sure I have his assurance that in the rules which will have to be made appropriate insistence will be laid upon the court's having before it information about the conditions of life in the country to which the child is to be taken—such as labour laws, employment of children laws, educational facilities, adoption procedure and generally everything about the care and protection of the child once it gets to the country of its destination. In some respects it is a risky thing for a child to be taken as an adopted child to some countries, at least, and I am sure that the Secretary of State for the Home Department will see that the regulations are as tight and effective as can well be the case.
  THE LORD CHANCELLOR: My Lords, again with your Lordships' permission, I have sensed the feeling of the House and I shall convey to my right honourable friend the desirability that the fullest possible information be obtained.
  On Question, Amendment agreed to.
  First Schedule [Provisions as to children awaiting adoption or placed with strangers]:
  THE LORD CHANCELLOR: My Lords, your Lordships will be relieved to know that all I need say is that this Amendment is consequential. I beg to move.
  Amendment moved—
  Page 26, line 5, leave out from ("court") to end of line 6.—(The Lord Chancellor.)
  On Question, Amendment agreed to.
  House adjourned at five minutes before seven o'clock.