Sitting of 6 July 1960

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  ESSO PETROLEUM COMPANY BILL
  Mr. John Arbuthnot, Mr. Mawby, Mr. Oram, Sir Leslie Plummer, and Mr. Leslie Thomas nominated Members of the Select Committee.—[Mr. E. Wakefield.]
ORAL ANSWERS TO QUESTIONS
  EMPLOYMENT

    Scotland
    Mr. Dempseyasked the Minister of Labour how many persons were registered for employment in Scotland at the latest date for which figures are available; and what steps he proposes to take to ensure that they will be offered suitable employment in the near future.
    The Minister of Labour (Mr. Edward Heath): The Answer is 69,543 on 13th June. My local officers will continue to do all they can to find suitable vacancies for them.
    Mr. Dempsey: Does not the right hon. Gentleman realise that Scotland requires something more than generalities? Will not he consult his right hon. Friends and precisely plan the development of employment opportunities in Scotland so that the 69,500 people who are unemployed can look forward to having a job in the very near future?
    Mr. Heath: The Government are doing everything they can to persuade industry to go to development districts, and these cover 77·4 per cent. of those who are unemployed in Scotland.
    Mr. Dempseyasked the Minister of Labour how many children left school in Scotland in 1959, and what number failed to find employment; how many are estimated to leave school in 1962;
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    and, on the basis of present employment prospects, how many are likely to be placed in employment.
    The Parliamentary Secretary to the Ministry of Labour (Mr. Peter Thomas): Out of approximately 62,000 school leavers, 152 who left in the summer and Christmas terms in 1959 were still awaiting employment on 13th June. No figure is available for those who left in the spring term. Some 81,000 will seek work in 1962 and their prospects will depend on the general employment outlook, which, I am glad to say, has lately improved significantly in Scotland.
    Mr. Dempsey: Does not the Parliamentary Secretary realise that that Answer is not good enough for the people of Scotland? It is a well-known fact that one authority alone is likely to have 5,000 girls and boys unemployed in 1962. Will not he try to give us exact details of the serious nature of the problem so that we will be able to make every effort to provide employment prospects for school leavers?
    Mr. Thomas: The Question which the hon. Member asked was how many children left school in 1959 and what number failed to get employment. I gave him the exact figures. He also asked how many it is estimated will leave school in 1962, and I gave him an estimate. He will appreciate that there has been a considerable improvement concerning children over the last year—an increase in vacancies and a decrease in unemployment. The number of vacancies for girls exceeds the number of girls who are unemployed by six times.
    Mr. Lee: Is it not the case that the Government's present economic policies will result in the creation of unemployment—[HON. MEMBERS; "Why?"]— because credit squeezes and 6 per cent. Bank Rates generally have that effect. Therefore, the Ministry of Labour must have serious representations to make to the Chancellor of the Exchequer concerning the opportunities which will arise during the next two years when the bulge will create a very great problem.
    Mr. Thomas: I certainly would not agree with the hon. Member's forecast about the result of the Government's economic policy.

    Ex-Apprentices, Machine Tool Industry (Call-up)
    Mr. Swinglerasked the Minister of Labour (1) what reply he will make to the letter to his Department of 23rd June from Newcast Foundries, Silverdale, Newcastle-under-Lyme, concerning the granting of deferment of call-up to ex-apprentices in the machine tool industry and allied industries;
    (2) why his Department is granting deferments beyond the end of apprenticeships to workers of certain firms in, or supplying, the machine tool industry, and not to workers of others, in cases where the circumstances of shortage of skilled labour are similar.
    Mr. Heath: A small number of ex-apprentices engaged on engineering work of special importance to the export trade, or connected with important defence projects, have been granted extended deferment. Letters have been sent to the firm mentioned by the hon. Member confirming that their ex-apprentices do not qualify under these limited arrangements.
    Mr. Swingler: Is it not clear that Newcast Foundries, in its letter to the right hon. Gentleman's Department, proved that his Department has been granting block deferments for skilled men in certain firms in the machine tool trade and not to others? This cannot be due to the question of exports, because this firm is supplying certain parts to firms for the purpose of making machine tools for export. All these men are involved in the export trade and their skill is vitally required to maintain production.
    Mr. Heath: That is not the case. I have read these letters very carefully. The deferments which have been granted have been to firms in the categories I have mentioned in my reply. This firm does not come into those categories. It is a supplier for the machine tool industry, but is not in the machine tool industry itself. The system is well-known and it has been explained to the firm, namely, that a firm requiring exemption of this kind has to be sponsored by a Government Department. This firm is not sponsored by a Government Department and therefore does not qualify. I hope that it will no longer
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    labour under the misapprehension that it is receiving unfair treatment.
    Mr. Swingler: Does not the right hon. Gentleman realise that this firm, which, I agree is very small, is supplying firms for the purpose of export orders? While it is perfectly true that it is not itself involved in the export trade, the loss of skilled labour to it means a drag on the firms which it is supplying and they cannot comply with their delivery dates for export orders.
    Mr. Heath: Yes, but, because firms qualify for exemption because of their own products, it does not necessarily mean that all their suppliers qualify as well. What I have to have is a sponsorship from another Government Department showing that supplies would be affected because of limitations of suppliers if I did not grant these deferments, and that has not been forthcoming.

    Sunderland
    Mr. Willeyasked the Minister of Labour what was the number of unemployed in Sunderland at the latest available date; and what were the corresponding figures for 1959 and 1958.
    Mr. Heath: There were 4,780 at 13th June, 1960, 4,401 at 15th June, 1959, and 2,818 at 16th June, 1958.
    Mr. Willey: We welcome the fall in unemployment over the past few months, but does the Minister realise that, if we compare the position over the last two or three years with what is happening now, we find that the employment position is very seriously deteriorating in Sunderland? Further, is he aware that we feel that we are being sadly neglected by the Government, in spite of the right hon. Gentleman's visit to Sunderland? When shall we have some signs that the Government are aware of the deteriorating situation?
    Mr. Heath: The situation has been deteriorating overall for reasons which are well known to the hon. Gentleman, namely, the particular difficulties of the shipbuilding, ship repairing, and construction industries. The sign of the Government's interest surely is that the area is a development district, and, at the moment, from the various sources available, there are 639 jobs in the pipeline.
    Mr. Willey: Will the Minister have a word with the Minister of Transport so that we may have a vigorous, active and positive approach to shipbuilding before matters become much worse?
    Mr. Heath: I am sure that my right hon. Friend will have noted the hon. Gentleman's remarks, but he is fully aware of the position of the shipbuilding industry.

    Disabled Persons, Sunderland
    Mr. Willeyasked the Minister of Labour how many disabled persons registered on the disabled persons register in Sunderland are at present unemployed.
    Mr. P. Thomas: Five hundred and two on 20th June.
    Mr. Willey: I recognise that Remploy is considering extending the factory in Sunderland, but will the Parliamentary Secretary recognise that this can play an important part in relieving the heavy unemployment there is among the disabled, and will he do his best to give Remploy encouragement to enable it to proceed with those plans?
    Mr. Thomas: I join with the hon. Gentleman in welcoming the consideration which is being given by Remploy to an extension of the factory in Sunderland.

    Crook
    Mr. Ainsleyasked the Minister of Labour what was the number of insured persons in the Crook Employment Exchange area in each of the last ten years; what is the present number; and what are the future employment prospects for the area.
    Mr. Heath: As the answer to the first two parts of the Question consists of a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT. Crook is part of a development district and my right hon. Friend the President of the Board of Trade is making continuous efforts to attract new industry there. A considerable number of additional jobs are already in prospect.
    Mr. Ainsley: Is the Minister aware of the deep concern felt by the three local authorities in this area? Will he accept the figures which I have, namely, that, in
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    my conservative estimation, there has over that period been a migration of about 10,000 people from the area and at the moment there are more than 2,000 young people in secondary schools in my area but there is no work available there? Will he impress upon the Board of Trade the need to do something to stop the migration and keep the young people there?
    Mr. Heath: I could not accept the figures which the hon. Gentleman has given without checking them. They were not the figures for which he asked in his Question and which I gave in my Answer. Generally, as regards migration, the best answer is that more industry should go to this area, and that is what my right hon. Friend is trying to bring about.
    Following is the table:

    ESTIMATED NUMBERS OF EMPLOYEES (EMPLOYED AND UNEMPLOYED EXCHANGE AT END-MAY OF EACH OF THE YEARS 1952 TO 1959

    ——

    Males

    Females

    Total

    1952

    …

    10,450

    2,360

    12,810

    1953

    …

    10,400

    2,280

    12,680

    1954

    …

    10,140

    2,330

    12,470

    1955

    …

    10,000

    2,410

    12,410

    1956

    …

    9,690

    2,370

    12,060

    1957

    …

    9,580

    2,280

    11,860

    1958

    …

    9,180

    2,350

    11,530

    1959

    …

    8,900

    2,390

    11,290

    Comparable figures are not available for any year before 1952.

    Commercial Apprenticeship Scheme
    Mr. Boydenasked the Minister of Labour how many boys and girls, respectively, have been apprenticed through the commercial apprenticeship scheme; and what percentage this represents of the annual recruitment into commerce of juveniles in the age group concerned
    Mr. P. Thomas: One hundred and seventy boys under 18 years of age have been apprenticed under the commercial apprenticeship scheme of the Association of British Chambers of Commerce from its inception in May, 1957, until 31st August, 1959. So far, no girls have been apprenticed. I cannot say what proportion this is of total recruitment into commerce as the figures do not distinguish commerce from clerical employment generally.
    Mr. Boyden: Is not this figure pitifully small, and does not the Minister think that he should use his influence with the banks and the insurance companies, for example, which give practically no day-release, to get them to help in the scheme? Can he not take more energetic steps to do something about it?
    Mr. Thomas: I agree that the figure appears to be small, but it must be appreciated that this scheme is not intended as a general training scheme for boys and girls entering commercial employment but is for the training of potential candidates for executive posts. It is some encouragement to know that it is expected that there will, this year, be an increase of about 50 per cent. in the numbers entering the scheme.

    Ayrshire
    Mr. Rossasked the Minister of Labour how many registered unemployed in Ayrshire are in districts listed for aid under the Local Employment Act; and how many are in unlisted districts.
    Mr. Heath: At 13th June, 1,722 in the development districts of Ayrshire and 2,220 in the rest of Ayrshire.
    Mr. Ross: Will the Minister compare those figures with what he said in answer to a supplementary question by my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) when he said that virtually 75 per cent. of the unemployed in Scotland were in development districts, and will he appreciate that the development district has been drawn far too narrowly in Ayrshire and invite the Board of Trade to do something about that as well as trying to draw some industry into Ayrshire to improve the figures?
    Mr. Heath: My Answer does not contradict the answer I gave the hon. Member for Coatbridge and Airdrie. As was constantly explained during the debates on the Bill when it was passing through the House, the policy is to concentrate development districts on the areas with densest unemployment, that is to say, where the need is greatest. In some cases, it will obviously happen that, over a larger area, there is a greater number of unemployed.
    Mr. Lee: Does the right hon. Gentleman appreciate that when the Distribution of Industry Acts went out of
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    commission and the present Local Employment Act came in, my hon. Friends were very sceptical about the changes in the development areas then and we asked the Government to keep a careful watch on areas which were formerly development areas but which are not now scheduled? Will the Minister say, taking the old areas as a basis, what has been the effect now that they have been de-scheduled?
    Mr. Heath: I could not answer that without notice. If the hon. Gentleman will put down a Question, I will gladly answer it. Of course, these areas are kept continually under review.
    Mr. Rossasked the Minister of Labour if he will state, for the latest available date, the number of unemployed in Ayrshire and Kilmarnock, respectively.
    Mr. Heath: There were 3,942 in Ayrshire and 751 in Kilmarnock at 13th June.
    Mr. Ross: Does the Minister realise that Ayrshire is a county of seaside resorts and the centre of the tourist industry, and that figures like those at this time of the year are really deplorable? Will he once again promise to see the President of the Board of Trade to get something done in this county?
    Mr. Heath: Of course, my right hon. Friend will see the comments which the hon. Gentleman has made, but the figures have declined much more than seasonally this summer—529 in Ayrshire between May and June and 25 in Kilmarnock—and in Kilmarnock the percentage of 2·6 is, of course, lower than the average for Scotland as a whole, which is3·2 per cent.
    Mr. Ross: Will the Minister accept that we in Ayrshire take a very dim view of the attitude of complacency on the part of the Government towards this problem? We still have 4,000 unemployed, whereas I doubt that we had 1,000 under the Labour Government.
    Mr. Heath: There is absolutely no complacency in the Government. I am sure that the hon. Gentleman will be pleased to know that there are about 11,088 jobs expected to accrue in Ayrshire, of which 591 are in Kilmarnock.

    Employers and Trade Unions (Consultation)
    Mr. Liptonasked the Minister of Labour if he will invite representatives of employers and trade unions to consider with him the human and industrial problems of the next five years.
    Mr. Heath: I am, of course, in regular contact with representatives of employers and trade unions through the various advisory bodies concerned with special aspects of these problems. I am also frequently in touch with them in many other more informal ways.
    Mr. Lipton: Is the Minister aware that in the 1959 election programme of the Conservative Party, in the section which was somewhat ironically entitled "Sharing Prosperity", a pledge was made to call such a conference as I have indicated in my Question? When will the right hon. Gentleman redeem the pledge, or will it be one of the many unredeemed pledges of this Administration?
    Mr. Heath: This Administration is continually in process of redeeming its pledges. [HON. MEMBERS: "Oh"] That is why the hon. Member for Brixton (Mr. Lipton) is so upset. I am perfectly ready to enlarge consultation with both sides of the industry when a suitable opportunity occurs.

    Ex-Regular Service Men (Resettlement Advisory Board)
    Mr. Atkinsasked the Minister of Labour whether he will make a statement about his plans for the advisory board on the resettlement of ex-regular Service men.
    Mr. Heath: The Advisory Board was appointed in July, 1957, for a two year period and re-appointed last year for a further twelve months. As the arrangements for resettlement are now operating smoothly, and ex-regulars are being readily accepted in commerce and industry, the special advice of the Board is no longer required. I have therefore decided, after consultation with the Chairman, that it should not be re-appointed. My Departmental machinery for assisting ex-Regulars will continue unchanged and the Resettlement Committees in Scotland, Wales and
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    the regions of England have been re-appointed.
    I would like to thank Sir Frederic Hooper and the members of the Board for the time and effort which they have so willingly and successfully devoted to this work.
    Mr. Atkins: Is my right hon. Friend aware that his expressions of gratitude to Sir Frederick Hooper will be widely shared throughout the House? Can he say whether this action will in any way affect the voluntary associations which help ex-Regulars into employment?
    Mr. Heath: No, Sir. The relations with voluntary associations will remain exactly the same, and we shall continue our present close co-operation with them.

  ROYAL NAVY

    H.M.S. "Jaguar" (Board of Inquiry)
    Mr. Dribergasked the Civil Lord of the Admiralty if he will make a statement on the findings of the court of inquiry into the damage to H.M.S. "Jaguar"; and if he will now estimate the approximate cost of the repairs.
    The Civil Lord of the Admiralty (Mr. C. Ian Orr-Ewing): The Board of Inquiry found that shot blast grit was present in the lubricating oil system of the main engine which failed. The grit was, or had been, present in the main engines, probably before the acceptance trials. There is no question of sabotage
    The detailed investigations in hand have not yet produced enough evidence to enable us to define the exact scope of the repair work required. Any estimate quoted at the present time would therefore be unreliable.
    Mr. Driberg: How soon will the Civil Lord be able to give an estimate? If he cannot give it by next Wednesday, which will be the last occasion on which he will be answering Questions before the Summer Recess, will he make a statement before the House rises, since a good deal of public money seems to have been wasted?
    Mr. Orr-Ewing: I am certainly prepared to promote or encourage a Question at the right moment. I do not expect that it will be very long. As the

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    hon. Member will know, we have to take the engine down and meticulously examine every part of it, and that is a long process, before we can assess exactly what has to be done. In the meantime, this ship has been replaced by another ship in her class.
    Mr. Steele: At what stage did this grit get into the oil? Can the hon. Gentleman give any indication of when it happened?
    Mr. Orr-Ewing: I cannot go much further than I did in the original Answer. It very probably got in before the acceptance trials. We have not been able to pinpoint it more closely at present.
    Mr. Steele: I understand, therefore, that the inquiries have shown that it was "probably" before the trials?

    H.M.S. "Bulwark"
    Mr. Wallasked the Civil Lord of the Admiralty whether he will make a statement about the experience so far gained with H.M.S. "Bulwark" since her employment as a commando carrier.
    Mr. C. Ian Orr-Ewing: Although it is early days, since H.M.S. "Bulwark" has been in commission as a commando carrier for only three months, first reports are promising. Trials show that she can successfully fill her primary rôle and that in an emergency she could transport a second commando of about 600 men. We have also had very good reports on the air-conditioning system and the excellent effect it has on the overall efficiency.
    Mr. Wall: As the trials have proved a success, can my hon. Friend say when it is likely that a second commando carrier will be provided?
    Mr. Orr-Ewing: H.M.S. "Albion" has been selected for this and preliminary work has already been authorised.

    N.A.39 Aircraft (Operational Service)
    Mr. Wallasked the Civil Lord of the Admiralty when he expects the first N.A.39 Squadron to be in operational service.
    Mr. C. Ian Orr-Ewing: It is not customary to disclose or forecast such information. I can say that the trials with
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    several aircraft of the development batch have been going very well.
    Mr. Wall: Can my hon. Friend say how the sales of this outstanding aircraft to our foreign allies are proceeding?
    Mr. Orr-Ewing: That is really a question for my right hon. Friend the Minister of Aviation, but my hon. Friend will know that it is part of Government policy under interdependence to try to interest N.A.T.O. and Commonwealth allies in now forms of armament in all the Services.
    Mr. Steele: The hon. Gentleman so far has not been able to interest the R.A.F.

    Naval Ratings (White Gloves)
    Vice-Admiral Hughes Hallettasked the Civil Lord of the Admiralty whether he is aware that the naval ratings who lined the streets on the occasion of the wedding of Her Royal Highness Princess Margaret were wearing white gloves; whether this is required by the uniform regulations; and on what occasions sailors must wear white gloves.
    Mr. C. Ian Orr-Ewing: Yes, Sir. Wearing of white gloves is authorised for naval guards of honour at important ceremonial occasions in the United Kingdom between 1st October and 30th April. This instruction was issued last year in Admiralty Fleet Orders and is being incorporated in the next edition of the uniform regulations. The wearing of these gloves was extended as a special case to the naval street-lining parties on this occasion, as it was considered that they would look smarter.
    Vice-Admiral Hughes Hallett: While I am sure that everyone will agree that, as ever, these men looked very smart indeed, may I ask my hon. Friend whether, nevertheless, he is aware that there are many people who do not regard the wearing of white cotton gloves by seamen as entirely appropriate? Can my hon. Friend at least give us an assurance that we shall not see anyone in tropical rig wearing long white cotton gloves?
    Mr. Orr-Ewing: In answer to the first part of my hon. and gallant Friend's supplementary question, I would say that the Royal Marines have always worn

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    white gloves and so have other Services. Therefore, this brings the Royal Navy into line with the other Services. I think that the House generally will agree that these men looked smart. I certainly note the last point and I assure my hon. and gallant Friend that there is no question of lengthening this issue.
    Mr. Shinwell: Are the gloves an Admiralty issue or a Government issue or were the ratings required to pay for them?
    Mr. Orr-Ewing: They were an issue.
    Captain Litchfield: Since when has it been the custom of the Royal Navy to follow the custom of the other Services?
    Mr. Orr-Ewing: When the other Services happen on something which we believe is worth copying, we copy it, but generally they copy us.
    Mr. Dugdale: In whose head did this curious little hit of whimsy emanate?

    Gibraltar
    Mr. Hollandasked the Civil Lord of the Admiralty what plans have been made for the Royal Navy to celebrate, on 24th July, the 256th anniversary of its victory at Gibraltar in the Western Mediterranean.
    Mr. C. Ian Orr-Ewing: None, Sir.
    Mr. Holland: Does my hon. Friend recall that this "impregnable" fortress was captured by a naval landing party of a detachment of the Royal Marines in an action which lasted less than four days? As this fortress of Gibraltar has been a valuable asset to the country ever since, does not my hon. Friend think that this occasion merits an annual order to the Fleet to splice the mainbrace?
    Mr. Orr-Ewing: I will bear in mind what my hon. Friend has said and have a look at the matter.

    Lower-Deck Structure (Committee's Report)
    Mr. Willisasked the Civil Lord of the Admiralty whether consideration of the Report of the Committee on Lower-Deck Structure has yet been completed.
    Mr. C. Ian Orr-Ewing: No, Sir.
    Mr. Willis: When will consideration of this Report be completed? The Admiralty has now had the Report far two years or more. Is it not really time that it finished its studies?
    Mr. Orr-Ewing: I agree that we have had this Report for about two years. It raises a number of fundamental issues about the careers of all ratings and it would be wrong to come to a quick or indefinite decision before we have thoroughly considered all the implications both on the efficiency of the Navy and on the careers of the men affected.
    Mr. Willis: When are we likely to learn the results of the consideration?
    Mr. Orr-Ewing: I can only say that the Board of Admiralty is examining each facet of these recommendations. We are having a long discussion on them and we are trying to come to some proper conclusions which will benefit the Navy and the men.

    Rosyth Dockyard (Assisted Travel Scheme)
    Mr. W. Hamiltonasked the Civil Lord of the Admiralty what protests he has received concerning the threatened withdrawal of the assisted travel scheme at Rosyth Dockyard; and how soon he expects to come to a decision on the matter.
    Mr. C. Ian Orr-Ewing: Apart from a memorandum sent to me by my hon. Friend the Member for Fife, East (Sir J. Henderson-Stewart) and the hon. Member for Fife, West (Mr. W. Hamilton), I have received no protest about this. I cannot say when the review of this scheme will be completed but we would give three months' notice of any change that we decided on.
    Mr. Hamilton: Is the Minister aware that the trade unions concerned are very perturbed at the prospective withdrawal of this scheme, and that it will mean that many workers will be faced with a substantially increased outlay per week and that many of them, who travel very far, will probably have to give up their jobs? Is he aware that this is at a time when it is very difficult in Scotland to obtain an alternative job? Will he undertake to keep these considerations in mind before he gives a decision?
    Mr. Orr-Ewing: We have always tried to make it clear that this form of travel aid is no part of wages and was not to be so considered. I understand what the hon. Member has said. We will certainly allow time for representations to be made before any changes are made. The men pay the first 6s. of their own travelling costs. After that, about 1,000 men receive 3s. or less a week assistance; another 1,000 receive between 3s. and 9s. a week assistance; and a further 500 receive between 9s. and 21s. a week assistance. We have also to bear in mind the interests of the taxpayers as well as the interests of others. I will certainly see that this matter is carefully considered before any decisions are reached.

    N.A.T.O. Projects, Argyll
    Mr. Lilleyasked the Civil Lord of the Admiralty whether he will now make a statement about further North Atlantic Treaty Organisation projects in Argyll.
    Mr. C. Ian Orr-Ewing: After receiving competitive tenders the Admiralty has now awarded the main contract for the construction of a N.A.T.O. oil fuel depot at Loch Striven to Messrs. Melville Dundas and Whitson Ltd. of Glasgow. The work is expected to take two years to complete, and the cost to be about £2 million.
    Mr. Lilley: While thanking my hon. Friend for that statement, which will give great pleasure, I am sure, to my hon. Friend the Member for Argyll (Mr. Noble), may I ask whether he is aware that this statement will be accepted by the building and civil engineering industries in Scotland as a most useful contribution, which they sorely need, to using plant and labour? Will he say whether this is additional work to that which is at present going on?
    Mr. Orr-Ewing: I gladly confirm that this is in addition to the Glen Douglas scheme, which will cost £¾ million; to the Macrihanish scheme which will cost over £1 million; to the boom defences at Fairlie, which in total will be over £3 million; and to the Rosneath scheme, which is to cost £300,000.
    Mr. Ross: Is the Minister sure that those figures are right? The Minister of Labour has just explained to me that when he told the House, in reply to my
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    supplementary question on Question No. 10, that there were 11,088 jobs in the pipeline, he meant 1,188 jobs.
    Mr. Orr-Ewing: I was expecting a warm welcome of cheers from the other side of the House. Up to that time it seemed to me that they were most anxious to have more jobs in Scotland. I have now announced how this might come about.
    Mr. Emrys Hughes: Will the Minister keep in mind that these jobs do not add to the economic plan for reconstructing the industries of Scotland, that they do not assist the recovery of essential industry in Scotland and that they are a waste of money on purely military and naval projects and will eventually lead to pools of unemployment?
    Mr. Orr-Ewing: We believe in being loyal to our N.A.T.O. commitments. Some of these projects may have commercial as well as military advantages.

    H.M.S. "Lion"
    Commander Keransasked the Civil Lord of the Admiralty whether he will make a statement about the completion, this year, of H.M.S. "Lion".
    Mr. C. Ian Orr-Ewing: H.M.S. "Lion" will be commissioned on 20th July, 1960, and accepted from the shipbuilder on 22nd July. She will be the second of the Tiger Class cruisers to be accepted into service. These ships, with their automatically controlled armament and other up-to-date equipment, long endurance and extra command facilities will be a most valuable addition to the strength of the Navy.
    Commander Kerans: While thanking my hon. Friend for that reply, may I ask whether he can say when the third Tiger Class cruiser is due?
    Mr. Orr-Ewing: I cannot. I think that it would be wrong at this stage to give a firm date. If my hon. and gallant Friend puts down a Question in due course, I shall be happy to try to answer it.

    Royal William Victualling Yard, Devonport (Fire)
    Miss Vickersasked the Civil Lord of the Admiralty if he will make a statement in regard to the recent fire in the

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    Royal William Victualling Yard, Devonport.
    Mr. C. Ian Orr-Ewing: On 1st July, a fire broke out on the second floor of the East Loft Bakery Block at the Royal William Yard, Devonport. The Dockyard Fire Brigade and the City of Plymouth Fire Brigade were called in and the fire was extinguished about four hours later. There were no casualties.
    Investigations are still being carried out as to the cause of the fire.
    Miss Vickers: While thanking my hon. Friend for that reply, may I ask him to remember that this is a very beautiful building by Sir John Rennie? I hope that he will find it possible to rebuild this section. Will he assure me that, in the meantime, while investigations are going on, no men will be dismissed?
    Mr. Orr-Ewing: I am aware that this building has a very nice façade but until structural surveys have been completed it would be wrong to announce our future intentions about the building. I can assure my hon. Friend that no people will be dismissed as a result of this fire.
    Sir J. Maitland: Will my hon. Friend tell me whether in this case normal fire insurance was carried?
    Mr. Orr-Ewing: No. The Government Departments and Service Departments do not carry normal fire insurance. They carry their own risks.

    Royal Dockyards (Working Week)
    Miss Vickersasked the Civil Lord of the Admiralty if he will make a statement on the introduction of the 42-hour week in Her Majesty's Dockyards.
    Mr. C. Ian Orr-Ewing: As from 3rd July the conditioned weekly hours of industrial employees in Her Majesty's Dockyards at home have been reduced to forty-two.
    We have received assurances from the trade unions of co-operation in every possible way to ensure that the shorter working week will lead to no loss of production and they have accepted a general obligation to assist in measures designed to increase efficiency.
    Miss Vickers: While thanking my hon. Friend for that Answer, which I am sure will be very satisfactory to all concerned, may I ask whether it has been agreed that the breakfast break, which they used to get on arrival—between ten and thirty minutes of arrival—is a wartime anomaly and is to be stopped?
    Mr. Orr-Ewing: Yes. We had a meeting of the Admiralty Industrial Council on this matter and the trade unions agreed that this was rather an old anomaly which should no longer exist. There will be other breaks during the day but not immediately after arrival.
    Mr. Steele: Is the Minister aware that the Government have no reason to congratulate themselves on the long-drawn-out negotiations which took place before a decision was reached and that, particularly in a factory in my constituency, industrial relations have certainly not been assisted?
    Mr. Orr-Ewing: This is probably not the right moment to start a long debate on the long-drawn-out negotiations in the J.I.C. and other councils, but there are two sides to the case. If the hon. Member is right in saying that labour relations have been roughened, I hope that this settlement, particularly in our own dockyards, will re-establish confidence in the Whitley Council and its workings.

  BRITISH ARMY

    Microbiological Research Establishment, Porton
    Mr. Frank Allaunasked the Secretary of State for War what was the total expenditure last year on the Microbiological Research Establishment, Porton; how much was spent in developing or manufacturing cholera, typhus, diphtheria, parrot fever, dysentery, plague, and botulinus germs and viruses, respectively; and if he will stop any further preparation for germ warfare.
    The Secretary of State for War (Mr. Christopher Soames): It would not be in the public interest to give the figures asked for. With regard to the future, I would refer the hon. Member to the answer of my right hon. Friend the

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    Minister of Defence on 23rd March this year, when Government policy in this respect was plainly stated.
    Mr. Allaun: Is it public security which prevents an Answer or is it public revulsion? Will the Minister admit that such research has taken place and, secondly, that stocks of botulinus toxins have been built up?
    Mr. Soames: Research is taking place constantly. I noticed a piece by the hon. Member in a periodical recently in which he said,
    "I confess that my blood ran cold as fact after fact"
    about germ warfare
    "was driven home"
    at meetings in the House of Commons. In view of that, I thought that he would be glad to know that steps were being taken to ensure that we keep abreast of movements in this field in order to be able to protect ourselves.

    Recruitment
    Mr. Shinwellasked the Secretary of State for War if he will state the latest recruitment figures.
    Mr. Soames: The figure for the Army for the month of May is 2,480 compared with 2,169 in April. Full details covering all three Services will be published this afternoon in the normal way.
    Mr. Shinwell: Does not the right hon. Gentleman have any anxiety about the figures? Are they coming up to expectations? If not, what does he propose to do about it?
    Mr. Soames: Projecting the recruiting figures forward to the end of 1962, we have no reason to alter the opinion of either myself or my right hon. Friend the Minister of Defence, which has been frequently stated in the House, that we will achieve an all-Regular Army of 165,000 in the early days of 1963.
    Mr. Shinwell: Is not the right hon. Gentleman making assumptions which are not justifiable on the facts and figures? Are the recruiting figures coming up to expectations or are they below expectations? Surely it is upon the basis of those figures that we make our estimates.
    Mr. Soames: This has been worked out on the basis of facts and figures and
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    not on the basis of assumptions and guesses as to what will happen in the next months or years.
    Viscount Hinchingbrooke: Are our defence commitments fitted to recruiting figures or vice versa?
    Mr. Soames: Recruiting figures of voluntary service must be regulated by the number of men who are prepared to come forward and join the Army.

    Malkara Anti-Tank Rockets
    Mr. Harold Daviesasked the Secretary of State for War what is the cost of the 500 Malkara anti-tank rockets ordered from Australia to equip the Royal Armoured Corps; and why this order was placed despite the fact that the weapon was cumbersome and already out of date.
    Mr. Soames: Some 400 missiles have been ordered at a cost of about £1 million. Others will follow. Malkara is air-portable, accurate, highly lethal against the heaviest tank at considerable range, and is already in production. It will be a most valuable addition to our armoury.
    Mr. Davies: Is the right hon. Gentleman aware that some of us know that there are always difficulties in ordering equipment like this? Can he explain why it is that Australia has abandoned this weapon because it is cumbersome and is not effective, while the British Government go ahead? Is it not time that somebody somewhere had a policy of building up our hardware instead of spending public money on equipment that is useless?
    Mr. Soames: I wonder whether the hon. Gentleman knows the reasons why the Australians have not ordered this weapon. I must make it clear that it was developed in Australia on our behalf and to meet our needs. It was not developed to meet the needs of the Australian Army, which is concerned with the much more restrictive conditions of jungle warfare. I would have been very surprised if the Australians had decided to adopt this weapon, because it does not fit their needs.
    Commander Kerans: Is my right hon. Friend aware that I saw this weapon last month when it was shown to many hon.

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    Members? I found it to be extremely effective for both moving and stationary targets at varying ranges.
    Mr. Soames: I am grateful to my hon. and gallant Friend for those comments. I wish the hon. Member for Leek (Mr. Harold Davies) had been able to see it for himself.
    Mr. Steele: How many of our N.A.T.O. allies have accepted this weapon and are prepared to buy it?
    Mr. Soames: It has not been sold to any other N.A.T.O. countries at present.

  POST OFFICE

    Postal Franking Machines (Advertisements)
    Mr. Jannerasked the Postmaster-General if he will prohibit the use of officially-approved postal franking machines for printing advertisements encouraging drinking before driving an example of which has been sent to him by the hon. Member for Leicester, North-West.
    The Assistant Postmaster-General (Miss Mervyn Pike): As my right hon. Friend informed the hon. Member the particular slogan to which he refers was intended to advertise a book. Unfortunately, it was clearly liable to misinterpretation, and as soon as it came to notice it was withdrawn under longstanding arrangements which are designed to preclude the sort of advertisement the hon. Member has in mind.
    Mr. Janner: While expressing my gratitude to the hon. Lady for the expeditious way in which this was dealt with, in view of the fact that such a statement as
    "Time Gentlemen, please! One For the Road."
    actually appeared on this franking, what kind of precautions does she intend to take to ensure that such a serious statement as that should not be contained in an allowed franking arrangement?
    Miss Pike: This was a regrettable error. Steps have been taken to ensure that the rules are not infringed any more.
    Mr. Mason: How closely does the hon. Lady watch these franking developments? This is not the first mistake in
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    recent months. We had the shocking franking recognising refugee year when the open hand appeared against the Monarch's head. Is there not need for closer scrutiny by the Post Office?
    Miss Pike: Regrettable errors have occurred, but to err is human, and we have been very unfortunate in these instances.

    Bear Cross Parade, Bournemouth
    Mr. Edenasked the Postmaster-General (1) what sub-offices are available in the borough of Bournemouth within one mile from Bear Cross Parade, Anchor Road, Bournemouth; and what is the extent of the counter space in each case;
    (2) when he proposes to authorise the establishment of a new sub-office in Bear Cross Parade, Anchor Road, Bournemouth, in order to meet the needs of the substantially increased population in the district.
    Miss Pike: There are three sub-post offices in the Borough of Bournemouth within a mile of Bear Cross Parade, Anchor Road. They are Cunningham Crescent, West Howe, and Kinson, and the lengths of their counters are 10½ feet., 10 feet. and 15 feet respectively. Also within a mile is the Bearwood sub-office, in the Borough of Poole, which has a counter 7 feet, long. I am sorry that in a letter sent to my hon. Friend in January it was wrongly stated that there were only three offices within a mile of Anchor Road. I am afraid I should not be justified in authorising yet another office in this area.
    Mr. Eden: Is my hon. Friend aware that, whilst I appreciate that she has given this very full consideration, her Answer will, nevertheless, disappoint a very large number of people who have recently come into this area? Will she give an assurance that her mind is not closed on this subject and that the needs of this area will have top priority on her list?
    Miss Pike: I am very glad to give an assurance that we will keep this under review. My hon. Friend is quite right in saying that there has been considerable housing development in this district. Within half a mile of this arcade the

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    population has risen, I think, from 2,000 to 7,900. The difficulty is that these offices are badly sited. We shall keep this in mind.

    Premises, Crawley
    Mr. Goughasked the Postmaster-General what are the reasons for the delay in his negotiations with the West Sussex County Council regarding the lease of Post Office premises for use by the proposed county library at Crawley; and if he will make a statement.
    Miss Pike: The County Council, the Post Office, and the Ordnance Survey will be sharing the use of this building, and the settlement of the details of the lease gave rise to some complications. I am sorry that it has all taken so long, but agreement on all points of substance has now been reached, and the Council took possession of its part of the premises on 25th June.
    Mr. Gough: While I thank my hon. Friend for that reply, may I ask whether she is aware that there is very strong local feeling that the Post Office authorities have delayed this matter quite unnecessarily? Is she further aware that there is a strange coincidence between the agreement finally come to and the date on which I originally put this Question on the Order Paper?
    Miss Pike: I realise that there has been some delay in this matter. It has been a very complicated one. On 25th March we suggested to the Council that it could take occupation in advance of formal agreement. It was not prepared to do that, however. The offer was repeated on 5th May and the Council took occupation on 25th June.

    Space Communications
    Mr. Mathewasked the Postmaster-General what plans he has for the eventual introduction of long-range telephone, teleprinter and television circuits routed via the moon, satellites or other space bodies; and what research his Department is carrying out on this new low-cost method of communication.
    Miss Pike: The possibilities of space communications are under close study by my officers and other organisations. It is, however, impossible for me to say
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    whether such techniques will provide reliable or economical means of communication.
    Mr. Mathew: Is my hon. Friend aware that I am not asking the Post Office to reach for the moon in that sense? The American Post Office is already operating a successful long-distance, low-cost teleprinter service across the Pacific, and scientists, at any rate outside the Post Office, consider that this is the probable pattern of long-range communications for the future?
    Miss Pike: I agree with my hon. Friend. The Post Office has always prided itself, in its 300 years of existence, on being well ahead of other people, and we are treating this as a matter of urgency.
    Mr. W. R. Williams: While accepting the last part of that reply, may I ask the hon. Lady two questions? Is the Post Office Research Department keeping in close liaison with Jodrell Bank on this very interesting scientific possibility? Secondly, would it not be in the national interest for the British Government to give further financial assistance to Manchester University and to the Jodrell Bank authorities in order that there can be a still more intensive search into these possibilities, at the same time helping to prevent some of our leading scientists in this subject from accepting very tempting offers from the United States and other countries?
    Miss Pike: The answer to the first part of the supplementary question is. "Yes" The second is not necessarily for the Post Office, but the Post Office is always glad to have more money for research

  WIRELESS AND TELEVISION

    Satellite Station, Llandrindod Wells
    Mr. Watkinsasked the Postmaster-General whether he will sanction the British Broadcasting Corporation to expedite the construction of the satellite station near Llandrindod Wells both for very high frequency radio and television inasmuch as the equipment is available; and whether he will give an assurance that the service will be available before next year.
    Miss Pike: The B.B.C. does not need such sanction from my right hon. Friend. It tells us that it is pressing on as fast as it can with this station, but it cannot promise operation before the early summer of next year.
    Mr. Watkins: Although her right hon. Friend has no power to direct the B.B.C., could the hon. Lady use her charming manner in order to ask it to do so? I do not want to see my constituents spending another Christmas without proper television reception, and with the bad weather in Wales they want to hear the radio at times.
    Miss Pike: I can assure the hon. Gentleman that the B.B.C. is pressing on with this as quickly as possible.
    Mr. Ness Edwards: Will the hon. Lady convey to the B.B.C. that we are of the impression that it has "ratted" on an undertaking given to a delegation of Welsh Members in connection with this matter?
    Miss Pike: I am sure that it will take note of the right hon. Gentleman's observations.

    Programmes
    Mr. Boydenasked the Postmaster-General if he will exercise his powers under Section 15 (4) of the Licence and Agreement to require the British Broadcasting Corporation to refrain from sending any television matter involving a display of violence.
    Miss Pike: No, Sir.
    Mr. Boyden: Is the hon. Lady satisfied that the B.B.C. exercises adequate scrutiny over programmes of this sort and is not in unhealthy competition with the commercial service?
    Miss Pike: I assure the hon. Member that the B.B.C. watches this matter very carefully. Hon. Members will probably be aware of the B.B.C.'s recently published guide note for producers of television programmes. The B.B.C. is well aware of this problem, but it would be helpful if specific difficulties could be brought to its attention.
    Mr. Lipton: Is the hon. Lady aware that the other night a television programme showed someone being hanged? Is that the sort of thing which should be encouraged?
    Miss Pike: I did not see that programme, but I have heard that it drew a great deal of public comment.

  TELEPHONE SERVICE

    Experimental Radiophone Service
    Mr. Masonasked the Postmaster-General how many vehicles have been fitted with a telephone instrument; if he is satisfied with the progress of this service; and if he will make a statement.
    Miss Pike: I think the hon. Member has in mind the experimental radiophone service in South Lancashire. Fifty-four vehicles are now fitted with these telephones. The service is growing, but not as rapidly as I should like. Nor is it as yet economic. As to our future plans, I would refer the hon. Member to the detailed information which the Postmaster-General is circulating in today's OFFICIAL REPORT.
    Mr. Mason: Is not the hon. Lady aware that it is not growing because it is not a satisfactory service? Is she not aware that a customer has to pay £200 for a set, it costs £30 in licence fees, and 10d. per minute to use, and that there is no privacy, no secrecy in using this telephone instrument? It is commonplace to listen in on cotton deals, sales of machinery, and private and intimate personal conversations. If the hon. Lady does not do something about ensuring secrecy on these telephone instruments, then telephone tapping in this service may even become a business.
    Miss Pike: This new service is having teething troubles, but my right hon. Friend is looking at it carefully.

    Telephone Directories, Leeds (Leaflets)
    Mr. C. Pannellasked the Postmaster-General whether his attention has been called to a leaflet, published by a Fascist body, sent to him by the hon. Member for Leeds, West, which is one of many deliberately left in telephone books in the City of Leeds; and what steps he will take to protect users of Post Office facilities from seditious libels in public places for which he is responsible.
    Miss Pike: My right hon. Friend's attention has been drawn to this leaflet.

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    So far as Post Offices premises are concerned, our staffs try to keep them free from any matter which may be offensive to our customers.
    As to the incidents referred to by the hon. Member, I am informed that the proper authorities are keeping a close watch on these people and on their offensive propaganda, and will take prompt action if there is any contravention of the law.
    Mr. Pannell: Is the hon. Lady aware that, when I sent this leaflet to her right hon. Friend, I thought that he would consider the matter sufficiently serious to send it on to the Director of Public Prosecutions for him to decide whether there was any ground for an action for seditious libel? Bearing in mind that the leaflet bore the imprimatur of the printers, the Combat Press, of 116 City Road, London, is this not a serious matter which might lead to civil disorder in the City of Leeds? Is not the hon. Lady aware that in the opinion of some of us there is a plain duty on her right hon. Friend to stop this practice?
    Miss Pike: The issue is one of sedition, and responsibility for that comes under the Home Office, whose attention has been drawn to the matter and which is keeping a watch on it.
    Sir C. Taylor: Can we know what this pamphlet says, and can it be circulated in the OFFICIAL REPORT?
    Miss Pike: This is one of a series of pamphlets and I do not think that any good purpose would be served by following the hon. Member's suggestion.

    Waiting Lists and Shared Lines
    Mr. Masonasked the Postmaster-General what plans he has in mind for making the telephone service more attractive, for reducing the waiting list, and for eliminating the shared-line service.
    Miss Pike: Our objectives for the telephone service were described in the White Paper (Cmd. 973) published last March. Some of the matters mentioned by the hon. Member depend on the capital resources available and the rate at which new applications are received. On others my right hon. Friend hopes to make a statement in the House today.
    Mr. Mason: Is the hon. Lady aware that things are gradually getting worse in the Telephone Department of the Post Office; that there are still 147,000 people waiting for telephones and still 1 million using shared lines; that there is a demand for telephones, and that unless we get more subtle tariffs introduced, so that people will be encouraged to use telephones more when they get them, as well as encouraging the Treasury to hand over more money for telephone development, those potential customers will be lost?
    Miss Pike: I assure the hon. Member that the hard core of the list numbers 50,000 and that the others are in the pipeline and are being attended to. Last year we connected 400,000 new telephones and with a buoyant economy the waiting list is always growing. We have this matter very much in mind. The hon. Gentleman will find that my right hon. Friend is well aware of all the possibilities suggested in the second part of the hon. Member's supplementary question.

  ROYAL AIR FORCE

    United States Aircraft, United Kingdom
    Mr. Frank Allaunasked the Secretary of State for Air if he will ask the United States Government not to allow the National Aeronautics and Space Administration to repeat the U2 flights which have taken place from Laken-heath, England.
    The Under-Secretary of State for Air (Mr. W. J. Taylor): I have nothing to add to the reply which my right hon. Friend gave to the hon. Member for Leeds, East (Mr. Healey) on 21st June.
    Mr. Allaun: Is that evasion good enough, since the lives of every man, woman and child in our country may be lost in the event of another U2 incident? Will the Under-Secretary confirm or deny a statement by Mr. Hugh Dryden, deputy chief of N.A.S.A., testifying in Washington on 2nd June, that such flights had taken place from the American base at Lakenheath, Norfolk?
    Mr. Taylor: I have no desire to be discourteous to the hon. Member or to

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    The House, but I am not prepared from this Box to confirm or deny anything of that kind.
    Mr. G. Brown—
    Mr. Allaun: On a point of order. May I seek your guidance, Mr. Speaker? First, I put down this Question to the Minister of Defence, who was then top of the list for answering Questions, three weeks ago. It was transferred to the Secretary of State for Air. Yesterday, the Prime Minister told the House that if this Question were put down, he would answer it. Therefore, is the House not entitled to an answer now?
    Mr. Speaker: I do not want to use up the rest of Question Time, but I am afraid that I may have to do so. The situation is extremely complicated and there is also involved in this context a Question by the hon. Member for Lincoln (Mr. de Freitas). The House knows the princple—we had it in connection with Questions relating to the nationalised industries. This is the one instance where the conduct of Ministers governs the operation of the rules of the House, in the sense that a refusal to answer a Question of a given class results in Questions of that class no longer being accepted by the Table. That is the difficulty.
    The House will remember that a Question asked of the Secretary of State resulted in an Answer rather like that which has just been given by the Under-Secretary. Thereafter, the Table operated on the principle that that class of Question was therefore barred. The Question of the hon. Member for Salford, East (Mr. Frank Allaun) would have been condemned under that principle had it not been deferred, as he knows. We then took the view that, in view of what the Prime Minister said yesterday, the situation had changed from the point of view of the Table and that we could rightly allow Questions of this kind. We have done so and that is why there has been a change in the Table's practice for the moment. I say nothing about what the Answer of the Prime Minister may be, or what may be its form—I do not know—and I am not criticising anything that happens here. I am simply explaining, in answer to the point of order, what has happened.
    Mr. G. Brown: The Under-Secretary said that he would not confirm or deny
    450
    reports on an issue which the people of Britain are entitled to have clearly put to them by Her Majesty's Ministers. Have these aircraft taken off from Laken-heath? Did they take off without permission or did they not? We can then consider what is the right thing, but should not Ministers stand up and say what they did on those occasions?
    Mr. Taylor: I was referring to a supplementary question put by the hon. Member for Salford, East (Mr. Frank Allaun) which referred to evidence given before a United States Senate Committee which I did not feel was a matter for me.
    Mr. G. Brown: The words the Under-Secretary used were, "I am not prepared to confirm or deny"—[Interruption.]—this must be a peculiar Tory mentality. The lives of British people are at stake and the whole policy of Britain is a stake. If Ministers want to persist in denying that, that is O.K. and I will leave it, but I want there to be no misunderstanding—the Minister is refusing to answer yes or no to the Question—[Interruption.]—I will go on when you shut up.—[HON MEMBERS: "Order"]—
    Mr. Speaker: If the right hon. Member for Belper (Mr. G. Brown) wishes to make observations, he must address them to the Chair.
    Mr. G. Brown: I beg your pardon, Mr. Speaker, but it helped to get a break in the conversation. May I ask the Minister whether aircraft took off from Lakenheath and, if so, did we know they were taking off?
    Mr. Taylor: I have nothing to add to what I have already said.
    Mr. Gaitskell: Is the hon. Member aware that in answer to a supplementary question yesterday the Prime Minister, with some reluctance, eventually agreed to answer if such a Question were put down?
    Mr. Nabarro: My hon. Friend is not the Prime Minister.
    Mr. Gaitskell: Did the hon. Member's office consult the Prime Minister's office before this reply was given today? Are we to assume from that reply that when the Prime Minister answers the Question he will also give us no information, or is

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    the hon. Gentleman merely leaving it to the Prime Minister to deal with the matter properly?
    Mr. Nabarro: Say, "I am not the Prime Minister"!
    Mr. Taylor: I do not think that the House needs reminding of that. I did not check whether my office had been in communication with No. 10 Downing Street, but the answer I have given seems to be perfectly clear.
    Mr. G. Brown: In that case, what consultations took place in the hon. Member's private office before this Question was handed to him?
    Mr. Taylor: That is another question. The right hon. Gentleman can put it down.
    Mr. G. Brown: The Under-Secretary of State is sitting next to the Home Secretary who is the best stone-wailer in the business, but stone-walling has its complications. We are now playing with people's lives—[HON. MEMBERS: "Question"]—Are the Government not aware that we are playing with people's lives? Is the Minister really satisfied with giving us a reply that he has not cleared with the Prime Minister and which he has no reason to think is the Prime Minister's view, and which he has not cleared with the Leader of the House and has no reason to think is his view? With whom did he clear this answer, except with the hon. Member for Kidderminster (Mr. Nabarro).
    Mr. Shinwell: Is it not obvious that the Under-Secretary is in a position of some difficulty?
    Mr. Nabarro: No; he is doing very well.
    Mr. Shinwell: This is a very serious matter. In view of the fact that, in reply to a series of questions yesterday, the Prime Minister clearly indicated that if a Question was put on the Order Paper he would reply to it, may we ask the Minister or the Leader of the House, who is present, whether, if a Question is put on the Order Paper—perhaps a Private Notice Question, in the circumstances—the Prime Minister will reply? Or can the Leader of the House give us an indication of the procedure that will be adopted?
    Mr. Taylor: None of these matters is for me to reply to.
    Mr. Shinwell: On a point of order. I am not quite certain whether it is a regular point of order, Mr. Speaker, but I think it is—
    Mr. Speaker: I do not want to hear irregular points of order, even from the right hon. Gentleman.
    Mr. Shinwell: What I meant was that I awaited your guidance. You will recognise that this is a very serious matter, in which the integrity of the Prime Minister is at stake. Yesterday he clearly indicated that if a Question were put on the Order Paper he would reply to it. The Prime Minister must have been aware that this Question was on the Order Paper today. Can you give hon. Members any guidance as to the way in which they should deal with the matter when the Prime Minister makes a clear statement of that kind?
    Sir W. Wakefield: Did not my right hon. Friend say that if a Question were put to him he would answer it? That is a very different point from the one raised by the right hon. Gentleman.
    Mr. Speaker: I would like to have this point of order supplemented, but by one hon. Member at at time.
    Mr. Shinwell: The Prime Minister said that if a Question were put to him he would reply, but if a Question is put to him and it is transferred to the Secretary of State for Air what procedure can we adopt? How can we bring the Prime Minister into the dock on a question of this sort?
    Several Hon. Members—
    Mr. Speaker: A number of hon. and right hon. Gentlemen wish to add to my wisdom in connection with this point of order, but if I collect all the views at once I shall have so many points to answer at once that the matter will become confused. In answer to the right hon. Member for Easington (Mr. Shinwell), I have not got the text of what the Prime Minister said in my hand —and it would not make any difference if I had, in the context, because whatever he said I should have no power, as a matter of order, to compel him to answer that Question. That is not a point of order.

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    The other point raised by the right hon. Member related to transfer, and the practice with regard to it. I have repeatedly said that I do not propose to depart from the established tradition and precedent that the transfer of Questions is not a matter in respect of which the Chair incurs any responsibility.
    Mr. G. Brown: It is probably within your recollection, Mr. Speaker, and certainly within the recollection of all those who were here yesterday, that the Prime Minister said that if a Question were put to him he would answer it. A Question has been put down for today. Is it possible to conceive that neither the Prime Minister's office nor the Under-Secretary's office got together to arrange the answer which the Prime Minister yesterday meant us to have? If the Under-Secretary says that he has nothing to say on the question whether these aircraft flew from this base, is not the simple conclusion that they did, and he did not know about it?
    Mr. Speaker: It is no good even the right hon. Gentleman trying to involve the Chair in a war of words between the two Front Benches.
    Mr. G. Brown: That is the only way we can get at them.
    Mr. Speaker: Exactly It is an abuse of the process of the House to try to involve the Chair in a war of words. It may be very good fun, but it is not a point of order.
    Mr. Driberg: May I seek your permission at the appropriate moment, Mr. Speaker, when other supplementary questions and points of order have been dealt with, to move the Adjournment of the House under Standing Order No. 9 on a definite matter of urgent public importance, that is, the refusal of the Under-Secretary of State for Air to confirm or deny a statement that U2 flights have taken place from the United States Air Force base at Lakenheath? May I make a brief submission in support of that Motion, either now or when you direct me to do so?
    Mr. Speaker: The hon. Member may indicate any reason why he thinks his Motion is within the Standing Order, but he must not make any part of the speech which he would make should I accede to his submission.
    Mr. Driberg: I submit that my Motion is within the ambit of the Standing Order. This is clearly a definite matter; there is urgency because U2 flights may be started again at any minute, as has been indicated by official statements in the United States—there may be one tonight or tomorrow; and it is clearly a matter of public importance. It could hardly be of greater public importance.
    Mr. Speaker: The hon. Member should bring me, please, his Motion in writing.
    (Copy of Motion handed in.)
    Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House under Standing Order No. 9 on a definite matter of urgent public importance; that is, the refusal of the Under-Secretary of State for Air to confirm or deny the statement that U2 flights have taken place from the United States Air Force base at Lakenheath.
    I regret that I cannot accede to the hon. Member's application. It is covered by direct precedent namely, the proposition that the refusal of a Minister to answer a Question does not found in an application under the Standing Order.
    Mr. Allaun: I was about to attempt to move the Adjournment of the House for a slightly different reason which I should like you, Mr. Speaker, to consider. I beg to move the Adjournment of the House on a definite matter of urgent public importance, namely, the failure of the Government to tell the House whether or not American U2 aircraft are at present taking off from this country. I do this because I submit that this makes it a matter of urgency and therefore within the scope of the Standing Order.
    Mr. Speaker: I am afraid that I have to enforce the "drill" upon the hon. Member. Would he be kind enough to bring me his Motion in writing?
    (Copy of Motion handed in.)
    Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House pursuant to Standing Order No. 9 on a definite matter of urgent public importance, namely, the failure of the Government to tell the House whether or not American U2 aircraft are at present taking off from this country.
    I am afraid that I cannot accede to the hon. Member's request. I conceive

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    that to be governed by exactly the same principle as the last application—ingenious though it may be.

QUESTIONS TO MINISTERS
The following Question stood upon the Order Paper:
Mr. WYATT: To ask the Minister of Defence what further information he now has concerning the availability for service of the Blue Steel flying bomb.
Mr. Wyatt: On a point of order, Mr. Speaker, which is quite different from the last one, but also arises out of Question Time.
May I seek your guidance about Question No. 59? On 22nd June, I accused the Minister of Defence of having misled the House of Commons, in a debate on Blue Streak on 27th April, by saying that V-bombers were now being fitted with the Blue Steel flying bomb when, in fact, this bomb was not in production. On 22nd June, the Minister indignantly repudiated what I said.
Mr. Speaker: What is the hon. Member's point of order?
Mr. Wyatt: I am just coming to it. I have to explain the preliminaries, Sir.
After that, the Minister wrote to me and said that he had misled the House and whether I would be kind enough to put down a Question again so that he could straighten the matter out. I then did so and asked the Minister whether he would ask your permission, Mr. Speaker, to answer the Question orally as he had orally repudiated what I said and which he now wished to put right.
I warned the right hon. Gentleman that if he would not ask your permission, if he refused to do so, I should raise this point—[An HON. MEMBER: "What?"] I warned him that if he would not ask Mr. Speaker's permission I should raise this point of order because I think that a matter which had taken place orally in this House, on which the Minister now admits that he was wrong, ought to be cleared up orally and not by way of a Written Answer.
As the Minister of Defence knows, and as Mr. Speaker knows, Oral Questions to the Minister of Defence will not be reached again at Question Time before we rise for the Summer Recess.
Mr. Speaker: I cannot allow the hon. Member or anybody else, to make speeches on a point of order about points other than points of order. The conduct of everyone involved may be all wrong, or it may be all right, but it is not a point of order.
Mr. Wyatt: Further to that point of order—[HON. MEMBERS: "It is not a paint of order"] I submit that this is a real point of order of substance. I was orally repudiated in this House—[Laughter.] I understand hon. Members opposite laughing because they know perfectly well the skill of the Minister of Defence at trying to avoid any mistake he makes—
Hon. Members: Order.
Mr. Speaker: Order. I do not require the assistance of the House about this. It is not in accordance with my duty to allow hon. Members to usurp the time of the House to make speeches. I am delighted to bear them on what is strictly a point of order, but this is not a point of order, because I am motivated about the answering of Questions which are not reached by an application from the Minister to answer them. As the House knows, I have not in this instance received such an application, and no point of order arises.
Mr. Gaitskell: We are not desirous of involving you, Mr. Speaker, in a controversy which is not really your concern. But there is a point on which I think that we are entitled to seek your guidance and that concerns the conventions of the House. It is undoubtedly the case that the Minister of Defence has admitted that he gravely misled the House, and that he wishes to put the matter right. It is surely the normal convention, when a statement of this kind is made and then withdrawn privately, and when the Minister says that he wishes to correct the impression he gave, that it should be made orally. I ask you, Mr. Speaker, is this not the case so far as the normal conventions are concerned?
Mr. Speaker: I should not like to deliver a lecture on what may be or what may not be the conventions. I am really concerned with the practice of the House and the rules of order, which is, in any case, my duty. I know absolutely nothing of the circumstances of this matter.

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I entirely accept that the Minister has expressed a desire to correct something, but I really do not think that by calling it a matter of convention it becomes a matter for the Chair.
Mr. Gaitskell: In that case, may I ask the Leader of the House, in view of the situation which has now developed, whether he will invite the Minister of Defence to make an oral statement on this matter?
The Secretary of State for the Home Department (Mr. R. A. Butler): I understand that this matter refers to Question No. 59. If that Question remains on the Order Paper the normal precedent would be for it to be answered by a Written Answer. If it is taken off the Order Paper it will not be answered at all. I am putting this to the hon. Member only because if the Question is left on the Order Paper it would normally be answered, but if it is not left on the Order Paper, if the position is open, I undertake to discuss it with my right hon. Friend.
Mr. Wyatt: If the Leader of the House is saying that the Minister will make an oral statement if I postpone my Question, I shall be very glad to do so.
Mr. Speaker: The hon. Member must decide for himself what he does with his Question.
Mr. Wyatt Mr. Wyatt rose—
Lieu.-Colonel Bromley-Davenport: Sit down.
Mr. Wyatt: I was trying to give the Leader of the House a chance to behave in an honourable way—[HON. MEMBERS: "Oh"] If it would help him further I will withdraw my Question and put it down another day—postpone it.
Mr. G. Brown: Further to that point of order. I am sure that the Leader of the House is trying to help us, because he sees—if his hon. Friends do not—the importance of this matter, and that Oral Questions to the Minister of Defence will not be reached again before the House rises at the end of July.
Is the Leader of the House saying that he will discuss with his right hon. Friend the question of coming to the House and asking the leave of Mr. Speaker to make a statement? If he is saying that, he
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will help us. I am not clear whether my hon. Friend is beyond the time when, technically, he can remove the Question from the Order Paper, but no doubt we can put that right. The point at present is whether the Leader of the House will discuss with his right hon. Friend the question of his coming here and making a statement. Is the Leader of the House saying that he will do that?
Mr. Butler: I was merely taking the normal precautions to preserve the procedure. In the event of there being a Written Answer, it would be a rather different discussion that I should have to have with my right hon. Friend. So that there shall be no misunderstanding I shall certainly discuss the matter with my right hon. Friend, whatever the procedure.
Mr. Wyatt: This is a very important matter. Surely back-bench Members have their rights. I am prepared to withdraw my Question, if I may do so, to give the Minister of Defence a chance to answer it orally.
Mr. Speaker: The question for me is not what the hon. Member is prepared to do, but what he can do. As a matter of order, he can withdraw his Question up to the end of Questions and I declare that, because of what has happened, we are still within Questions.
Mr. Chetwynd: I am sorry to trouble you further, Mr. Speaker, but there is another complication. The Question by my hon. Friend the Member for Bosworth (Mr. Wyatt) may be answered with my Question, which is the one before it and deals with precisely the same point. If my hon. Friend can defer his Question, I should like permission to defer mine.
Mr. Speaker: Yes, I think that it is sauce for both constituencies.

POST OFFICE (CHARGES)
The Postmaster-General (Mr. Reginald Bevins): With your permission, Mr. Speaker, and that of the House, I should like to make a statement on Post Office charges.
I want to encourage the use of residential telephones, especially during off-peak periods when existing plant is not fully used.

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I am pleased to inform the House that I have decided:

1. To reduce to2½d. the local call charge for residential subscribers. The charge of 2d. for local call units payable by people in areas with subscriber Trunk Dialling will continue unchanged.

2. To reduce from 2s. 6d. to 2s. the charge for 3 minutes in the cheap rate period for trunk calls of more than 125 miles, connected by an operator.

3. To reduce from 1s. to 9d. the charge for 3 minutes in the cheap rate period for timed trunk calls of less than 35 miles, connected by an operator.

4. To apply the cheap rate period throughout the whole of Sundays.

I have also decided to reduce by from 12½ per cent. to 25 per cent. the rentals for certain sizes of private automatic branch exchanges.
The extension of the cheap rate period on Sundays will apply as from 10th July. In general, the other reductions will take effect as from 1st September.
I also intend to restore quarterly accounts to all telephone subscribers. This will require a phased programme over the next four years. I believe that the public will welcome a return to quarterly telephone accounts.
As from 1st September the charge per word for the Radio Telegraph Service with ships at sea at the standard rate will be 1s 8d instead of 1s. 6d.
I have also come to the conclusion that the inland registered service does not satisfactorily meet public requirements, and I have decided to provide a cheaper alternative to it for articles, such as documents, where it is more important to be able to prove delivery than to secure compensation in case of loss. This new service—the Recorded Delivery service—will require a supplementary fee of 6d. only, as opposed to 1s. for registration. It will provide both for a receipt on posting and on delivery. Compensation will be limited to £2.
At the same time, the minimum fee for both the inland and overseas registration services will be increased from 1s. to 1s. 6d. These changes will take effect at about the turn of the year and should make these services generally economic.
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I have no intention at present of increasing the charges for inland telegrams.
Full details of these and some other minor changes will be circulated in the OFFICIAL REPORT.
Mr. Ness Edwards: I wish to associate myself with the House in congratulating the Postmaster-General on reversing the policy of his predecessor. I think that the cheap telephone service throughout Sunday will be very welcome, that it is fairly obvious that the quarterly accounts will be very welcome, and that there will be less quibbling about the charges which have been made for calls which people cannot remember.
I wish to ask the right hon. Gentleman whether he is satisfied that these concessions are really bold enough to win back the 300,000 subscribers which his predecessor lost. Is he not aware that it has always been our view that the maximum use of the telephone at a lower rate of profit is far better than the minimum use of the telephone with a high rate of profit? We hope that he will proceed on that policy of giving more and more concessions in respect of telephone charges so that we can get a much more general use of the telephone and a better return for the huge quantities of capital investment in the equipment.
Can the right hon. Gentleman tell us what is to be the cost to the Post Office of the concessions on the telephone rates? Secondly, will he let us know what is going to be the cost of the Recorded Delivery service? Thirdly, in the list that is to be circulated in the OFFICIAL REPORT, can he indicate how many cases there are of increased rather than decreased charges? In general, we welcome the right hon. Gentleman's approach to the general problem of revising charges for the telephone service. We only wish that he had not been quite so timid.
Mr. Bevins: I am grateful to the right hon. Member for what he said, except that what I have announced to the House this afternoon is in no sense a reversal of policies pursued by my predecessor. If, in due course, my successor takes as favourable a view of my endeavours as I take of the endeavours of my predecessor, I shall be very happy.

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In reply to the detailed questions of the right hon. Member, the purpose of these changes in telephone tariffs is to encourage the use of the telephone rather than to build up an excessive demand for new telephones. That is the design. As to the cost of these concessions, all told, over the total field, the gross cost will amount to about £2¼ million to £2½ million in the next financial year.
Mr. Ness Edwards: How many cases of increased charges are involved in the statement which is to be circulated?
Mr. Bevins: There are one or two very minor ones, but, on the whole, the net effect is, of course, in favour of the public.
Sir T. Moore: As the Opposition will undoubtedly say that this statement is a prelude to a General Election, can we have an assurance that there is no truth in that suggestion?
Mr. Shinwell: May I ask the Postmaster-General whether he knows of any private industry in the United Kingdom which has reduced its charges as has this nationalised industry?
Mr. Bevins: Yes. There have been a considerable number of cases in which private enterprise has brought down prices during the last twelve months.
Hon. Members: Name them.
Mr. Mackie: While appreciating the right hon. Gentleman's decreases of telephone service costs, I wonder whether he would increase something to do with it, that is, the height of the bolt that holds the spring which closes the door of a telephone kiosk? It is exactly 6 ft. 2 ins. I have broken skin off my head twice and so far I have refrained from suing him, but if this happens a third time I shall have seriously to consider the matter.

POST OFFICE TARIFFS

INLAND TELEPHONES

Present Charges

New Charges

Local calls from Residence telephone, without coin box, except those in areas with Subscriber Trunk Dialling.

3d.

On accounts due after 1st September, 1960: 2½d.

Timed Trunk calls connected by an operator in the Cheap Rate Period:—

over 125 miles

2s. 6d. for 3 minutes (2s. 9d. from a call office)

From 1st September, 1960; 2s. for 3 minutes (2s. 3d. from a call office)

up to 35 miles

1s. for 3 minutes (1s. 3d. from a call office)

From 1st September, 1960: 9d. for 3 minutes (1s. from a call office

Mr. Watkins: Did the right hon. Gentleman give consideration to revising the charges for rentals in exchanges for subscribers over three miles and, if so, what decision did he come to? What was his finding?
Mr. Bevins: I have considered that matter on a very recent occasion. The fact is that charges for people in country districts are already very low in comparison with other countries and to make them lower still would increase demands and add to the claims on our limited capital resources.
Sir M. GalpernCould the right hon. Gentleman give consideration to the complaint, which I am sure many hon. Members have received, to the effect that subscribers are unable to calculate the accuracy of the accounts rendered to them? A number of people have complained to me, as I am sure they have complained to other hon. Members, that they are alarmed to find that they have used a telephone to such an extent as is suggested by the account.
Would it be impossible for the Postmaster-General to indicate, as is the normal practice for anyone incurring an account, the details as to how that account has been arrived at and to show the actual number of calls incurred by subscribers so that they may be satisfied about the accuracy of the Department?
Mr. Bevins: It is open to any subscriber to challenge the accuracy of his telephone account, but the number of mistakes that are made is, in fact, very few. We are transferring to the new system of Subscriber Trunk Dialling, and as that comes into force the liability for error in accounting will progressively diminish.

Present Charges

New Charges

Cheap Rate Period on Sundays

2 p.m. to 6 a.m.

From 10th July, 1960 From 6 p.m. Saturdays until 6 a.m. Mondays

Private Automatic Branch Exchanges:—

Type No. 1:—

up to 15 automatic extensions

£200 a year

From 1st September 1960: £160 a year

25 to 35 automatic extensions

£280 a year

From 1st September, 1960: £240 a year

Type No. 2:—

up to 15 automatic extensions

£240 a year

From 1st September, 1960: £200 a year

25 to 35 automatic extensions

£320 a year

From 1st September, 1960: £280 a year

Type No. 3 (privately installed):—

For every 50 extensions

£120 a year

From 1st September, 1960: £90 a year

For each switchboard position

£60 a year

From 1st September, 1960: £50 a year

Experimental Radiophone service in South Lancashire:—

Calls in Service area

2s. 6d. for 3 minutes

From 1st September, 1960: 1s. 3d. for 3 minutes

Calls to or from places outside Service area

Trunk charge plus radio fee of 2s. for 3 minutes

From 1st September, 1960: Trunk charge plus radio fee of 1s. for 3 minutes

ORDERS OF THE DAY
  FINANCE BILL
  As amended (in Committee and on recommittal) further considered.

New Clause.—(REPEAL OF TELEVISION DUTY.)
As from the beginning of September, nineteen hundred and sixty, section two of the Finance Act, 1957 (which imposes on television licences television duty at the standard yearly rate of one pound, subject to certain modifications) shall cease to have effect.—[Mr. Redhead.]
Brought up, and read the First time.
4.0 p.m.
Mr. E. C. Redhead: I beg to move, That the Clause be read a Second time.
The purpose of the Clause is the abolition of the television licence duty of £1 which is payable on every television licence taken out and which was first imposed in 1957. I want to advance as my primary justification for this proposal the fact that the circumstances which obtained when this duty was first introduced three years ago have changed and that the only reason which was adduced at that time for imposing the duty originally no longer exists. It is, therefore, my submission that in those circumstances this duty should be abolished.
May I remind the House of what those circumstances were? In 1957, the then Chancellor of the Exchequer, the right hon. Member for Monmouth (Mr. Thorneycroft) abolished Entertainments Duty which had been in existence since 1916, in respect of all forms of entertainment with the exception of the cinema. The then Chancellor of the Exchequer seemingly recognised that what he was doing, in leaving this tax applicable only to the cinema, was to apply a degree of discrimination against the cinema, and seemingly he sensed that it was unfair still to burden the cinema alone, particularly in view of the fact that it was engaged in a fierce competition with the television set.
To make abundantly clear what his reasons were for introducing this duty on television licences, I should like to quote, as I did on an earlier occasion, what the
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then Chancellor said. Speaking of the Entertainments Duty, he said
"… there have been many changes since the duty was introduced in 1916 and, indeed, since it was last revised in 1954. Some forms of entertainment are expanding. As they expand they affect the profit of the other types. In particular, television has, in recent years, grown to be a powerful competitor with other entertainments, and I have had to consider whether it is bearing a share of taxation comparable with its rivals. I have not overlooked the fact that anyone who buys a television set pays a substantial amount of Purchase Tax upon it. But there is no tax on its use comparable with the tax on the admission price to a cinema. I am satisfied that a fairer balance in the taxation of these competitive entertainments is desirable."—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 989.]
I submit that that statement clearly shows that the television licence duty was imposed by way of consolation to the cinema, burdened, as it continued to be, by Entertainments Duty, and to rectify, to use the then Chancellor's own words,
"the balance in the taxation of these competitive entertainments".
As I said earlier, in Committee, this was completely consistent with a fairly well-established principle of taxation of applying a countervailing duty—when a duty was applied to one service or article, to apply similarly a duty to any alternative or competitive service or article. But in Clause 4 of this Bill we have already agreed to the entire repeal of Entertainments Duty. In those circumstances, the ostensible reason for imposing a television licence duty has entirely disappeared. It is my submission that to perpetuate it in these completely changed circumstances is to repeat unjustifiably the history of so many taxes which have been imposed in the past, supposedly for limited reasons or for a limited period, only to be prolonged far beyond their original intention and when the reasons for them have disappeared. In these circumstances, the Chancellor is giving up £7½ million of revenue through the repeal of the Entertainments Duty, but is holding very rigidly to an expected revenue of £11½ million which accrues to him by the television licence duty.
The public, which has derived no benefit whatever from the remission of Entertainments Duty on the cinema—for reasons which we have discussed before—still has to meet this new impost of the television licence duty. I think

467
that it is fair to lay emphasis upon the fact that those who have television sets already contribute quite substantially to the revenue in the substantial levy of Purchase Tax upon television sets and upon some of the component parts.
I suggest that there is no longer any justification for the maintenance of this separate television licence duty. Let no one imagine for a moment that it has any justification on the ground that the revenue derived from it is used in any way for an improvement or expansion of television services. The whole of the proceeds of this duty go to swell the revenue.
I also plead, in aid of my contention that this licence duty has outlived its purpose, the fact that today, in many homes, television can no longer justifiably be regarded as a pure luxury. On the contrary, there are thousands of homes—and I am thinking particularly of the thousands of old people—in which the television set is a boon, a comfort and a relief in their loneliness. I am sure that there are hon. Members on both sides of the House who know of many cases in which that is true.
Unfortunately, many old people, particularly with the burden of Purchase Tax upon such sets, are unable in these unhappy days to purchase sets for themselves. I know, as I am sure do other hon. Members, of cases in which, in compassion, friends and relatives, recognising the boon that the television set is to such old people, either buy sets for them, or arrange for some second-hand reconditioned sets to be made available to them.
Then comes the burden of the licence. For the licence in those circumstances to have imposed upon it a licence Excise duty of an additional £1 is, to my mind, to inflict taxation on an act of charity and good will exercised towards these old people. In those circumstances, it is a completely unwarranted additional burden. Nor can it be justified that an Excise licence duty has to be paid in respect of the use of television sets by schools and educational institutions, to which the television service is increasingly becoming an educational asset.
Therefore, on all grounds there is no longer any justification for perpetuating
468
this duty. I hope that the Chancellor of the Exchequer will not repeat the sad history of Entertainments Duty and other duties. I hope that he is not introducing this Measure with the excuse that it is for a supposedly purely temporary period or to meet particular circumstances, but then, when the circumstances have changed, perpetuate it solely because the revenue derived from it is so attractive that he is unwilling to forgo it.
The right hon. Gentleman must recognise that the original reason for this duty has now disappeared. If he nevertheless feels that on other and more general grounds it is justifiable to look in the field of television for additional revenue, I suggest to him that it would be more equitable to seek such revenue not from the users of television in this direct form, but from those who are making large and inordinate profits in this field in the direction of commercial advertising on television.
That is a point on which doubtless some of my hon. Friends better versed in that field than I will probably want to dilate. I contend primarily that the justification for the new Clause lies in the fact that the only reason ever adduced for its introduction no longer obtains, and that, therefore, it is an act of equity that the duty itself should now be abolished.
Mr. Donald Chapman: My hon. Friend the Member for Walthamstow, West (Mr. Redhead) has moved the Clause with such a wealth of explanation and evidence that it does not leave anyone else with very much to say. He was correct in saying that the rational justification for this duty has disappeared. The duties on its competitors—other forms of entertainments—have been repealed, and, therefore, the justification for the introduction of this duty has disappeared.
My hon. Friend was right in saying that the main worry of the Chancellor of the Exchequer will no doubt be that he cannot afford to forgo the revenue involved. Therefore, I want very briefly to follow my hon. Friend in suggesting that the right hon. Gentleman makes it up from other sources within the television industry. My hon. Friend was right in saying that it is now proper that this tax on the viewer should be transferred and become a tax on the industry.

469
One has only to look at the present state of advertising revenues in commercial television to see how well the industry can afford it. I have not added up this year's profits on Independent Television, but I should be surprised if they are not about £50 million. Even after all the ordinary rate of taxes has been paid on that £50 million, I should be very surprised if the Chancellor could not make up quite fairly from the industry most of the £10 million which he obtains from this duty.
After all, we have now reached the position when the poor viewer pays both ways. First, he has to pay Purchase Tax on his television set. Then he has to sit at home and pay the duty. He has to stand the burden of watching the programmes, which are making profits on an inordinate scale now for the television companies. The duty lies most unfairly on the poor viewer and should be transferred to the pople who put out the advertisements.
There is a further factor which is worth considering. As the Television Act has worked out, there is no doubt whatsoever that what we have done is to set up regional monopolies in various parts of this country. There is no competition whatsoever in the world of Independent Television. In the Television Act we tried to provide that the Authority was to see that there was competition between different programme contractors.
What has happened, in practice, is that the Authority has had to give regional monopolies to particular programme companies. The result is that in the regions they are in the happy position of being able to mount millions upon millions in their profits because of the sheer absence of competition in their own region. The Act has proved unworkable.
4.15 p.m.
Mr. Speaker: That must be the absolute limit to Which I am entitled to indulge the hon. Member on this proposition.
Mr. Chapman: I will draw what I was saying to a close, Mr. Speaker.
All that I wanted to add to that simple point was that we have now reached a situation where the industry, particularly
470
because of the limited number of programme contractors in it, is proving extremely profitable. It has surplus funds. I hand it to the industry that it is putting some of its funds to use for charitable and educational purposes, but it remains true that any revenue the Chancellor would lose if he accepted this Clause could be made up quite easily by a new television tax on that end of the television industry.
I do not think that the industry would mind paying it now. The companies are so happy with the profits they are making—they are happier still with some of the capital profits that they have made from starting the industry—that they would take it in their stride at the moment and would almost accept it quite freely as a legitimate impost on what has become a monopoly situation in various regions.
For those reasons, my hon. Friend was right in saying that this duty is now misplaced. It ought to be imposed on another part of the industry. I hope that we can persuade the Government to accept the Clause.
The Economic Secretary to the Treasury (Mr. Anthony Barber): As the hon. Member for Walthamstow, West (Mr. Redhead) said, the purpose of the Clause is to repeal the television duty of £1 a year on a normal licence costing £3. I should tell the House at the outset that the cost of it in a full year would be £11½ million and in this year £8½ million, because the Clause provides that it shall only become operative on 1st September.
The hon. Member described the television duty as a countervailing duty. He is quite right in saying that one of the reasons for the introduction of the television duty in 1957 was to secure a fairer balance in the taxation of competitive entertainments. But he then went on to say on two occasions that this was the only reason. If he considers the matter again he will realise that Entertainments Duty on the cinema was certainly not the only factor which prompted the introduction of the television duty.
The hon. Member quoted from the speech of my right hon. Friend the Member for Monmouth (Mr. Thorneycroft), when he was Chancellor of the Exchequer. The hon. Member will have

471
noted that one of my right hon. Friend's observations was:
"Entertainment is not in itself an unreasonable object of taxation …"—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 989.]
What is perhaps more apposite in view of what the hon. Member said in moving the Clause is that my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), who was then Financial Secretary to the Treasury, said this:
"… television viewing forms a suitable subject for the imposition of duty; … and … it is a duty which can very properly replace the revenue remitted on sport and the theatre."—[OFFICIAL REPORT, 23rd May, 1957; Vol. 570, c. 1536.]
I mention these matters only because the House would be under an illusion if it considered that the only matter which prompted my right hon. Friend the Member for Monmouth to introduce this duty in 1957 was its relationship to the Entertainments Duty on the cinema.
The hon. Member for Walthamstow, West rightly said that circumstances have changed since this duty was first introduced. Whatever differing views we may take about the circumstances of its introduction, what are really relevant to this afternoon's consideration are the circumstances of today. There is a complete contrast between television and the cinema industry. I should like to give the House a few figures which are very relevant in this context.
The television duty was introduced in 1957 and in that year the number of television sets sold on the home market was 1,816,000. Last year—only two years later—that number had risen to 2,754,000. In the fiscal year 1957–58, the first year in which the television duty was operative, the number of licences issued was 8,114,000. Last year, it had risen to 10,576,000. Expansion of the industry is continuing, and the licence sales during this fiscal year are likely to amount to about 11½ million. Contrast that with what has been happening in the cinema industry, which, as every hon. Member knows, has been declining for years. Admissions fell from a peak of 1,600 million in 1946 to 1,200 million in 1955, 915 million in 1957, and 601 million last year. The decline is still continuing.
As the House knows—and I shall not weary it with the figures again, because
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I have given them before—the rate of closures of cinemas has continued to be heavy, and it was, in the main, for these reasons that my right hon. Friend thought it right this year to abolish the Entertainments Duty on the cinema. I cannot see why that is a reason, in the present circumstances, for selecting television licence holders for a concession. The abolition of the duty on the cinema will, I think, be a real help to the industry, but no one can claim that the abolition of the television duty would be of any significant benefit to the television industry. Indeed, from the figures that I have given, I think that it is quite apparent that the industry does not need it.
The hon. Member for Walthamstow, West went on, very fairly, to say that television is today a great boon for many old people who are living on their own, and I am sure that he is absolutely right, but I should like the House to consider very briefly the sort of people whom we are considering. It is perfectly true, as the hon. Member said, that in some cases television sets are provided by relatives and friends. But the great bulk of the 11 million people who own television sets have paid perhaps £60 or £70 for a set and are also prepared to pay the annual licence fee of £3. I think that it is fair to ask the hon. Member whether it is really too much to expect these people to pay an extra 4½d. a week, which is all that this duty amounts to—in other words, less than the cost of a couple of cigarettes.
The hon. Gentleman quite fairly referred, in his closing observations, to the economic situation. I have said that this duty would, in fact, cost £11½ million in a full year and £8½ million this year. My right hon. Friend has explained why he is not able to propose this year any net reduction in taxation, and I shall not go over that ground again this afternoon, but it follows from his assessment of the situation that if we were to agree to this proposal either he would have to cut out a reduction which he has already made, or he would have to find another source of revenue to make up the £8½ million this year and the £11½ million in a full year.
The hon. Member for Birmingham, Northfield (Mr. Chapman) thought that it would be a good thing to get the

473
money from some other source connected with the television industry, but I do not think that most hon. Members will disagree with me when I say that we believe that it would be quite wrong to adopt either of these courses. For
those reasons, I cannot advise the House to accept the Clause.
Question put, That the Clause be read a Second time:—
The House divided: Ayes 171, Noes 233.

Division No. 132.]

AYES

[4.25 p.m.

Abse, Leo

Healey, Denis

Pearson, Arthur (Pontypridd)

Ainsley, William

Hill, J. (Midlothian)

Peart, Frederick

Albu, Austen

Hilton, A. V.

Pentland, Norman

Allaun, Frank (Salford, E.)

Holman, Percy

Plummer, Sir Leslie

Awbery, Stan

Houghton, Douglas

Price, J. T. (Westhoughton)

Bacon, Miss Alice

Hughes, Cledwyn (Anglesey)

Probert, Arthur

Bellenger, Rt. Hon. F. J.

Hughes, Emrys (S. Ayrshire)

Randall, Harry

Benson, Sir George

Hunter, A. E.

Rankin, John

Blackburn, F.

Hynd, H. (Accrington)

Redhead, E. C.

Boardman, H.

Hynd, John (Attercliffe)

Reid, William

Bowden, Herbert W. (Leics, S.W.)

Irvine, A. J. (Edge Hill)

Reynolds, G. W.

Bowles, Frank

Irving, Sydney (Dartford)

Ross, William

Boyden, James

Janner, Barnett

Royle, Charles (Salford, West)

Braddock, Mrs. E. M.

Jay, Rt. Hon. Douglas

Shinwell, Rt. Hon. E.

Brockway, A. Fenner

Johnson, Carol (Lewisham, S.)

Short, Edward

Brown, Rt. Hon. George (Belper)

Jones. Rt. Hn. A. Creech (Wakefield)

Silverman, Julius (Aston)

Brown, Thomas (Ince)

Jones, Dan (Burnley)

Slater, Mrs. Harriet (Stoke, N.)

Butler, Herbert (Hackney, C.)

Jones, Elwyn (West Ham, S.)

Slater, Joseph (Sedgefield)

Butler, Mrs. Joyce (Wood Green)

Jones, Jack (Rotherham)

Small, William

Castle, Mrs. Barbara

Jones, J. Idwal (Wrexham)

Smith, Ellis (Stoke, S.)

Chapman, Donald

Jones, T. W. (Merioneth)

Snow, Julian

Chetwynd, George

Kelley, Richard

Sorensen, R. w.

Cliffe, Michael

Kenyon, Clifford

Spriggs, Leslie

Corbet, Mrs. Freda

Key, Rt. Hon. C. W.

Steele, Thomas

Craddock, George (Bradford, S.)

King, Dr. Horace

Stewart, Michael (Fulham)

Crosland, Anthony

Lee, Frederick (Newton)

Stones, William

Crossman, R. H. S.

Lever, Harold (Cheetham)

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

Cullen, Mrs. Alice

Lipton, Marcus

Summerskill, Dr. Rt. Hon. Edith

Davies, G. Elfed (Rhondda, E.)

Logan, David

Swingler, Stephen

Davies, Harold (Leek)

Mabon, Dr. J. Dickson

Sylvester, George

Davies, Ifor (Gower)

McCann, James

Taylor, Belnard (Mansfield)

Davies, S. O. (Merthyr)

MacColl, James

Taylor, John (West Lothian)

de Freitas, Geoffrey

McInnes, James

Thomas, Iorwerth (Rhondda, W.)

Delargy, Hugh

McKay, John (Wallsend)

Thompson, Dr. Alan (Dunfermline)

Dempsey, James

Mackie, John

Thomson, G. M. (Dundee, E.)

Diamond, John

Mallalieu, E. L. (Brigg)

Thornton, Ernest

Dodds, Norman

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

Wainwright, Edwin

Driberg, Tom

Manuel A. C.

Warbey, William

Dugdale, Rt. Hon. John

Mapp, Charles

Watkins, Tudor

Ede, Rt. Hon. Chuter

Mason, Roy

Weitzman, David

Edelman, Maurice

Mayhew, Christopher

Wells, Percy (Faversham)

Edwards, Rt. Hon. Ness (Caerphilly)

Mellish, R. J.

Wells, William (Walsall, N.)

Edwards, Robert (Bilston)

Millan, Bruce

Wheeldon, W. E.

Edwards, Walter (Stepney)

Mitchison, G. R.

White, Mrs. Eirene

Evans, Albert

Monslow, Walter

Whitlock, William

Forman, J. C.

Moody, A. S.

Williams, D. J. (Neath)

Fraser, Thomas (Hamilton)

Mort, D. L.

Williams, W. R. (Openshaw)

Gaitskell, Rt. Hon. Hugh

Moyle, Arthur

Willis, E. G. (Edinburgh, E.)

Galpern, Sir Myer

Neal, Harold

Wilson, Rt. Hon. Harold (Huyton)

Ginsburg, David

Noel-Baker, Rt. Hn. Philip (Derby, S.)

Winterbottom, R. E.

Gordon Walker, Rt. Hon. P. C.

Oliver, G. H.

Woodburn, Rt. Hon. A.

Gourlay, Harry

Oram, A. E.

Woof, Robert

Grey, Charles

Owen, Will

Wyatt, Woodrow

Gunter, Ray

Pannell, Charles (Leeds, W.)

Yates, Victor (Ladywood)

Hall, Rt. Hon. Glenvil (Colne Valley)

Parker, John (Dagenham)

Zilliacus, K.

Hamilton, William (West Fife)

Parkin, B. T. (Paddington, N.)

Hannan, William

Paton, John

TELLERS FOR THE AYES:

Hayman, F. H.

Pavitt, Laurence

Mr. Cronin and Mr. Mahon.

NOES

Allan, Robert (Paddington, S.)

Baxter, Sir Beverley (Southgate)

Bowen, Roderic (Cardigan)

Allason, James

Beamish, Col. Tufton

Box, Donald

Amory, Rt. Hn. D. Heathcoat (Tlv'tn)

Bennett, F. M. (Torquay)

Boyle, Sir Edward

Arbuthnot, John

Berkeley, Humphry

Brewis, John

Ashton, Sir Hubert

Biggs-Davison, John

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

Atkins, Humphrey

Bingham, R. M.

Brooke, Rt. Hon. Henry

Barber, Anthony

Birch, Rt. Hon. Nigel

Brooman-White, R.

Barlow, Sir John

Bishop, F. P.

Browne, Percy (Torrington)

Barter, John

Bossom, Clive

Bullard, Denys

Batsford, Brian

Bourne-Arton, A.

Burden, F. A.

Butcher, Sir Herbert

Hopkins, Alan

Peel, John

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

Hornby, R. P.

Percival, Ian

Campbell, Sir David (Belfast, S.)

Hornsby-Smith, Rt. Hon. Patricia

Pickthorn, Sir Kenneth

Campbell, Gordon (Moray & Nairn)

Howard, John (Southampton, Test)

Pike, Miss Mervyn

Carr, Robert (Mitcham)

Hughes Hallett, Vice-Admiral John

Pilkington, Capt. Richard

Cary, Sir Robert

Hughes-Young, Michael

Pitman, I. J.

Channon, H. P. G.

Hutchison, Michael Clark

Pitt, Miss Edith

Chataway, Christopher

Iremonger, T. L.

Powell, J. Enoch

Cole, Norman

Irvine, Bryant Godman (Rye)

Prior, J. M. L.

Collard, Richard

Jackson, John

Prior-Palmer, Brig. Sir Otho

Cooke, Robert

Jenkins, Robert (Dulwich)

Proudfoot, Wilfred

Cooper, A. E.

Johnson, Dr. Donald (Carlisle)

Ramsden, James

Cordeaux, Lt.-Col. J. K.

Johnson, Eric (Blackley)

Redmayne, Rt. Hon. Martin

Cordle, John

Johnson Smith, Geoffrey

Rees, Hugh

Corfield, F. V.

Joseph, Sir Keith

Renton, David

Costain, A. P.

Kerans, Cdr. J. S.

Ridley, Hon. Nicholas

Courtney, Cdr. Anthony

Kerby, Capt. Henry

Ridsdale, Julian

Craddock, Sir Beresford

Kerr, Sir Hamilton

Roberts, Sir Peter (Heeley)

Critchley, Julian

Kershaw, Anthony

Robinson, Sir Roland (Blackpool, S.)

Cunningham, Knox

Kimball, Marcus

Ropner, Col. Sir Leonard

Currie, G. B. H.

Kirk, Peter

Sandys, Rt. Hon. Duncan

Dalkeith, Earl of

Kitson, Timothy

Scott-Hopkins, James

Dance, James

Lancaster, Col. C. G.

Sharples, Richard

d'Avigdor-Goldsmid, Sir Henry

Leather, E. H. C.

Shepherd, William

de Ferranti, Basil

Leavey, J. A.

Simon, Sir Jocelyn

Donaldson, Cmdr. C. E. M.

Legge-Bourke, Sir Harry

Skeet, T. H. H.

Drayson, G. B.

Lewis, Kenneth (Rutland)

Smith, Dudley (Br'ntf'rd & Chiswick)

Duncan, Sir James

Lilley, F. J. P.

Smithers, Peter

Eden, John

Lindsay, Martin

Spearman, Sir Alexander

Elliott, R. W.

Linstead, Sir Hugh

Speir, Rupert

Emery, Peter

Litchfield, Capt. John

Stevens, Geoffrey

Emmet, Hon. Mrs. Evelyn

Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)

Stodart, J. A.

Farr, John

Longbottom, Charles

Storey, Sir Samuel

Fell, Anthony

Longden, Gilbert

Studholme, Sir Henry

Finlay, Graeme

Loveys, Walter H.

Summers, Sir Spencer (Aylesbury)

Fisher, Nigel

Low, Rt. Hon. Sir Toby

Talbot, John E.

Fletcher-Cooke, Charles

Lucas-Tooth, Sir Hugh

Tapsell, Peter

Fraser, Ian (Plymouth, Sutton)

MacArthur, Ian

Taylor, Sir Charles (Eastbourne)

Freeth, Denzil

McLaughlin, Mrs. Patricia

Taylor, W. J. (Bradford, N.)

Gardner, Edward

Maclay, Rt. Hon. John

Teeling, William

George, J. C. (Pollok)

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

Temple, John M.

Gibson-Watt, David

MacLeod, John (Ross & Cromarty)

Thomas, Leslie (Canterbury)

Glover, Sir Douglas

McMaster, Stanley R.

Thompson, Kenneth (Walton)

Glyn, Dr. Alan (Clapham)

Macpherson, Niall (Dumfries)

Thornton-Kemsley, Sir Colin

Glyn, Sir Richard (Dorset, N.)

Maddan, Martin

Tiley, Arthur (Bradford, W.)

Goodhart, Philip

Maitland, Cdr. Sir John

Tilney, John (Wavertree)

Goodhew, Victor

Manningham-Buller, Rt. Hon. Sir R.

Turner, Colin

Gower, Raymond

Markham, Major Sir Frank

Turton, Rt. Hon. R. H.

Grant, Rt. Hon. William (Woodside)

Marlowe Anthony

van Straubenzee, W. R.

Green, Alan

Marshall, Douglas

Wade, Donald

Grimond, J.

Marten, Neil

Wakefield, Edward (Derbyshire,w.)

Grimston, Sir Robert

Mathew, Robert (Honiton)

Wakefield, Sir Wavell (St. M'lebone)

Hamilton, Michael (Wellingborough)

Matthews, Gordon (Meriden)

Wall, Patrick

Harris, Reader (Heston)

Mawby, Ray

Watts, James

Harrison, Brian (Maldon)

Mills, Stratton

Wells, John (Maidstone)

Harrison, Col. J. H. (Eye)

Montgomery, Fergus

Whitelaw, William

Harvie Anderson, Miss

Moore, Sir Thomas

Williams, Dudley (Exeter)

Hay, John

Mott-Radclyffe, Sir Charles

Williams, Paul (Sunderland, S.)

Henderson, John (Cathcart)

Nabarro, Gerald

Wills, Sir Gerald (Bridgwater)

Hendry, Forbes

Neave, Airey

Wolrige-Gordon, Patrick

Hicks Beach, Maj. W.

Nicholls, Harmar

Wood, Rt. Hon. Richard

Hiley, Joseph

Noble, Michael

Woodhouse, C. M.

Hill, Dr. Rt. Hon. Charles (Luton)

Oakshott, Sir Hendrie

Woodnutt, Mark

Hinchingbrooke, Viscount

Ormsby Gore, Rt. Hon. D.

Worsley, Marcus

Hirst, Geoffrey

Orr-Ewing, C. Ian

Yates, William (The Wrekin)

Hobson, John

Osborn, John (Hallam)

Hocking, Philip N.

Osborne, Cyril (Louth)

TELLERS FOR THE NOES:

Holland, Phillip

Pannell, Norman (Kirkdale)

Mr. Bryan and Mr. J. E. B. Hill.

Holt, Arthur

Partridge, E.

New Clause.—(VOLUNTARY OFFERINGS TO CLERGYMEN.)
The earnings of clergymen and ministers of religion, of all denominations, so far as derived from the voluntary offerings of their congregations in the immediately preceding year, shall, to the extent of one hundred pounds in each case, be disregarded as income for the purposes of any of the Income Tax Acts for any future year of assessment—[Mr. Hendry.]
Brought up, and read the First time.
Mr. Forbes Hendry: I beg to move, That the Clause be read a Second time.
I do not propose to detain the House long, because in Committee this proposal, in a slightly different form, was debated at some length. You will recognise, Sir, that it is a lineal descendant of a new Clause about Easter offerings which stood on the Notice Paper, in Committee, in the name of my hon. and

477
gallant Friend the Member for Cheltenham (Major Hicks Beach). I have made certain amendments to the proposal since it was considered in Committee.
I do not propose to go into all the arguments which I adduced in Committee, because, although my right hon. Friend the Chancellor of the Exchequer was not present throughout the debate, he is a man of such honour that he will have read all the arguments which were put forward, and I think that most hon. Members who are here now were present then. It is, however, necessary, to examine for a moment the reasons why my right hon. Friend's predecessors have not found themselves able to agree to an attempt to keep the hand of the tax collector out of the sacrificial offerings of churchmen of all denominations.
There is a great deal of disgust up and down the country and, I venture to say, on both sides of the House that these sacrificial offerings should be tampered with for the sordid purpose of running the country when they are given for purely spiritual purposes which are on a higher plane and which we in this House have a duty to regard.
In the past, proposals of this sort have been supported by the leaders of both sides, including my right hon. Friend the Prime Minister. It is for that reason that, once again, I should like to go over the objections which have been made to proposals of this sort in an effort to try to ease the burden of my right hon. Friend the Chancellor in dealing with my present proposal. I have tried to do that 'before. I have tried to explain why we are justified in departing from the usual principle of taxation—that there should be no discrimination between persons. I have tried to point out, and the Chancellor has agreed, that there is a unique difference between the clergy, of whatever denomination it may be, and all other people in this country. They are men of vocation. They are called to their spiritual work, not for any purpose of gain, but because they have a direct call from above.
The voluntary offerings of the people are, to a very large degree, sacrificial offerings. They are offered to God for the spiritual guidance and spiritual comfort given to them by the clergy. They are tokens of spiritual gratitude and are
478
not to be confused in any way, as has so often been done in the House, with tips to servants and others for personal services. In Committee, on 22nd June, the Chancellor said that he did not
"in any way place those kind of offerings on the same level as voluntary offerings to the clergy."—[OFFICIAL REPORT, 22nd June. 1960; Vol. 625, c. 586.]
By "those kind of offerings" he meant tips and gratuities of that sort. We have discriminated in favour of a unique body which cannot be confused in anybody's mind with any other body of men in this country. The Chancellor conceded that there was a very great difference in that case.
My hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) put forward a very valid objection. He has a very logical mind. He said that this proposal would create a precedent and that it was illogical and contrary to all the orthodox principles of taxation to make a departure in this way. I suggest that this is a case where we should not be logical. The spiritual experiences which we all have from time to time are not logical things. They are matters of faith. They are very deep feelings which we experience. We cannot possibly measure these things in terms of pure logic. I suggest, with the greatest seriousness, that this is a case where we may disregard logic and the ordinary precepts and principles of taxation. This is a case where we ought to make a concession in very special circumstances.
The other objection which has been adduced in the past to a proposal of this kind is that it discriminates in favour of certain denominations. That was the case in the past, and it was so in the case of the proposed Clause in the name of my hon. and gallant Friend the Member for Cheltenham, which sought to exempt Easter offerings, because it discriminated in favour of one particular religious denomination. But my proposed Clause embraces all denominations—Christian and otherwise—in this country. Every proper religious denomination stands to benefit from it.
I suggest that I have got over one of the very grave objections to Clauses of this sort in the past. Since this subject was discussed in Committee I have given it further study and thought in the light of what was said then. The first real

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objection which was raised in Committee was that there would be unfairness between one type of clergyman and another. Certain clergymen of different denominations derive their full stipend income from the voluntary offerings of their people whereas in other Churches, notably in the Church of England and the Established Church of Scotland, the income of certain of the clergy, at any rate, is derived from tithes in the case of England and teinds in the case of Scotland.
There would be a discrimination against a clergyman of the Established Church who receives a larger proportion of his income from other sources compared with the proportion represented by the voluntary offerings of his people. He would be in an unfortunate position compared with a Nonconformist minister whose stipend income came entirely from the voluntary offerings of his people. For that reason, I gave thought to this matter and I have further amended my Clause since the Committee stage by limiting the amount to £100 in each case.
If my right hon. Friend the Chancellor of the Exchequer should think that my paltry figure of£100 is still too high, I am prepared, with the permission of the House, to suggest that he might accept a smaller figure—say£50. I think that many hon. Members would be prepared to accept such a figure so long as we could get the principle accepted.
Mr. Chapman: Could the hon. Gentleman say why he chose a figure of £100? Would that not cover every case, anyway?
Mr. Hendry: One reason for choosing a figure of £100 is that in many cases there might be a far greater sum than £100 involved. In Committee, one hon. Member referred to Nonconformist ministers and others, without endowments, receiving as much as £800 a year. It was considered that to exempt an income of £800 a year completely from taxation could not be justified. For that reason, I took the modest figure of £100. It was to some extent a purely arbitrary figure and, as I say, if my right hon. Friend thinks that it is too high, it is for him to say so and it might well be that the House would agree to a lower figure than that.
Mr. Douglas Houghton: Why does the hon. Gentleman propose a limit at all? If this is spiritual money and not secular money, why is there any limit?
Mr. Hendry: The reason is twofold. The first reason is that I am trying to establish a principle. After all, this matter has been argued in this House for upwards of forty years. Various Chancellors of the Exchequer have agreed that something ought to be done along these lines, but so far every Chancellor has failed to find a means of doing it. We hope that the present Chancellor, or one of his successors, will find a way of producing fairness in these matters. I would remind the House that in 1957 the then Chancellor of the Exchequer promised that he would look into this matter.
4.45 p.m.
Mr. Glenvil Hall: Surely the hon. Gentleman has got this matter rather muddled. We have had this debate year after year for a good many years, and up till now, so far as my memory serves me, all that has been asked for in this connection is that Easter offerings should be exempted. The hon. Gentleman is going very much further than that, and, if I may say so, is becoming quite illogical.
Mr. Hendry: I should have thought that the right hon. Gentleman would have listened more carefully to what I said.
The proposal relating to Easter offerings was quite unacceptable to many hon. Members because it related only to the Anglican community. So far as I understand, no other denomination in this country has an Easter offering. It was a discriminatory proposal. Various hon. Members of all religious denominations, including Jews and Noncomformists, all supported the proposal in principle, but a great many found difficulty in accepting it in that form because it was discriminatory, and the Churches of which they were members did not stand to benefit. So I have for that reason—logically, in my opinion—widened my Clause to include all denominations, Christian and otherwise, in this country.
I come to the next objection about which I have thought since the subject was discussed in Committee. It is this. I understand that certain Noncomformist denominations in this country do not pay

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their clergy directly out of the offerings of their people. What happens in a number of cases, including, I understand, the Church of Ireland, is that a large part of the congregational income, whether from Christian liberality or from the freewill offerings of the people, is sent to a central fund and is disbursed from that fund. That obviously produces a procedural difficulty, but if we can establish as a matter of principle that a small sum, such as £100, or even £50, is permissible for exemption, then it should not be beyond the wit of these Noncomformists and other denominations to retain a small part of the voluntary offerings of the people for this purpose and hand over that small part to their parsons or ministers as part of their voluntary offering. I have tried very hard to meet the cases of all denominations so far as they have come to my notice.
Another objection was raised in Committee, and it was a very sincere objection. It was raised in a very moving speech by the hon. Member for Gloucester (Mr. Diamond). He said that there was another side to this matter and pointed out that a clergyman, possibly a very poor one—in his case, I think, a rabbi, although it does not matter whether it is a rabbi, a priest, or a minister—might feel that he should not accept a benefit that was not available to the ordinary run of mankind, and that he was being given some sort of privilege because of his spiritual position.
I was very impressed by that argument and gave it a lot of thought. I think that I have got an answer to it, and it is very much tied up with the question which I have already been asked, namely, why I decided upon a figure of £100. We who know the Churches and the clergy are well aware that a clergyman has a tremendous amount of outgoing which he cannot claim as an expense for Income Tax purposes. There is a lot of secret benevolence from the clergy in this country. We all know how poor Mrs. So-and-So was helped by the minister, or the priest. It happens every year. We do not ask these reverend gentlemen to keep an account of the few shillings spent on this or that object.
During the Finance Bill debates, we have spoken at great length about expense allowances given to businessmen
482
and others. Everyone knows that expenses legitimately incurred in earning an income, no matter whose income it may be, are admissible as a deduction for Income Tax, but we surely do not wish to ask these reverend gentlemen to note down in a little book every few shillings they spend on benevolence to Mrs. So-and-So, every bus fare, or the price of every sheet of notepaper that they have to buy. We all know that every clergyman of whatever denomination has expenses of that sort. I should be surprised if the figure of £100 is not related fairly exactly to those expenses which are incurred.
It has been announced that my right hon. Friend is about to retire. He has been a great Chancellor, as I think most of us will agree. I appeal to him to show his greatness in this case. I ask him to take the bull by the horns, admit the principle, and do something for the clergy. The cost would be negligible. It would make no inroads into the country's Budget. In 1957, my predecessor in my constituency put a Question to the then Chancellor of the Exchequer. The reply from the Financial Secretary at that time is reported in HANSARD, Vol. 568, c. 1294, to the effect that the cost of relieving the whole of the stipend income of the clergy from Income Tax would be about £1 million a year.
I am not asking for relief in respect of the whole of the stipend income of the clergy. I am asking only for an infinitesimal part, perhaps one-eighth, or something like that. We are left with a figure of a little over £100,000. Surely, £100,000 or a little more is a small sum to make the people of this great nation the protagonists of God. I appeal to my right hon. Friend to use this opportunity, which may be the last opportunity he has, not to make a vague promise that his successors will do something about it but to bring to reality that part of our daily prayers said in the House when we ask that the result of our councils should be to the glory of God and the maintenance of true religion.
Dr. Horace King: I support the new Clause the Second Reading of which the hon. Member for Aberdeenshire, West, (Mr. Hendry) has so movingly and persuasively proposed. The wicked old priests of the Old Testament used to dig a

483
fork into the offerings which the congregations made and everything that stuck to the fork belonged to the clergy and the rest went to God.
For over sixty years now, the Treasury and the Chancellor of the Exchequer between them have been acting like Hophni and Phinehas, in the Old Testament. They have been sticking their fork into the offerings which congregations make out of their affection for good clergy and anything that stuck to the fork has belonged to the Treasury. They seem to have acted on the religious belief that congregations should render unto Caesar not only the things which are Caesar's, but a percentage of what belongs to the clergy in question.
I hope that we shall at last make a decision on this question in our debate this evening. All the arguments were advanced in the very long and serious debate we had in Committee, and I believe that the Chancellor offered no effective reply to the plea which hon. Members on both sides made. There may be technical difficulties in separating what both sides have in mind in the various Clauses which have been put down on different occasions, that is to say, the stipend of the clergy, or the living of the clergy, from the voluntary offerings which people make in addition to the regular salary which is paid to a clergyman in any denomination.
Nevertheless, the House has declared over and over again in past years that the Treasury ought to forgo its part of such extra voluntary gifts. I believe that, if the Treasury will accept the principle lying behind the new Clause, it will have the technical skill to separate by a formula which it can devise the stipend of the clergyman from the extra voluntary gifts which a congregation makes.
In most of the requests which have been made to the Chancellor in Committee and during the Report stage of the Bill, important matters of finance have been involved. I can understand the Chancellor's standing by his Budget and his Finance Bill as a whole, but he can concede this without jeopardising in any way their main principles. The sum involved is very small. Neither the right hon. Gentleman nor, I believe, any Chancellor of the Exchequer would have the right to demand, to put it like that, the
484
loyal party support of his usual supporters in a matter of this kind.
I hope that we can persuade the right hon. Gentleman. If not, I hope that the House will register its own decision on this matter, since the Finance Bill itself is not in question. The total cost can be no more than between £500,000 and £1 million. It can mean very little indeed to the Chancellor, and it will add nothing to the inflationary spiral. It can, on the other hand, mean quite a lot to the poor clergymen whose fortunes we are discussing.
I must add that, if we speak as I hope we shall in this debate and, if need be. we vote as I believe we ought to do, we should, as Christians, make up our minds to tackle the problem which really lies behind this matter, namely, the inadequate pay of the clergy. Anyone who speaks in the debate or votes at the end of it in favour of asking the Chancellor to do something for the clergy but refuses himself to do something outside in the Church to which he belongs will, indeed, be a hypocrite.
Mr. Arthur Tiley: The hon. Gentleman has raised a very important point. Will he look at it in this way? In the light of his last few sentences, would it not be better for the House to send a message from this debate that we should pay our priests, our vicars, our curates, whoever they may be, properly? That is not a matter for us as politicians, or for my right hon. Friend. The message should be that throughout the whole Church our priests should be paid properly. I say that to the hon. Gentleman because he is making a very impassioned and sincere plea, but there is that other side to the argument. If we indulge in this method of legislating, we may tend to take responsibility from ourselves in the congregations.
Dr. King: I did not interrupt the hon. Gentleman in his intervention, because I thoroughly agree with its purport. I hope that, as a result of this and previous debates that we have had, the sentiments that he has expressed will reach outside this House.
But that does not absolve us from solving the problem which we have discussed as a matter of principle year after year. The gifts which congregations make out of their love and affection for

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their clergymen ought to go to the clergymen and no portion of them ought to go to the Treasury. The people who make those gifts "cough up" in the ordinary way, as taxpayers, on every conceivable occasion with good grace, but this is not, in their opinion, an occasion when part of what they wish to give to the clergy should be diverted to the Chancellor of the Exchequer.
I add my plea to that expressed by the hon. Member for Aberdeenshire, West, and I ask the Chancellor to make the concession. Let him modify the new Clause in any form that he likes. Let us not have people saying that they will not support it either because it goes too far or because it does not go far enough. If he would concede the principle, and this is why we have already mentioned in this new Clause the limiting sum of £100, then we shall be carrying out what I believe is a right and proper thing, and something about which the House has expressed its opinion over and over again since the war.
5 0 p.m.
Mr. Norman Cole: Briefly, I should like to support the new Clause, and, at the outset, to endorse what the hon. Member for Southampton, Itchen (Dr. King) has just said. It is perfectly true, and if the debate will do nothing else it will underline the fact that all of us in all our Churches get our spiritual leadership much too cheaply. I could put that in bolder and more definite terms, but I will not do so. This debate may, for some of us here and many people outside, underline in our consciences the fact that we do not pay enough for this service, above all services, which we want to have in our lives.
Another point is that we should realise—and I am sure that my right hon. Friend the Chancellor will say this, and I agree with him before he says it—that this will need some sorting out in order to make some kind of equitable arrangement. I hope he will be able to do it, because if we do not go about it properly we might, in trying to solve one problem, create a considerable number of others and be in a much worse state. Nevertheless, the fact remains that something can be done about this. I refuse to believe that it is beyond the wit of the House or people outside to devise
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some kind of system to help those whom we most want to help.
Logic has been talked about. I do not believe that this is so illogical as it has been made out to be, because we already do many illogical things, illogical in the sense that they are coloured by human compassion, in our Income Tax legislation. We have marginal relief for old people, various other kinds of reliefs for dependants and people looking after members of their families, as well as other kinds of concessions where we believe there is a human need. Neither in past Finance Bills nor in the present one, nor I trust ever in the future, have we been, or are we being or shall we be, always logical in our tax concessions. In this, above all, I think that if we cannot afford to be a little illogical, then it is a sad day for our country.
My fourth and last point is that I should be very sorry to see the day in this country or in the House when everything we do is coloured and determined only by logic. Indeed, the House of Commons itself does much of its excellent work on the basis of things which are themselves very illogical. I would go further and say that the whole system of democracy is in many ways illogical itself. We all know that it is not the quickest or the best way, from the point of view of speed and logic, of attaining the government of the nation, but it is the right way—the human way, the way that is fair and equitable to all, if not the most speedy way. That is what we ask for in this new Clause.
We do not plead logic or the streamlined efficiency of the new age. We do not think that all people should necessarily have the same thing at the same time, until we can work it all out. I should be surprised to find anybody in this House pleading for this concession elsewhere just because clergymen would be already getting one. Nobody would go that far. We are not pleading this case solely on the grounds that these people ought to have a bigger payment from those of us who go to church and form the congregations—that is something which we all believe must be left to us, and is not a matter for the House—but in order that those who are our spiritual leaders may enjoy this reasonable, proper, even if illogical, human concession from the Chancellor.
Mr. Glenvil Hall: I do not know how many debates on this subject I have heard down the years, but it must be lengthening out now pretty considerably. Up to now, no Chancellor of the Exchequer, in spite of the fact that most moving speeches have been made year after year from every quarter of the House, has found it possible to accede to a request of this kind. I think that we have to bear that in mind, for it is the fact that Chancellors of the Exchequer have found the reasons for not conceding the request pretty considerable, and they still are.
I think they are more formidable now on this new Clause than they were on those we have had previously. Previously, the Chancellor has been asked to exempt Easter offerings, and there was a good deal to be said for that on sentimental grounds. It was a voluntary offering for services rendered by the spiritual head of a particular church to which certain people went, and it was felt, and I think is still felt, by a lot of people that it should not be considered as normal income. The test here which any Chancellor has to take into account is not whether the offering—the amount received—is the same each year, but whether it is recurring. If it happens every year, it is part of the individual minister's income, and that, I believe, is one of the tests, if not the acid test, which any Chancellor has to bring to bear when considering this matter.
If I read this new Clause aright, obviously the allowance is to be made for £100 every year, and, therefore, the assumption is that these offerings will be made year after year and will in time, if not from the very beginning, be looked upon as part of the permanent income of the clergyman or minister, and that is the difficulty which the Chancellor has to get over. Income is income, no matter who gets it, and a clergyman in this direction is in no different position from the rest of us.
There are other arguments, if I may use them, apart from this one, which I think are very much to the point. I doubt if some of the poorest clergymen or ministers would benefit from this new Clause. Their ordinary income is subject to tax and an extra £100 of allowances would probably not mean very much, if anything, to them, because some of them would not pay much tax,
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anyway. If I understand correctly the intentions of the hon. Gentleman who moved the new Clause, what he wants to do is to help the poorer ministers and clergymen, and I am not sure that this is the way to do it. The right way is for those of us who go to church and chapel to look after our clergymen and ministers and see that they receive enough to keep themselves and their families and yet allow them to make those charitable contributions to the poorer parishioners or members of their churches who are in need.
At the other end of the scale, ministers or clergymen who have a living which is endowed would not, I assume, get any help from this allowance, because they would not be living, in any sense or shape, on voluntary contributions. Therefore, it will not be universal. The new Clause will not even help those whom the hon. Gentleman who moved it wants to help. It will be something which some ministers would get and many would not, and that is not the way to help them.
Dr. King: I am grateful to my right hon. Friend for giving way. He has said that some clergymen would not get any benefit from this if their main income were derived from a living, but if a voluntary gift were made to such a clergyman on top of his living, he would benefit, surely, from the new Clause?
Mr. Glenvil Hall: No. If it were one that occurred year after year—and, as I understand it, and someone will correct me if I am wrong, the only time when they get voluntary offerings of that kind is at Easter—[HON. MEMBERS: "No."]—I think there is a case for exempting Easter offerings, but I may be wrong about that and do not want to say any more. For the reasons I have given, and for others which I might give but which doubtless others will give, I hope the Chancellor will resist this new Clause.
The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): I think we all know the depth of the feelings with which my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) introduced his new Clause. We all respect those feelings.
In Committee on the Bill, in the discussion on the new Clause tabled then by my hon. Friend, I promised that I

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would examine the tax position of the clergy between the Committee and Report stages to see whether there was anything that could be done on their behalf. I have in fact given quite an amount of thought to this subject in the last week or two. It would have been quite inexcusable on my part if I had not done so.
I think we shall all agree with what was said by my hon. Friend the Member for Bradford, West (Mr. Tiley) and my hon. Friend the Member for Bedfordshire. South (Mr. Cole) and by the right hon. Member for Colne Valley (Mr. Glenvil Hall) expressing the consciousness of us all that the main trouble here is that the remuneration of our clergy is very low. I am sure that there must be a number of other hon. Members who, as a result of this debate today, feel as I do: I have made up my mind that I will try to carry my responsibilities a little more seriously in this respect as a humble member of the Church of England than I have done hitherto. I do not know whether any others feel as I do, but there is no question about it that the more one thinks about these things and the more one is brought up against these facts the more one is conscious that one does not always get one's priority tight in deciding where help is required.
The question of exempting in whole or in part that part of a clergyman's remuneration which is represented by voluntary offerings, as has been mentioned, has been considered by a long succession of Chancellors over nearly fifty years; not only the question of Easter offerings, but of all voluntary offerings also; and, as has been said, the obstacles have always seemed insuperable to them. The greatest obstacle always has been considered to be the difficulty of discriminating in a manner which is contrary to the general principles of our tax law in favour of the income of one particular calling, however worthy, as against other forms of service to the community. Whatever decision we finally reach in this matter, we must face the fact that to do so, I think, would be to establish a new and far-reaching precedent in our tax law. As I said the other day when speaking in Committee, that is my view. I acknowledged also that that in itself was not entirely conclusive.
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The argument that the receipt of offerings by an incumbent for services rendered is not a form of remuneration is, I think, hard to sustain in the light of the facts. Nor does the voluntary nature of the offerings offer any unique basis for special treatment, unfortunately. My hon. Friend the Member for Wolverhampton. South-West (Mr. Powell) put that difficulty very cogently in Committee.
Then there is the difficulty, of course, as I think my hon. Friend recognised in his speech, of ensuring equitable treatment between ministers of different denominations and even between ministers of the same denomination, because according to the best information I have been able to get, I believe that direct voluntary offerings by congregations to the clergy would probably apply to about half of the ministers of religion in this country; and even within this field relief from tax for offerings would operate unequally as between two clergymen both doing equally good work and getting the same total income, one of whom happened to be in a benefice which depended almost exclusively on endowments, the other in a benefice where voluntary contributions played a very large part indeed.
One question which we have to consider is whether it would be fair to tax the recipient according to the source of his income, because the new Clause, of course, would be confined to voluntary offerings made direct to a clergyman by his own congregation, and, as my hon. Friend implied, outside the Church of England there is a wide variety of systems, and many Churches aim at a central pooling of resources from which stipends are subsequently paid out to local ministers. These central funds may be fed, of course, from sources other than the voluntary offerings of members of the Church. Out of these funds there may have to be paid many other expenses besides the stipends—quite necessary expenses of the Church.
5.15 p.m.
In these circumstances, it is quite impossible to say how much of a minister's income comes to him from the offerings of his congregation, and the element of personal relationship, which is so largely relied upon, I think, by those who support the proposal, is of course absent.

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These denominations might regard it as unreasonable that spasmodic giving by a congregation should attract a tax benefit which was not available to regular, methodical giving to the needs of the Church as a whole. I am sure that that is one problem we have got to consider.
I am bound to say that in these circumstances, like all my predecessors, I find it extraordinarily hard at present to see a way in which voluntary offerings by a congregation to its own clergyman can legitimately be treated as other than income. If they are income, then it is not easy to find grounds on which, with fairness to others who receive a modest level of remuneration for their services to the community, such income can be exempted from the application of the Income Tax. I do believe that in the course of time we should find it extremely hard to confine the exemption solely to clergymen, however hard we were to try. I wish it were otherwise.
However, I do not intend to leave the matter there. As my hon. Friend the Member for Bedfordshire, South said, this problem does need some sorting out if we are to find a workable solution, and what I propose to do is to consult again representatives of all the main Churches to seek to find some relief which can be given without unfairness to others, and without too fundamental a breach of the principles of our tax law.
Although from what I have said the difficulties are obvious, I shall include in this examination a study of all the various forms which voluntary offerings take in the different Churches to see whether some grounds may come to light which would justify some degree of special treatment.
We will see whether a practicable way of helping clergymen might be to find some means of relieving the burden of Schedule A tax on parsonage houses as far as that falls on the incumbent. It might be worth investigating. I think it is possible something could be done there. In this respect, Schedule A tax, many clergymen of the Church of England are at present at a disadvantage compared with other ministers whose houses are regarded as in occupation of the Church and, therefore, exempt.
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I am anxious that clergymen should avail themselves to the full of the tax allowances which are available in regard to expenses necessarily incurred in the performance of their duties. Here again I must adhere to the general principles of the law, but I understand that it is generally accepted that the law is at present interpreted generously in regard to clergymen's expenses, and that every type of expense which a clergyman could reasonably claim to fall within the expenses rule is in fact allowed. There may be a number of ministers who are not aware of the expenses which may be charged against taxable income. I should like to make sure that our present rules do, in fact, cover all appropriate and relevant expenditure and are generously interpreted, and if they are not, if there are any other expenses which could legitimately be brought within their scope, then we will consider what we can do.
The consultations on these matters will be entered into with a real hope of producing some positive result. I hope that in these circumstances my hon. Friend, recognising the difficulties with which I am faced in finding a fair solution and my anxiety to find one, will not press this particular proposal, which, I feel, in the light of our present evidence, really would not do the justice which we are all out to try to find a way of doing.
Mr. A. V. Hilton: I regret that the Chancellor is unable to accept the Clause, but I am glad that he has not closed the door in our face and that he has promised to consult the various religious denominations on the subject. He said that he hoped that he might be able to find a way whereby help could 'be given to the people whom we have in mind.
I as a Methodist wish briefly to speak in support of the Clause. At the moment the Methodist Church is in conference and my hon. Friend the Member for Cardiff, West (Mr. G. Thomas) has just been elected vice-president of that conference. It is the first time that a Member of Parliament has received this honour. I am sure that the Methodist conference will receive what the Chancellor has just said with pleasure—the fact that he has not closed the door on the suggestion.

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It has been said on a number of occasions during this brief discussion that ministers of religion are not properly paid. That is true. I personally know many ministers, some of the Church of England and some of the Free Churches, who are receiving no more in remuneration than what ordinary labourers are getting. As the hon. Member for Aberdeenshire, West (Mr. Hendry) said, it is true that theirs is not a job but a calling, and everyone in the House, whether he supports the Clause or not, respects the wonderful work that ministers of religion are doing.
Even if the Chancellor were to accept the Clause, ministers of my own Church would be unlikely to benefit from it to the same extent as ministers of some other denominations, but even so, I still think that what the Clause proposes is a move in the right direction, and I only wish that it could have been accepted. Help for the clergy is needed now. The hon. Member for Bradford, West (Mr. Tiley) intervened to say that we as members of on. Churches ought to pay our ministers properly. I agree with that, but it is a fact, as we all know, that it is getting more difficult to do so all the time, in view of the unfortunate decline in congregations. We in the Free Churches find it particularly difficult to do so at the present time.
At the Methodist conference to which I have already referred it is suggested that we should pay our ministers more. I know from experience that that is going to be very difficult, but, despite the difficulty, we shall set about it and try to honour our obligation.
Mr. Diamond: Will my hon. Friend explain how, if members of a congregation are finding it more and more difficult to put their hands into their own pockets in order to pay their ministers adequately, it can be right that they should put their hands, through the Treasury, into the pockets of their fellow-citizens in order to pay the ministers of their own congregation?
Mr. Hilton: I think that my hon. Friend has got it wrong. The money is, in fact, coming from the same pockets, because the people who regularly attend our respective churches and regularly give to collections for their maintenance
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are the people who on any special occasion dip into their own pockets, and, sometimes, dip a bit deeper.
The point that I am trying to make is that it has always been difficult for the Free Churches in particular, which are self-supporting, to maintain their ministers, and with the unfortunate decline in congregations at the present time, about which many of us are so sorry, it is becoming increasingly difficult.
I intervened in the debate only to say a few words about the Clause and to thank the Chancellor for giving some ray of hope that in the not too distant future he may, to some extent, be able to help the body of people about whom we are speaking and who are doing such very good work for the benefit of the people of this country.
Mr. Glenvil Hall: May I interrupt my hon. Friend to point out that the Chancellor has given much more than a ray of hope? He has indicated that ministers will now be informed that they can claim certain expenses, one of which is for the use of a room with heating and lighting in their own houses. That, in most cases, will come to more than £100.
Mr. William Yates: I think that the speech of my right hon. Friend the Chancellor was encouraging, especially his reference to the advice to be given about the recovery of tax and also about Schedule A. However, I am in sympathy with the Clause and with the way in which my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) moved it and the way in which it was so ably supported by the hon. Member for Southampton, Itchen (Dr. King).
There seems to be some idea that we cannot alter a principle. Who says that we in the House of Commons cannot alter a principle if we decide to do so? Who is telling us that the House cannot alter tax principles if it so desires? This is a new theory and the sooner it is debunked the better. Anyone who says that the House of Commons cannot—
Mr. Amory: I do not know whether my hon. Friend is referring to me, but I did not make that statement.
Mr. Yates: I was not referring to my right hon. Friend. I would not dream of doing so.

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This matter was discussed quite a lot in Committee. My right hon. Friend the Chancellor says that certain people receive a special form of income and that we cannot make an exception in their case. We must not make exceptions for special classes of people who receive some special form of income.
What about my disability pension? Do I pay tax on that? Certainly not. That is part of my income. Is that not a special class? What is all this business that ministers of the Church should not be regarded as being in a special category? What are those people who take this view talking about? They run away with the idea that because something is logical or because it is a theory or a practice it should not be varied. We in this House decide what laws we shall pass. I should have thought that on this occasion it might have been wiser to say that the proposal in the Clause was one which my right hon. Friend should commend to his successor.
I do not wish to take up more of the time of the House in going into the matter, but it seems, perhaps, that the people who ought to be setting an example are those in charge of the direction of the affairs of the country. I should have thought that the high Court of Parliament might in its wisdom have decided to try to produce a modified Clause on the lines suggested.
In view, however, of what my right hon. Friend has said and of his suggestion concerning relief of tax, I would suggest to my hon. Friend the Member for Aberdeenshire, West that he might consider withdrawing the Clause on that undertaking. I would point out, however, that if an undertaking of the nature which has been given today by my right hon. Friend had not been forthcoming, I for one would certainly have voted for the Clause.
Mr. Hendry: In view of what my right hon. Friend the Chancellor has said, and the opinions expressed by certain hon. Members associated with me, I beg to ask leave to withdraw the Motion.
Motion and Clause, by leave, withdrawn.

New Clause.—(SUPPLEMENTARY PROVI- SIONS AS TO SS. 20 TO 25.)
If—

(a) a person furnishes to the Commissioners of Inland Revenue particulars of a transaction or transactions effected or to be effected by him being a transaction or transactions which but for the provisions of this section might fall to be dealt with under any of the provisions of sections twenty, twenty-one, twenty-two, twenty-three, twenty-four, or twenty-five of this Act; and

(b) the Commissioners are satisfied that the transaction or transactions as described in the particulars were or will be such that they ought not to be dealt with under the provisions of any of those sections

the Commissioners shall notify the said person accordingly and where such a notification has been given under this section none of the provisions of the said sections twenty, twenty-one, twenty-two, twenty-three, twenty-four, or twenty-five shall apply to him in respect of that transaction or those transactions.—[Sir C. Black.]
Brought up, and read the First time.
5.30 p m
Sir Cyril Black: I beg to move, That the Clause be read a Second time.
The point covered by this Clause is comparatively simple and straightforward. Whatever differences of opinion we may have about this year's Finance Bill, there will be no difference of opinion that Clauses 20 and 25, with which this new Clause seeks to deal, are extremely complicated and very largely incomprehensible to the layman. Indeed, many lawyers with whom I have discussed them have been unable to express definite opinions on matters of detail as to what they seek to achieve.
Many years ago, Mr. Gladstone laid down certain criteria regarding sound tax principles. I have not been able to trace his exact words, but I believe that one of his criteria was that taxes should be of a character that would make them easily intelligible to the taxpayer. If that be the case, we have certainly moved a very long way today now from the principles that operated in Mr. Gladstone's day. Any hon. Member who claimed to have a complete understanding of Clauses 20 to 25 would, indeed, be a very bold man.
The new Clause in no way challenges any of the proposals contained in Clauses 20 to 25. We may or may not agree with those Clauses, but their merits are in

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no way affected by this new Clause, the purpose of which is to enable perplexed potential taxpayers, who are in doubt as to what Clauses 20 to 25 mean, to ascertain in advance from the Inland Revenue what would be the tax consequences of certain transactions.
There is a precedent in the present Finance Bill for that procedure, because in reference to Clause 26, we find in Clause 27 (9) words that very nearly accord with the words to be found in the new Clause. What I seek to do is to apply to Clauses 20 to 25 the procedure that is applied by Clause 27 (9) to Clause 26. That seems to be an eminently reasonable thing to do. There is a precedent for doing it, and I find it difficult to understand why the procedure should be regarded as relevant to Clause 26 but, apparently, not relevant to Clauses 20 to 25. Therefore, in the interests of clarification, I hope that my right hon. Friend may be able to advise the Committee to accept the new Clause.
Mr. Barber: As my hon. Friend the Member for Wimbledon (Sir C. Black) has said, the purpose of the new Clause is to provide that any person may furnish the Commissioners of Inland Revenue with particulars of transactions effected by or to be effected by him that might fall under any of the provisions in Clauses 20 to 25, with the object of obtaining a clearance. I am certainly the first person to admit to my hon. Friend that these are very complex Clauses, and I have a great deal of sympathy with the object he has in mind.
My hon. Friend has very skilfully drafted this Clause as a shortened version of the provisions about application for a clearance under Clause 27. I am sure that almost every hon. Member will now be familiar with the provisions of that Clause, but, in order to explain the position, I must, very briefly, state once again certain of the matters contained in it.
Clause 27 deals with transactions in securities giving rise to tax advantages and has effect—and these are the important words—unless the person concerned
"… shows that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments, and that none
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of them had as their main object, or one of their main objects, to enable tax advantages to be obtained, …"
In that context, provisions for a clearance by the Commissioners of Inland Revenue are clearly appropriate. I agree with my hon. Friend that Clause 20 also lends itself to provision for a clearance in so far as under subsection (2) of Clause 20 its operation turns upon the question of whether or not the Commissioners having jurisdiction in the matter are satisfied that after a sale of shares all trading stock belonging to the company at the time of the sale has been or will be disposed of in the normal course.
I should say that since Clause 20 (2) places the responsibility for deciding the matter on the Income Tax Commissioners, this new Clause would hardly be satisfactory taken on its own because, as Clause 20 is at present drafted, there is no room to give the Commissioners of Inland Revenue any power in the matter. I agree, however, that there is much to be said for the view that a person proposing to sell shares ought, if possible, to be able to ascertain where he stands before carrying out the sale.
It is with that in mind that there is a Government Amendment to Clause 20 which will be moved later, in combination with an earlier Government Amendment to the Clause, which will introduce the necessary machinery. This machinery will enable the intending vendor, together with the proposed purchaser of the shares, to approach the Commissioners to get a clearance if the Commissioners are satisfied that the trading stock will be disposed of in the ordinary course, as required by Clause 20 (2).
There are two points that are important. This provision for a clearance will also run for a sale of shares in a holding company which, under Clause 22, falls to be treated as a sale of shares under Clause 20 (1). It will also run in relation to a company that falls to be treated as within Clause 20 by reason of the special provisions of Clause 21, which, as my hon. Friend will remember, relate to a company which has put up, or is putting up, a building.
I hope my hon. Friend will agree that what I have said goes quite a long way towards dealing with the point that has, rightly, been concerning him, but I

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should add that provisions for a clearance in relation to other provisions mentioned in the new Clause are—as I think that he will agree on reflection—not appropriate. Apart from the question whether or not trading stock will be disposed of in the ordinary way after a sale of shares, the application of the Clauses must depend upon whether, on the facts of the case and on the proper interpretation of the law, the taxpayer falls or does not fall within the provisions. In the event of dispute about any such question, it should be resolved in the ordinary way by appeal to the appropriate body of commissioners, just like any other dispute about a taxation matter.
I hope that what I have said about the Amendments which we propose to move later will convince my hon. Friend that we have done all we can to meet his point in providing for a clearance in cases where we consider it to be appropriate.
Question put and negatived.

New CIause.—(MAINTENANCE PAYMENTS TO BE TREATED AS EARNED INCOME.)
(1) In subsection (2) of section five hundred and twenty-five (meaning of "earned income") of the Act of 1952, at the end of paragraph (c) there shall be inserted the following:—
"(cc) any small maintenance payments, as defined by section two hundred and five of this Act, and any payments which, but for their amount, would be such small maintenance payments; and"
(2) Section two hundred and seven (Duty of court to give information as to small maintenance orders) shall have effect in relation to any payments mentioned in this section as it has in relation to small maintenance payments and the expression "small maintenance order" shall, for the purposes of this section, be construed accordingly.—[Mrs. Castle.]
Brought up, and read the First time.
Mrs. Barbara Castle: I beg to move, That the Clause be read a Second time.
This is a Clause which attempts to deal with a point of hardship at present endured by a considerable body of deserving women, but it also raises an important point of principle which, I believe, is unanswerable. The Clause seeks to give the benefit of the two-ninths deduction of earned income relief to every wife who is separated from her husband and receiving a small maintenance payment from him.
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I was very surprised, and so were a number of my constituents who are affected by the present position, to find that such payments are ranked as the unearned income of the wife and, therefore, are taxed as such without the benefit of earned income relief. A number of separated wives, both in my constituency and elsewhere, have written to me to complain that these small maintenance payments are income which is the husband's contribution to the maintenance of the wife which he would have to make in any event if she were still living with him and which she often needs to maintain the home, to which his children are entitled—often, she is looking after the children—and which is generally the family home, which he has deserted and which she is left with the burden of maintaining.
Therefore, these small maintenance payments ought not to be taxed as though they were some kind of investment income which the wife had not earned. It is ironical to class these small maintenance payments as investment income. They would be more appropriately described as disinvestment income, because they are the product of the failure of the wife's investment in marriage. She is awarded the money by the court to help to maintain the family home which was not broken up by her.
Therefore, from the purely human point of view, it seems an outrage to these women, who have faced the breakup of marriage and who have had to carry on with the family life and the family home with no companionship from the husband and with simply these small payments from him, suddenly to find that this money, which they regard as part of the ordinary housekeeping money, which they were getting before the home was broken up, is classified as investment income and is taxed as though it were unearned.
5.45 p.m.
I want, at this point, to come to an important technical side of the matter. In the Clause, I am not asking for any form of double tax relief. What happens at present is that these small maintenance payments are mostly paid by the husband out of earned income. Since, however, under the present law, these small maintenance payments are regarded as a charge on his income,

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they are deducted from his income before the earned income relief is assessed upon it. What this means under the existing law is that nobody gets earned income relief upon this slice of the man's income which goes to the wife for her maintenance. That is the point of principle to which I want particularly to draw the attention of the Chancellor of the Exchequer.
Surely, this situation is quite wrong. Why should a slice of the man's income not be entitled to the normal tax relief that everyone else would get? Why should the benefit of it go to the Chancellor instead of to a woman who has to face life's struggle under additional difficulties? Clearly, the point of principle is that somebody should get the legitimate earned income relief on this slice of the man's earned income.
I maintain in the Clause that it is the wife who should get it, because the small maintenance payments come to her as a form of housekeeping money which she would have got had she remained in the man's companionship. It is most unfair that the break-up of the home, which, in the eyes of the law, is not the fault of the separated wife—that is, why she has the maintenance payment—should mean that she is deprived of her right to treat these payments as a form of housekeeping money.
I am well aware that the Chancellor may argue against me that same, at least, of these separated wives are already covered by the small income relief, which is the same in extent as the earned income relief and is available, I understand, to anybody with a total income of less than £300 a year, regardless of the source from which it comes—regardless, that is to say, of whether it is earned income or investment income.
That does not meet the principle involved, however, because it is, clearly, only wives with a very small income indeed who get the benefit of this. If the Chancellor brings this argument in aid in resisting the Clause, he will be saying that he is prepared to help only the separated wife who is living in something near to penury. I say that the separated wife ought not to have to be living in very stringent circumstances before she gets this tax relief which is equivalent to the earned income relief figure.
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Even bearing this concession in mind in regard to the small income relief, the present position is that if the separated wife goes out to earn, She is immediately penalised—and, of course, the large majority of these wives have to go out to earn. All that the small maintenance allowance means to this class of separated wife to whom I am referring is a little bit of help. In a large number of cases, it is simply not enough to live upon and the separated wife has to go out to earn to keep the home together, particularly when children are involved. She certainly has to go out to earn if she wants to keep anything like the same domestic standard that she had looked forward to enjoying all her life when she entered into the marriage contract, which I repeat she did not break.
I should like to give an example of how things work at present. The separated wife going out to work might earn £6 a week, a typical woman's wage and certainly not a handsome one. In addition, she might receive 30s. a week maintenance allowance from her husband. In the present situation the small income relief will cover her earnings, but not her maintenance allowance in this case and that means that she would have to pay tax on the 30s. as if it were an investment income.
One woman wrote to me on these lines:
"I have a court order of £1 10s. per week made in 1944 owing to my husband's desertion and adultery with the woman with whom he still lives. As I had a son 4½ years of age I was compelled to do what work I could obtain and give him a home. It has been a very sore point with me to have to pay Income Tax on such a small allowance."
Assuming that in this case she had earned £6 a week, that 30s. maintenance payment which she received under a court order would be treated as investment income or unearned income and taxed accordingly.
Under my proposed new Clause what would happen in this case would be that the woman would receive in future the two-ninths earned income relief on her 30s. a week court order payment, which would be some small help. I do not exaggerate the amount of help that it would give, but this woman is in a situation in which even a few pounds of tax relief a year is important. It might make all the difference between having a

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holiday and not having one or having a new dress or not having one, or buying something for the home which at the moment she cannot buy owing to sheer financial stringency.
This proposed concession is very modest. It does not go as far as I should have liked. I should have liked to have seen more done for the woman, but I have to put my request in this modest form to keep it within the confines of the principle which I have already stated, namely, that the 30s. she gets is something which has not under the present law been given the benefit of the earned income relief at all—the Chancellor has pocketed the relief.
I would ask the right hon. Gentleman to see that, in future, the separated wife shall have that relief. I have put my request in this modest way because I believe that the Chancellor will admit that the principle which I have outlined is unanswerable and I am confident that he will accept my Motion.
The Solicitor-General (Sir Jocelyn Simon): I believe that this is the first time that we have had the pleasure of listening to the hon. Lady the Member for Blackburn (Mrs. Castle) on this Finance Bill. I know that the House will want to recognise her persuasive and, indeed, moving speech. The hon. Lady said that her case was unanswerable in point of principle, but, as so often happens in our debates, even the most unanswerable point receives some sort of answer. I shall certainly try to show why her new Clause is not acceptable and how, indeed, it runs counter to the tax principle which is pretty fundamental to this part of the code.
The hon. Lady moved the new Clause in very human terms. I can tell her that I have tried at times to put forward the case for these women. A few years ago I urged an Amendment to the Finance Bill which would make greater provision for the woman who is dependent on small maintenance payments, and the Amendment was accepted in a subsequent Finance Bill. But when it comes to this point I am bound to say that the proposal is not acceptable.
The hon. Lady puts her case in two ways. First, on the ground that these are women who are suffering hardship. I think that that is inherent in their posi-
504
tion. They are women whose marriages generally have broken up and, almost ex hypothesi, through no fault of their own. Their position must obviously excite compassion. But recognising that this is not a sufficient case for asking for a tax definition in their favour, the hon. Lady goes on to say that she is not asking for double tax relief because the small maintenance payment is deducted from the husband's income before arriving at the figure on which he is entitled to earned income relief.
This is so, but the reason why it is so is that it is deducted from his earnings, and on that part of his earnings he does not pay any tax at all. It is not considered to be part of his income. In fact, the small maintenance payment is really only a matter of machinery and, as machinery, it is very much to the advantage of separated wives who are living in small circumstances. It means that they do not have to wait to recover a tax certificate from a feckless or ill-intentioned husband and then reclaim the tax. It means also that the whole amount of the weekly order by the court is handed over to the wife. It is not part of the husband's income, but it is taxable in her hands. Even where the small maintenance order is not strictly a maintenance order the same result is arrived at in that the sum is not taxable in the hands of the husband but is taxable in the hands of the wife.
I take it that for that reason in the new Clause the hon. Lady does not limit the provision to small maintenance payments as strictly defined. The point I make is that it is purely a matter of machinery. Whether it is a small maintenance payment or not within the meaning of the Income Tax code, the result is that the weekly sum awarded by the court is deductible by the husband from his income before that income is assessed to tax, and he does not receive the earned income relief on it because he is not taxed on it.
Mrs. Castle: Surely the hon. and learned Gentleman, in saying that the husband is not taxed on it, is admitting that nobody gets tax relief on it. He says that it is done that way because it is a quicker means of ensuring that the wife gets the money, but my answer is that the present arrangement makes the wife pay for an act of convenience. I am not asking that this sum should be

505
tax-free. I am saying that the Government can secure their administrative convenience but that they should give tax relief at the point where the tax is paid, namely, by the wife. What possible objection can there be to that?
6.0 p.m.
The Solicitor-General: I was coming on to the objection to that, but I wanted to deal with the hon. Lady's point of departure and show that the reason why the husband does not get earned income relief on this part of his income is that he does not pay tax on it at all. It is not considered as part of his income for tax purposes.
Mr. Douglas Jay: The hon. and learned Gentleman is not suggesting, is he, that it is a mere matter of machinery whether or not this proposal is accepted? Does he agree that if my hon. Friend's proposal were accepted and earned income relief were granted on the income received by the wife, the wife would be better off in substance—that it is not just a matter of machinery, that it would leave the husband just as he was and that the wife would receive the relief? Is that correct?
The Solicitor-General: That is absolutely true. I do not think I said anything which would have implied the contrary. If I did, it was certainly inadvertence.
The real objection to the proposal is that this is not earned income in the sense for which relief is made, but earned income relief is given on income which is derived directly or indirectly from the personal exertions of the tax- payer—such things as the wages and salaries earned by those who are part of the working population, pensions in respect of past services and business profits earned by professional men, individual traders and so on.
Mr. Houghton: Did the hon. and learned Gentleman say "pensions"?
The Solicitor-General: If I called it a "pension" I should be using terms extremely inaccurately. "Pensions" so far as earned incomes relief is concerned are emoluments which are given in respect of past services whereby an income has been earned by personal exertion, and it is really playing with words to say that a housekeeping allowance paid
506
to a wife is earned income in that sense or analogous to a pension.
Consequently, with very great respect to the hon. Lady, when she puts this as a question of principle I say that the approach is wrong in principle because maintenance payments, whether small or otherwise, are not earned by the exertions of the recipient. Apart from the inherent case of personal hardship, the woman concerned has no equitable claim to earned income relief in the computation of the tax liability which falls on her.
Mrs. Castle: Would not the hon. and learned Gentleman agree that it is playing with words to call this money investment income?
The Solicitor-General: I have never called it investment income. It was the hon. Lady who did so. It is quite wrong to equate unearned income with investment income. There are many types of income which do not rank as earned income which are not investment income. For example, sums paid by way of annuity under a deed of covenant are unearned income and not earned income, and yet they are certainly not investment income. One can think of a case which is very close to the cases which the hon. Lady has urged on us and which is not covered by her proposed Clause. We might have a wife who, instead of having a court order, had a payment under a deed of separation. That is not earned income, and it is certainly not investment income either. I should have thought that that case might be every bit as much deserving in the human sense in which the hon. Lady urged the proposed Clause as some of the cases which she has in mind. Also, in some of the cases of a deed of separation one cannot start on the hypothesis that it is a wronged wife.
I come back to the point that this is not income which is earned by the exertions of the recipient, and, therefore, it is not earned income. There are, after all, many cases of people who are living on small income derived from investment, derived from covenant, derived from deeds of separation, and so on, to which the general arguments which the hon. Lady urged are equally susceptible. But one comes back to it in the end that in none of those cases, any more than in this, is it earned income in the sense that it is got by the personal exertions of the recipient. One must look at the facts as they are.

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The hon. Lady mentioned that there is an alternative relief in the case of the very poorest of the type of persons who would be beneficiaries under the proposed Clause. She fairly put the case of the small income relief. I do not want to over-emphasise that point. However, it means that an equivalent relief is available to those who have most to bear in the field which the hon. Lady has in mind. In addition, in the case of elderly separated wives there is the age relief of two-ninths of earned income—on any unearned income of a taxpayer aged 65 and over—and there the limit is £800 and not £300.
So in the end, although the hon. Lady has, as I think the House will appreciate, urged her case with great force and with feeling, it is unacceptable. This is not earned income. It is not in the nature of earned income. If we want to help people in this position we ought to do it in some other way.
In conclusion, it has been my experience that the courts take the tax position of a separated wife into consideration in fixing the amount of the order. My experience is that that has been increasingly so as the amounts that can be awarded by courts of summary jurisdiction have increased. Consequently, the tax liability may be an important consideration.
Mr. Diamond: I feel that the hon. and learned Gentleman has touched on a very bad point. The case that my hon. Friend has made is simply that of the revenue versus the wife. What the hon. and learned Gentleman is talking about is the court's decision as between husband and wife. This cannot possibly affect the fact. Whatever the court decided could not affect the pocket of the Revenue. My hon. Friend was properly saying that the Revenue should cough up and that the wife should get the benefit of it.
The Solicitor-General: In spite of what the hon. Gentleman says, I think that the point is a valid one. In deciding how much a wife ought to have for her support in the circumstances, the court will consider the tax position of not only the wife but also of the husband. One comes back to the point that whatever order is made in favour of the wife, whether a small maintenance order or not, it is deductible from the husband's
508
gross income before assessing his liability to tax. For those reasons, I regret that I cannot advise the House to accept the proposed Clause.
Mr. Houghton: That is a very disappointing reply. A few moments ago we listened to very moving pleas by hon. Members opposite to the Chancellor of the Exchequer to put aside logic and consider the deep feeling in various parts of the House about the taxation of voluntary offerings given to clergymen and ministers of religion. The Chancellor announced that he was giving further consideration to the matter and would consult representatives of the various denominations in the real hope that some way would be found of giving acceptable relief in that direction.
We know that there are difficulties about the proposed Clause in logic, but there is a very human side to it which my hon. Friend the Member for Blackburn (Mrs. Castle) ably described to the House. I would like to congratulate her on her entry into Income Tax debates. We have listened to many moving and, very often, provocative speeches from her, but this is a new rôle for her. I am inclined to ask where she has been all this time. I am sure that we will look forward to her participation in debates on these matters in future. It seems that she can touch some chords in the heart of the Solicitor-General that the rest of us cannot touch.
I want to discuss with the hon. and learned Gentleman these proposals on the more practical ground of taxation. The hon. and learned Gentleman says that this is not earned income. Earned income is what the Income Tax Act says is earned income, and this new Clause proposes to add to the definition of earned income. A learned judge once reminded the court that Income Tax is, after all, a tax on income, but the truth is that income for the purpose of the Income Tax Act is what the Income Tax Act says is income, and no other income is taxable. I think that we can, therefore, base our approach to this matter on the quite extraordinary traditions of our Income Tax, which apply definitions to certain types of income which are taxable and leave aside other income which is not.
In asking what is earned income, the reply is: what this House says is earned

509
income is earned income. Already, in the past, the House has departed from the strict interpretation of earned income as being by the exertions of the individual by conceding earned income relief to such income as pensions.
I remember the time—if my right hon. Friend the Member for Battersea, North (Mr. Jay) will forgive me—when he argued that a retirement pension paid to a wife by reason of her own contributions was not earned income. I contended that it was. Eventually, the House accepted my view and the pension of a wife paid by virtue of her own contributions is now earned income. It is not necessarily the product of her own exertions, but we decided that it would be unfair and unreasonable to allow the husband's retirement pension to be treated as earned income, and the wife's pension in her own right as unearned income. We can decide that these maintenance payments shall be treated as earned income if we so will.
Is such a payment worthy of inclusion in the definition of earned income? This is housekeeping money one stage removed. If the woman were at home, performing the wifely duties which she has every desire to continue to do, this money would be paid Ito her for housekeeping, and the husband would receive earned income relief. He spurns and deserts the family home, however.
It may be argued that when this money is passed to her under the compulsion of the court it is for maintenance of the home as housekeeping money one stage removed. But the husband exercises his right to regard this payment as a charge on his income. Clearly, if he does so, he pays no tax on it. Nor does the Inland Revenue concede earned income relief on this earned income. It is charged against his income. He does not receive earned income relief from it. He passes money to his wife; she does not receive earned income relief on it. Therefore, on a parcel of earned income, the Inland Revenue escapes its obligation to concede earned income relief. That is a tenable argument and will stand up just as straight as many justifications for tax changes and reliefs in the past.
6.5 p.m.
The other justification for this proposal is that it is restricted to small main-
510
tenance payments. These are made without deduction of tax and are directly assessable on the wife, subject to her own personal liability to tax. A Clause which has, I believe, never been mentioned in the course of our discussions on the Bill, is Clause 39, which extends the scope of the concessions given to small maintenance payments up to a maximum of £7 10s. That is a valuable concession to the wives concerned because it relieves them of the obligation, as the Solicitor-General said, of claiming back tax deducted from the payments made to them by the husbands.
The restriction of this concession to small maintenance payments ensures that the more lavish provisions for wives by the well-to-do—who, perhaps, can enjoy the luxury of separation more easily than poorer people—will not qualify for earned income relief. I see no reason to object to that discrimination in favour of the small maintenance payments, because the crux of this argument is that they are virtually housekeeping payments for the maintenance of the home and are not payments to maintain wives in some high standard of living. They are basic to the life and happiness of a wife who has been deserted by her husband.
Had we been given some hope that this matter would be considered in the spirit in which the Chancellor of the Exchequer gave an undertaking a short while ago, we would have felt differently about this, but there is a strong case here for more sympathetic consideration and we believe that something should be done—not necessarily, perhaps, strictly on the lines of this proposed Clause. There is only one way in which our disapproval can be expressed in concrete fashion in the House, and so I beg my right hon. and hon. Friends to divide the House.
Mr. James Dempsey: I have been trying to follow the Solicitor-General's arguments, but it is difficult at times to understand the reasons for those that he has so far adduced. We are dealing here with a great social problem, as I am sure he appreciates. Countless thousands of wives living with their husbands receive only housekeeping allowances. It is only husbands who receive this earned income relief. I wonder why these payments should be treated as unearned income.

511
The Solicitor-General referred to income which has been obtained as a result of personal exertions, but only recently I listened to an hon. Member opposite talking about disability pensions which were disregarded. Those pensions are earned income—they have been earned as a result of sacrifice on the battlefield, or in our industries. Yet it seems that they are designated as unearned income. I find myself in great trouble trying to determine what is earned income and what is not.
We have just decided that an Easter offering to a minister will be treated as earned income and taxable as such. In this case we are discussing a person who, through no fault of her own, finds herself in certain circumstances. Will the Solicitor-General explain to what extent a so-called maintenance allowance will be included in such a person's income for Income Tax purposes?
Let us take the example of a woman in this situation who is compelled to find employment and whose wage is not sufficient to warrant taxation, but whose aggregate income, if the so-called maintenance allowance is included, would rank for Income Tax. Would the maintenance allowance not be included as earned income in that case? One recognises the validity of the argument for regarding the pension of disabled people as earned income or disregarding it completely. They have made a physical sacrifice in the country's service. Why should not a similar decision be made in this case?
The sort of case which I have just instanced is not hypothetical and many similar cases can be found all over the country. The Solicitor-General spoke of maintaining taxation principles, but already various incomes are given special treatment or are ignored. In the circumstances which I have outlined, will a maintenance allowance be treated as income for Income Tax purposes or not? If the answer is in the negative, there may be some argument for the hon. and learned Gentleman's case, but if it is possible that the allowance will be taxed then the hon. and learned Gentleman should reconsider the whole position. It is reasonable, when a person is not responsible for the state of affairs which we are considering and when she is
512
receiving a form of compensation for something denied to her, that she should be given special consideration.
Mr. Jay: May I give a second chance to the Solicitor-General? If he wants to meet the substantial argument put by my hon. Friend the Member for Blackburn (Mrs. Castle) and, at the same time, preserve the taxation principles in which he is interested, will he consider the following suggestion?
The hon. and learned Gentleman admits that in the case of age relief we give persons who are 65 years old and more a two-ninths earned income relief. In that case, we do not say that the income is earned income, but we treat it as if it were and we apply that arrangement up to a maximum of £800 a year. In the case of the small income relief, of which the hon. and learned Gentleman also spoke, again we do not necessarily say that that is earned income, but we treat it as if it were by applying the two-ninths relief up to a maximum of £300.
That applies to the maintenance payments of which we have been speaking. Unfortunately, however, in that case the maximum is not £800, but £300. Would it not be possible in the case of maintenance payments to say that the two-ninths earned income fraction shall apply up to a maximum not of £300, but of £800, which is the maximum which applies in the case of age relief?
The hon. and learned Gentleman would be doing no more violation to tax principles than we already do by approving of the age relief and the small income relief, but we would be doing something useful by saying that these people are in a position which is not fundamentally and humanly different from that of those who are 65 and more and we would also be meeting the need without considerable loss of revenue.
Mr. Diamond: Will the Solicitor-General consider a further argument? I am sure that from his deep knowledge of these matters outside the House, and his great knowledge of these fiscal matters, he must be very moved by the arguments put forward and not controverted.
Will he consider an aspect which must be resting heavily on his conscience? At the moment, perhaps, unwittingly, he is taking an unfair tax advantage from

513
women in these circumstances. I do not suppose that that is his intention. He is getting that unfair advantage in that this money, which is supposed to be a simple transfer from husband to wife, would have attracted tax at a certain rate if the two had been living together—the standard rate, say, less earned income relief. Yet, when the money is transferred as a matter of administrative machinery the wife pays tax at the higher rate, namely, the standard rate, for example, or the highest possible rate under the provisions, without deduction of earned income relief.
It is conceivable that there are many cases in which the highest rate of tax would be payable and the only way to make sure that it is not paid is to accept the proposal of my right hon. Friend the Member for Battersea, North (Mr. Jay)—at any rate, for consideration—if not up to the maximum of £800 which my right hon. Friend mentioned, then at least to the maximum of the earned income relief which would have been granted had it remained the income of the husband.
Dr. Edith Summerskill: It is very difficult to understand the Solicitor-General in this new guise. Before he was raised to his exalted position he seemed so receptive to these ideas. He seems to be a Jekyll and Hyde and I am very sorry to see this change, now that he is on the Front Bench, in someone who has studied the problems of women in adverse circumstances and who should not have to be taught these simple lessons from this side of the House.
I appreciate his refusal to acknowledge that this money is not unearned income in oases where the woman concerned is well off and living in a good deal of comfort, with no hardship, but how does the hon. and learned Gentleman's logical mind address itself to the problem in the lower income groups? There a woman may receive a sum of money for which, in return, she scrubs, cleans, makes clothes and does all sorts of things in the household, for which, as the hon. and learned Gentleman knows, people have to pay very highly today. Why does he not agree that that important and necessary work which she does in return for the money is earned income?
6.30 p.m.
Mr. Leo Abse: I would have hesitated to intervene in a debate on Income Tax matters if it did not also touch upon matters with which we were dealing to some extent last week, and in connection with which I heard the hon. and learned Gentleman adopt an entirely different attitude. In his case a metamorphosis has taken place from a matrimonial lawyer last week to an Income Tax lawyer this week. Last week, the hon. and learned Gentleman told us that this maintenance, which could be obtained by going to the law courts, was essentially a housekeeping allowance, and he made it perfectly clear that he would resist any attempts we made to obtain orders under circumstances which would mean that the magistrates would be determining the housekeeping allowance. Now it is not to be treated as such. The housekeeping allowance of last week has suddenly become unearned income.
I would not have intervened, either, if it had not been for the fact that the Solicitor-General indicated—and my hon. Friend the Member for Gloucester (Mr. Diamond) was correct in his interruption—that it was the practice in the courts to examine the Income Tax position in these matrimonial cases. That is far removed from my experience. In fact, when the courts have to determine the amount of these small payments they have to direct their attention to many matters. They direct it to the rent of the house, to the amounts paid on hire purchase, and to rates and gas payments. They very often go into complicated figures to find out how much the man must have to survive as an earning machine, and how much the wife needs.
Is it seriously suggested that at the end of the hearing of such a case either the clerk or the magistrate is able to give his full attention to the Income Tax position? I doubt whether either clerk or magistrate would have the capacity to do so. The blunt fact is that in 99 per cent. of the cases it is completely ignored.
I want to reinforce the argument which has been put forward that at least some consideration should be given in the case of small payments. The position of a deserted wife is harsh enough already. It usually means that the husband who is at fault does not have a very

515
large earning capacity—or at least what he discloses is not large—and the payments that she receives are small enough without this harsh burden. It would show some sign of humanity if in these cases, which together make up a great social problem, affecting tens of
thousands of women, a little compassion were shown, rather than this very cold, illogical logic.
Question put, That the Clause be read a Second time:—
The House divided: Ayes 176, Noes 250.

Division No. 133.]

AYES

[6.35 p.m.

Abse, Leo

Holman, Percy

Plummer, Sir Leslie

Ainsley, William

Houghton, Douglas

Price, J. T. (Westhoughton)

Allaun, Frank (Salford, E.)

Hoy, James H.

Probert, Arthur

Bacon, Miss Alice

Hughes, Cledwyn (Anglesey)

Pursey, Cmdr. Harry

Bellenger, Rt. Hon. F. J.

Hughes, Emrys (S. Ayrshire)

Randall, Harry

Benson, Sir George

Hughes, Hector (Aberdeen, N.)

Rankin, John

Blackburn, F.

Hunter, A. E.

Reid, William

Boardman, H.

Hynd, H. (Accrington)

Reynolds, G. W.

Bowden, Herbert W. (Leics, S.W.)

Hynd, John (Attercliffe)

Ross, William

Bowles, Frank

Irvine, A. J. (Edge Hill)

Royle, Charles (Salford, West)

Boyden, James

Irving, Sydney (Dartford)

Shinwell, Rt. Hon. E.

Brockway, A. Fenner

Jay, Rt. Hon. Douglas

Short, Edward

Brown, Rt. Hon. George (Belper)

Johnston, Douglas (Paisley)

Silverman, Sydney (Nelson)

Brown, Thomas (Ince)

Jones, Dan (Burnley)

Skeffington, Arthur

Butler, Herbert (Hackney, C.)

Jones, Elwyn (West Ham, S.)

Slater, Mrs. Harriet (Stoke, N.)

Butler, Mrs. Joyce (Wood Green)

Jones, Jack (Rotherham)

Slater, Joseph (Sedgefield)

Castle, Mrs. Barbara

Jones, J. Idwal (Wrexham)

Small, William

Chapman, Donald

Jones, T. W. (Merioneth)

Smith, Ellis (Stoke, S.)

Chetwynd, George

Kelley, Richard

Snow, Julian

Cliffe, Michael

Kenyon, Clifford

Sorensen, R. W.

Corbet, Mrs. Freda

Key, Rr. Hon. C. W.

Soskice, Rt. Hon. Sir Frank

Craddock, George (Bradford, S.)

King, Dr. Horace

spriggs, Leslie

Cronin, John

Lawson, George

Steele, Thomas

Crosland, Anthony

Lee, Frederick (Newton)

Stewart, Michael (Fulham)

Crossman, R. H. S.

Lever, L. M. (Ardwick)

Stones, William

Cullen, Mrs. Alice

Lipton, Marcus

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

Davies, G. Elfed (Rhondda, E.)

Logan, David

Summerskill, Dr. Rt. Hon, Edith

Davies, Harold (Leek)

Mabon, Dr. J. Dickson

Swingler, Stephen

Davies, Ifor (Gower)

McCann, John

Sylvester, George

Davies, S. O. (Merthyr)

McInnes, J.

Symonds. J. B.

Deer, George

McKay, John (Wallsend)

Taylor, Bernard (Mansfield)

Dempsey, James

Mackie, John

Taylor, John (West Lothian)

Diamond, John

Mahon, Simon

Thomas, Iorwerth (Rhondda, W.)

Dodds, Norman

Mallalieu, E. L. (Brigg)

Thompson, Dr. Alan (Dunfermline)

Driberg, Tom

Mallalieu. J.P. W. (Huddersfield. B.)

Thomson, G. M. (Dundee, E.)

Dugdale, Rt. Hon. John

Manuel, A. C.

Thornton, Ernest

Ede, Rt. Hon. Chuter

Mapp, Charles

Timmons, John

Edelman, Maurice

Mason, Roy

Tomney, Frank

Edwards, Rt. Hon. Ness (Caerphilly)

Mayhew, Christopher

Ungoed-Thomas, Sir Lynn

Edwards, Robert (Bilston)

Mellish, R. J.

Wainwright, Edwin

Edwards, Walter (Stepney)

Mendelson, J. J.

Warbey, william

Evans, Albert

Millan, Bruce

Watkins, Tudor

Fitch, Alan

Mitchison, G. R.

Wells, Percy (Faversham)

Foot, Dingle

Monslow, Walter

Wells, William (Walsall, N.)

Forman, J. C.

Moody, A. S.

Wheeldon, W. E.

Fraser, Thomas (Hamilton)

Mort, D. L.

Whitlock, William

Gaitskell, Rt. Hon. Hugh

Moyle, Arthur

Willey, Frederick

Galpern, Sir Myer

Mulley, Frederick

Williams, D. J. (Neath)

Ginsburg, David

Neal, Harold

Williams, W. R. (Openshaw)

Gordon Walker, Rt. Hon. P. C.

Oliver, G. H.

Willis, E. G. (Edinburgh, E.)

Gourlay, Harry

Oram, A. E.

Wilson, Rt. Hon. Harold (Huyton)

Grey, Charles

Owen, Will

Winterbottom, R. E.

Gunter, Ray

Padley, W. E.

Woof Robert

Hall, Rt. Hon. Glenvil (Colne Valley)

Pannell, Charles (Leeds, W.)

Wyatt, Woodrow

Hamilton, William (West Fife)

Parker, John (Dagenham)

Yates, Victor (Ladywood)

Hayman, F. H.

Paton, John

Zilliacus, K.

Healey, Denis

Pavitt, Laurence

Herbison, Miss Margaret

Pearson, Arthur (Pontypridd)

TELLERS FOR THE AYES:

Hill, J. (Midlothian)

Peart, Frederick

Dr. Broughton and Mr. Redhead.

Hilton, A. V.

Pentland, Norman

NOES

Allason, James

Barter, John

Bidgood, John C.

Amory, Rt. Hn. D. Heathcoat (Tiv'tn)

Batsford, Brian

Biggs-Davison, John

Arbuthnot, John

Baxter, Sir Beverley (Southgate)

Bingham, R. M.

Ashton, Sir Hubert

Beamish, Col. Tufton

Birch, Rt. Hon. Nigel

Atkins, Humphrey

Bennett, F. M. (Torquay)

Bishop, F. P.

Balniel, Lord

Bennett, Dr. Reginald (Gos & Fhm)

Bossom, Clive

Barber, Anthony

Berkeley, Humphry

Bourne-Arton, A.

Barlew, Sir John

Bevins, Rt. Hon. Reginald (Toxteth)

Box, Donald

Boyle, Sir Edward

Hirst, Geoffrey

Pannell, Norman (Kirkdale)

Brewis, John

Hobson, John

Partridge, E.

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

Hocking, Philip N.

Pearson, Frank (Clitheroe)

Brooke, Rt. Hon. Henry

Holland, Philip

Peel, John

Brooman-white, R.

Holt, Arthur

Percival, Ian

Browne, Percy (Torrington)

Hopkins, Alan

Pickthorn, Sir Kenneth

Bullard, Denys

Hornby, R. P.

Pike, Miss Mervyn

Burden, F. A.

Hornsby-Smith, Rt. Hon. Patricia

Pitman, I. J.

Butcher, Sir Herbert

Howard, John (Southampton, Test)

Pitt, Miss Edith

Campbell, Sir David (Belfast, S.)

Hughes Hallett, Vice-Admiral John

Powell, J. Enoch

Campbell, Gordon (Moray & Nairn)

Hughes-Young, Michael

Price, David (Eastleigh)

Carr, Compton (Barons Court)

Hulbert, Sir Norman

Prior, J. M. L.

Cary, Sir Robert

Hitchison, Michael Clark

Prior-Palmer, Brig. Sir Otho

Channon, H. P. G.

Iremonger, T. L.

Proudfoot, Wilfred

Chataway, Christopher

Irvine, Bryant Godman (Rye)

Ramsden, James

Cole, Norman

Jackson, John

Redmayne, Rt. Hon. Martin

Collard, Richard

James, David

Rees, Hugh

Cooper-Key, Sir Neill

Jenkins, Robert (Dulwich)

Rees-Davies, W. R.

Cordeaux, Lt.-Col. J. K.

Johnson, Dr. Donald (Carlisle)

Renton, David

Cordie, John

Johnson, Eric (Blackley)

Ridley, Hon. Nicholas

Corfield, F. V.

Johnson Smith, Geoffrey

Ridsdale, Julian

Costain, A. P.

Jones, Rt. Hn. Aubrey (Hall Green)

Rippon, Geoffrey

Courtney, Cdr, Anthony

Joseph, Sir Keith

Roberts, Sir Peter (Heeley)

Craddock, Sir Beresford (Spelthorne)

Kerans, Cdr. J. S.

Robinson, Sir Roland (Blackpool, S.)

Critchley, Julian

Kerby, Capt. Henry

Robson Brown, Sir William

Crosthwaite-Eyre, Col. O. E.

Kerr, Sir Hamilton

Ropner, Col. Sir Leonard

Cunningham, Knox

Kimball, Marcus

Sandys, Rt. Hon. Duncan

Curran, Charles

Kirk, Peter

Scott-Hopkins, James

Currie, G. B. H.

Kitson, Timothy

Sharples, Richard

Dalkeith, Earl of

Lancaster, Col. C. G.

Shaw, M.

Dance, James

Leather, E. H. C.

Shepherd, William

d'Avigdor-Goldsmid, Sir Henry

Leavey, J. A.

Simon, Sir Jocelyn

de Ferranti, Basil

Legge-Bourke, Sir Harry

Skeet, T. H. H.

Donaldson, Cmdr. C. E. M.

Lewis, Kenneth (Rutland)

Smith, Dudley(Br'ntf'rd & Chiswick)

Drayson, G. B.

Lilley, F. J. P.

Smithers, Peter

Duncan, Sir James

Lindsay, Martin

Spearman, Sir Alexander

Eden, John

Linstead, Sir Hugh

Stevens, Geoffrey

Elliott, R. W.

Litchfield, Capt. John

Stodart, J. A.

Emery, Peter

Longbottom, Charles

Storey, Sir Samuel

Emmet, Hon. Mrs. Evelyn

Loveys, Walter H.

Studholme, Sir Henry

Farey-Jones, F. W.

Low, Rt. Hon. Sir Toby

Summers, Sir Spencer (Aylesbury)

Farr, John

Lucas-Tooth, Sir Hugh

Talbot, John E.

Fell, Anthony

MacArthur, Ian

Tapsell, Peter

Finlay, Graeme

McLaren, Martin

Taylor, Sir Charles (Eastbourne)

Fraser, Nigel

McLaughlin, Mrs. Patricia

Taylor, W. J. (Bradford, N.)

Fletcher-Cooke, Charles

Maclay, Rt. Hon. John

Teeling, William

Fraser, Ian (Plymouth, Sutton)

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

Temple, John M.

Freeth, Denzil

Macleod, John (Ross & Cromarty)

Thomas, Leslie (Canterbury)

Gammans, Lady

McMaster, Stanley R.

Thomas, Peter (Conway)

Gardner, Edward

Macmillan, Maurice (Halifax)

Thompson, Kenneth (Walton)

George, J. C. (Pollok)

Macpherson, Niall (Dumfries)

Thornton-Kemeley, Sir Colin

Gibson-Watt, David

Maddan, Martin

Tiley, Arthur (Bradford, W.)

Glover, Sir Douglas

Maltland, Cdr. Sir John

Turner, Colin

Glyn, Dr. Alan (Clapham)

Manningham-Buller, Rt. Hn. Sir R.

Turton, Rt. Hon. R. H.

Glyn, Sir Richard (Dorset, N.)

Markham, Major Sir Frank

van Straubenzee, W. R.

Godber, J. B.

Marshall, Douglas

Vaughan-Morgan, Sir John

Goodhart, Philip

Marten, Neil

Vickers, Miss Joan

Goodhew, Victor

Mathew, Robert (Honiton)

Wade, Donald

Gower, Raymond

Matthews, Gordon (Meriden)

Wakefield, Edward (Derbyshire, W.)

Grant, Rt. Hon. William (Woodside)

Maudling, Rt. Hon. Reginald

Wakefield, Sir Wavell (St. M'lebone)

Green, Alan

Mawby, Ray

Wall, Patrick

Grimond, J.

Mills, Stratton

Watkinson, Rt. Hon. Harold

Grimston, sir Robert

Montgomery, Fergus

Watts, James

Hall, John (Wycombe)

Morgan, William

Wells, John (Maidstone)

Hamilton, Michael (Wellingborough)

Mott-Radclyffe, Sir Charles

Williams, Dudley (Exeter)

Harris, Reader (Heston)

Nabarro, Gerald

Williams, Paul (Sunderland, S.)

Harrison, Brian (Maldon)

Neave, Airey

Wills, Sir Gerald (Bridgwater)

Harrison, Col. J. H. (Eye)

Nicholls, Harmar

Wise, A. R.

Harvie Anderson, Miss

Noble, Michael

Wolrige-Gordon, Patrick

Heald, Rt. Hon. Sir Lionel

Nugent, Sir Richard

Wood, Rt. Hon. Richard

Henderson, John (Cathcart)

Oakshott, Sir Hendrie

Woodhouse, C. M.

Hendry, Forbes

Ormsby Gore, Rt. Hon. D.

Woodnutt, Mark

Hicks Beach, Maj. W.

Orr-Ewing, C. Ian

Worsley, Marcus

Hiley, Joseph

Osborn, John (Hallam)

Yates, William (The Wrekin)

Hill, Dr. Rt. Hon. Charles (Luton)

Osborne, Cyril (Louth)

TELLERS FOR THE NOES:

Hill, J. E. B. (S. Norfolk)

Page, Graham

Mr. Bryan and Mr. Whitelaw.

Clause 6.—(TOBACCO DEALERS' LICENCES.)
6.45 p.m.
Mr. Redhead: I beg to move, in page 3, line 38, at the end to insert:
(2) Any such licence as is mentioned in the last foregoing subsection may be granted in Great Britain for the sale of tobacco by retail from a registered goods vehicle the property of and plying from the premises of the person authorised to sell tobacco at those premises and accordingly the said section one hundred and eighty-seven shall have effect from the end of September, nineteen hundred and sixty, with the addition immediately after subsection (3) of the said section of the following subsection:—
"(3A) Notwithstanding anything in the said subsection (2), a licence under this section may be granted in Great Britain, subject to such conditions as the Commissioners think fit to impose, so as to authorise the sale of tobacco by retail from a registered goods vehicle specified in the licence and being the property of and plying from the premises of the person authorised to sell tobacco at those premises; and this Act shall have effect accordingly as if the vehicle specified in a licence so granted were premises of the person authorised to sell tobacco there".
The purpose of this Amendment is to give effect to a suggestion made during the Committee stage when we had under consideration the modest reform of the tobacco dealers' licences proposed by the Chancellor, a suggestion which the Economic Secretary promised to consider again having already had it under consideration in connection, I believe, with an informal approach to the Treasury.
The intention of the Amendment is to make it possible for a tobacco dealers' licence to be issued in respect of mobile shops and vehicles. As was explained in Committee, the tobacco dealers' licence duty was not orginally devised for revenue purposes as such but solely as a means of control to safeguard for the revenue the amount due on tobacco. It is and always has been a form of registration of legitimate traders in tobacco in order that Customs and Excise officials may be able to identify the legitimate outlets of tobacco and thus check on any illicit sales of uncustomed or stolen tobacco, and, in effect, to have some measure of control over the possibility of adulteration of tobacco which is itself an offence.
The original provision of the law in this regard—I believe it goes back for more than 100 years—stipulated that such licence should be issued only in respect of fixed premises. There was, I think,
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legitimate cause in those days for relating such licences to fixed premises when otherwise there was a considerable risk of the hawking of tobacco which, if the licence was not restricted to such premises, might well have gone undetected in the evasion of the main duty. With minor exceptions that restriction has been applied rigidly ever since and, indeed, interpreted by the Customs and Excise Department in a very rigid fashion. It is the submission of my hon. Friends and myself that that rigidity is no longer necessary, no longer called for, from any reasonable consideration of safeguarding the revenue.
Today in many parts of the country there exist mobile shops, a feature which was quite unknown when this law was first promulgated. The shops are operated from vehicles and vans over a wide area, even in urban areas, and fulfil a public need by carrying a considerable variety of goods. But as the law now stands they are not permitted to deal in tobacco and cigarettes because, as mobile vehicles, they cannot be licensed for this purpose.
The present position is clearly absurd. For example, it is perfectly permissible for me to place an order at the premises or the shop of a tobacco dealer duly and properly licensed, and for the tobacco and cigarettes which I have ordered to be delivered by van to my house. No offence is committed. But for the van man to make a casual sale in the course of selling other goods at my house would be to commit an offence because the transaction, technically, did not take place at the licensed premises. The van man would commit the heinous offence of what is known as tobacco hawking by engaging in any such practice. I suggest that there is already a considerable degree of evasion of this provision, and the absence of an ability to gain a licence because of the restrictions of the law only encourages a degree of connivance on the part of both the trader and the public.
It is perfectly possible to obtain tobacco, and cigarettes on a train, but it is quite illegal to obtain them by way of a mobile vehicle plying on the highway and calling at households. In order to preserve at least an adherence to the law and yet to make some degree of concession to common sense in this

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matter, the Customs and Excise Department has been compelled from time to time to connive at various queer devices to make it possible to issue a licence in respect of some traders who wish to deal perfectly legitimately in tobacco and cigarettes, devices which, frankly, make the average person look upon the present provisions as an extraordinary degree of fussy red tape.
I can give an example of a coffee stall which, because it was on wheels, was not permitted to have a tobacco dealer's licence. The Customs and Excise Department said to the owner, "You can put yourself right if you arrange for the wheels to be sunk in the earth, or remove the wheels, or lash the vehicle firmly to stakes driven into the ground. Then we shall be prepared to regard the coffee stall, although theoretically mobile, as constituting fixed premises for which a licence may be issued." Devices of that kind are really absurd. They ought not to be resorted to in order to remove what clearly are silly restrictions in these days.
During the course of our discussion of Clause 6 in Committee, the Economic Secretary made a point of the fact that there still exists today a degree of trafficking in uncustomed and stolen tobacco. I do not know to what extent that still obtains. He gave that reason, quite understandably, as one why we must still maintain the system of tobacco dealers' licences. I suggest that the risks in this particular respect would be in no wise rendered greater by allowing licences to be issued in respect of registered vehicles as proposed in this Amendment, particularly as under the Amendment this would be limited to registered goods vehicles plying from premises which are themselves duly licensed for tobacco retailing.
The Amendment contemplates that in order to ensure any further requisite safeguards, the Commissioners might lay down such conditions in attachment to such licences as they may feel necessary. That, I suggest, would ensure that it would he perfectly possible to have a cross-check and cross-reference of the stock carried by any licensed shop or mobile vehicle in relation to the records of the tobacco dealer's fixed premises. Therefore, any risks in this regard would
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be of the most minimal character. I submit that all the essentials of adequate control in this connection would be well maintained within the provisions contained in the Amendment.
In Clause 6 originally, the Chancellor introduced a very modest but very sensible administrative reform in regard to this ancient licence duty. I hope that he may be persuaded not to limit his reforming zeal to that but to be prepared to accept the Amendment, which I am certain would remove a very irksome restriction on legitimate and reputable traders. It would remove something which in the minds of the public is an impediment to good service to them and regarded as a piece of fussy and unnecessary red tape.
Mr. Barber: The hon. Member for Walthamstow, West (Mr. Redhead) has, as usual, put his case in support of the Amendment with complete fairness. I can add that it also has the attraction that this proposed Amendment would involve a modest increase in revenue, which I have not the slightest doubt would be very valuable this year.
As the hon. Member said, the effect of the Amendment would be to authorise the issue of licences for the sale of tobacco by retail from registered goods vehicles specified in the licence and the property of and plying from the premises of the person authorised to sell tobacco on his premises.
Last year, the Co-operative Union Ltd. approached my right hon. Friend the then Economic Secretary with a request that the law should be amended to allow tobacco and cigarettes to be sold from its mobile shops. The outcome was that my right hon. Friend asked the Commissioners of Customs and Excise to inquire into the proposal and report back to him. The Commissioners saw representatives of the Co-operative Union and the National Union of Retail Tobacconists and, in due course, they reported. I saw that report in, I think, April of this year. I considered as carefully as I could the whole question. I came to the conclusion that a case had not been made for the extension which they had requested.
Mrs. Harriet Slater: Why?
Mr. Barber: May I be allowed to proceed with my speech? I did not interrupt the hon. Member who moved the Amendment.
The next thing which occurred was that, when we were discussing Clause 6 of the Bill in Committee, this matter was raised again. I promised to look into it, but explained to the Committee that, in view of the very recent examination, I could not hold out any great hope of the possibility of anything being done in this year's Finance Bill.
I have genuinely given this matter further consideration since that time. I have to tell the House that it involves very difficult considerations. It is not an easy matter to determine whether or not it would be right and proper, and safe, to allow the sale from goods vehicles in the manner provided for by this Amendment.
Those hon. Members who were here at the time will remember that, in 1951, the Labour Government introduced a modest extension of the law, which was debated at some length, to allow licences for mobile vehicles to meet an exceptional and temporary need. I have not the slightest doubt that at the time when this matter was being considered by that Government they naturally took into account the various considerations which were relevant in connection with a further extension of the kind which has now being suggested by the hon. Member.
From the point of view of the consumer, the first thing to bear in mind is that there are at present ample outlets for the sale of tobacco. It is true that in certain places they are limited in number and there is difficulty, but there are 420,000 tobacconists with shops, that is to say, there is about one licence for every 40 smokers. From the revenue point of view, to which the hon. Member referred—
Mrs. Slater: May I ask whether due consideration has been given to the consumer? These mobile shops operate mostly on large new housing estates, where the provision of ordinary shops is very inadequate. This means that the consumer on such a housing estate may get his groceries delivered to his door, but cannot get tobacco or cigarettes delivered. This seems to be an exceptional case in which the consumer has the right to be considered.
Mr. Barber: I entirely agree with the hon. Lady that the point of view of the consumer is of great importance in this context, but I would remind her again that the Labour Government, in 1951, took specific steps to try, so far as they thought reasonable and proper, to help in those circumstances by allowing licences to be issued to mobile shops to meet an exceptional and temporary need.
I realise that—not through any tough interpreation of the law by the Customs and Excise, but by a proper interpretation—because of the wording, the provision "exceptional and temporary need" does not help in every case. At any rate, it was thought in those days that this was as far as it was reasonable to go. There was a long debate, and the proposal was opposed by many of my hon. Friends who were then on the other side of the House, but in the end the House decided that this was right.
7.0 p.m.
I was dealing with the point raised by the hon. Member for Walthamstow, West about the control of points of sale of tobacco. There is the definite interest from the point of view of Customs and Excise of knowing and controlling the points of sale of tobacco which, otherwise, could conceal dealing in uncustomed tobacco. If it were not so, then prior to this Finance Bill when we were reviewing the question of tobacco licences, dealt with in Clause 6, we should have reached the conclusion that licences were unnecessary; but we still believe them to be very necessary.
I realise that the present Amendment attempts to meet this point by restricting sales to registered goods vehicles operated by persons who are licensed to sell tobacco at their premises. But this would establish only the base from which the vehicle operated and would not impose any limitation on the vehicle operator's freedom to sell tobacco away from that base. In particular, it would not limit sales to particular points or particular routes. There could be, I should have thought, no satisfactory Revenue control over a vehicle which, like that of an itinerant ice cream vendor, was free to travel wherever the driver thought business was to be found.
Mr. G. R. Mitchison: Is there not a reference—I had something

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to do with the preparation of the Amendment—to:
"… such conditions as the Commissioners think fit to impose …"
which would enable them to deal with that?
Mr. Barber: I was just coming to that point. I have also considered that aspect, but I think that as soon as one attempted to introduce some limit—which could be done by the Clause, I agree—prescribing routes or points of sale, for example, it would put the Customs and Excise in a very difficult position. In the first place, it would certainly be drawn into a conflict between trade interests, and I am sure—I feel that the House will agree with me on this whatever hon. Members may think of the merits of the proposal—that that is not the sort of task which it would be right to impose upon the Customs and Excise.
We have, as I have said, considered this again, and we have reached the conclusion that, although in particular cases it would be a limited advantage to a number of consumers, the need for a general extension in present circumstances is not made out. However, I must tell the House that, in my view, this is not a conclusion which must stand for all time. We made a thorough investigation as a result of the approach made to my predecessor as Economic Secretary not long ago, and we have considered the matter again. As I say, this is not a conclusion which must stand for all time. Circumstances may change and we will certainly keep the matter under review. However, I could not at this time advise the House to accept the Amendment.
Mr. Percy Holman: How does the hon. Gentleman's argument about Customs and Excise control operate in respect of the thousands of automatic cigarette machines which are now to be found all over the country?
Mr. Barber: Sale from automatic machines takes place from a fixed point. It is in that respect that the difficulty arises with mobile shops.
Mr. Holman: But the automatic machines are outside the shops.
Mr. A. E. Oram: Having listened to the Economic Secretary's reply, I am still completely at a
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loss to know what is the Treasury's case against the very modest, sensible and commonsense proposal by my hon. Friend the Member for Walthamstow, West (Mr. Redhead).
Several references have been made to the debate during the Committee stage. I recall that the Economic Secretary then said that he thought that the arguments against the proposal were by no means overwhelming. I suggest that his speech today has borne out that the arguments are by no means overwhelming. I welcome what he has said about the case still being open and the possibility of its being reconsidered in the future, but in the absence of some adequate argument about present circumstances I cannot understand why the Government are taking this particularly unhelpful attitude.
My hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) referred to the fact that mobile shops are necessary in country districts and large housing estates where, perhaps, fixed shops cannot provide an adequate service. It is particularly in those cases that we feel that tobacco licences should be granted for mobile shops. The present situation is, as has been explained, that mobile shops can be licensed if there is a special local need; but in such cases the licence is only temporary.
Let us take the case of a trader who, because he has not been able to obtain a fixed shop in the area which he wishes to serve, operates a mobile vehicle to meet the needs of his customers, being granted a temporary licence because it is recognised that there is a special local need. Along may come a competitor who secures a fixed shop and a licence. The operator of the mobile shop then loses his temporary licence. I suggest that that is an anomalous and unfair situation.
I said during the Committee stage debate that I suspected that the Government were misusing their powers in respect of the granting of tobacco licences to restrict competition. Some of the remarks of the Economic Secretary towards the end of his speech seemed rather to confirm that. I suggest that the tobacco licence was never intended, and ought not to be intended, as a means of restricting competition. It is not comparable with a liquor licence. It is merely

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—I think that the Economic Secretary will admit this—a means of identifying the trader who is to sell tobacco and cigarettes so that suitable control can be exercised over his trade.
The licence should be readily available to all who wish to sell tobacco. Under the Amendment a mobile shop would be very easily identifiable. These mobile shops are not just travelling vans. They are properly equipped mobile shops. There is a definition for Purchase Tax purposes of a mobile shop, and the provisions in the Amendment suggest that the mobile shops operate from a fixed shop which is itself licensed. Thus the possibility of identifying a mobile unit is perfectly clear.
I believe that there is something more behind this than the Economic Secretary was prepared to reveal. He referred to the fact that he had had representations from the National Union of Retail Tobacconists. I am wondering—I hope that he will be a little more forth-coming—
Mr. Barber: Perhaps I may correct the hon. Gentleman. What I said was that as a result of the approach by the Co-operative Union Ltd. the Customs and Excise discussed the matter with the Co-operative Union and also with the National Association of Retail Tobacconists. I certainly have had no representations from the Association at all.
Mr. Oram: I accept that, of course, but the Treasury obviously has the views of the National Union of Retail Tobacconists in mind in reaching this conclusion.
I believe—I should welcome a denial of this if it is untrue—that pressure has been brought to bear upon the Government to misuse the machinery of tobacco licensing to give a monopoly value or a quasi-monopoly value to certain existing traders with tobacco licences. If that is so, this is a complete misuse of tobacco licensing. It was never intended that tobacco licences should be used in this way. The Government should have further thoughts about their attitude to this Amendment.
Mr. Glenvil Hall: I understood the Economic Secretary to say that he would like to do this, that there is a good deal in the proposition, that it is already done in part on a temporary basis, but the
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reason why the Government cannot accede to the request is that it would or might lead to fraud. The Government believe that people would sell tobacco and cigarettes from mobile vans not having been licensed to do so.
Vans of that type can be easily traced. The Customs and Excise authorities have their own inspectors and ways and means of finding whether people selling cigarettes and tobacco are properly licensed according to law. All that my hon. Friend the Member for Walthamstow, West (Mr. Redhead) is asking in the Amendment is that those who already have licences and are operating from a definite shop or shops, whose vans are properly marked with their names, should be allowed when they are visiting housing estates and other outlying districts to sell articles which they can sell in their shops in the town, namely, tobacco and cigarettes.
Perhaps there is a loophole here? I should like to know if there is. How could there possibly be any fraud when the regulations will be as tight as that? I am not a Co-operative Member, but I cannot but agree with my hon. Friend the Member for East Ham, South (Mr. Oram). If co-operative societies were allowed to sell from their vans in this way, other traders would have the same facilities. Why not? If those who have shops have protested—I can understand their protests—I do not think that that is a sufficient reason for refusing to accept the Amendment, which strikes me as being eminently reasonable.
Mr. Laurence Pavitt: I want to intervene very briefly to reinforce the arguments which have been advanced by my hon. Friends. The Economic Secretary's case for refusing this very limited proposal does not carry a great deal of weight. The main burden of his contention seemed to be the difficulty of maintaining a satisfactory check. The Amendment is worded in such a way as to provide adequate safeguards to deal with any difficulties which might arise.
I ask the House to get away from the London mind on this matter. We always seem to approach these subjects as though there is a tobacconist's shop at every corner and a kiosk at every railway station. We should try to approach this subject from the consumer's point of view. There are still many areas in

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this country in which selling points are long distances apart. Some of my hon. Friends representing Scottish constituencies could make a strong plea on this question of mere geographical situation.
By stating an average the Economic Secretary gave no answer, because, as everyone knows, an average means nothing. It may be true that the average is one selling point for every 40 smokers, but we must remember that densities vary. Before I entered the House I spent some little time trying to find what the average doctor received as average pay. After three years I found that there was no such animal as the average doctor. I suspect that there is no real way to define the average number of selling points if the question is looked at from the point of view of the consumer.
7.15 p.m.
Like my hon. Friend the Member for East Ham, South (Mr. Oram), with due respect to the Co-operative Union, I feel that the approach has been rather from the point of view of retailers and not sufficiently from the point of view of the consumers. The Amendment states quite clearly that a licence would be
"subject to such conditions as the Commissioners think fit to impose …".
It would be quite easy to devise a way in which the ordinary vehicle which the Economic Secretary is scared of—a van or cart being driven round an area for the purpose of hawking—could be clearly distinguished from a mobile shop. A mobile shop has a proper entrance, internal lighting, display and a cash register. It is actually a shop on wheels. It would not be beyond the wit of man to draw up a short summary of the conditions which a mobile shop should fulfil. It would certainly be just as easy to do that as to direct that a coffee stall should have stakes in the ground or employ some other method by which it is no longer a coffee stall but is a fixed place.
I hope that the Economic Secretary will consider the economic straits of the country. He said that one great asset in the Amendment was that it would bring in more revenue. In spite of the 6 per cent. Bank Rate, the economic stringency and everything else perpetrated by this Government, perhaps on this occasion we on this side can give him a little help. If the country's economic situation is so straitened, let
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the hon. Gentleman accept the Amendment and have a little more in the till from tobacco licences for mobile shops.
Mr. Jack Jones: I had not the slightest intention of intervening in the debate. It is not usual for me to talk about finance and budgetary matters, but when I heard the feeble defence put forward by the Economic Secretary it prompted me to tell him a few home-truths.
I am a non-smoker. I have never touched a cigarette in my life, nor do I intend to do so as long as I live. As I do not smoke, I do not have a vested interest in this matter, but my wife likes a cigarette. I live in a part of the country which is developing. Why should not the newsagent with a licence who lives two miles away from where I live be able to bring a packet of "fags" along with the morning paper? The Government will not allow him to. It gives me a curious feeling. The notion of Tory freedom is an anachronism. Our grocer delivers groceries to our door, thereby helping my wife, because she does not have to spend money on petrol and waste her time by going to collect them. Why cannot my grocer deliver a packet of cigarettes?
The Economic Secretary said that it would have an effect upon retailers. Retailers sell an enormous amount of cigarettes. Why should not a retailer be able to deliver them to consumers' doors, thereby keeping queues away from his shop when he is busy? If he were allowed to do so he would prevent chaos inside his shop on a Saturday morning. In other words, if a retailer can get rid of his stock without crowding his shop on a Saturday, so much the better for him and for the consumer.
It is ridiculous to say that there will be jiggery-pokery and non-payment of revenue. If a licence to sell cigarettes and tobacco is granted to a local newsagent or grocer, who already delivers newspapers or groceries, he should be entitled to sell them and deliver them if he feels inclined to or if his customers request him to do so. It is fantastic that the Government should refuse this freedom to our people, who want to be given the opportunity to purchase what they wish, as they wish, where they wish, at any point they wish. It is wrong that they should be denied this opportunity

531
simply because the Government have decided that, because they are refusing other things, they cannot accept this Amendment.
I am speaking as an ex-junior Minister. The Economic Secretary has been told by somebody else, "Do not bother. It does not matter. Take no notice. They cannot have it". That is not the way for the Government to conduct the country's affairs.
Mr. Dempsey: I ask the Economic Secretary to consider this problem from the national viewpoint rather than from a City complex. To say that there is one tobacco licence to every forty smokers is a most misleading application of the law of averages. After all, some parts of the country are very sparsely populated. I assure the hon. Gentleman that I could take him to areas which have several square miles of land and buildings, but there is not a single tobacco licence available in such a huge area with a fairly large rural community.
I hope that the Economic Secretary realises that he is doing the general public a disservice by not allowing an extension of tobacco licences in respect of mobile trading vans. These vans are most up-to-date shopping centres. Some of them are obviously among the finest in Europe. Indeed, I can say, speaking from my own experience, that many of them are far more hygienic places from which to sell goods than are some of the existing obsolete shops. I cannot understand the argument of the Minister. Has he forgotten that there is such an important right in this country as freedom of consumer choice?
Does the Economic Secretary not realise that consumers in many parts of the country have shopping facilities only once a week and that if they cannot purchase tobacco and cigarettes from mobile vans they are restricted to using the shops in perhaps some remote area, where they experience difficulty in obtaining their choice of brands. Surely if vans can go to little crofts and farms and small hamlets to supply goods and hardware, which, incidentally, is a costly service, there is no legitimate reason for denying traders the right also to sell tobacco and cigarettes.
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I am very interested in the Economic Secretary's remarks. He as offered only one argument why this provision should not be extended to mobile vans. His argument is that it is very difficult to locate and supervise unfixed selling points. If a tobacco licence is in respect of fixed promises then, obviously, it is easier to supervise. I should like to draw his attention to the fact that some of us have been members of local authority licensing committees for many years and that they have to send out inspectors and supervisors to see that the laws of this country are enforced on mobile trading premises. Has he forgotten that often coal is not sold from fixed premises? It is sold from mobile vans. Inspectors or weights and measures officers have to locate those mobile premises at various selling points throughout large counties in order to enforce the law, and they do it very efficiently indeed.
Does the Economic Secretary realise that a recent Act of Parliament was passed whereby mobile trading vans are controlled from a health and hygienic point of view. Here again, health officers have no difficulty in enforcing the law on these mobile trading vans. Why, then, is there a difficulty in ensuring that the Customs and Excise laws are enforced in respect of the sale of tobacco and cigarettes from unfixed premises? There is obviously no difficulty. Where there is a will there is a way, but I believe that the Minister has not the will to extend this concession.
I beg the Economic Secretary to realise that we are dealing with this problem in 1960 and not during the period of the Labour Government from 1945 to 1951. We are dealing with a new problem in a period when neighbourhood units have been added to existing townships and when private enterprise has refused to provide shopping centres for many parts of those areas and failed, therefore, to meet consumer demand. I could take the Minister to my own county and show him several derelict shopping sites where we cannot induce private enterprise to build. If other traders are willing to serve an area and to provide customers with an efficient service of goods and commodities, the House of Commons should be the very last institution to stand in the way of the provision of such a full and

533
efficient service, yet the Government are doing so by restricting the sale of tobacco and cigarettes from mobile vans.
Does not the Economic Secretary agree that the present tendency is to develop a distributive service on the basis of mobility? All sorts of services for the supply of all sorts of goods and perishable commodities are being provided by mobile trading vans, and if the various enactments to which I have referred can be enforced, there should be no difficulty in introducing a provision by which we could extend the tobacco licence from fixed to unfixed premises—as these mobile trading vans are described.
I agree with the hon. Gentleman that by increasing sales one increases the Revenue, but he will realise that one also increases the tax yield. Therefore, if we are to continue our efforts to provide efficient services of this kind for the community, we are entitled to eliminate as many restictions as possible, and this is one restriction that the distributive trade could very well do without.
It must be remembered that these vans operate not only from premises that are already licensed but from premises that are already rated. In addition to that, they pay a fair share of motor taxation consequential on the service operated. There is no valid reason, therefore, for restricting their use for the sale of tobacco, etc. The existing law is unquestionably archaic and should be repealed at once. I ask the Economic Secretary to consider this matter and to realise that thousands of our fellow citizens depend on these door-to-door services and ought to be able to purchase their tobacco and cigarettes by this means if they so wish.
7.30 p.m.
Mr. Snow: I wonder whether the Economic Secretary has considered the distributive problems that have arisen in the Midlands as a result of the enormous transfer of population in connection with
the overspill scheme, where population is going out to the Staffordshire areas from Birmingham. I doubt very much whether the Commissioners have analysed the ratio of distributive points, not only as to the number of residences, but to the geographical location and density of those residences.
While I do not at this point speak for the co-operative societies, the impression I get in my part of the world is that those societies have not only taken a good business advantage of the problems of distribution but have, in fact, fulfilled their real function, which is to provide a service for the consumer. Since the Economic Secretary has mentioned the Labour Government's provisions in 1951 to deal with what was then considered a temporary emergency, I would ask him whether the factors that led that Government to introduce those provisions do not still exist because of subsequent transfers of population.
I know that it exists in an extremely urgent form in my part of Staffordshire, and I believe that if the position is examined carefully there will be found to be a perfectly justifiable case for giving what has been called this freedom to be able to purchase conveniently. Many of my constituents, both husband and wife, are at work, because the Midlands is, with great respect to my hon. Friends from Scotland, very hardworking and there is a lot of work there for all, I am glad to say.
The fact is that the shopping facilities are not always convenient. They are particularly inconvenient in these small townships which are absorbing population well beyond their original distributive capacity and which would normally expect to benefit by the sort of mobile distribution that is the subject of the Amendment.
Question put, That those words be there inserted in the Bill: —
The House divided: Ayes 172, Noes 234.

Division No. 134.]

AYES

[7.31 p.m.

Abse, Leo

Bowden, Herbert W. (Leics, S.W.)

Chapman, Donald

Ainsley, William

Bowles, Frank

Chetwynd, George

Allaun, Frank (Salford, E.)

Boyden, James

Corbet, Mrs. Freda

Bacon, Miss Allce

Brockway, A. Fenner

Craddook, George (Bradford, S.)

Baxter, William (Stirlingshire, W.)

Broughton, Dr. A. D. D.

Crosland, Anthony

Bellenger, Rt. Hon. F. J.

Brown, Thomas (Ince)

Cullen, Mrs. Alice

Benson, Sir George

Butler, Herbert (Hackney, C.)

Davies, C. Elfed (Rhondda, E.)

Blackburn, F.

Butler, Mrs. Joyce (Wood Green)

Davies, Harold (Leek)

Boardman, H.

Castle, Mrs. Barbara

Davies, Ifor (Gower)

Davies, S. O. (Merthyr)

Jones, T. W. (Merioneth)

Ross, William

Deer, George

Kelley, Richard

Royle, Charles (Salford, West)

Dempsey, James

Kenyon, Clifford

Short, Edward

Diamond, John

Key, Rt. Hon. C. W.

Silverman, Sydney (Nelson)

Dodds, Norman

King, Dr. Horace

Skeffington, Arthur

Driberg, Tom

Lawson, George

Slater, Mrs. Harriet (Stoke, N.)

Dugdale, Rt. Hon. John

Lee, Frederick (Newton)

Slater, Joseph (Sedgefield)

Ede, Rt. Hon. Chuter

Lever, Harold (Cheetham)

Small, William

Edelman, Maurice

Lever, L. M. (Ardwick)

Smith, Ellis (Stoke, S.)

Edwards, Rt. Hon. Ness (Caerphilly)

Lipton, Marcus

Snow, Julian

Edwards, Robert (Bilston)

Logan, David

Soskice, Rt. Hon. Sir Frank

Edwards, Walter (Stepney)

Mabon, Dr. J. Dickson

Spriggs, Leslie

Evans, Albert

McCann, John

Steele, Thomas

Fitch, Alan

McInnes, James

Stewart, Michael (Fulham)

Fletcher, Eric

McKay, John (Wallsend)

Stones, William

Foot, Dingle

Mahon, Simon

Stress, Dr. Barnett (Stoke-on-T rent, C.)

Forman, J. C.

Mallalieu, E. L. (Brigg)

Summerskill, Dr. Rt. Hon. Edith

Fraser, Thomas (Hamilton)

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

Swingler, Stephen

Ginsburg, David

Manuel, A. C.

Sylvester, George

Gourlay, Harry

Mapp, Charles

Symonds, J. B.

Grey, Charles

Mason, Roy

Taylor, Bernard (Mansfield)

Grimond, J.

Mendelson, J. J.

Taylor, John (West Lothian)

Gunter, Ray

Millan, Bruce

Thomas, Iorwerth (Rhondda, W.)

Hall, Rt. Hon. Glenvil (Colne Valley)

Mitchison, G. R.

Thompson, Dr. Alan (Dunfermline)

Hamilton, William (West Fife)

Monslow, Walter

Thomson, G. M. (Dundee, E.)

Hannan, William

Moody, A. S.

Thornton, Ernest

Hayman, F. H.

Mort, D. L.

Timmons, John

Healey, Denis

Moyle, Arthur

Tomney, Frank

Herbison, Miss Margaret

Mulley, Frederick

Ungoed-Thomas, Sir Lynn

Hill, J. (Midothian)

Neal, Harold

Wade, Donald

Hilton A. V.

Oliver, G. H.

Wainwright, Edwin

Holman, Percy

Oram, A. E.

Warbey, William

Holt, Arthur

Owen, Will

Watkins, Tudor

Houghton, Douglas

Padley, W. E.

Weitzman, David

Hoy, James H.

Pannell, Charles (Leeds, W.)

Wells, Percy (Faversham)

Hughes, Cledwyn (Anglesey)

Parker, John (Dagenham)

Wells, William (Walsall, N.)

Hughes, Emrys (S, Ayrshire)

Pavitt, Laurence

Wheeldon, W. E.

Hughes, Hector (Aberdeen, N.)

Pearson, Arthur (Pontypridd)

Whitlook, William

Hunter, A. E-

Peart, Frederick

Willey, Frederick

Hynd, H. (Accrington)

Pentland, Norman

Williams, D. J. (Neath)

Hynd, John (Attercliffe)

Plummer, Sir Leslie

Williams, W. R. (Openshaw)

Irving, Sydney (Dartford)

Price, J. T. (Westhoughton)

Willis, E. G. (Edinburgh, E.)

Janner, Barnett

Pursey, Cmdr. Harry

Wilson, Rt. Hon. Harold (Huyton)

Jay, Rt. Hon. Douglas

Randall, Harry

Winterbottom, R. E.

Johnston, Douglas (Paisley)

Rankin, John

Woof, Robert

Jones, Dan (Burnley)

Redhead, E. C.

Yates, Victor (Ladywood)

Jones, Elwyn (west Ham, S.)

Reid, William

Zilliacus, K.

Jones, Jack (Rotherham)

Reynolds, G. W.

Jones. J. Idwal (Wrexham)

Roberts, Goronwy (Caernarvon)

TELLERS FOR THE AYES:

Mr. Probert and Mr. Cronin.

NOES

Allason, James

Campbell, Gordon (Moray & Nairn)

Fell, Anthony

Alport, Rt. Hon. C. J. M.

Carr, Compton (Barons Court)

Finlay, Graeme

Amory, Rt. Hn. D. Heathcoat (Tiv'tn)

Carr, Robert (Mitcham)

Fisher, Nigel

Arbuthnot, John

Cary, Sir Robert

Fraser, Ian (Plymouth, Sutton)

Ashton Sir Hubert

Channon, H. P. G.

Freeth, Denzil

Atkins, Humphrey

Chataway, Christopher

Gammans, Lady

Balniel, Lord

Cole, Norman

Gardner, Edward

Barber, Anthony

Collard, Richard

George, J. C. (Pollok)

Barlow, Sir John

Cooper-Key, Sir Neill

Gibson-Watt, David

Barter, John

Cordeaux, Lt.-Col. J. K.

Glover, Sir Douglas

Batsford, Brian

Cordie, John

Glyn, Dr. Alan (Clapham)

Batter, Sir Beverley, Southgate)

Corfield, F. V.

Glyn, Sir Richard (Dorset, N.)

Bennett, F. M. (Torquay)

Costain, A. P.

Godber, J. B.

Bennett, Dr. Reginald (Gos & Fhm)

Courtney, Cdr. Anthony

Goodhew, Victor

Berkeley, Humphry

Craddock, Sir Beresford

Gower, Raymond

Bevins, Rt. Hon. Reginald (Toxteth)

Critchley, Julian

Grant, Rt. Hon. William (Woodside)

Bidgood, John C.

Crosthwaite-Eyre, Col. O. E.

Green, Alan

Biggs-Davison, John

Cunningham, Knox

Hall, John (Wycombe)

Bingham, R. M.

Curran, Charles

Hamilton, Michael (Wellingborough)

Bishop, F. P.

Currie, C. B. H.

Harris, Reader (Heston)

Bossom, Clive

Dalkeith, Earl of

Harrison, Brian (Maidon)

Bourne-Arton, A.

Dance, James

Harvie Anderson, Miss

Box, Donald

d'Avigdor-Goldsmid, Sir Henry

Boyle, Sir Edward

de Ferranti, Basil

Hay, John

Brewis, John

Donaldson, Cmdr. C. E. M.

Heald, Rt. Hon. Sir Lionel

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

Drayson, G. B.

Hendry, Forbes

Brooman-White, R.

Duncan, Sir James

Hicks Beach, Maj. W.

Browne, Percy (Torrington)

Eden, John

Hiley, Joseph

Bryan, Paul

Elliott, R. W.

Hill, J. E. B. (S. Norfolk)

Bullard, Denys

Emery, Peter

Hirst, Geoffrey

Burden, F. A.

Emmet, Hon. Mrs. Evelyn

Hobson, John

Butcher, Sir Herbert

Farey-Jones, F. W.

Hocking, Philip N.

Campbell, Sir David (Belfast, S.)

Farr, John

Holland, Philip

536

537

Hopkins, Alan

Marlowe, Anthony

Smith, Dudley(Br'ntf'rd & Chiswick)

Hornby, R. P.

Marshall, Douglas

Smithers, Peter

Hornsby-Smith, Rt. Hon. Patricia

Mathew, Robert (Honiton)

Spearman, Sir Alexander

Howard, Gerald (Cambridgeshire)

Matthews, Gordon (Meriden)

Stevens, Geoffrey

Hughes Hallett, Vice-Admiral John

Mills, Stratton

Steward, Harold (Stockport, S.)

Hughes-Young, Michael

Montgomery, Fergus

Stodart, J. A.

Hulbert, Sir Norman

Morgan, William

Storey, Sir Samuel

Hutchison, Michael Clark

Mott-Radclyffe, Sir Charles

Studholme, Sir Henry

Iremonger, T. L.

Nabarro, Gerald

Summers, Sir Spencer (Aylesbury)

Irvine, Bryant Godman (Rye)

Neave, Airey

Talbot, John E.

Jackson, John

Nicholls, Harmar

Tapsell, peter

James, David

Noble, Michael

Taylor, Sir Charles (Eastbourne)

Jenkins, Robert (Dulwich)

Nugent, Sir Richard

Taylor, W.J. (Bradford, N.)

Johnson, Dr. Donald (Carlisle)

Oakshott, Sir Hendrle

Teeling, William

Johnson, Eric (Blackley)

Ormsby Gore, Rt. Hon. D.

Temple, John M.

Johnson Smith, Geoffrey

Orr-Ewing, C. Ian

Thomas, Leslie (Canterbury)

Jones, Rt. Hn. Aubrey (Hall Green)

Osborn, John (Hallam)

Thomas, Peter (Conway)

Joseph, Sir Keith

Osborne, Cyril (Louth)

Thompson, Kenneth (Walton)

Kerans, Cdr. J. S

Page, Graham

Thornton-Kemsley, Sir Colin

Kerby, Capt. Henry

Panned, Norman (Kirkdale)

Tiley, Arthur (Bradford, W.)

Kerr, Sir Hamilton

Partridge, E.

Turner, Colin

Kimball, Marcus

Pearson, Frank (Clitheroe)

Turton, Rt. Hon. R. H.

Kirk, Peter

Peel, John

van Straubenzee, W. R.

Kitson, Timothy

Percival, Ian

Vaughan-Morgan, Sir John

Lancaster, Col. C. G.

Pickthorn, Sir Kenneth

Vickers, Miss Joan

Leather, E. H. C.

Pike, Miss Mervyn

Wakefield, Edward (Derbyshire, W.)

Leavey, J. A.

Pitman, I. J.

Wakefield, Sir Wavell (St. M'lebone)

Legge-Bourke, Sir Harry

Pitt, Miss Edith

Wall, Patrick

Lewis, Kenneth (Rutland)

Powell, J. Enoch

Watkinson, Rt. Hon. Harold

Lilley, F. J. P.

Price, David (Eastleigh)

Watts, James

Lindsay, Martin

Prior, J. M. L.

Wells, John (Maidstone)

Linstead, Sir Hugh

Prior-Palmer, Brig. Sir Otho

Whitelaw, William

Litchfield, Capt. John

Proudfoot, Wilfred

Williams, Dudley (Exeter)

Longbottom, Charles

Ramsden, James

Williams, Paul (Sunderland, S.)

Loveys, Walter H.

Redmayne, Rt. Hon. Martin

Wills, Sir Gerald (Bridgwater)

Low, Rt. Hon. Sir Toby

Rees, Hugh

Wise, A. R.

Lucas-Tooth, Sir Hugh

Rees-Davies, W. R.

Wolrige-Gordon, Patrick

MacArthur, Ian

Renton, David

Wood, Rt. Hon. Richard

McLaren, Martin

Rippon, Geoffrey

Woodhouse, C. M.

McLaughlin, Mrs. Patricia

Roberts, Sir Peter (Heeley)

Woodnutt, Mark

Maclay, Rt. Hon. John

Robinson, Sir Roland (Blackpool, S.)

Worsley, Marcus

MacLeod, John (Ross & Cromarty)

Robson Brown, Sir William

Yates, William (The Wrekin)

McMaster, Stanley R.

Roots, William

Macmillan, Rt. Hn. Harold(Bromley)

Scott-Hopkins, James

TELLERS FOR THE NOES:

Macmillan, Maurice (Halifax)

Shaw, M.

Colonel J. H. Harrison and

Maddan, Martin

Simon, Sir Jocelyn

Mr. Sharples

Markham, Major Sir Frank

Skeet, T, H. H.

Clause 19.—(RESTRICTION OF RELIEF FOR LOSSES.)
The Financial Secretary to the Treasury (Sir Edward Boyle): I beg to move, in page 13, line 38, after "incurred", to insert:
"by a local authority (within the meaning of section one hundred and seventy-one of the Act of 1952) or by any person".
This is a small, tidying-up Amendment which I can explain briefly. If hon. Members will look at the proviso to subsection (1) of this Clause, they will see that the proviso as at present drafted lets out losses incurred
"in the exercise of functions conferred by or under any enactment …"
and thus, among other things, exempts from the Clause local authorities generally.
Since the Committee stage of the Bill it has come to the notice of my right hon. Friend that the City of London is exceptional as a local authority, because its general functions are not conferred under any enactment, so that it does not
538
come, as the Bill is at present drafted, within the proviso to subsection (1).
This question is important to the City of London because it carries on certain activities of a trading nature in the public interest and, when losses are incurred, secures tax relief against other income. It will be common ground that all local authorities ought to be in the same position as one another, and, in order to secure this, the Amendment extends the proviso to cover losses incurred by local authorities within the meaning of Section 171 of the Income Tax Act, 1952.
Fortunately, the Income Tax Act, 1952, in Section 171 (4), gives a pretty clear definition of what is meant by "local authority", and we are therefore using that subsection for that purpose.
As I said, this is simply a tidying-up Amendment in order to ensure that all local authorities will be in the same position, and does not in any way alter the original purpose of the Clause or the proviso to the subsection.
Mr. Mitchison: As I understand the Amendment, the object is to bring in the City of London. I regret that the Conservative Party forgot the City of London, but I am glad that they have discovered their error.
Mr. Ede: I commend the language of the Financial Secretary about all local authorities being in the same position in these matters, but I am surprised to hear that the City of London, which escaped the Municipal Corporations Act, 1835, should uphold that principle and ask the Government to assert it.
Amendment agreed to.

Clause 20.—(SALE OF SHARES IN CERTAIN TRADING COMPANIES.)
The Solicitor-General: I beg to move, in page 15, line 1, after "that", to insert "the value of".
Would it also be convenient to take with this Amendment the next Amendment in line 4, Sir?
Mr. Speaker: Yes, if the House so pleases.
The Solicitor-General: It is indeed consequential on the Amendment which I am moving.
Subsection (1, b) brings within the Clause sales of shares of a company carrying on a trade if the trade is such that any one object forming part of the company's trading stock forms a substantial part of its assets. My hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) in Committee drew attention to the practical inconvenience of a test of this sort which might provide a very fruitful source of litigation, and urged that we should introduce a platform instead of the phrase "a substantial part".
The purpose of the Amendments is to substitute as a test the provision that the value of any one object forming part of the company's trading stock should amount to one-fifth or more of the value of its assets. The point was discussed in connection with Clause 21 on recommittal yesterday when the Committee approved of this change, and I commend it to the House in respect of this Clause.
7.45 p.m.
Mr. Geoffrey Stevens: Once again I have the pleasure and privilege of thanking my
540
hon. and learned Friend for accepting a suggestion which I made seeking to clarify the English language and thereby presumably reducing the potential livelihood of his brothers in law. I am grateful to him.
Mr. Mitchison: I would only say that it is comparatively rare for an hon. Member to be able to thank the Government twice for one suggestion.
Amendment agreed to.
Further Amendment made: In page 15, line 4, leave out "forms a substantial part of the" and insert:
"amounts to one-fifth or more of the value of the net".—[The Solicitor-General.]
The Solicitor-General: I beg to move, in page 15, line 12, to leave out from "If" to "that" in line 13, and to insert:
"on the surveyor certifying to the Commissioners having jurisdiction in the matter particulars showing that the case falls within the foregoing subsection, and giving notice thereof in writing to the seller, it is not shown to the satisfaction of those Commissioners".
Subsection (2) of Clause 20 as drafted brings the Clause into operation if it is not shown to the satisfaction of the Commissioners having jurisdiction in the matter that all trading stock belonging to the company at the time of the sale of shares within subsection (1) will be disposed of in the ordinary course of trade. This Amendment introduces a new condition before the Clause can run, namely, that the inspector must certify to the Commissioners having jurisdiction particulars showing that the case falls within subsection (1) and notifies the seller that he is doing so.
The Amendment serves two purposes. The first is to save unnecessary hearings by the Commissioners. The transactions in question might be clearly outside the scope of the Clause and it is undesirable that every such case should have to be brought before the Commissioners. The Amendment enables the formalities to be dispensed with in appropriate cases, because the inspector can refrain from certifying the particulars to the Commissioners.
The Amendment also serves the purpose of paving a way for the Amendment to page 16, line 34, to insert a new subsection (8), which we put down in response to a suggestion—indeed, a plea—by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell),

541
which enables a prospective vendor of shares to approach the Commissioners of Inland Revenue jointly with the prospective purchaser and apply for a clearance in relation to the provisions of subsection (2). That provision would not work if the Commissioners of Inland Revenue could not give a binding clearance, and of course they could not do so if in every case the question had to be taken before the appropriate body of General Commissioners.
Mr. Mitchison: On the face of it, this Amendment stands by itself and, although it is, no doubt, preparatory to a later Amendment, we can, perhaps, discuss the later Amendment better when we come to it. On this Amendment I have nothing to say except just to inquire who the appropriate commissioners are in cases of this kind. Is it the case that, where there is no specific reference, it means the General Commissioners having jurisdiction in the area, or does it include the Special Commissioners?
The Solicitor-General: If the House will permit me to speak again in response to the hon. and learned Gentleman's question, the appropriate body of commissioners is defined in a later Amendment.
Amendment agreed to.
The Solicitor-General: I beg to move, in page 15, line 24, at the beginning to insert:
"Subject to the next following subsection".
This Amendment goes with the two following Government Amendments, in page 15, lines 32 and 36. Perhaps you would permit the House to discuss them together, Mr. Deputy-Speaker.
Mr. Deputy-Speaker (Major Sir William Anstruther-Gray): Yes, I think that it would be for the convenience of the House.
The Solicitor-General: These Amendments introduce a new subsection to deal with possible hardship which might arise in certain cases where a seller of shares would, apart from the new subsection, be charged with his share of the company's notional trading profit, which is calculated normally by reference to the consideration for the shares, but where he has, in fact, made less out of the transaction than his share of the company's notional trading profit.
542
The House will recall that the broad scheme of Clause 20 is to take the price paid by the future controller of the company for the shares sold to him first of all as a base, to work out from that what would be the sale price for all the issued shares of the company, to treat that amount as the price received by the company for its trading stock, subject to certain adjustments, so as to arrive at a notional profit, and then to allocate an appropriate proportion of that to the shares which were sold and to tax that appropriate proportion of the profit as income of the seller of the shares.
In the ordinary way, of course, an operator will be charged with no more than the difference between what he subscribed for the shares originally and what is paid for them by the purchaser, but it is possible that that may not work in certain cases. For example, one might have an independent person who happened to buy some shares from one of the operators half way through the period when the building was in course of erection. He would then probably have to pay more than the original subscription. In those circumstances, his share of the trading profit might well prove to be more than the difference between what he paid for the shares and what he got for them. That is the first of the cases with which the new subsection is designed to deal.
There is also a possibility that, under the legislation as it stands at present, the same trading profit might, in effect, be taxed twice. For example, there might be a sale of control of a company which purported to have put up the building by way of investment. The effect of Clause 21 in such a case—Clause 21 being the one which bites on that case—would be that, if the building were to continue to be held as an investment. a charge on the sellers would be imposed under Clause 20. If the person who had acquired control on that occasion decided to sell his shares in the company to somebody else, Clauses 20 and 21 together would operate all over again.
Further, the Committee passed yesterday an Amendment to Clause 23, in page 20, line 36, designed to prevent avoidance by the device of selling shares to the ultimate controller of the company through an intermediary. In that case, it is possible that the original seller of the shares would be charged under

543
that Amendment and the intermediary, unless he were a dealer, could make himself liable to pay tax on the appropriate share of the company's national trading profit under Clause 20.
We have really two cases here. The first is the minority shareholder getting caught up, so to speak, in one of these colourable transactions. The second is the double charge. Paragraph (a) of the new subsection brings within its scope a seller who had, at the time of the sale, less than 5 per cent. of the shares issued by the company. The object of keeping the figure as small as that is to give a measure of protection to owners of a quite small minority of the shares. They are the people likely, we feel, to become unwittingly involved with the operators of the avoidance device in such circumstances that they do not realise a full share of the profit—the sort of case which I described a few moments ago. Paragraph (b) deals with the possibilities of a double charge and brings within the subsection any sale of shares where subsection (2)
"has had effect in relation to all or any of the same trading stock on a previous sale of the shares".
The scheme of the new subsection is to give a seller who comes prima facie within its provisions the right to apply to the Commissioners of Inland Revenue for relief. In the case of the minority shareholder, he has to show that he did not acquire the shares
"in pursuance of arrangements for transferring control of the company to another person".
He is, of course, the only person who is in a position to establish that fact. The Commissioners are to give such relief
"as may be reasonable and just".
This follows an existing scheme under Section 66 of the Income Tax Act and, in the ordinary way, of course, the just relief will be such an adjustment as to reduce the charge to the difference between the price which the seller paid for the shares and the price for which he got them. I hope that that deals with the main points of the new subsection.
Mr. Bruce Millan: We are doing in Clause 20 something similar to what we did in Clause 25
544
yesterday. In the discussion on Clause 25 I said that I thought that what the Government were doing was not right. In my view, this is even more so when we come to Clause 20 and the Amendment that we are now considering.
I wish to deal particularly with the position of the seller whose shares amounted to less than 5 per cent. of the shares issued by the company. There has been confusion here of two quite unrelated things.
Perhaps it would be easier to explain it by giving a small example. If someone buys a number of shares, any sort of shares, for a certain figure, expecting a certain dividend from them, and then receives that dividend, and finds that the dividend is not quite what he expected when he bought the shares, and that the shares have come down in value, it has never been argued that the loss of value of the shares should be set off against the dividend. The dividend is a revenue profit and is taxable, but any reduction in the value of the shares is a capital loss, which is not allowed as a deduction against the taxable income. I am speaking from the ordinary point of view of a person who is not dealing in shares. That is only fair, because a capital gain, an increase in the value of the shares, is also not taxable.
8.0 p.m.
We have here a similar thing. By this Amendment, we are allowing a seller of shares to set off what really amounts to a capital loss against the profit to which he would otherwise be assessable under the terms of Clause 20. That really has the effect of allowing the seller in these circumstances to have some relief where the differences between the actual consideration for the sale of the shares and the consideration he originally paid when he bought them is less than the profit to which he is being made assessable under the present Clause.
We are here dealing with two completely different things. The Amendment which the Government made yesterday to Clause 25 and this Amendment which they are making today, dealing with this category of sellers of shares, are founded upon a misconception of the position, and I am sorry that the Government should have brought forward this Amendment to this Clause.

545
Quite apart from the fundamental objection in principle to what is being attempted here, there are one or two other points which are worth making. One of them is in regard to subsection (4,a) of the Amendment to line 36 which refers to the question of the number of
"the shares belonging to the seller amounted to less than 5 per cent. of the shares issued by the company".
When we deal with the question when control in the company passes to the purchaser, we have, in Clause 23, certain definitions of associated parcels of shares. I think that these definitions are necessary and acceptable, but these definitions of associated parcels of shares ought to be associated in some way with this Amendment. If we have a seller who has less than 5 per cent. of the shares issued, but who has nevertheless shares which are part of an associated parcel of shares, it is surely not the Government's intention that he should escape the full rigours of Clause 20? I think that the Amendment is defective in this respect.
The Solicitor-General: I want to follow the hon. Gentleman's point, but will he say whether he is dealing with the purchaser in this case, or with the seller?
Mr. Millan: I am here dealing with the seller of shares. Under Clause 23, the shares are not necessarily dealt with individually. If the shares are associated, there is the provision for treating the shares as associated parcels of shares and for treating them as a whole. There is no similar provision in this Amendment. Each lot of shares sold by that particular individual is to be treated individually, but they may, of course, be associated parcels of shares, under the terms of Clause 23. I should have thought that the Government would have wanted to have this Amendment restricted to the categories of shares which are not part of associated parcels of shares. I am sure that that is what the Government intended, but it is not what we have got in the Amendment as it stands at present.
There is a reference in line 14 to the seller having to show
"that he did not acquire his shares in pursuance of arrangements for transferring control of the company to another person."
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This does not meet the point, because here we are dealing not with circumstances in which the seller acquired his shares, which are important enough, but with the circumstances in which the seller sells his shares subsequently, which is the transaction which brings the whole operation of Clause 20 into effect.
There is only one other point. In line 17, there is reference to adjustments being whatever may be "reasonable and just". The hon. and learned Gentleman said that this repeats words which appeared in Section 66 of the 1952 Act, but I should have thought that there was a nearer parallel, and that it is Clause 25 of the Bill with which we are dealing, because, as I said at the beginning, the kind of provision in these Amendments is roughly similar to one in Clause 25 which we made yesterday, and, therefore, the words "reasonable and just" do not apply at all. We have here a choice given to the person concerned to elect to substitute for the sum that would otherwise be chargeable the actual profit he made on the sale of the shares, as defined in exactly similar terms to the definition which is used in the first few words of this Amendment. It seems to me to be rather extraordinary that, in two cases dealing with roughly similar kinds of adjustments in the same Bill, we should get two different definitions of the adjustment that has to be made.
Mr. J. Enoch Powell: Whatever substance, if any, there may be in the points which the hon. Member has just made, I think that it would be right that, any rate in regard to the first of the two purposes of this new subsection, a word of recognition should be said. And perhaps this should be said on behalf of my hon. Friend the Member for Basingstoke (Mr. Freeth) and his aunt, for, if I am not mistaken, we are, in paragraph (a), dealing with the case which, in the deliberations of the Committee, we came to regard as the case of his aunt in Basingstoke.
The object here, I feel the House would agree, is a right object, and it is to take out persons who hold a minority interest—the aunt held only 2 per cent.—in the company in question, who might otherwise be within the mischief of these provisions.
Mr. Mitchison: I regard this as an unsatisfactory Amendment, and I think it particularly regrettable that it should

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be brought in at such a late stage. I agree with what was said by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), but I would add that, looking at this Clause and dealing for a moment with "Mrs. Five Per Cent."—"Mr. Five Per Cent." used to be the late Mr. Gulbenkian—I do not see what is happening. This relates to what I might call something like a dirty transaction from the point of view of tax avoidance.
Here is somebody who is innocently involved in it. There are two possible things to do in a case of that kind. One is to say, "We cannot draw quantitative lines; we cannot go into questions of innocence. The transaction is bad, and these people must take the unfortunate consequences", and then it is said that that is very hard on "Mrs. Five Per Cent". But why "Mrs. Five Per Cent"? Why not "Mrs. Two Per Cent." or, indeed, "Mrs. Ten Per Cent." or almost any other percentage? This is illogical, and I should have thought we could have taken any fixed figure in this case. It seems to me to show a reluctance by the Government to accept one or other of two propositions which are at any rate logical, and which I think could have been dealt with in other ways.
One of these propositions is that, the transaction being dirty, everybody involved must suffer the consequences. The other is that if one can show innocence in a dirty transaction, one should not suffer the consequences, but why because one happens to hold 4 or 6 per cent., as the case may be, of the shares in a company, the treatment should be different, completely passes my understanding. Now the Government say, "You have got to take your share in the sale no further". I can only believe that this is one of those cases where the Government must be going to their reactor or some similar machinery they keep in the Treasury and tossing up to find the figure. I agree it cannot be a majority, but short of that any figure could be defended on the same argument and with the same reactor.
Surely the right thing to do in a case of this kind is for the Government to make up their mind between the two alternatives. If we come to whether one is innocent or not, whether one is the
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aunt, the whole aunt and nothing more, then one has to see what it is. The person in question has to show not later than six years after the transaction—a very long period for this sort of matter, I should have thought—
"that he did not acquire his shares in pursuance of arrangements for transferring control of the company to another person".
I wonder whether that is quite enough. I should have thought that in a transaction of this kind there might be degrees of innocence, as it were, and that the simplest thing to have done would have been to have made the proof in that case a good bit stricter.
That is not the whole story. I have been talking about paragraph (a). I turn to paragraph (b). One has to remember that in these cases the trading stock may be all kinds of things. It is not necessarily securities or land or buildings. It may be anything within the pretty sweeping category indicated by Clause 20 (1, b). Apparently it is sufficient if subsection (2) of the Clause has had effect in relation to any of the same trading stock on a previous sale of the shares. Is that enough? I can see all kinds of combinations of stock in relation to some small part of which, on a previous sale of the shares, subsection (2) has had effect. I may be very bad at following these things, but, as to the shares: what shares? Shares amounting to 5 per cent. or 95 per cent., assuming a 5 per cent. holding? Or any shares?
The Solicitor-General: The 5 per cent. relates only to paragraph (a).
Mr. Mitchison: Yes. Well, then, what does it mean? Does it mean any of the shares of the company or the whole lot? Or what? I really find this an extremely difficult Clause to follow. It may be clearer to my hon. Friends than it is to me, but I do not like it.
I turn from that to "reasonable and just." It is all very well to leave it all to the Commissioners, but I should have thought that the Tory Party would have been a bit critical of some of these administrative decisions of a sweeping character. I had the curiosity to look up rather rapidly Section 66 of the 1952 Act, and it is about errors and mistakes. What is "reasonable and just" for a case of that kind is clear by comparison with what may be "reasonable and just" in this case.

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Here it may be as clear as mud, as the phrase goes, what was reasonable and just. I should have thought that, if one meant what the hon. and learned Gentleman told us it meant, that is to say, that they should be indemnified, as it were, for the consequences of this penal Clause in relation to them, he could have put that into the Bill. It is absolutely nothing to what was called "multiple top slicing." If he can define "multiple top slicing" he can certainly define what he told us today.
Therefore, I do regard this as a most unsatisfactory Clause. I should have liked to have had the opportunity not merely to put down Amendments to it but to allow the Government to take it away and think over it again, but, of course, it is brought forward on Report. What are we to do? Accept it on the ground that it is rough and unsatisfactory justice, but that it may be on the side of justice rather than injustice? Or turn it down and leave the aunt to stew?
I feel that, on the whole, we have probably got to accept the thing, but I really do not know; and I am a little bit moved by my two hon. Friends the Members for Craigton and Gloucester (Mr. Diamond), who do not want to accept it. They think that it is such a muddle. And why not? Let us see what the views of the House are on the matter.
8.15 p.m.
Mr. Diamond: I am grateful to the Solicitor-General for deferring his reply to allow me to speak. I was about to appeal to my hon. and learned Friend the Member for Kettering (Mr. Mitchison) not to adopt his usual compromising and gentle attitude with the Government, but to fight for the rights of the Opposition.
This is a muddle-headed Clause at least, and at worst it is a deliberate attempt to fog the House and to insert into a Bill a method under which a capital loss, for no proper reason at all, is set off against a profit and, therefore, avoids tax. That is something which, in principle, which is a very important principle, we should oppose. There are various reasons for opposing this, but I will deal, first, with what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), with his critical mind, picked on immediately, and which is the same point which occurred previously.
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I hope that the Government are aware that although we are objecting to it we are not objecting on grounds of drafting, however unsatisfactory the drafting may be as a result of the Government's continually vacillating and changing their mind from moment to moment and being pushed all over the place by their back benchers instead of sticking to sound tax principles. We are not objecting on those grounds, but we are objecting on the very simple ground which my hon. Friend has illustrated and which I will illustrate by the simplest arithmetic.
Let us take a figure which I am sure the Solicitor-General will understand. I buy shares at £10 each. Let us suppose they rise in value to £12 each at the point of time at which I sell them at a value of £14. For the purposes of this Clause I am then taxed on £2, the difference between the sale price and the value, in effect. The difference is £2. I do not pay tax on the increase in value from £10 to £12 because the increase is a capital increase which is not caught by this Clause.
Let us reverse that position, because this is what we are complaining about. We are not complaining at the moment that this treatment is given under which a normal rise in value is not regarded as taxable. We are complaining about the reverse a this, where the Government seek to introduce an entirely novel principle, namely, where the opposite happens, and the shares which I bought at £10 each drop in value to £9 each and I sell them—shall we say?—for £12.
According to the Government's proposals I pay tax only on £2. In fact, I have done two things. I have sustained a capital loss of £1 and I have made a revenue profit—for this purpose, taxable profit—of £3. There is no question about having made a taxable profit of £3. There is no question of having a taxable loss of £1. The point is that where I make a capital loss of £1 the Government say, in their sense of fairness, "We will allow you to set that off"; but where I make a capital loss of £1 they say, in their sense of fairness, "If you make a capital profit you pay tax on it"
They cannot have it both ways. I do not think that I have misunderstood it, however difficult it is to apply to these words such intelligence, even perhaps limited intelligence, as I have and in the

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certainly limited amount of time. That is the effect of it. The Government are combining those two.
As to treating capital profits as tax-free and capital losses as deductible for taxation purposes, I suggest to my hon. and learned Friend that that is not a principle to be swallowed in any circumstances on this side of the House. I suggest that we should object to that in the strongest terms. If it is too late for the Clause to be taken away, then we should get rid of our steam in the appropriate way, which is in the "Aye" or "No" Lobby as the case may be. That is the material point I wish to make.
There are other points of drafting which I should like to make if there were an opportunity for making the alterations. Subsection (4) reads:
"Where the said amount exceeds the difference between …"
As I read the Clause, what it is intended to mean is not the difference between two things but the excess of the first over the second. The assumption apparently is that the difference will always be a profit, but it need not be; it could be a deficiency. This difference has a limiting effect on the amount later brought into tax. It is, therefore, conceivable that the Government's intention will be defeated by using the word "difference", which could be a difference up or down, as opposed to the word "excess", which can mean only one thing.
For these reasons, mainly of principle and partly of drafting, I strongly object to the Clause. I endorse what has been said by my hon. and learned Friend. I, too, have looked at the errors and omissions Section in the 1952 Act, and I did not think that on this occasion the Solicitor-General was as helpful as he normally is in making only the slightest passing reference to Section 66 of the 1952 Act without telling us, at the same time, that it was an utterly irrelevant Section and has nothing to do with the principle. We are dealing here with equity—what is right and fair. Section 66 of the 1952 Act is what happens when a mistake has been made and it is necessary to put a person back into the position in which he would have been if certain events had not taken place and the years had not rolled by; and it is an almost impossible situation.
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Apparently the Government have made an attempt to work it out, but have failed. They have said, "We cannot work it out and we will leave it to the Commissioners to decide what 'may be reasonable and just'." This is continuing the principle of saying, "We cannot cope with Income Tax and we will, therefore, hand it over to the executive, and somebody else will do it." That, too, is a principle to which I object.
If those are not sufficient grounds on which to vote against the Clause, I also have the strongest possible objection to the last line, for there is a full stop at the end of the line which should not be there.
The Solicitor-General: If the House will permit me, I should like to say a few words in reply to the points which have been made. The earlier points seemed to be little more substantial than the last, made by the hon. Member for Gloucester (Mr. Diamond), which, no doubt, the officials of the House will put right. I am sorry that the hon. Member threatened to vote against the Clause without waiting to hear the answer to the points which he made.
First, the hon. Members for Glasgow, Craigton (Mr. Millan) and Gloucester say that what we are doing is to allow a capital loss to be set off against taxation. There is no question here of a capital loss. The case is not, as the hon. Member suggested it was, that the seller sold for too little; it is that he bought for too much. It would be grossly unfair, when we are fixing a notional profit, to tax him on a profit which he did not make. If he can show that he bought at price A and sold at price B, it is the profit between price A and price B that we should tax.
Mr. Millan: The hon. and learned Gentleman says that the seller bought at too high a price, but that does not necessarily follow. If I buy shares at £100 and they fall to £90 it does not necessarily follow that I paid too high a price for them, any more than it necessarily follows that if I buy at £100 and the shares rise to £110 I paid too low a price. The hon. and learned Gentleman is assuming a stability in the price of shares which has no relation to actuality.
Mr. Diamond: And also assuming that the Tory Government will not put up the Bank Rate every other day.
The Solicitor-General: I must not be led away from the Clause, which is already difficult enough, to discuss the Government's fiscal policy. What we are saying is that, ordinarily speaking, we intend to convert into a taxable profit what is a capital gain under the law at the moment. We do that in what I confess is an artificial way. It is necessarily artificial, but, on the whole, it works.
In the ordinary way, the people who have been perpetrating these claims are those who have put up the building with the intention, in effect, at the end of getting rid of it—to use a neutral term—to an investment company. If they sold the building in the normal way to the investment company, they would be taxed on the profit which they made on the building because it would be the profit which they made in disposing of their trading stock. Instead, they sell the shares, and we have in some way to convert the price paid for the shares into the trading profits.
The Clause does that in the necessarily complicated way which we have discussed. For the operator, the man who puts up the building and who has probably planned this from the start, the scheme works quite reasonably, because he will be charged on no more than the difference between what he subscribes for the shares and what are paid for them by the purchaser, for the money subscribed will either have gone in expenses or capital expenditure allowed to the company in arriving at its profit or, at the end of the day, will be represented by the fixed assets of the company, the value of which is deducted, as the Bill stands, in subsection (4, a), in arriving at the notional trading profit.
It works all right in that case, but there may be an independent person who comes in half-way through the erection of the building. If he buys some shares from one of the operators half-way through the period during which the building is being put up, he will probably have to pay more than the original subscription. In those circumstances, the formula which we have laid down, and which works perfectly well in the case of the original subscriber, works unfairly, because ex hypothesi he will have paid more than the original subscription price. His share of trading profit in
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these circumstances may prove to be more than the difference between what he paid for the shares and what he should get for them. It is for that reason that we think it right that he should be taxed on the profit that he did make.
8.30 p.m.
Mr. Diamond: Perhaps I may be allowed to put a rather lengthy question, as we are not allowed to speak twice on Report.
I revert to the example that the Solicitor-General gave, quite correctly, of converting back into a profit on the building what has been converted by the operators into a profit on the shares. A profit has been made on the shares and one wants to convert that back into a profit on the building. One only wants to do what the operators themselves did. They said. "We want a profit on the building of £X and we will put it on the shares." But when they come to it they do not put the £X on the original subscription cost, or the original price of the shares, but on the value of the shares at the time they conspired together to do this.
Whether, between the time when they conspire and the time when the deal is done and the £X are added to the cost of the shares instead of the building, there is a rise or a fall in the value of the shares, is either irrelevant or a capital profit that is not taxed, or is a capital loss on which no tax is allowed but is now proposed to be allowed by this Amendment.
The Solicitor-General: There is no question here of a capital profit except under the existing law. If the original subscription price of the shares is £10 and a small shareholder, coming in halfway through, pays £12, and the ultimate sale is for £14, it is playing with words—is fanciful—to say that he has made a capital loss of the difference between the £10 and the £12. It does not represent what has happened. We know what profit he has made and it would be unfair to tax him on more than that. He has not made a capital loss. The Clause does not bite if he does
Mr. Mitchison: The operator carried out half of what he intended to do and evaded the Clause to that extent. He intended to sell at £14. He sold at £12 to

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some independent person, and the difference between £10 and £12 went untaxed into the operator's pocket as part of the scheme which he intended. It is being paid for by the Exchequer handing back some tax which it would otherwise have collected if the operator had stuck to the shares throughout.
The Solicitor-General: That is not what the Clause is designed to do. It is designed to strike at the circumstances in which, instead of the building being sold to somebody who is to hold it as an investment, shares are sold to somebody who is to hold the building as an investment. It has nothing to do with the sale of shares to somebody independently who merely comes into this scheme fortuitously.
That brings me to the point made by the hon. Member for Glasgow, Craig-ton (Mr. Millan) about associated parcels of shares. That is taken care of in lines 14 and 15 of the new subsection, because in the case of the minority shareholder it is incumbent upon him to show that he did not acquire his shares in pursuance of arrangements for transferring control of the company to other persons. Since the onus is on him, rightly, in this case, it seems to me to do every bit as much as is done by the definition of associated parcels of shares in Clause 23.
Before leaving that point, I shall answer the hon. and learned Gentleman, who asked why the figure of 5 per cent. had been chosen. One has to take a figure and that is a reasonable one. A little while ago the House was applauding me enthusiastically—perhaps that is a little exaggerated, but at any rate it was approving—for a proposal that instead of saying a "substantial proportion" of the assets we should say one-fifth. One might ask: "Why 20 per per cent.?" Everybody seemed to think yesterday when we discussed it, that 20 per cent was a reasonable figure. I suggest that it is perfectly reasonable to put down a specific figure of 5 per cent. for the reason which I gave—that one wants to limit it in the case of the small man in the circumstances I described.
The last point which was made by the hon. Member for Craigton, by the hon. Member for Gloucester (Mr. Diamond) and also by the hon. and
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learned Gentleman was in reference to the words:
"as may be reasonable and just."
They are far more appropriate to the case we have in mind than the rigid formula which we wrote into Clause 25 yesterday. Section 66 of the Income Tax Act provides for relief for a person who has paid tax on a Schedule D or Schedule E assessment which was excessive by reason of some error or mistake in his Income Tax return and enjoins the Commissioners to do what is right and just in those circumstances.
It seems to me to be every bit as appropriate in this case. In the ordinary way, to adjust relief will be such an adjustment as to reduce the charge for the difference between the price the seller paid for the shares and the price he got for them, but under this formula it will remain open to the Commissioners to take into account, for example, earlier transactions in the shares and to restrict relief if, for example, the holders of a small block of shares in a company set up for the express exploitation of the avoidance device benefit from the concession in the new subsection by selling their shares to each other before the time limit comes to make arangements for transferring control of the company to the ultimate purchaser.
It seems to give the requisite flexibility to prevent the concession, which we think it is right to make, being used for avoidance. It is not a case of handing over responsibility to the Executive, as was suggested. In the concluding paragraph of the subsection there is a provision for an appeal to the General Commissioners or to the Sepcial Commissioners and a further appeal to the courts on points of law. For all those reasons, I hope that the House will agree to the Amendment.
Mr. Millan: The hon. and learned Gentleman has explained why the words "reasonable and just" appear in this Amendment, but surely the same considerations also applied to Clause 25, with which we dealt yesterday. There is nothing in what he has said about this Amendment which does not apply with equal justice to Clause 25 where an entirely different form of words was inserted. Since some flexibility is

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allowed, I hope that the Inland Revenue will conclude that a reasonable adjustment may be nil.
Mr. Deputy-Speaker: As there appears to be some controversy, I propose to put each Amendment separately.
Mr. Mitchison: On a point of order. If we were to divide on the first Amendment that would get over the difficulty
and we should be understood by the House to be dividing against the three Amendments as a body.
Mr. Deputy-Speaker: I take that to be so.
Question put, That those words be there inserted in the Bill:—
The House divided: Ayes 227, Noes 147.

Division No. 135.]

AYES

[8.39 p.m.

Allason, James

Freeth, Denzil

McLaughlin, Mrs. Patricia

Alport, Rt. Hon. C. J. M.

Gammans, Lady

Maclay, Rt. Hon. John

Amory, Rt. Hn. D. Heathcoat (Tiv'tn)

Gardner, Edward

MacLeod, John (Ross & Cromarty)

Arbuthnot, John

George, J. C. (Pollok)

McMaster, Stanley R.

Ashton, Sir Hubert

Gibson-Watt, David

Macmillan, Maurice (Halifax)

Atkins, Humphrey

Glover, Sir Douglas

Maddan, Martin

Balniel, Lord

Glyn, Sir Richard (Dorset. N.)

Maginnis, John E.

Barber, Anthony

Godber, J. B.

Manningham-Buller, Rt. Hn. Sir R.

Barlow, Sir John

Goodhew, Victor

Markham, Major Sir Frank

Barter, John

Gough, Frederick

Marlowe, Anthony

Batsford, Brian

Gower, Raymond

Marshall, Douglas

Baxter, Sir Beverley (Southgate)

Grant, Rt. Hon. William (Woodside)

Mathew, Robert (Honiton)

Beamish, Col. Tufton

Green, Alan

Matthews, Gordon (Meriden)

Bennett, F. M. (Torquay)

Grimond, J.

Mawby, Ray

Berkeley, Humphry

Grimston, Sir Robert

Mills, Stratton

Bevins, Rt. Hon. Reginald (Toxteth)

Hall, John (Wycombe)

Montgomery, Fergus

Bidgood, John C.

Hamiton, Michael (Wellingborough)

Morgan, William

Biggs-Davison, John

Harris, Reader (Heston)

Mott-Radclyffe, Sir Charles

Bingham, R. M.

Harrison, Brian (Maldon)

Nabarro, Gerald

Bishop, F. P.

Harrison, Col. J. H. (Eye)

Neave, Airey

Bourne-Arton, A.

Harvie Anderson, Miss

Nugent, Sir Richard

Box, Donald

Hay, John

Oakshott, Sir Hendrie

Boyle, Sir Edward

Heald, Rt. Hon. Sir Lionel

Orr-Ewing, C. Ian

Brewis, John

Hendry, Forbes

Osborn, John (Hallam)

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

Hicks Beach, Maj. W.

Osborne, Cyril (Louth)

Brooman-White, R.

Hiley, Joseph

Page, Graham

Browne, Percy (Torrington)

Hill, J. E. B. (S. Norfolk)

Pannell, Norman (Kirkdale)

Bryan, Paul

Hirst, Geoffrey

Partridge, E.

Bullard, Denys

Hocking, Philip N.

Pearson, Frank (Clitheroe)

Butcher, Sir Herbert

Holland, Philip

Percival, Ian

Campbell, Gordon (Moray & Nairn)

Holt, Arthur

Pickthorn, Sir Kenneth

Carr, Compton (Barons Court)

Hopkins, Alan

Pike, Miss Mervyn

Carr, Robert (Mitcham)

Hornby, R. P.

Pilkington, Capt. Richard

Channon, H. P. G.

Hornsby-Smith, Rt. Hon. Patriola

Pitman, I. J.

Chataway, Christopher

Howard, Gerald (Cambridgeshire)

Pitt, Miss Edith

Cole, Norman

Howard, John (Southampton, Test)

Powell, J. Enoch

Collard, Richard

Hughes-Young, Michael

Price, David (Eastleigh)

Cooper, A. E.

Hulbert, Sir Norman

Prior, J. M. L.

Cooper-Key, Sir Neill

Hutchison, Michael Clark

Prior-palmer, Brig. Sir Otho

Cordeaux, Lt.-Col. J. K.

Iremonger, T. L.

Proudfoot, Wilfred

Cordle, John

Irvine, Bryant Godman (Rye)

Ramsden, James

Corfield, F. V.

Jackson, John

Redmayne, Rt. Hon. Martin

Costain, A. P.

James, David

Rees, Hugh

Craddock, Sir Beresford (Spelthorne)

Jenkins, Robert (Dulwich)

Rees-Davies, W. R.

Critchley, Julian

Johnson, Dr. Donald (Carlisle)

Renton, David

Crosthwaite-Eyre, Col. O. E.

Johnson, Eric (Blackley)

Ridley, Hon. Nicholas

Cunningham, Knox

Johnson Smith, Geoffrey

Rippon, Geoffrey

Curran, Charles

Joseph, Sir Keith

Roberts, Sir Peter (Heeley)

Currie, G. B. H.

Kerans, Cdr. J. S.

Robinson, Sir Roland (Blackpool, S.)

Dalkeith, Earl of

Kerr, Sir Hamilton

Robson Brown, Sir William

Dance, James

Kimball, Marcus

Roots, William

d'Avigdor-Goldsmid, Sir Henry

Kirk, Peter

Scott-Hopkins, James

de Ferranti, Basil

Kitson, Timothy

Sharples, Richard

Donaldson, Cmdr, C. E. M.

Lancaster Col. C. G.

Shaw, M.

Drayson, G. B.

Leather, E. H. C.

Simon, Sir Jocelyn

Duncan, Sir James

Leavey, J. A.

Skeet, T. H. H.

Eden, John

Legge-Bourke, Sir Harry

Smith, Dudley (Br'ntf'rd & Chiswick)

Elliott, R. W.

Lewis, Kenneth (Rutland)

Smithers, Peter

Emery, Peter

Lilley, F. J. P.

Spearman, Sir Alexander

Emmet, Hon. Mrs. Evelyn

Lindsay, Martin

Steward, Harold (Stockport, S.)

Farey-Jones, F. W.

Litchfield, Capt. John

Stodart, J. A.

Farr, John

Longbottom, Charles

Storey, Sir Samuel

Fell, Anthony

Loveys, Walter H.

Studholme, Sir Henry

Finlay, Graeme

Low, Rt. Hon. Sir Toby

Summers, Sir Spencer (Aylesbury)

Fisher, Nigel

Lucas-Tooth, Sir Hugh

Talbot, John E.

Fletcher-Cooke, Charles

MacArthur, Ian

Taylor, W. J. (Bradford, N.)

Fraser, Ian (Plymouth, Sutton)

McLaren, Martin

Temple, John M.

Thomas, Leslie (Canterbury)

Wade, Donald

Wolrige-Gordon, Patrick

Thomas, Peter (Conway)

Wakefield, Edward (Derbyshire, W.)

Wood, Rt. Hon. Richard

Thompson, Kenneth (Walton)

Wakefield, Sir Waved (St. M'lebone)

Woodhouse, C. M.

Thornton-Kemsley, Sir Colin

Wall, Patrick

Woodnutt, Mark

Tiley, Arthur (Bradford, W.)

Watts, James

Worsley, Marcus

Turner, Colin

Wells, John (Maidstone)

Yates, William (The Wrekin)

Turton, Rt. Hon. R. H.

Whitelaw, William

van Straubenzee, W. R.

Williams, Dudley (Exeter)

TELLERS FOR THE AYES:

Vaughan-Morgan, Sir John

Wills, Sir Gerald (Bridgwater)

Mr. Peel and Mr. Noble.

Vickers, Miss Joan

Wise, A. R.

NOES

Abse, Leo

Herbison, Miss Margaret

Pavitt, Laurence

Ainsley, William

Hill, J. (Midothian)

Pearson, Arthur (Pontypridd)

Allaun, Frank (Salford, E.)

Hilton, A. V.

Peart, Frederick

Bacon, Miss Alice

Holman, Percy

Pentland, Norman

Baxter, William (Stirlingshire, W.)

Houghton, Douglas

Plummer, Sir Leslie

Bellenger, Rt. Hon. F. J.

Hoy, James H.

Price, J. T. (Westhoughton)

Benson, Sir George

Hughes, Cledwyn (Anglesey)

Randall, Harry

Blackburn, F.

Hughes, Emrys (S. Ayrshire)

Rankin, John

Boardman, H.

Hughes, Hector (Aberdeen, N.)

Redhead, E. C.

Bowden, Herbert W. (Leics, S.W.)

Hunter, A. E.

Reynolds, G. W.

Bowles, Frank

Hynd, H. (Accrington)

Roberts, Goronwy (Caernarvon)

Boyden, James

Hynd, John (Attercliffe)

Ross, William

Brockway, A. Fenner

Irving, Sydney (Dartford)

Short, Edward

Broughton, Dr. A. D. D.

Johnston, Douglas (Paisley)

Skeffington, Arthur

Brown, Thomas (Ince)

Jones, Dan (Burnley)

Slater, Mrs. Harriet (Stoke, N.)

Butler, Herbert (Hackney, C.)

Jones, Elwyn (West Ham, S.)

Slater, Joseph (Sedgefield)

Butler, Mrs. Joyce (Wood Green)

Jones, Jack (Rotherham)

Small, William

Castle, Mrs. Barbara

Jones, J. Idwal (Wrexham)

Snow, Julian

Corbet, Mrs. Freda

Jones, T. W. (Merioneth)

Soskice, Rt. Hon. Sir Frank

Craddock, George (Bradford, S.)

Kenyon, Clifford

Spriggs, Leslie

Cronin, John

Key, Rt. Hon. C. W.

Steele, Thomas

Crosland, Anthony

King, Dr. Horace

Stewart, Michael (Fulham)

Cullen, Mrs. Alice

Lawson, George

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

Davies, G. Elfed (Rhondda, E.)

Lee, Frederick (Newton)

Swingler, Stephen

Davies, Harold (Leek)

Lever, Harold (Cheetham)

Sylvester, George

Davies, Ifor (Gower)

Lever, L. M. (Ardwick)

Symonds, J. B.

Davies, S. O. (Merthyr)

Logan, David

Taylor, Bernard (Mansfield)

Deer, George

Mabon, Dr. J. Dickson

Thomas, Iorwerth (Rhondda, W.)

Dempsey, James

McCann, John

Thompson, Dr. Alan (Dunfermline)

Diamond, John

McInnes, James

Thomson, G. M. (Dundee, E.)

Dodds, Norman

McKay, John (Wallsend)

Thornton, Ernest

Driberg, Tom

Mallalieu, E. L. (Brigg)

Timmons, John

Dugdale, Rt. Hon. John

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

Ungoed-Thomas, Sir Lynn

Ede, Rt. Hon. Chuter

Manuel, A. C.

Wainwright, Edwin

Edelman, Maurice

Mapp, Charles

Warbey, William

Edwards, Rt. Hon. Ness (Caerphilly)

Mason, Roy

Watkins, Tudor

Evans, Albert

Mendelson, J. J.

Weitzman, David

Fitch, Alan

Millan, Bruce

Wells, William (Walsall, N.)

Fletcher, Eric

Mitchison, G. R.

Wheeldon, W. E.

Foot, Dingle

Moody, A. S.

Whitlock, William

Fraser, Thomas (Hamilton)

Morris, John

Williams, D. J. (Neath)

Ginsburg, David

Mort, D. L.

Williams, W. R. (Openshaw)

Gourlay, Harry

Moyle, Arthur

Willis, E. G. (Edinburgh, E.)

Grey, Charles

Neal, Harold

Wilson, Rt. Hon. Harold (Huyton)

Gunter, Ray

Oliver, G. H.

Winterbottom, R. E.

Hall, Rt. Hon. Glenvil (Colne Valley)

Oram, A. E.

Yates, Victor (Ladywood)

Hamilton, William (West Fife)

Owen, Will

Zilliacus, K.

Hannan, William

Padley, W. E.

Hayman, F. H.

Parker, John (Dagenham)

TELLERS FOR THE NOES:

Healey, Denis

Paton, John

Mr. Probert and Mr. Mahon.

Further Amendments made:In page 15, line 32, leave out "the subsection" and insert:
"subsection (5) of this section."
In line 36, leave out "(4)The said "values" and insert:
(4) Where the said amount exceeds the difference between the actual consideration for the sale of the shares and the consideration for which the seller bought them (or, if he acquired them otherwise than by buying them, their value on a sale in the open market at the time when he acquired them), and—

(a) immediately before the time of the sale the shares belonging to the seller
560
amounted to less than five per cent. of the shares issued by the company (regard being had to any differences in the nature of the shares or the rights attaching thereto), or

(b) subsection (2) of this section has had effect, in relation to all or any of the same trading stock on a previous sale of the shares,

then if not later than six years after the end of the year of assessment the seller applies in writing to the Commissioners of Inland Revenue for relief, and, in the case of an application made only by virtue of paragraph (a) of this subsection, shows to the satisfaction of those Commissioners that he did not acquire his shares in pursuance of arrangements for transferring control of the company to another

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person, the Commissioners of Inland Revenue shall give, by repayment or otherwise, such relief (if any) as may be reasonable and just.
Any applicant aggrieved by a decision of the Commissioners of Inland Revenue under this subsection may, on giving notice in writing within thirty days after the notification of the decision, appeal to the General Commissioners having jurisdiction in the matter of the assessment under this section, or if he so elects to the Special Commissioners, and the provisions of the Act of 1952 relating to such an appeal (including the provisions relating to the statement of a case for the opinion of the High Court on a point of law) shall apply with any necessary modification.
(5) The values referred to in paragraphs (a) and (b) of subsection (3) of this section.—[The Solicitor-General.]
The Solicitor-General: I beg to move, in page 16, line 34, at the end to insert:
(8) The following provisions shall have effect where in pursuance of this subsection a person proposing to sell shares in such circumstances that the sale would fall within subsection (1) of this section and the person proposing to buy the shares furnish to the Commissioners of Inland Revenue particulars of the proposed transaction, that is to say—

(a) if the Commissioners are of opinion that the particulars, or any further information furnished in pursuance of this paragraph, are not sufficient for the purposes of this subsection, they shall within thirty days of the receipt thereof notify to the said persons what further information they require for those purposes, and unless that further information is furnished to the Commissioners within thirty days from the notification or such further time as the Commissioners may allow they shall not be required to proceed further under this sub-section;

(b) subject to the foregoing paragraph, the Commissioners shall within thirty days of the receipt of the particulars, or where that paragraph has effect of all further information required, notify the said persons whether the Commissioners are satisfied that the trading stock will be disposed of as mentioned in subsection (2) of this section;

and if the Commissioners notify the said persons that they are so satisfied, the surveyor shall not give a certificate under subsection (2) of this section in respect of a sale of shares in the company by the one of the said persons to the other which is carried out within six months after the notification by the Commissioners
In discussing this Amendment, I might perhaps be allowed to discuss the Amendment, in line 36, to leave out from "seller" to "and" in line 39 and to insert:
"if subsection (2) of this section had had effect".
The new subsection provides that a person who proposes to sell shares in a company which is within subsection (1)
562
of this Clause can, together with the prospective purchaser approach the Commissioners of Inland Revenue for a clearance in respect of the question of whether or not the transaction would be caught under subsection (2) because the trading stock will cease to be used as trading stock after the sale we put down this subsection in response to an appeal as I mentioned earlier, by my hon. Friend the member for Wolverhampton, south-west (Mr. Powell), who referred to the uncertainly of a seller of shares about his position. I promised that this was one of the matters which would be considered before Report stage.
We have had representations that people proposing to sell shares in a company which might fall within the Clause would not know how they stood and that they ought to be able to get a clearance before the transactions are completed. My right hon. Friend thinks that is a perfectly valid point, and we have sought to meet it by the clearance procedure which, of course, is well known to the House.
Mr. Mitchison: I see the point of making some provision of this sort. The Government seem to do rather better when acting in pursuance of a suggestion made by the hon. Member for Wolverhampton, South-West (Mr. Powell) than when they are acting on their own, but that, of course, is always a matter of opinion.
No doubt they have considered the point, but are the Government quite satisfied that the thirty days, which is all that the Commissioners have to come to a decision in the matter, is really sufficient? If the Commissioners do nothing for thirty days, what happens? Is the result that a clearance is taken to have been given?
The Solicitor-General The Solicitor-General indicated assent.
Mr. Mitchison: I thought so, but one is never certain in these hard times. With, no doubt, an insufficiency of staff at any rate in some tax offices, thirty days might be a little short. Is there any power to extend the provisions or notice, or anything of that sort, or are the Government convinced that this is really enough?
Mr. Powell: This Amendment introduces the same clearance procedure to which the House has already assented in Committee in regard to Clause 27 yesterday. I should have thought that if

563
the Commissioners were in any doubt as to whether they had before them all that was necessary for coming to a decision, the provision for calling for further information gave them everything they needed and it would be quite wrong to widen the limits of time which are set out. I am grateful to my right hon. Friend for providing in this way what is just and proper.
Mr. Millan: This Amendment repeats the provisions to which we agreed in Clause 27 yesterday. However, in Clause 27 there is a proviso which is not repeated in the Amendment we are considering. That proviso is that if the particulars which are given with respect to the transactions that are to be carried out do not represent a full and accurate disclosure of all the facts and circumstances, the clearance procedure is void. There is no similar provision in Clause 20.
Presumably, the Government are relying on subsection (8) which gives a certain power, but there is a difference there in that subsection (8), as far as I can see, comes into operation only after six years, whereas under Clause 27 the clearance procedure can be voided at any time if the Revenue discovers that there has not been a full and accurate disclosure of the facts. Would it not have been better to have had the same sort of provision in the Amendment as in Clause 27?
The Solicitor-General: Perhaps the House will allow me to answer two specific points. There is not a deemed clearance under the subsection, like the other one, if the Commissioners do not answer in thirty days, but, of course, since Parliament will have expressed its wish in this subsection if the Amendment is accepted, they are clearly bound to do so.
With regard to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan), we feel that we have in this case got the longstop of subsection (8) and that that is sufficient.
Amendment agreed to.
Further Amendment made: In page 16, line 36 leave out from "seller" to "and" in line 39 and insert:
"if subsection (2) of this section had had effect".—[The Solicitor-General.]
The Solicitor-General: I beg to move, in page 17, line 16, at the end to insert:
(10) If after the sale of the shares, in a case not falling within the proviso to subsection (5) of this section, a balancing charge falls to be made in respect of any asset of the company falling within paragraph (a) of subsection (4) of this section, the amount on which the charge is made shall not exceed the aggregate of—

(a) the appropriate proportion of what would have been the maximum amount of the balancing charge if the asset had been bought by the company at the time of the sale of the shares for a price equal to the amount unallowed at the time of the sale of the capital expenditure actually incurred by the company on the construction or provision of the asset, the said maximum amount being ascertained on the footing that no initial allowance fell to be made, and

(b) the amount which apart from this subsection would be the maximum amount of the balancing charge less the appropriate proportion of that amount.

This is a rather difficult Amendment to follow. I will do my best to make plain what it is we are trying to do. The point arises out of the reference made by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) during the Committee stage about the possibility of, in effect, a double charge to tax where a balancing charge arises.
To give an example, one might get the written-down value of the assets referred to in subsection (4, a) at, say, £800, with a market value of £1,000 and a price for the shares of £10,000. The payment is the £10,000 would, in effect, have comprised £9,000 for the trading stock, which is what we are trying to arrive at, and £1,000 for the capital allowance assets.
But under the Clause, the written-down value of £800 would be deducted from the total consideration to arrive at the price for the trading stock, so that the sellers would be charged the tax at £9,200 instead of £9,000. But the matter would go further, because on a subsequent sale of the assets, which would be for the £1,000—their market value—there would be a balancing charge of £200 on which there would be a liability to pay tax. It seemed, I think, to the whole Committee that my hon. Friend had a perfectly valid point there.
9.0 p.m.
The hon. Member for Glasgow, Craigton (Mr. Millan) followed that up by pointing out that there could be the

565
same anomaly by way of balancing allowance. To put that matter right by getting at the actual market value of the capital allowance assets would be a matter of appalling complication. We have therefore proceeded in a different way.
The aim is to limit the balancing charge so that the amount to be taxed under the Clause is not being taxed over again. So that we should not have to ascertain the market value of the capital allowance assets, which might be very many and very diverse, we have tried to get at it in a different way. The balancing charge is made up of two elements. The first is the annual allowance since the sale. That will not have been taken into account under the Clause. Therefore, paragraph (a) takes it into account for balancing charge purposes.
If hon. Members wish it I can spell out to the House the effect of paragraph (a), but the end product is that everything is hived off except the annual allowances which have been received by the purchaser since the sale. They obviously have not been taken into account for balancing charge purposes. It is perfectly fair to take them into account in seeking to arrive at the maximum amount of the balancing charge which may be made in the circumstances of this Clause.
In addition, where there is the sale of part only of the share capital, a proportion only of the capital allowance assets will have been effectually taken into account in the working out of the notional profit. Therefore, it is only with reference to that proportion that there is a liability to double taxation by way of balancing charge in the way that I have described.
To put it the other way round, the balance of the balancing charge not represented by this proportion should be taken into account. That is paragraph (b). What we have done is to say that paragraphs (a) and (b) should be added together to arrive at the maximum, which is the fair balancing charge, and by this means one ensures that there will be no double taxation element.
I appreciate that this is by no means an easy Amendment to understand. I think that it will be easier if I give an
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example. Take a case where three-fifths of the shares were sold in a company which at the time of the sale had a capital allowance asset of a written down value of £1,000. Subsequent annual allowances of, say, £100 brought the new written down value down to £900.
Mr. Diamond: At what date does the new written down value obtain? This is an essential part of the whole transaction.
The Solicitor-General: This is before the sale. It then sells the asset for £1,100. If the asset had been bought for £1,000, the maximum balancing charge would be £100 only. The appropriate proportion of this £100 is three-fifths, which is £60, and that is picked up under paragraph (a). The balancing charge which would arise in the ordinary way is £200. That £200 is reduced by three-fifths, leaving £80. That is paragraph (b). So under the Amendment the maximum balancing charge is £60 plus £80—£140.
Mr. Stevens: When I raised this point in Committee it seemed a relatively simple one. It seemed to me that, although we intended to tax certain people who by subterfuges were avoiding taxation, we did not intend to tax them twice. That seemed a simple kind of principle. It was not until the hon. Member for Glasgow, Craigton (Mr. Millan) raised the balancing charge that I realised that there were certain difficulties, and it was not until I saw the Government's Amendment on the Paper that I realised the immensity, the complexity and the difficulties involved. I am sure that I am speaking for the entire House, and for you, Mr. Deputy-Speaker, when I express very great gratitude to my hon. and learned Friend the Solicitor-General for having made the position crystal clear to everyone except myself. I am very grateful to him.
Mr. Mitchison: There is no accounting for taste, but personally I think that this Amendment, as explained by the Solicitor-General, was rather clearer than some of the Government's Amendments. I should like to say to the hon. and learned Gentleman that had he not been such a conspicuous success at the Bar and in this House, he would have done very well indeed as a teacher, particularly in an infants' school.
Mr. Diamond: I congratulate the Solicitor-General on his very balanced statement. If he says that it is all due to the intervention of the hon. Member for Portsmouth, Langstone (Mr. Stevens), I can only suggest that his hon. Friend should go back into his bath or wherever it was he came from last night.
We are in this real difficulty, and we might as well face it. The hon. Member for Langstone raised a simple point of justice. He will not mind my saying that his disposition was to look at one side of the question only, and, quite properly, to see that the taxpayer did not get caught and have to pay twice in the case of a balancing charge. My hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who has a much more objective mind and sees all sides of the question, raised the further question of the balancing allowances, and we now have this Amendment.
It fell to my lot to read and to try to understand this Amendment in case any comments had to be made on it at this stage. I studied it, I wrote out all sorts of examples and came to the conclusion that I was near to understanding, but was not fully there. I have listened to the hon. and learned Gentleman's explanation and I am now back to where I started from—if not a good deal further away than that.
To speak seriously, if this is the best that can be done we now have to take it on trust, because I am not capable of understanding the explanation given nor, as far as I know, is any other chartered accountant in the House—and I speak, at all events, for three chartered accountants. It will fall to the lot of my professional brethren outside to understand what this really means. In this House we have had the advantage of studying the Bill during its various stages and we know what it is all about. We have now listened to the explicit, clear and short statement of the Solicitor-General. How it will be operated outside, I just do not know.
Had we been at an earlier stage of the Bill, I would have suggested, with the greatest deference, that the Government might have thought about it again and found something capable of being worked by practitioners in the field. As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has said, all those who have to work in this field
568
find this without question the most difficult Amendment, or part of the Bill, we have yet met or, I think, ever will meet—and that includes all the problems of the "golden handshake" and the schedules thereto. In those circumstances, all one can do is to sit quietly when the vote is taken, but with the knowledge that I, for one, for the first time am utterly and completely beaten.
The Solicitor-General: Before the hon. Member for Gloucester (Mr. Diamond) intervened, I should have added something to what I said. It strikes me that in reference to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan) I may have misled the House because I omitted to say something. Although we have met the point raised by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) we have not met that put by the hon. Member for Craigton, and I meant to tell the House why.
I think that it was implicit in what I said that to meet that point would have necessitated ascertaining the market value of the capital allowance assets. As I said, those would be extremely numerous, and it would introduce an appalling complication, in the administration of what is a lesser matter, into the drafting of a Clause which, heaven knows, is already difficult enough.
What really weighed with us was that we felt that in these days it was extremely unlikely that the industrial assets would be worth less than the written-down value. In these days of very generous capital allowances—which have recently been raised, with the approbation of all parts of the House—it does not very often happen that the industrial assets are worth less than their written-down value. The point made by the hon. Gentleman was perfectly valid, but we feel that when one looks at it on the ground it is minimal, and we did not think the complication of the alternative approach involved was called for.
Several Hon. Members Several Hon. Members rose—
Mr. Deputy-Speaker: Mr. Cooper.
Mr. Mitchison: I asked the hon. and learned Solicitor-General a question: is he willing to answer it, and—
Mr. Deputy-Speaker: Order. I have called Mr. Cooper.
Mr. A. E. Cooper: All I want to do at this stage is to enter a protest that, in this day and age, it is found necessary to introduce into the Finance Bill a Clause that is admitted on all sides to be almost incomprehensible. I am sure that we have reached a stage in Income Tax law when some serious attempt should be made to introduce legislation whereby the ordinary man in the street can understand what is going on.
Here we are, at the Report stage of the Finance Bill of 1960—the penultimate stage before it becomes law—and men and women in this House, who are of average and, perhaps, of above-average intelligence, are unable to understand what we are passing tonight. It is a deplorable state of affairs, against which I protest very sincerely.
Mr. Millan: Apart from not following the Amendment at all, I particularly do not follow the Solicitor-General's argument about balancing allowances, especially when he says that these would involve taking into account or ascertaining the market value of the assets concerned. I do not follow why with balancing allowances there should be any particular difficulty that there is not in the case of balancing charges. On the other point about balancing—
Mr. Diamond: Before my hon. Friend leaves that point, does he not think It only fair to the Solicitor-General to say that if we did introduce what my hon. Friend wants to introduce it would, as the Solicitor-General said, make this a complicated Clause?
9.15 p.m.
Mr. Millan: I dare say it would. The other point, that balancing allowances do not often arise, is valid up to a point, but there must nevertheless be many occasions, particularly when we are dealing with assets which become obsolescent very quickly because of technical changes, when unfortunately the annual allowances have not kept up with the technological position.
Apart from that, I do not understand the Amendment at all, in common with everyone else, but perhaps I may ask one or two specific questions. First, with regard to "the appropriate proportion" which appears twice in the Amendment Presumably it is intended that
570
"the appropriate proportion" should have the same meaning as is ascribed to it in the rest of the Clause. I would point out that the definition in Clause 20 (6) specifically refers only to subsection (3). We are now dealing with subsection (10), which is not referred to there, and which is a subsequent subsection to subsection (6). I think it is rather unfortunate, because it is not absolutely clear that "the appropriate proportion" in this subsection is the same as the "appropriate proportion" in other parts of the Clause.
I would mention two other points. First, what exactly is the significance of the phrase
"the maximum amount of the balancing charge"?
I would have thought that just "the balancing charge" was sufficient without introducing the words "the maximum amount of".
Also. I should like to know what is meant in paragraph (a):
"… the said maximum amount being ascertained on the footing that no initial allowance fell to be made."
What is the significance of mentioning "initial allowance" here? Among the many obscurities of this Amendment, this is one of the most obscure.
The Solicitor-General: The hon. Gentleman asked me—
Mr. Mitchison: On a point of order, Mr. Speaker. Has the hon. and learned Gentleman asked the leave of the House to speak again?
Mr. Speaker: I did not know that the hon. and learned Gentleman had already spoken more than once. No doubt, he will ask leave. What will then happen I do not know.
The Solicitor-General: I have so far asked for leave on each occasion. I had been told that I need not do so when speaking to a Government Amendment. I assure the House that I intended no discourtesy, but if I do need leave I certainly ask leave to speak again.
The first question that the hon. Member for Glasgow, Craigton (Mr. Millan) asked related to the words "appropriate proportion". Undefined as it is, it simply means that whatever proportion is decided by the General Commissioners

571
or the court, as the case may be, if necessary. is appropriate. I think it perfectly clear that the interpretation of the Clause will be guided by the phrase in subsection (6), although that expressly refers only to subsection (3).
Mr. J. T. Price: May I interrupt the hon. and learned Gentleman on what may be a matter of principle? How can there be equal application of the law if there is an unfettered discretion resting with the Commissioners to treat each case according to the circumstances? I always thought it was an overriding principle in all these matters that there should be equality of treatment between the various citizens dealt with. It seems to me that in these circumstances there is to be the widest discrepancy according to the whim and caprice of the people administering the law. Is that not so?
The Solicitor-General: No, that is not so at all. We have just had a Clause containing the words "as is just and reasonable", and there is certainly no question of giving a discretion to the Commissioners or leaving it to their caprice in deciding what is appropriate. As I have said, subsection (6) will clearly colour the meaning of "appropriate proportion" in this subsection. What one is seeking to do, as in the example I gave, is to find what proportion of the total shareholding has been sold, and that will be the appropriate portion.
Mr. Diamond: Will the hon. and learned Gentleman tell the House, as a lawyer, whether that is what happens in the courts? When there is in a Section a definition which specifically refers to a limited part of the Section, such as this definition in subsection (6) which is said to refer to the purposes of subsection (3), are the courts guided by that? Would not a court be likely to say that, whatever it means, it cannot mean that or Parliament would have said so directly and would have used words to include the purposes of subsection (3) and (10)?
Also, does the Solicitor-General recollect that the definition in subsection (6) is
"such proportion as may be just"?
What does the hon. and learned Gentleman mean when he suggests that the court would be guided by a reference to
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what may be just? This is really very difficult to understand. Would it not be much simpler to say that this is a drafting error and there should be a reference to subsections (3) and (10)?
The Solicitor-General>: I do not think that "appropriate proportion" here is susceptible of any meaning other than the meaning it has in subsection (6). The words which the hon. Member for Gloucester has quoted,
"such proportion as may be just",
do not refer to the appropriate proportion except in relation to the proviso to the previous subsection, which is the exceptional case of the sale of shares of of different classes.
The second question which the hon. Member for Craigton asked related to the words "maximum amount". That follows Part X of the Income Tax Act, 1952. He will find it also, for example, in Section 293. A charge is limited to the aggregate of the allowances already given.
The hon. Gentleman had a final point on the concluding words of paragraph (a),
"on the footing that no initial allowance fell to be made".
The reason for those words is that what we want to limit paragraph (a) to in the way I described is the annual allowances. I think I gave an example to the House. Perhaps I can show how it would not work unless one left the initial allowances out. I instanced the case where there was a capital allowance asset with a written-down value of £1,000 and subsequent annual allowances of £100, bringing the new written-down value to £900. The asset is then sold for £1,100. On the sale of the asset, there would, of course, be a new initial allowance. It is that which one wishes to discount, and so one fastens only on the annual allowances which have not already been taken into account in the computation carried out under subsections (2), (3) and (4) of the Clause.
Finally, I have very great sympathy with the point made by my hon. Friend the Member for Ilford, South (Mr. Cooper).
Mr. Mitchison: It was not a point; it was a bludgeon.
The Solicitor-General: Well, perhaps it was his rapier, as well as his bludgeon.

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I have very great sympathy with his protest. On the other hand, the Royal Commission pointed out that in taxing Statutes we have to take a very narrow line, and, particularly in cases like this, where we want to make sure that the subject is not taxed twice in very complicated circumstances, the language is apt to be obscure. That is additionally so when we are trying to express in words what is very frequently a mathematical concept. I think that it was roughly in these words that the Royal Commission put it.
I may add that I think on one occasion Lord Simon, when Chancellor of the Exchequer, put himself in the hands of the House and said: "I am told that this is what the Clause means. I do not understand why it means that, but I hope that the House will accept it," and the House did. I feel very tempted to put myself in the hands of the House in the same way tonight.
Amendment agreed to.
The Solicitor-General: I beg to move, in page 17, line 16, at the end, to insert:
(11) In this section "the Commissioners having jurisdiction in the matter", in relation to any sale of shares in a company, means the Commissioners having jurisdiction with respect to the making of assessments under Schedule D on the company or, if more than one body of Commissioners has such jurisdiction, such of those bodies as the Commissioners of Inland Revenue may direct; and the Commissioners having jurisdiction in the matter shall in any case have jurisdiction with respect to the making of an assessment on the seller in respect of any amount in respect of which he is chargeable under this section.
Clause 20 (2) as drafted depends for its operation on whether or not it is shown to the satisfaction of the Commissioners having jurisdiction in the matter that all the trading stock of the company in question will continue to be used as trading stock after the sale of the shares. In the context, the Commissioners having jurisdiction in the matter will be the Commissioners dealing with the tax affairs of the vendor of the shares. I think this was the point which the hon. and learned Gentleman is referring to earlier. There may, of course, be different vendors within the jurisdiction of different bodies of Commissioners, and it would obviously be highly inconvenient if different bodies of Commissioners formed a different view about the material question in subsection (2).
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In addition to that, it seems best to leave matters connected with the intentions of the company in question to be considered by the Income Tax Commissioners who normally deal with its position, rather than by any other body which is concerned with the tax affairs of vendors of its shares. Therefore, the Amendment provides that the Commissioners having jurisdiction in the matter shall be the Commissioners having jurisdiction with respect to making assessments under Schedule D on the company or, if more than one body, such of those as the Commissioners of Inland Revenue may direct. I am happy to think that this is an easier subsection to understand than the last.
Amendment agreed to.
Mr. Speaker: I understand that the Government do not desire to move the Amendment to page 17, line 30.

Clause 21.—(PROVISIONS AS TO CERTAIN BUILDING COMPANIES NOT CARRYING ON A TRADE.)
Mr. Graham Page: I beg to move, in page 17, line 30, at the end to insert:
Provided that this subsection shall not apply if—

(a) the shares in the company are sold by a person or persons to another company and the shares in each company are held (directly or indirectly) by the same person or by the same persons in the same proportion, or

(b) the shares are sold by one company to another company and the shares in each company are held (directly or indirectly) by the same person or by the same persons in the same proportion.

regard being had in each case to any differences in the nature of the shares or the rights attaching thereto.
Clause 21 as it stands is intended to tax the gains on the sale of shares in a building company to another similar type of company. I am putting it very briefly because I am sure that the House knows full well what is contained in that Clause. The intention of this Amendment is that where the parties are the same, the seller and purchaser, the Clause should not bite. I can, perhaps, give an example best in this way.
9.30 p.m.
There are a number of financiers who carry out the development of sites each by the means of a separate company,

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and then, quite genuinely, wish to place a holding company to take over those separate companies, genuinely as an investment company. The actual individual does not change. The financier holding 99 per cent. in each of the building development companies is going to hold 99 per cent. of the shares in the holding company, holding it as an investment. As Clause 21 stands, he would be caught.
There was on the Notice Paper, if I may refer to it although it has not been called, a Government Amendment which referred only to a company being a shareholder in the building company selling its shares to an investment company. Frankly, I could not understand why that Amendment restricted the share selling individual to a company.
Therefore, the Amendment which I move covers not only the company which holds shares in the building company and disposes of those shares to the investment company but includes the individual as well. Where the individual shareholder in the building company is to have the same proportion of shares in the investment company he would by this Amendment escape the Clause as it stands.
The Solicitor-General: I think that all I need to say is that this seems to the Government an acceptable Amendment for the reasons advanced by my hon. Friend the Member for Crosby (Mr. Graham Page). I think it is right to replace with this Amendment the Government Amendment which we did not move and which related purely to transactions between companies. I promised my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) to consider this point, and I conceded that the Clause as drawn goes too far in perfectly genuine amalgamations between companies where there is no possibility of tax evasion, and for that reason I would advise the House to accept this Amendment.
Mr. Millan: I should like to ask the Solicitor-General only one question. If this is a perfectly acceptable Amendment to Clause 21, I wonder if he will explain why it is not also a perfectly acceptable Amendment to Clause 20? I should have thought that the considerations under Clause 21 might have been
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roughly the same as the considerations to be taken into account under Clause 20. Why have we got this Amendment for one Clause and not the other?
Amendment agreed to.
Further Amendment made: In page 17, line 32, leave out "has".—[Mr. Diamond.]
Amendment proposed: In page 17, line 33, after "(a)", insert "has".—[Mr. Diamond.]
The Solicitor-General: I ought to have intervened on the last Amendment, and I will certainly intervene on this to thank the hon. Member for Gloucester (Mr. Diamond) for having put right the drafting of the Clause.
Mr. Mitchison: I congratulate my hon. Friend the Member for Gloucester (Mr. Diamond) on being the first hon. Member on this side of the House to secure any concession from the Government.
Amendment agreed to.
The Solicitor-General: I beg to move, in page 18, line 16, at the end to insert:
Provided that where all the shares in the company belong to another company, that other company may, by notice in writing given to the surveyor within one year after the commencement of the winding up, elect that if in the winding up the company acquires the interest or interests of the subsidiary company in the building or buildings, the foregoing provisions of this subsection shall not apply and shall be deemed not to have applied, but that if the acquiring company sells the interest or any of the interests, or grants an interest thereout, or sells an interest created thereout, that company shall be chargeable to income tax under Case VI of Schedule D on the amount which would have been its profit if the interest or interests it acquired had been trading stock acquired for the amount which under the foregoing provisions of this subsection (if they had had effect) would have been deductible in ascertaining the amount of profits or gains chargeable to tax referred to in those provisions; and if the company elects as aforesaid it shall be treated for the purpose of subsections (1) and (3) of this section as if its activities had included the erection of the building or buildings, whether or not it would otherwise have been so treated.
This is a corollary to the Amendment which we have made to this Clause, which lets out from the charge imposed by the Clause sales of shares in connection with company amalgamations involving no change of beneficial ownership. A redeployment of assets within a group of companies might well take the

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form of the liquidation of subsidiary companies and of the taking into its own ownership by the parents of the subsidiary's assets; and it seems to us that in those circumstances the Clause ought not to apply, on the condition that the parent company will itself become liable to any profit which it makes on a subsequent sale of the building.
Amendment agreed to.
The Solicitor-General: I beg to move, in page 18, line 16, at the end to insert:
(4) For the purposes of this section there shall be disregarded any building provided for use, and brought into use, for the purposes of a bona fide trade carried on by the company, other than a trade of dealing in securities or land or buildings, or of developing land, or of the provision of services for the occupier of land an interest in which is held by the company.
The Amendment provides that for the purpose of determining whether or not this Clause applies there shall be disregarded any building provided for use and brought into use for the purpose of a bona fide trade carried on by a company, with the exception of certain trades in relation to which we feel that the let-out would be inappropriate. This Amendment is in response to a point made in Committee by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), which we felt to be a valid point.
Amendment agreed to.

Clause 23.—(SUPPLEMENTARY PROVISIONS AS TO SS. 20 TO 22.)
Mr. Barber: I beg to move, in page 20, line 17, after "control" to insert:
"(not being sales effected before the sixth day of April, nineteen hundred and sixty)."
This Clause brings within the charge imposed by Clause 20 certain sales of shares taking place before the ultimate purchaser of the company obtains control. Since Clause 20 bites only on sales of shares taking place after 5th April. 1960, the same limitation should obviously run for sales brought within Clause 20 by this Clause. The Amendment provides accordingly that subsection (1) of the Clause shall not apply to sales effected before 6th April of this year.
Amendment agreed to.
Mr. Barber: I beg to move, in page 20, line 42, at the end to insert:
(5) Where a sale of shares is effected in pursuance of a previous agreement, the time of the sale shall be taken for the purposes of the three foregoing sections and of the foregoing provisions of this section to be the time of the making of the agreement.
Clause 20 applies to sales of shares in a company taking place after 5th April of this year. It has been represented to us that under the Clause as drafted there might be some doubt whether this provision applies to the actual date of the sale or to the date on which the contract of sale was made, if earlier. It is obviously as well that this should be resolved, and that is the purpose of the Amendment.
Amendment agreed to.

Clause 24.—(TRANSACTIONS BETWEEN ASSOCIATED DEALING COMPANIES AND OTHER COMPANIES.)
Sir E. Boyle: I beg to move, in page 21, line 2, after "sixty", to insert:
"and otherwise than in pursuance of an agreement made on or before that day."
We now come to Clause 24, and this first Amendment to it is one of the easier to understand of those with which the House has dealt today. As it emerged from the Committee stage, Clause 24 imposes a charge to tax in cases where a non-dealing company acquires assets from an associated dealing company, or disposes of an asset to an associated dealing company, after the 5th April. It is the Chancellor of the Exchequer's view that, without any prejudice to the principles of the Clause, we should take out of it transactions made in pursuance of an agreement made on or before 5th April, so as to make it plain that the Clause does not have any retrospective effect. That is the sole purpose of the Amendment.
Mr. Diamond Mr. Diamond rose—
Mr. Speaker: The Question is;—
Mr. Mitchison: On a point of order. Mr. Speaker. My hon. Friend the Member for Gloucester (Mr. Diamond) was on his feet when you started to put the Question.
Mr. Speaker: I beg the hon. Gentleman's pardon. I did not see him. I have not completed putting the Question. Mr. Diamond.
Mr. Diamond: I thought that you were looking at me, Mr. Speaker, but the reflection of the light in your glasses misled me. I apologise for inconveniencing you.
I want to raise a point concerning the date of agreement. What constitutes the date of the agreement or the evidence of the agreement? An agreement is not necessarily in writing. A verbal agreement may be adduced. If it is verbally adduced—and we are dealing here with parties who, to be precise, conspire together to defeat the Inland Revenue, to manipulate their affairs to their advantage and to its disadvantage—they will not be too finnicky about saying that, within their recollection, the agreement, 'though put into effect after the Bill became an Act, was reached during a lunch at the Savoy over the third brandy before the date specified here, and, therefore, would not be covered by it. Is it sufficient that we should leave this in these rather wide words?
Sir E. Boyle: I am assured that there is a great deal of precedent for this. On the question of what constitutes an agreement, and of the date when it was reached, I am assured that that must be a point of fact to be determined by the courts, and that the wording of this Clause makes it perfectly clear what the Government and the House have in mind. The date of an agreement must be a matter for the courts to decide on the evidence in each case.
Amendment agreed to.
Sir E. Boyle: I beg to move, in page 21, line 5, after "company" to insert:
"and not being securities which are shown to have been acquired in pursuance of an offer for sale to the public made by that company and in the allotment of which no preference was given to associated companies".
Mr. Speaker: It would be for the convenience of the House to consider, at the same time, the following Amendment in the name of the hon. Member for Wolverhampton, South-West (Mr. Powell) and other hon. Gentlemen, in line 8 at the end to insert:
"such asset not being securities so disposed of with a view to being offered for sale to the public by the dealing company"
Sir E. Boyle: That would be convenient, Mr. Speaker.
The Amendment which I am moving arises directly out of a point raised by
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my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) during the Committee stage. The purpose is to take out of Clause 24 securities acquired by a non-dealing company from an associated dealing company in connection with a public offer for sale made by the associated dealing company. The point which he raised is within the recollection of the House. He raised it when moving an Amendment designed to have the effect of this one we are considering.
As I recall it, the argument he used was that it was anomalous that an investment company which acquired shares in a genuine public issue by an associated issuing house should be caught by the Clause if it realised the shares subsequently at a profit, whereas if the issue had been handled by an independent issuing house the investment company could take up the shares and remain outside the Clause. I undertook to look into the matter.
We are also considering an Amendment by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and some other hon. Members. That raises a separate point which my hon. Friend the Member for Walsall, South also raised on the same occasion. At that time, he moved an Amendment which would take out of the charge imposed by subsection (1, b) an investment company or other non-dealing company which sold securities to an associated dealing company to be offered for sale to the public. I think that the House will remember that in Committee I made rather less sympathetic noises in reply to my hon. Friend on that issue than on the earlier issue.
We have considered the matter since the Committee stage, and it is my right hon. Friend's view that we cannot make a concession in the second type of case without rather gravely weakening the purpose of the Clause, because it is probable that the investment company in that case has been nursing the shares until a favourable opportunity has arisen for disposing of them, so that the profit is substantially in the nature of a dealing profit.
Whereas my right hon. Friend has put down an Amendment to meet the first of the points which my hon. Friend the Member for Walsall, South raised in Committee, he does not feel that he can

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meet a second without, perhaps to a damaging extent, weakening the purpose of the Clause.
9.45 p.m.
Mr. Mitchison: I confess that I am not altogether happy about the Amendment. I see the force of the arguments which the Financial Secretary put and, in view of the case he had in mind, a tolerably simple case, there is justice in the argument. However, this is a transaction between an associated company and an issuing company and it is let out if there is an offer for sale to the public and no preference given to the associated company.
That might open the door to some trouble and it is the sort of case, I should have thought, where some other sort of arrangement should have been made, because the terms of the Amendment are rather wide. I shall not, however, oppose it at this hour of the night. This is another instance of the sort of case in which, if the Amendment had been brought forward at an earlier stage, it would have been useful to have had a discussion, because that might have led to some result. This is like an Order brought up on a Prayer—we have either to accept or refuse it, and that is the difficulty with Amendments at this stage.
Sir Henry d'Avigdor-Goldsmid: I begin by expressing the thanks of my hon. Friends and myself to the Financial Secretary for meeting the first point which we raised on this subject in Committee. If I do not go into the arguments of the hon. and learned Member for Kettering (Mr. Mitchison), it is not because I am afraid to meet them, but simply for the convenience of the House. I confine myself to a few remarks about the second Amendment which you, Mr. Speaker, have kindly allowed us to discuss at the same time.
Clause 24 is aimed against the shunting of shares from an investment company to a dealing company and vice versa, the idea behind that being that shares likely to appreciate will be moved by an unscrupulous manipulator from the dealing company to the investment company, which would not be liable for taxation on capital profit, while shares liable to depreciate would be moved from the investment company to the dealing company when, if the shares
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were sold at a loss, the dealing company would be able to write off that loss against its other earnings. The Government took the view that these transactions do not stand up to the light of day, by which I mean the light of a public issue. That point was fully taken, and I do not want to say any more about it.
On the second point, in Committee my hon. Friend the Financial Secretary said:
"If the issue were made through a dealing company not associated with the group, the investment company would realise its profits tax free, and it is particularly anomalous to impose a charge to tax where the issue was made through the associated dealing company since the family company has only acted in the most natural way possible by going to the associated dealing company to arrange the public flotation."
My hon. Friend was putting up the case for the Clause. He then answered his own words by saying:
"Once the general proposition is accepted that an investment company should be liable on profits it makes out of selling assets to the associated dealing company, it seems rather difficult to see whether there is sufficient ground for exempting this type of transaction …".—[OFFICIAL REPORT, 24th May, 1960; Vol. 624, c. 379.]
That is the point upon which I join issue with my hon. Friend. I do not accept—and I do not believe the House accepts—the proposition that a company of any sort should be made liable to taxation on its capital profits without at the same time being allowed to offset those capital profits by capital losses. In those remarks my hon. Friend is asking us to accept the proposition that an investment company which by its very nature is not allowed to offset capital losses should nevertheless be charged on a capital profit.
This proposition savours of the rather imaginary world in which we have been living in our discussion of the Bill during the last two or three months—a world where all transactions are profitable, and the only question people have to consider is how best to dispose of those profits. Those who have experience of business know that that is not the case, and that losses occur just as well. With the best intentions, and acting on the best information, many companies of the kind to which my hon. Friend the Financial Secretary referred as being nursed are not able to produce a healthy child.

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Sometimes the child becomes particularly sickly and comes to an untimely end. This is a common experience, which I do not need to repeat a hundred times. That is my objection to the general proposition enunciated by my hon. Friend.
Some of the anomalies which will arise if we accept the philosophy which causes the Government to reject the second part of the Amendment are worth detailing. I know of a group of companies which includes an important industrial company, privately held, and also a dealing company, or an issuing house. Under the Bill it will not be possible for the issuing house to take any part in the eventual public flotation of this important private industrial company, because the shareholders in the investment trust which controls the industrial company will be caught for Income Tax on the capital profit resulting when those shares are sold to the public if the business is done through the issuing house. If the transaction is carried out through another issuing house, however, no mischief is done.
Another example which has also been mentioned to me is that of an investment company which has taken an interest in shares in a foreign bank. Owing to developments in the Common Market and similar matters this foreign bank says that it would like to have a quotation for its shares on the London Stock Exchange. It suggests to the investment company, which already holds some of the shares, that it will arrange a placing through the issuing house and that some of the shares from the investment company will be put in with other shares coming in to be placed.
Again this is caught and the important issuing house will have to say to its friends on the Continent, "We cannot do this business. You must go to our friends next door to do this business and then it will be free of British tax. But we should be caught for Income Tax on the capital profit which we have made in holding these shares, which we had not nursed in any way but which we have held and they have gained in strength."
It may be argued that in these circumstances nothing is easier than for important issuing houses to come to a reciprocal agreemen and arrange to
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take in each other's washing. In other words, the issues which they cannot handle because of the restrictions in this Clause would be passed on then to their neighbours and vice versa. Obviously, that would be a simple arrangement to make, but it is repugnant to the sense of this House that we should put important people, doing first-class business on first-class and accepted lines, in the position of having to enter into a subterfuge of that sort.
A further point which arises, and which I wish to emphasise, is that, as hon. Members know, it very often happens that no single issuing house is responsible for one issue. There may be an important issue of shares in which a group of issuing houses combine. I need only go back to the various steel flotations in which I think nearly all the important issuing houses in London took part. I am not saying that the same situation arose in relation to Richard Thomas and Baldwins; those shares are not held in investment trusts. But I am saying that where there is a general issue in which more than one issuing house is involved we are piling up quite unnecessary legal difficulties which will have to be sorted out at great expense to all concerned in the courts and with the aid of private advisers.
I urge my hon. Friend, for those reasons, to give this matter a little more thought during the coming year to see whether the effect of publicity which attends on a public issue, and which he has admitted has a purifying effect on transactions whereby investment companies acquire shares, would not also be useful on the reverse side when an investment company sells shares.
Mr. Powell: I am sure that my hon. Friend the Financial Secretary recognises that here there is a real difficulty which has been exposed by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid). The Government have decided and are recommending the House to accept that there is no reason why an investment company should not bona fide take up shares issued to the public by its dealing parent. The converse of that proposition is that there is no reason why a company in which shares are held by an investment company should not have its shares placed

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or issued to the public by the dealing company, which is the parent of that investment company. The one proposition is the converse of the other.
In both cases, as was pointed out by my hon. Friend, there is the safeguarding publicity of the fact that there is an offer to the public, and, therefore, the true value can be ascertained. I venture to join with my hon. Friend in urging on the Government the consideration of both parts of this proposition.
Amendment agreed to.
10.0 p.m.
Sir E. Boyle: I beg to move, in page 21, line 14, at the end to insert:
Provided that where, in the case of any such acquisition of assets by a company as is mentioned in paragraph (a) of this subsection or any such disposal of assets by a company as is mentioned in paragraph (b) thereof, the assets fall by virtue of a direction under section four hundred and sixty-nine of the Act of 1952 (sales etc. between associated persons) to be treated in computing the profits of the other associated company for income tax purposes as having been sold for a price other than that actually paid, the foregoing provisions of this subsection shall have effect as if the assets had been acquired or, as the case may be, disposed of for that other price instead of for the price actually paid for them.
This Amendment simply ensures that the interaction of Clause 24 of this Bill and Section 469—the "arm's length" Section—of the 1952 Income Tax Act cannot result in a double charge. My hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) referred to this possibility during the debate in Committee, and I pointed out then that he acted very properly in raising this point.
The Amendment provides that in any case within subsection (1) of this Clause where Section 469 of the 1952 Act has already been applied, the subsection shall have effect as if the assets had been transferred at the price at which they are treated as having been transferred under Section 469. That is the kind of technical but highly important point from the point of view of doing our duty to the taxpayer which is bound to come up, and I think that the whole House will be very grateful to my hon. Friend, who was absolutely right in raising this point, which needed correcting.
Mr. Powell: I am much obliged to my hon. Friend for what he has just said and for making this Amendment to the Clause, which will rule out the possibility of an unfair double charge. It is now quite clear that my hon. Friend the Financial Secretary has a very delicately graduated scale of approbation. Last night we came to a point of mine which he described as a fair point, but which he decided on Report not to meet. The next point was one raised by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) which had been described as a very fair point and it was met by an Amendment moved in by the Committee last night. Now we have a point which reaches the high order of merit of being described by my hon. Friend as absolutely right and which is about to be added.
Mr. Millan: The Amendment mentions in line 3 "paragraph (b)" in regard to disposals. I wonder if it is not possible that there could be a disposal here which would come under paragraph (a) and should also be covered by this Amendment. I wonder whether paragraph (a), dealing with a non-dealing company could cover the disposal of the assets to another associated company that is a non-dealing company acquiring assets from an associated company and subsequently disposing of them to another associated company. So far as I can see, that transaction would be covered by (a). If so, this Amendment, in addition to referring to (b) in line 3, should mention (a) to make it absolutely right.
Sir E. Boyle: I can assure the hon. Member that that difficulty could not arise. The point is that Section 469 deals with transfers of assets between associated companies, and it empowers the Commissioners of Inland Revenue to direct that assets should be treated as having been transferred at market value in computing the taxation liability both of the seller, where the asset is sold at a price below open market value, and also of the buyer when it is sold at a price above open market value. Therefore, it could be applied in both types of case under Section 469.
I could give a fairly lengthy account of exactly how the Amendment will operate. I shall certainly take note of the point made by the hon. Member, but

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I can assure him that it will, in fact work all right.
Amendment agreed to.
Sir John Barlow: I beg to move, in page 22, line 5, after "right", to insert:
"(other than a right arising out of the mere ownership of shares)".
It appears that subsection (4) is much wider than it seems at first sight. It appears to apply to, among other things, the depreciation in the value of shares held by a dealing company in an associated non-dealing company.
An investment dealing company is allowed to deduct from its taxable income depreciation of any shares held, to the extent that the market value of those shares falls below their cost. Shares held by a dealing company are trading stock, and their depreciation is allowed on grounds applicable to all similar trades that stock is valued for tax purposes at the lower of cost or market value.
It is, therefore, quite equitable that any depreciation suffered on shares held in an associated non-dealing company should be regarded as taxable income of the latter company, particularly as the circumstances would be beyond the control of either company and would not in any way benefit the non-dealing company. [HON. MEMBERS: "Reading."] I am trying to be as brief as possible. I know that time is very short. I admit that for that reason I have rather full notes on this very technical matter.
The tax charge would operate to the detriment not only of the dealing company but also of the minority shareholders in the non-dealing company. As the subsection stands at present, it seems to cover a far wider area than I think the Government desire. We all wish to control matters of this kind with in reason, but I think the Government are probably going very much wider than they supposed at first sight.
Sir E. Boyle: As my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) says, this is quite a technical matter. On the other hand, I must tell the House that this subsection is integral to the Clause and an important subsection within the Clause. An
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example of the type of manipulation against which this part of the proviso to subsection (4) is aimed—this is an important case—is where a dealing company has paid its associated company for an option which has become worthless because it has expired.
As I understand the Amendment, my hon. Friend wants to say that the subsection shall apply only to a right other than a right arising out of the mere ownership of shares. I am told that in the ordinary way, if shares taken by or acquired by a dealing company in an associate dropped in value because the associate company was unsuccessful, the dealer would get a deduction for the fallen value of the shares. But that would not be a depreciation in the value of any rights subsisting against the associated company, but in respect of a depreciation in the value of the dealing company's property.
I listened to my hon. Friend's case as carefully as I could. I think that he and some others are, possibly, concerned with the chance that shares might be taken up conferring certain rights on the winding-up of an associated trading company, and that the associated company might be unsuccessful and have very little left when it went into liquidation, so that the rights conferred by the shares were of little or no value. Again, as drafted, the Clause would not have any application. The situation would not be that the company got a deduction in respect of the depreciation in value of its rights, but that, having been allowed as a trading expense in the first instance whatever it paid for the shares, it would have brought in as a trading receipt at the end of the day the lesser sum which it had in fact realised.
We have looked at the point carefully, but I do not believe that the Amendment really would be necessary In relation to any possible genuine case where no question of tax avoidance was involved. On the other hand, I must say that the Amendment could have an effect—I am sure that it is an effect which my hon. Friend never intended—in relation to a real avoidance device or intention.
For instance, a dealer might acquire preference shares in an associated company carrying the right, which would be a right arising out of the mere ownership of shares, to substantial arrears of

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preference dividend. If the associated company had the funds to meet those arrears, the price of the shares would be substantially enhanced by the right to draw them. If arrangements were then made to waive the arrears of preference dividend, notwithstanding that the associated company still had funds available, the value of the shares would drop and the dealer would then get a deduction. Any case of this kind ought then to remain caught by the subsection.
On the other hand, if when the shares were acquired the associated company had no funds to meet the arrears of dividend and it was for that reason that they were waived, the value of the shares would remain unaffected, so there would not be any question of the dealing company becoming entitled to a deduction and the Clause would not apply.
Having looked into this, I do not believe that my hon. Friend's Amendment would make any difference in any genuine case not affected by the Clause, but I think that there would be dangers if we accepted the Amendment of certain avoidance tricks not being caught by the Clause. It is just for that reason that I cannot advise the House to accept the Amendment.
Sir J. Barlow: I am very much obliged to my right hon. Friend for his very full explanation. In view of his clarification of the point, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Sir E. Boyle: I beg to move, in page 22, line 12, to leave out from "received" to "income" in line 13 and to insert:
"on the last day of the period"
It may be convenient to the House also to take the Amendment in page 22, line 15, at the end to insert:
Provided that—

(a) where the company not being a dealing company is carrying on a trade, the said income shall, if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose, and, if the company is an Overseas Trade Corporation, to have been trading income;

(b) where the said company is carrying on, or was formed to carry on, a trade, then if the said right subsisting against the company was a right to the repayment of moneys lent for meeting expenditure which
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has proved (in whole or in part) abortive, or the payment to the company was made for meeting such expenditure, and the expenditure is such that the company is not entitled in respect thereof to any allowance or deduction in computing losses or gains, this subsection shall not apply in so far the expenditure proved abortive.

I will, first, say a few words about the subsection and its relation to the two Amendments. Under Clause 24 (4), as we now have it, a non-dealing company, either an investment company or an ordinary trading or manufacturing company, which receives a payment from a —
Mr. Millan: On a point of order. As far as I can see, the Amendments in lines 12 and 15 are not related in any way. One deals with the assessment period and the other deals with an entirely different matter. Is it in order for us to take them together, Mr. Deputy-Speaker?
Mr. Deputy-Speaker (Sir Gordon Touche): It is a matter entirely for the convenience of the House.
Sir E. Boyle: The point is that the Amendment in page 22, line 12, is, as I shall hope to show the House, really a paving Amendment for the Amendment in line 15. That often happens in our proceedings. It will be easiest if I try to explain the Amendment in line 15 to the House and then show how the Amendment in line 12 is intended as a paving Amendment to the Amendment in line 15. It will no doubt be perfectly in order for the hon. Member for Glasgow, Craigton (Mr. Millan) afterwards to raise a question on either Amendment if he wishes to do so.
Under subsection (4), as it has now emerged from Committee, a non-dealing company which receives a payment, not otherwise taxable in its hands, from an associated dealing company which is entitled to deduct that payment in computing its profits is liable to tax on the amount of that payment under case VI of Schedule D.
The Amendment in line 15 provides that, if the non-dealing company is carrying on a trade, that company may choose, instead of being charged under case VI, to have the payment brought in as a trading receipt. Secondly, the Amendment takes out of the Clause loans to a company carrying on, or formed to carry on, a trade, to the extent that the loans have been used to meet abortive

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expenditure for which the trading company is not entitled to any Income Tax relief.
This Amendment arises out of a matter raised in Committee by my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow). My hon. Friend referred in Committee—I took a note of his point—to the effect of the Clause on the operating subsidiaries of a mining finance house. The same point has been raised with us by the British Overseas Mining Association.
As I understand the problem, it arises in this way. For example, a mining finance house which is taxed as a dealing company may make a loan to an operating subsidiary company. Then the operating subsidiary company spends the money but fails to make a success of the undertaking, and the money is lost and written off by the mining finance house.
The Clause as drafted imposes the liability under case VI of Schedule D on the subsidiary company, which may very well in these circumstances have no money at all to pay the tax. The complaint that in any such case the Clause goes too far has been a valid one just to this extent he amount loaned has effectively been lost to the group; and secondly, the recipient company gets no set-off by way of loss relief or capital allowance in respect of the expenditure. To these two extents it seems to us that this was a reasonable complaint.
10.15 p.m.
To a great extent the expenditure by the operating company will attract relief of taxation. It will either enter into the computation of a loss which, under Section 341 of the 1952 Act, may be set against other income of the year in which the loss is incurred or be carried forward to be set against future trading profits. If the expenditure were on revenue account it would come into the computation of losses in the ordinary way. If it were on capital assets which rank for capital allowances, unrelieved capital allowances can be brought into the computation of a loss relievable against other income under Section 341. But the operating company may fail to qualify for relief on the full amount of the expenditure under the Clause as at present drafted for two reasons.
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First, because the loan may have been expended on a capital account on assets not ranking for capital allowances, as for example in the acquisition of mineral rights in the United Kingdom; and secondly, if there are no trading profits, losses and capital allowances of previous years cannot be set against the case VI charge.
A similar consideration could conceivably arise outside mining, although it is the mining case that we had principally in mind. That is the reason for this Amendment whereby, as I have said, if a non-dealing company is carrying on trade the company can elect instead of being charged under Case VI, to have the payment brought in as a trading receipt. The reason why this Amendment is drafted in general terms is that it could conceivably arise outside mining and we thought that it should be drafted to apply to all companies carrying on or formed in order to carry on a trade. So much for the second of the two Amendments—page 22, line 15.
The first Amendment, page 22, line 12, is really a paving Amendment. Subsection (4) applies where the dealing company becomes entitled to a deduction, in respect of a payment to a non-dealing associate, in computing its profits for any period ending after 5th April, 1960.
Under the subsection as at present drafted, the non-dealing associate is treated as receiving an equivalent payment of income for the year of assessment in which that period ends. But if a trading company elects to have the payment treated as a trading receipt, this needs to be made the receipt not of a year of assessment but of an accounting period for which the company's profits will fall to be computed.
The point of the Amendment, therefore, is to provide a precise date on which a taxable payment is to be treated as arising to the recipient company and, as the House will no doubt have gathered from the Amendment, that date is the last day of the period for which the dealing company gets a deduction. So, although the first Amendment apparently deals with a different point from that dealt with by the second Amendment, it is simply a paving Amendment to the second Amendment, which is the important one. It simply arises out of

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the need that if a trading company elects one way, that is to say, to have this treated as a trading receipt, it has to be made a receipt of the accounting period for which the company's profits are to be computed.
I am sorry that this is a slightly complicated series of Amendments, but it arises out of a perfectly genuine point that has been raised, and I think that my right hon. Friend has been right to give the Amendment a slightly greater degree of generality so that it goes rather beyond the mining case.
Mr. Millan: I am not very clear about paragraph (b) of the Amendment to line 15. The Financial Secretary has explained it with particular reference to the acquisition of mining rights. He has said that if we take a mining finance company with an associated operating company and the associated operating company spends money on the acquisition of mineral rights, that would be money in respect of which it would not be entitled to any reduction or allowance or deduction in computing losses or gains. Am I to understand, if that is so, that when the money has been expended directly, in this case by the mining finance company, the same position would obtain?
If, in fact, the finance company could not deduct this expenditure in computing its profits or losses, there seems to be no reason why it should be able to do so through the intermediary of the operating company. As I understand him, the hon. Gentleman has said that if the mining finance company does not spend the money on the acquisition of mineral rights directly, but through the operating company, the paragraph will expressly permit that money to be allowed as a deduction in computing losses or gains. I think that we need a little further explanation of that.
Sir J. Barlow: Perhaps I may take this opportunity to thank my hon. Friend for meeting me as far as he has done
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here. This is an extremely complicated matter, and I am very grateful to him for what he has done.
Mr. Mitchison: May I ask if my hon. Friend the Member for Glasgow, Craig-ton (Mr. Millan) can have an answer to the very pertinent question he asked?
Sir E. Boyle: First, in anticipation of his Amendment, I should like to thank my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) for having spotted a misprint. By leave of the House, I shall try to explain to the hon. Member for Glasgow, Craigton (Mr. Millan) the purpose of paragraph (b) of the Amendment to line 15. The point about that paragraph is that it provides for the case where the loan was spent on abortive expenditure which is not brought into the computation of loss and does not rank for capital allowance—that is, in the words of the paragraph, on expenditure in respect of which the company —and I am quoting here, because I cannot do better, from the words of the paragraph:
"is not entitled … to any allowance or deduction in computing losses or gains …"
As I understand it, in regard to the extent to which any such expenditure proved abortive, the loan used to meet that expenditure shall not have been brought within the charge imposed by the Clause. Paragraph (b) covers both the case where the operating company is carrying on a trade and the case where it was formed to carry on a trade but, because the project was abortive and never proved successful, it never actually started.
Mr. Millan: My point is this. If the company making the loan had spent the money itself directly, and not through the operating company, would that money have been deducted in computing profits and losses?
Sir E. Boyle: The short point on that is that the mining finance house gets a deduction for expenditure on the United Kingdom mineral rights.
Amendment agreed to.
Amendment proposed, in page 22, line 15, at end insert:

Provided that—

(a) where the company not being a dealing company is carrying on a trade, the said income shall if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose, and, if the company is an Overseas Trade Corporation, to have been trading income;

(b) where the said company is carrying on, or was formed to carry on a trade then if the said right subsisting against the company was a right to the repayment of moneys lent for meeting expenditure which has proved (in whole or in part) abortive, or the payment to the company was made for meeting such expenditure and the expenditure is such that the company is not entitled in respect thereof to any allowance or deduction in computing losses or gains this subsection shall not apply in so far the expenditure proved abortive.—[Sir E. Boyle.]

Question proposed, That those words be there inserted in the Bill.
Amendment to the proposed Amendment made: In line 14, after "far", insert "as".—[Sir J. Barlow.]
Proposed words, as amended, there inserted in the Bill.
Sir E. Boyle: I beg to move, in page 22 line 23 at the end to insert
(6) Any loss which a company, not being a dealing company, sustains in any transaction falling within subsection (1) of this section by virtue of paragraph (a) thereof shall be treated as being a loss to which section three hundred and forty-six of the Act of 1952 (relief in respect of losses in transactions the profits of which would be chargeable under Case VI of Schedule D) applies, so however that relief under that section for any loss to which that section applies by virtue of this subsection shall be given only to the extent that that loss can be deducted from or set off against profits arising from other transactions falling within subsection (1) of this section by virtue of paragraph (a) thereof.
The simple effect of this Amendment is that where a company sustains any loss as a result of a transaction in assets acquired from an associated dealing company, and, had a profit resulted, it would have been taxable by virtue of the provisions of subsection (1) (a) of Clause 24, the loss may be set against profits arising from other transactions falling within subsection (1) (a).
This is really a point that arose during the Committee stage, and I think that the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) will no doubt have noticed that all except one of the Amendments to Clause 24 arose out of points raised in Committee. It was raised by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) and by my hon. and learned Friend the Member for Warwick and Leamington (Mr. Hobson). Both hon.
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Members raised the point that it was wrong that the Clause should impose a charge on profits without giving any relief for corresponding losses, and I said during the Committee stage that I would consider the point. The Clause not only taxes profits made by a non-dealing company out of a transaction in an asset which it acquired from an associated dealing company, but it also charges the profit made by a non-dealing company on disposing of an asset to an associated dealing company.
The view that my right hon. Friend has taken is that the relief should be confined to the case where the non-dealing company buys an asset from an associated dealing company and subsequently disposes of it outside the group. In such a case the loss arises after the transaction between the associated companies has taken place.
The reason that we have not gone further on this Amendment and have not gone so far as to give relief for losses incurred by a non-dealing company on disposal of an asset to an associated dealing, company, is that in that case the non-dealing company can surely choose whether it sells to its associated dealing company or through the open market. To have given relief in the case of this kind of transaction would have been an open invitation to a non-dealing company, which had a dealing associate, to dispose of any assets whose value had already fallen, so that a loss on sale was certain, through its associated dealing company so as to get a tax relief to set off against profits.
This is one of those cases where the Government have had a fairly wide course suggested to them, where we have been right to make an Amendment to the Bill to provide in the one case that

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the loss may be set against profits but not to go quite as far as the Amendment which was urged in Committee.
Mr. Mitchison: While I trust that in the course of these Amendments the Government have not issued too many, sealed invitations to persons to take advantage of them, the argument that the hon. Gentleman puts forward seems to me much more reasonable than the suggestion that in any circumstances 129 Amendments to a Finance Bill on the Report stage can be justifiable on the part of any Chancellor of the Exchequer.
Mr. Millan: This Amendment is obviously fair in so far as we are dealing with the ultimate disposition of the assets of a company to someone else outside the group. That is obviously its intention.
May I raise this point once again? Are we absolutely clear that paragraph (a) does not include a subsequent disposal of assets to another associated company? It does not say
… subsequently disposes of these assets to a non-associated company or to a person not being an associated company."
Are we sure that paragraph (a) could not include a subsequent disposal of the assets
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to another associated company? If it did, this Amendment would obviously leave a loophole. I do not expect an answer to this question tonight. In any case, it is probably too late now to do anything about it. I raised a similar point at an earlier stage and I did not really get an answer, but I hope there is not a loophole here.
Sir E. Boyle: By the leave of the House, I will answer the hon. Member who has raised this point on a number of occasions on this Clause. It is my belief that the Clause as now drafted will be efficient. In response to suggestions, I think that we have made one or two very reasonable Amendments to the Clause and have given concessions, but I do not think that the main effect of the Clause will be jeopardised thereby.
Incidentally. I do not think the Clause has had as much discussion as some Clauses have had. It is an important Clause from the point of view of tax avoidance, because in closing a loophole there was a real danger that we might have done injustice in some cases. It is my real hope that as a result of the representations which have been made we have got the Clause about right.
Amendment agreed to.

Clause 27.—(CANCELLATION OF TAX ADVANTAGES FROM CERTAIN TRANSAC- TIONS IN SECURITIES.)
10.30 p.m.
Mr. Powell: I beg to move, in page 24, line 23, after "transactions" to insert:
"irrespective of the form thereof".
This Amendment raises a point of real importance, and I hope that my right hon. and learned Friend the Attorney-General, even if he feels unable to accept it, will give a very clear assurance on the effect of the subsection as it stands.
The House will recall that, where a taxpayer finds himself within the circumstances set out in subsection (2) as a result of a transaction in securities, then the tax consequences, namely, the annulment of the tax advantage which the remainder of the Clause brings about, fall upon him unless he can show certain things set out in subsection (1), that is to say,
"that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments "—
that is the first, and the second is
"that none of them had as their main object"—
incidentally, that is faulty English because "none" is singular and the word should be "its"—
"or one of their main objects, to enable tax advantages to be obtained".
I believe it to be common ground on both sides that the citizen is entitled, in going about his legitimate affairs and in carrying out legitimate transactions, to do them in such a way as to minimise his tax liabilities. He is entitled to have regard, in the way he goes about his legitimate business, to the tax consequences of what he does. What he is not entitled to do, and what this Clause among others is intended to prevent him from doing is to make a business of tax avoidance. There is a very clear distinction between the two operations.
It seems to me that there is a real danger, as the subsection is drawn, that consideration might be directed not to the matter of the transaction, so that the taxpayer would have to show that the underlying purpose of the transaction was not mainly tax avoidance, but to
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the form of the transaction, with the result that, although his object was a perfectly legitimate one and the transaction had a perfectly correct business motive, nevertheless the fact that he had chosen to do it in one way rather than in another simply because that one way gave a greater tax advantage, might lead to his being caught, since it would be the main object of his choosing the one method rather than the other of the legitimate transaction that he thereby secured a tax advantage.
I cannot believe that this is the purpose of the subsection or of the Clause. I feel sure that the object the whole House has in mind is to ensure that we protect cases where the taxpayer has been going about legitimate business for which there is a good and sound reason even though he has prudently and properly carried it out in the most advantageous, or least disadvantageous, way. As I say, I hope that my right hon. and learned Friend will either accept these words to make that clear or will give the House an assurance that the result which I apprehend will not flow from the words of the subsection as they stand.
The Attorney-General: I think that I can give my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) the assurance that he wants, and I should like to give it in the clearest possible form. I cannot advise the House to accept the Amendment, first because I think that it is unnecessary, and secondly because it might have consequences which none of us desires. In the first place, I remind the House that as a result of efforts in Committee and on Report, subsection (2) has been redrafted—or will be redrafted by later Amendments—so as to cover only such transactions and their consequences as are prima facie likely to lead to tax advantages of the kind at which the Clause strikes.
If there should be a case of a genuine commercial transaction, in which some of the circumstances specified in subsection (2) are present but the tax advantage could be shown to be merely incidental, the taxpayer would be able to make his case out by reference to the substance of the transaction, whether or

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not the Amendment were accepted. Even if it were disposed to put forward the contention that someone was brought within the scope of the Clause because if he had adopted another form of carrying out his business transaction he would have been liable to pay more tax, and even if there were evidence of that, I cannot believe that the Revenue would succeed either before the Special Commissioners or before the Tribunal.
Of course it is right to say that the form in which a transaction is carried out may be some evidence of the object of the transaction, but if I correctly understand the Amendment, my hon. Friend is concerned whether the Revenue will be able to make the Clause operate and to bring persons within its scope merely by saying that if they had carried out their transaction in another way, they would have been liable to pay more tax. There again, it comes right down to the substance of the matter.
If the transaction comes within subsection (2), then whether the person concerned can bring himself within the let-out provision depends upon the substance and not upon the form of the transaction. Where the substance is purely a genuine commercial object and where, if there is any tax advantage, it is incidental, then obviously the taxpayer will not find it difficult to discharge the onus of satisfying the Revenue or the Commissioners or the Tribunal that this transaction or series of transactions had not as one of its main objects the securing of a tax advantage.
My hon. Friend has clearly summarised the purpose of the Clause. It is intended to apply to those who make a business of tax avoidance. If we were to accept the Amendment it might lead to difficulties in bringing a charge under the Clause home in a case in which it ought to be applied—that is to say, a case in which transactions were carried out in a form conferring a tax advantage precisely because the obtaining of a tax advantage was one of the main objects. An argument might even be raised to try to secure the exclusion of cases which undoubtedly ought to be vulnerable under the Clause.
Let us take the type of case which has come to be known as stock stripping. It might be said that the transaction was
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carried out to realise the stock to the best advantage of the shareholders, which is a bona fide commercial purpose, and that the form adopted to this end must be disregarded.
It is for those reasons that I cannot advise the House to accept the Amendment, although I hope that I have made it clear that it certainly is not the view of the Revenue that in considering the scope of the Clause attention has to be paid to the various forms in which the transaction may be carried out. It is my view, and I can say that it is the view of the Revenue, that attention must be paid to the substance of the matter and, in relation to that, while the form may be some evidence of the substance of the matter, it is not a governing consideration to regard one way in which the transaction might have been carried out as against another possible way.
Mr. Mitchison: With all due and no undue respect, I agree with every word that has fallen from the lips of the right hon. and learned Gentleman—for once. I would only ask one other thing. A slight point was mentioned by the hon. Member for Wolverhampton, South-West (Mr. Powell). The grammar of this Clause is unnecessarily bad. May I now, or at the appropriate moment, ask leave to insert two manuscript Amendments to substitute the word "its" for the word "their"?
Mr. Powell: I have listened very carefully to the reply of my right hon. and learned Friend, and it appears to me that he gave a most explicit declaration on the point of anxiety which my Amendment was designed to meet, stating quite clearly that it was to the substance of the transaction that the main objects, or one of them, would require to relate. That being so, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Mitchison: May I ask leave to introduce the following two manuscript Amendments—in page 24, line 26, to leave out the first "their" and to insert "its" and in the same line to leave out the second "their" and to insert "it"?
Mr. Deputy-Speaker (Sir Gordon Touche): I would not be prepared to accept a manuscript Amendment unless it was generally agreed.
The Attorney-General: I would like to consider that. Views on grammar may differ. I do not think that the subsection would read very happily if we were to say
"… none of them had as its main object, or one of its main objects …"
The Attorney-General: I beg to move, in page 24, line 30, to leave out from "if" to the end of line 31 and to insert:
"(i) the transaction or transactions in securities were carried out, and
(ii) any change in the nature of any activities carried on by a person, being a change necessary in order that the tax advantage should be obtainable, was effected".
This Amendment is designed to meet a point raised by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) who raised the question whether the provisions in the Bill, which were designed to avoid retrospective operations, were, in fact, entirely satisfactory. As I said to my hon. Friend, we were not entirely satisfied with the wording of the proviso and we could not accept his Amendment because we were also not entirely satisfied with the wording of that. I hope that this Amendment, which deprives the operation of this Clause of any retrospective effect will be satisfactory to my hon. Friend and to the House.
Amendment agreed to.
The Attorney-General: I beg to move, in page 25, line 16, to leave out from the beginning to "a" in line 17.
It might be to the convenience of the House to consider with this Amendment the Amendments in lines 19, 23 and 25 and the second Amendment in line 31. They are really related Amendments. I cannot describe the first three Amendments as consequential because they are, in fact, drafting Amendments to pave the way for the last two.
All these Amendments are to subsection (2, c). The House will recollect that the Clause as originally drafted came in for considerable criticism. Some of it, I must confess, appeared to be based on a misapprehension of the content of the Clause. In Committee we moved a revised version of the subsection and in the course of our discussions I said that my right hon. Friend the Chancellor and I would carefully consider any suggestions that might be made and, where possible, improve the subsection still
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further on Report. Since the Committee stage my right hon. Friend and I have, with our advisers, carefully considered what was said in Committee. It has been suggested that in the second part of paragraph (c), as revised in Committee, we were breaking new ground or entering a new field. This really is not so.
The House will remember that the main objects of Clause 27 are to stop the evasion of liability to tax by stripping a company of its assets in such a way that sums which ordinarily would be distributed by way of dividend are not so distributed and so avoid liability to tax.
10.45 p.m.
I have already given an illustration of the way in which this can be done. I need not repeat it. But one feature of some of these operations is to secure that a dividend is paid to a person or body exempt from liability to income tax. Where that happens, there is a claim for repayment by the Inland Revenue for tax notionally deducted on payments of dividend, so that a great deal, if not all, the tax paid by the company on its profits is recoverable from the Inland Revenue.
This Clause deals with dividend stripping and also with bond-washing. From the outset it was realised that it would be pointless to stop avoidance of liability to tax through dividend stripping if it left the possibility of achieving the same result by the use of the provisions of the Companies Act. I remind the House of what my right hon. Friend, the Chancellor of the Exchequer, stated in the Budget debate, when he said that the Finance Bill would cover
"getting profits or reserves or assets out of companies in such a way that, in the end, the Revenue would lose the tax that has been paid, or would fail to collect tax that ought to be paid."—[OFFICIAL REPORT, 7th April, 1960; Vol. 621, c. 691.]
The last part of (c), as it stands in the Bill, endeavoured to stop evasion of tax by this form of stripping the assets of a company. On further consideration, we felt that it would assist in the comprehension of these provisions if we made provision by a separate paragraph for the stripping of the assets simpliciter. That is done by the Amendment to line 25, which gives a new sub-paragraph (d). Sub-paragraph (a) deals with cases where a person who is entitled to recover tax in respect of dividends received by him receives an abnormal amount by way of dividend.

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Subparagraph (b) deals with cases where advantage is secured by persons entitled to deduct losses on securities in computing their profits. The first part of subparagraph (c)—and, if this Amendment is accepted, the whole—deals with the opposite numbers of the persons coming within (a) and (b)—that is to say shareholders who may, by surtax, benefit out of transactions in which another party gets a tax benefit, and transactions in which another party gets a tax advantage as a person entitled to repayment of tax or to relief for losses.
The Amendment proposes to leave out the words
"or in connection with the distribution of profits of a company …".
It makes it clear that the person who receives the consideration specified in subparagraph (c) comes within subsection (2), and so if, as a result, he is in a position to obtain, or has obtained, a tax advantage, he may have that advantage nullified.
There is also this difference between the cases which come within (a), (b) and (c) and those which come within (d). In the former category the Revenue is in peril of losing both income tax and surtax, and in the latter it is primarily in danger of losing surtax, since company reserves which are extracted will normally have to hear income tax at the standard rate.
It has been suggested that the kind of practice in question, which was here involving profits or reserves free of Surtax, is only likely to be practised in the case of companies under close control, where shareholders were likely to be persons liable for income tax at the standard rate, and liable for Surtax also. We have studied very closely whether it would be possible to define more narrowly the scope of paragraph (d) without running the risk that that would lead to the door being opened to more tax evasion, and I would not move, nor would my hon. Friends support, any Amendment which opened the door to the continuance of tax evasion.
We considered whether we might not limit the operation of paragraph (d) to the class of company already defined by Section 245 of the Income Tax Act, 1952, but we concluded that that might leave the revenue at some risk. The definition in Section 245 of the companies which
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are controlled by five or fewer persons is very narrow, and there are excluded from that definition those companies which are under the control of five persons, but which have 25 per cent. or more of their ordinary voting shares quoted or dealt in on a stock exchange.
We did not think that it would be right or wise to exclude those companies from the scope of paragraph (d); we did not think that the line should he drawn there. There might be other small public or private companies where the securing of Surtax advantages could be very material.
We have given a lot of thought to this matter and we have reached the conclusion that paragraph (d) must apply, first, to what I might call the Section 245 companies, that is to say, companies under the control of five or fewer persons; secondly, to companies under the control of five or fewer persons, but with 25 per cent. or more of their ordinary voting shares in the hands of the public; and, thirdly, to all other companies which do not have their ordinary share capital quoted by and dealt in regularly, or from time to time, on a recognised stock exchange. To that there is one exception, namely, that paragraph (d) does not apply to a company under the control of one or more companies to which paragraph (d) does not apply.
The result of the last of these Amendments is to exclude from the operation of the Clause companies—or their subsidiaries—not controlled by five or fewer persons and whose shares are authorised to be dealt in and are regularly, or from time to time, dealt in on a stock exchange.
We feel that it is inherently unlikely that companies in that category will engage in this kind of operation. Should we be wrong about that, then their actions are hardly likely to escape public notice, and further action can be taken. But, that being our considered view, we feel that we can safely narrow the scope of paragraph (d) without opening the door to tax evasion, and for those reasons I commend the Amendments to the House.
I apologise to the House for taking so long at this late hour to remind hon. Members of the structure of this Clause, which I thought essential to put the Amendments in perspective, and also in explaining what are rather lengthy Amendments.
Mr. Mitchison: Perhaps I had better not agree too much with the right hon. and learned Gentleman the Attorney-General, as that appears to have unfortunate results immediately afterwards. On this occasion, I see the point of what is being put forward, but I am not altogether clear about why this limitation is necessary, having regard to the provisions of the rest of the Clause.
If we are to deal with cases where these transactions happen in connection with the distribution of the profits of a company, why should it be limited—perhaps I missed something in the right hon. and learned Gentleman's speech—to companies of this class? It is obvious that the Government have had considerable difficulty in deciding exactly where the limits should be, and whenever that happens I feel inclined to say that somebody will be very ingenious just to get round the limit which the Government have sought to impose. Therefore, I feel some doubt about the necessity for this type of limitation. It was not suggested in Committee, and what appears to have happened is that the Government have said, "This is really a Surtax matter. We need only deal with companies where Surtax questions will arise," and have accordingly limited their Amendment.
But if it is only a Surtax matter is there any need to go into this definition of "companies"? An ordinary public company, where there is no question of an individual charge to Surtax, will not be affected. If, on the other hand, there is some possibility of an Income Tax benefit of a kind which it is desired to avoid by the earlier paragraphs it is clearly advisable not to have a limiting definition of this kind. I just do not see the object of this piece of ingenuity, and it strikes me that it is, if not an open invitation—since the Government apparently do not issue those—a sealed invitation to people to try to avoid it.
There is another point: I have always felt with these Surtax companies—to use a concise phrase—that although there is a statutory limitation its application is a matter of some difficulty, because the Revenue authorities may not always know the facts that bring a company within Section 256, which is the defining Section for the purposes of Section 245.
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Therefore, I would rather not have rested any more on that type of definition than was absolutely necessary.
For those reasons, although I see the object of the concession, I wish it had been more widely drawn. Here again, we have a case where, if we have to choose between "Aye" and "No," "Aye" to the Amendment is better than "No," but it is a pity that the introduction of an Amendment at so late a stage—even if it was occasioned by proceedings in Committee—makes it difficult to suggest any alteration which will have any practical effect.
Mr. Diamond: As I understood the right hon. and learned Gentleman, he said that the Government were deliberately leaving it open to a substantial public company to enter into transactions out of which a tax advantage of this kind might be gained, and in respect of which this Clause would not apply, because, being substantial public companies, owned by more than four persons, with their shares quoted, they would be in the public eye and not likely to do this sort of thing. We agree that that is so.
But I understood the right hon. and learned Gentleman to go on to say that if, however, he was wrong in that expectation, and they did enter into transactions of this kind, further action would be taken. I was listening very carefully, but I did not fully hear him when he went on to say that further action would be taken so as to catch such a company transaction as from today.
The Attorney-General: With the leave of the House I will reply to the hon. and learned Member for Kettering (Mr. Mitchison) and the hon. Member for Gloucester (Mr. Diamond). The hon. Member for Gloucester's hearing was quite accurate. For greater accuracy he can check my remarks in tomorrow's HANSARD.
Mr. Mitchison: This is a point of importance. At the end of it, does the right hon. and learned Gentleman mean, or does he not mean, that action will be taken retrospectively in this case?
The Attorney-General: I am not in a position to commit future Chancellors of the Exchequer as to what they would do should action be taken contrary to the belief of the Government as to its likelihood.

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11.0 p.m.
I now turn to the question raised by the hon. and learned Member Of course, he is quite right in saying that this kind of stripping of assets is done primarily and I think nearly always, so far as one can see, solely for Surtax purposes. He is also, therefore, quite right in saying in relation to these big companies which we are excluding from the scope of the Clause that there is no real chance of their engaging in this operation.
The hon. and learned Member asks why draw the line now? The answer simply is that we do not want to have the scope of a Clause like this larger than is necessary to meet the evil. We feel that by making this Amendment, which is narrowing it, we can do something to dispel the unnecessary alarm which has arisen and at the same time preserve what we want of this Clause, namely, to ensure that if those likely to try to carry out this kind of operation seek to do so in the future, they will receive no tax advantage from so doing. That, I think, we have done.
Amendment agreed to.
Further Amendments made: In page 25, line 19, after "company", insert "in question".
In page 25, line 23, leave out "(in any case)".
In page 25, line 25, at end insert:
"or
(d) in connection with the distribution of profits of a company to which this paragraph applies, the person in question so receives as is mentioned in paragraph (c) of this subsection such a consideration as is therein mentioned".—[The Attorney-General.]
The Attorney-General: I beg to move, in page 25, line 31, at the end, to insert:
"but the assets mentioned in paragraph (c) of this subsection do not include assets which (while of a description which under the law of the country in which the company is incorporated is available for distribution by way of dividend) are shown to represent a return of sums paid by subscribers on the issue of securities".
This Amendment is designed to take out of the scope of Clause 27 payments which are, in effect, returns by overseas companies of subscribers capital. Paragraph (d) of the Clause, as amended, is only intended to catch the considerations as defined in paragraph (c), representing in effect profits which the person in question receives in non-taxable form. It ought therefore to have no application
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to what is, in effect, a return of subscribed capital.
The possibility that the Clause can go too wide in this respect arises in the company law of an overseas country, because that law may have the effect that certain amounts subscribed for shares are available for payment of dividends. For example, under South African law amounts subscribed for shares and put to the share account before 1952 are available for payment of dividends and would attract liability to tax as dividends if paid in this way to shareholders in the United Kingdom. If the South African company sought to escape this tax liability by making a bonus issue out of the share account the Clause would apply to impose a tax on capital paid in by the company subscribers, and it is the purpose of the Amendment to prevent that from happening.
The Amendment accordingly says that assets mentioned in paragraph (c), assets available for distribution as dividends, do not include assets shown to represent a return of sums paid by subscribers on the issue of securities, although those assets might be of a description which was or would have been available for distribution by way of dividends under the law of the country in which the company is incorporated.
Mr. Mitchison: In relation to this and to the other Amendments, one has to remember that these are considerations of the kind mentioned in subsection (1) of the Clause and that the whole transaction is thus subject to the taxpayer being able to show that the transaction or transactions were carried out for bona fide commercial reasons and so on, and that none of them had as its main object, or one of its main objects, to enable a tax advantage to be obtained.
I should have thought that in the type of case which the right hon. and learned Gentleman has in mind there would be no difficulty in showing that. Therefore, I wonder whether this Amendment is necessary. If it is not, it is a question of relieving the taxpayer of an unnecessary onus of proof. When I look at the Amendment I see that he still has to prove something in connection with this Amendment and I wonder whether a complicated proof of this kind is necessary in a subsection which follows on the subsection I have quoted, the latter

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subsection (1) being the main governing subsection of the Clause.
I say that for this reason. This is a very complicated Bill and this is a fairly complicated Clause in it. The more these specific cases are put in, the more we come to cases which are just on the borderline. I can see such cases in connection with foreign law. The more we come to borderline cases the more we open the door to possibilities as much of doubt as of avoidance. I therefore would have preferred to have left the matter to the provisions of subsection (1) instead of complicating it in this way with a feeling that there would be no cases where this Amendment would apply where the taxpayer would have any difficulty in discharging the burden. If in fact it is the case that these were the transactions the main object of which was to enable tax advantages to be obtained, I feel a little doubtful whether this Amendment is right.
The Attorney-General: I speak again by leave of the House. I assure the hon. and learned Member that this is necessary for this reason. If he will look again at paragraph (c)—I think it is convenient to look at it in the Bill—the consideration is something
"which either is, or represents the value of, assets which are … available for distribution by way of dividend."
That is the difficulty. Under the law overseas, as I gave the illustration, certain capital could be available for distribution under the law there by way of dividend.
That brings the case clearly within paragraph (c). This makes it quite clear that where the sum being distributed, or which is capable of being distributed, by way of dividend which is in fact a return of capital to subscribers, that does not come within the scope of paragraph (c). We have proceeded on the basis of trying to define subsection (2) as closely as possible. We feel, in view of the use of the words "by way of dividend" in Clause 27, it is essential to make this Amendment, which can apply only to companies of the character to which I have referred, so as to make quite clear where there is a return of capital it does not come within the scope of paragraph (c) because it could be distributed "by way of dividend".
Mr. Millan: Would a payment of that sort be in any way taxable without this Amendment? I should have thought it would be attributable to the return of capital and could not be taxed in any case. Is the Attorney-General saying by implication that this is something which could be taxed?
The Attorney-General: I speak again by leave of the House. I was not saying anything by implication but merely dealing with the position of overseas companies.
Amendment agreed to.
Further Amendment made: In page 25, line 31, at end insert:
"and the companies to which paragraph (d) of this subsection applies are any company under the control of not more than five persons, and any other company which does not satisfy the condition that its shares or stock or some class thereof (disregarding debenture stock, preferred shares or preferred stock) are authorised to be dealt in on a stock exchange in the United Kingdom, and are so dealt in (regularly or from time to time), so however that the said paragraph (d) does not apply to a company under the control of one or more companies to which that paragraph does not apply; and subsections (2) and (3) of section two hundred and fifty-six of the Act of 1952 (which define for the purposes of that section the circumstances in which a company is to be deemed to be under the control of not more than five persons) shall apply for the purposes of this subsection as they apply for the purposes of that section"—[The Attorney-General.]
The Attorney-General: I beg to move, in page 27, line 18, to leave out from "no" to "in" in line 19 and to insert:
"notice under subsection (3) of this section ought to be given."
This is a drafting Amendment consequential upon the Amendment made to Clause 3 in the course of the Committee stage when we changed the wording from "directions" to "giving notice."
Amendment agreed to.
Further Amendment made: In page 27, line 38, leave out "paragraph (a) of."—[The Attorney-General.]
The Attorney-General: I beg to move, in page 28, line 2, at the end to insert:
"so however that an amount shall not be treated as abnormal by virtue only of this paragraph if during the six months beginning with the purchase of the securities the recipient does not sell or otherwise dispose of, or acquire an option to sell, any of those securities or any securities similar (within the meaning of section twenty-three of the Finance Act. 1959), to those securities."

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The Amendment arises out of a promise of consideration during the debate in the Committee stage on an Amendment moved by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth). The object is to ensure that a body entitled to tax exemption—for example, a charity or a superannuation fund—shall not be hampered by the fear of action under Clause 27 when it is contemplating a legitimate "switch" of its investments.
I need not remind the House of the history of this matter in any detail. The definition in the Amendment applies only to Clause 27 (10, a), and we have, after considering the arguments advanced by my hon. Friend and others, come to the conclusion that there is a good case for letting out of the scope of this definition purchases of fixed dividend securities if the facts of the case tend to show that the purchase was the normal purchase of an investment. For this purpose we think it is possible to take as a test that the recipient of the dividend continues to hold the securities for at least six months from the date of purchase. In the legislation of 1959 directed against specific forms of bond-washing the same six months' test was used. A cum-dividend purchase of securities was excluded from that legislation if the securities were not in any way disposed of until at least six months had passed.
The Amendment provides that a fixed dividend is not to be considered as "abnormal" under paragraph (a) of the definition if the recipient refrains from disposing of the securities for at least six months from the date of purchase. The Amendment is so worded as to impose various safeguards.
One is that if the purchaser, without actually selling the securities, takes out an option during the six months' period which would entitle him to sell them as a "pegged" price after its expiry, the let-out will not operate.
A second is that if the purchaser already owns a holding of the securities he cannot claim the benefit of the let-out for a further purchase cum-dividend merely by selling the original holding and keeping the further purchase until the six months have run out. This follows from the reference to selling
"any securities … similar to those securities".
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A third is that the definition of "similar" securities which is borrowed in this way from the 1959 Act is wide enough to cover cases where two holdings of securities are really equivalent for all practical purposes notwithstanding differences of outward form.
I think that we have gone as far as we can go to meet the fair point made by my hon. Friend the Member for Basingstoke and that this Amendment is an improvement to the operation of the Clause.
Mr. Denzil Freeth: It would be churlish if I let this go by without saying "Thank you" to my right hon. and learned Friend. He said that the Government have gone as far as they could go in putting down the Amendment. They have not gone quite as far as I hoped they would go, but I am most grateful to them for going as far as they have gone.
11.15 p.m.
Mr. Mitchison: I take the same objection to this provision as I did to the one I last spoke to. The whole of these circumstances are subject to the taxpayer being able to show that the transactions were carried out for bona fide commercial reasons or in the ordinary course of making or managing investments. In the particular instance the right hon. and learned Gentleman gave, the facts almost proved themselves. A pension fund obviously comes within the definition of
"in the ordinary course of making or managing investments".
Another fairly obvious instance is the aunt of the 'hon. Member for Basingstoke (Mr. Denzil Freeth). She would do no wrong, ex hypothesi. She is an honest old lady making and managing her investments.
Is it really necessary to put this in? It involves putting in a fixed period of six months. The trouble about any fixed period is that the person who has done it for 5 months and 29 days feels very aggrieved because he has to prove something which a person who has done it for 6 months and 1 day does not have to prove.
Mr. Freeth: I hope that the hon. and learned Gentleman is not assuming that my aunt is a gross fund.
Mr. Mitchison: I make no further assumptions about the hon. Gentleman's aunt, other than her impeccable and continuous honesty.
I have said what I want to say. It is late at night. I wish we had had the opportunity of hearing the right hon. and learned Gentleman's explanations about these Clauses at an earlier stage when we might have been less lenient towards them.
Mr. Diamond: I want to ask the Attorney-General only one question. Is he satisfied that the period of six months is sufficient? In introducing the Amendment he said that it followed on a period introduced in a Section in an earlier Act, of which no doubt the Inland Revenue has some experience. Does his experience lead him to believe—I have certain doubts about it—that six months is long enough? There is no objection to accepting the Amendment. Its purpose is understood, but it would have been a much safer Amendment from the point of view of the Inland Revenue if the six months period had been much longer.
The Attorney-General: With the leave of the House, my answer to the hon. and learned Gentleman is that his argument always supposes that most weight should be placed on the let-out. His answer to these proposed Amendments is to ask whether they are necessary. He says that the taxpayer could get out under the let-out.
Our approach is somewhat different. We are trying to shape the Clause so that many cases which ought not to come within its scope are excluded from its scope. The last Amendment was one of those cases. This Amendment amends the definition of "abnormal dividend". Subsection (2. c) says:
"the person in question receives, in consequence of a transaction whereby any other person—

(i) subsequently receives, or has received, an abnormal amount by way of dividend. …"

Under our first choice of words many dividends would have satisfied that definition. It might be difficult for charities in some cases to operate the let-out Clause. But there was a real difficulty of definition, namely, what was meant by "abnormal". That is all the
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Amendment seeks to do. We have followed the precedent in that respect of holding for a six months period. We would not have done so if past experience in relation to that test had proved unsatisfactory.
Amendment agreed to.
The Attorney-General: I beg to move, in page 28, line 5, at the end to insert:
"Provided that there shall be disregarded any amount received by a company by way of dividend from an associated company except in so far as the dividend is paid out of profits accumulated before the two companies became associated companies; and the Third Schedule to the Finance (No. 2) Act, 1955, shall with the necessary modifications apply for determing the extent to which a dividend was so paid."
This is a drafting Amendment.
Mr. Diamond: I am prepared to accept that this is a drafting Amendment, but if the learned Attorney-General Would—
The Attorney-General: I am sorry, Mr. Speaker, but I thought that we had gone a little farther than we have. It is correct to say that this Amendment is of a drafting nature, but I should like to say a word or two about it with the leave of the House.
It is an Amendment which merely provides that we let out of subsection 2 (a) abnormal dividends drawn by a loss-making company in a group on shares which it holds in another company in the group to the extent that the dividend comes out of profits accumulated after the dividend-paying company and the loss-making company become members of the same group. I should never have described that as merely a drafting Amendment, but I had temporarily lost my place.
Mr. Mitchison: The right hon. and learned Gentleman said "after", but I think he meant "before" the two companies had become associated companies. His sense of time seems to have become a little deficient.
Amendment agreed to.
Further Amendment made: In page 28, line 24, to leave out from "whether" to end of line 25 and insert:
"a notice under subsection (3) of the foregoing section should be given in respect of him".—[Sir E. Boyle.]

Clause 31.—(RECEIPTS ACCRUING AFTER DISCONTINUANCE OF TRADE, PRO- FESSION OR VOCATION.)
Sir E. Boyle: I beg to move, in page 29, line 6, after "vocation", to insert:
"during any period before the discontinuance (not being sums otherwise chargeable to tax)".
I think it might be for the convenience of the House if we also considered the next four Amendments to Clause 31.
The purpose of these Amendments is to guard against a possible misinterpretation, which I will explain in a few words. The first of this series of Amendments states that the Clause will apply only to sums not otherwise chargeable to tax; this is a Clause on which, if I remember rightly, we had some controversial discussion during the Committee stage, when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) had something to say about it. The Clause does not seek to tax a receipt which has escaped a charge to tax merely because at some stage in the life of the business the earnings basis was not adopted.
The Clause could be incorrectly interpreted as meaning that, if at any time during the life of the business the earnings basis was used, post-cessation receipts arising because the taxpayer was subsequently put on a cash basis were chargeable to tax. The Clause in the original form lent itself to this interpretation. That was because subsection (2) says that where the profits or gains for any period before discontinuance were computed by reference to earnings, all post-cessation receipts are to be taxed under the Clause in so far as they were not brought into account in computing the profits or gains for that period or any subsequent period.
As those words stood, it could be maintained that where a professional man started off by being assessed on the earnings basis and then changed to the cash basis, all his post-cessation receipts would be taxable because they were not brought into account for a period during which the cash basis operated and because there was a period when he was assessed on the earnings basis.
Indeed, since the publication of the Bill, this interpretation appears to have been quite widely adopted. It has given rise to considerable misunderstanding about the scope of the Clause, and it is for that reason that we are now moving the Amendments. We are, I think, all
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clear as to the purport of the Clause, but we are ensuring that, whatever view hon. Members take, the Clause does in fact do what it is intended to do.
There is one other point. The insertion in the Clause, by way of the Amendment to page 29, line 6, of the words:
"not being sums otherwise chargeable to tax"
is desirable to make it clear that the Clause in no way affects the position of sums chargeable to tax under the existing law. A person who buys from an author an interest in copyright is already taxable on the royalties arising therefrom. Incidentally the recommittal Amendment to Clause 32, page 30, line 20, ensures that if a retired trader or professional man sells the right to any post-cessation receipt, the sum chargeable under the Clause is the consideration which he receives for the assignment. It follows that the person to whom it is assigned cannot be charged.
An argument might be advanced that the purchaser of the right to receive royalties had acquired the right to sums arising from the carrying on of the author's profession, and that the provision of Clauses 31 and 32 taken together mean that he could not be charged to tax on the royalties as they come in. By specifying, as we are doing in this first Amendment, that the Clause shall not apply to sums otherwise chargeable to tax—that is the second half of the Amendment to page 29, line 6—we secure that no such argument could be sustained. It is for those two reasons, and not to make any alteration in the substantive meaning of the Clause, that we have put down these Amendments.
Sir Henry d'Avigdor-Goldsmid: Having heard many speeches from the Financial Secretary, I should like to tell him that I have heard none from him in the last few days which have given me so much satisfaction as the last one. I should like to thank him unreservedly.
Mr. Mitchison: That is very nice. I should like simply to say that, apart from the sufficiency or insufficiency of the Clause as a whole, which we are not discussing now, these two points are points on which I agree with the hon. Gentleman. The sense of the Committee was that which has been indicated and clarified by these Amendments.
Amendment agreed to.
Further Amendments made: In page 29, line 7, leave out "any period before the discontinuance" and insert "that period."
In line 11, leave out "that period or any subsequent" and insert "any."
In line 13, leave out from "where" to "were" in line 14 and insert: "those profits or gains."
In line 16, leave out "that period" and insert:
"any period before the discontinuance."—[Sir E. Boyle.]
Sir E. Boyle: I beg to move, in page 29, line 41, to leave out from "itself)" to "and" in line 44 and to insert:
"which, if the trade, profession or vocation had not been discontinued, would have been deducted in computing for tax purposes the profits or gains of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits or gains as so computed."
This is a drafting Amendment which covers two points which I ought briefly to explain. As the House is aware, subsection (4, a) of Clause 31 is intended to allow the taxpayer to set off against any post-cessation receipt post-cessation expenses and any unrelieved loss of business at the time of discontinuance. During the Committee stage my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) suggested that the wording of the subsection was not sufficient to allow a deduction for unrelieved losses. My right hon. and learned Friend the Attorney-General, in winding up the debate, said that he would look at the drafting.
11.30 p.m.
There was, I think, a real doubt on this point, for the following reason. As originally drafted, subsection (4, a) provided for a deduction for any loss which would have been deducted in computing the taxable profits of the business if it had not been discontinued; but Section 342 of the 1952 Act provides that such losses may be deducted from or set off against the profits on which the taxpayer is assessed—that is to say, the loss is not deducted in computing the assessable profits but is set against those profits after they have been computed.
This Amendment puts the matter beyond a peradventure by making subsection (4, a) refer to a loss, expense or debit which would have been deducted
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in computing the profits of the business during its life or would have been deducted from or set off against those profits as so computed.
While we were at it, we took the opportunity also to remedy another defect in the subsection. In effect, it referred to loss, expense or debits incurred by the person chargeable in respect of post-cessation receipts; and, therefore, the original wording might have failed to give an executor who got in a post-cessation receipt, and was charged under the Clause, relief for losses or expenses incurred by the professional man himself. To remedy this, the Amendment makes the subsection refer to losses and expenses which would have been allowed in computing the profits of the person by whom the business was carried on. Once again, this does not in any way alter the original purport of the Clause, but it deals with the point raised by my hon. Friend the Member for Langstone and, as I have said, we have in other respects taken the opportunity to make the subsection perfectly clear in its purpose.
Mr. Powell: In the temporary absence of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens), I thank my hon. Friend the Financial Secretary for having put down this Amendment, which makes it absolutely clear that any losses or expenses can be allowed which would have been allowed if the business had continued.
Amendment agreed to
Sir E. Boyle: I beg to move, in page 30, line 2, to leave out "he" and to insert:
"the person who carried on the trade, profession or vocation."
This is a drafting Amendment to subsection (4, b) to remedy a defect similar to that dealt with by the second limb of the Amendment to subsection (4, a) which we have just discussed. I do not think I need give the House any further explanation.
Amendment agreed to.
Sir H. d'Avigdor-Goldsmid: I beg to move, in page 30, line 19, after "sixty" to insert:
"nor to sums received after that date being sums of which the value has been assessed to estate duty."

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This Amendment is intended to avoid a situation which I mentioned in Committee and on which I have had correspondence with my right hon. and learned Friend the Attorney-General, namely, the case of a professional man who died when in partnership and on whose estate Estate Duty was paid on payments to be received after his death. Those payments now, under this Clause, have been caught for Income Tax.
I take the point that the original assessment for Estate Duty would probably have taken into account that such payments might be caught for Income Tax because that was the position ruling, as I understand it, until the Cheyney case this year. Since the Cheyney case, these payments have been made free of duty. Therefore, the Amendment would particularly bite on deaths occurring between the judgment in the Cheyney case and the presentation of the Bill when, presumably, assessment for Estate Duty would be made on payments which would, in the then state of the law for that relatively short period, be free of Income Tax. Now, they are caught for Income Tax, and I should be glad to hear a public assurance that people will not be caught in this way.
Sir E. Boyle: My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) has explained clearly the purpose of the Amendment, which is to cancel the Income Tax charge because for the future the Estate Duty valuation in the sort of case which we are considering will take account of Income Tax. We have considered this point carefully, but I think that to cancel the Income Tax charge in respect of all deaths before the coming into force of the Clause would be unjustifiably generous, because in most cases the Income Tax liability has been allowed for and there is no overcharge.
There is the further point to which my right hon. and learned Friend the Attorney-General drew attention—that such a provision would mean exempting copyright royalties, which might continue to come in for the next thirty or forty years. Apart from royalties and similar receipts, the Clause will be of very limited application, and it is likely to be exceptional for it to bite on anything but the recovery of a bad debt which had been
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written off for tax purposes, and cases in which a debt written off as had can he seen to be good at the time of death are rare cases.
As the Amendment is worded, it does not limit the exemption to cases in which death occurred before 6th April, 1960, but in effect allows it in all cases, without time limit, where the value of post-cessation receipts has been assessed for Estate Duty, and it would effectively remove discontinuance through death from the ambit of Clause 31.
I understand the interest of my hon. Friends the Members for Walsall, South and Wolverhampton, West (Mr. Powell). We have had correspondence on this matter. I think that, as worded, the Amendment is too generous in relation to the Clause, and for that reason I am afraid that on this occasion I cannot make a speech which will please my hon. Friends as much as did the last which I made.
Mr. Powell: Before he sits down, will my hon. Friend make one point a little clearer? I understood him to say that in most cases Estate Duty would have been assessed on the basis that tax would be payable on the receipts. Are there cases since the Cheyney case in which Estate Duty has been assessed on the higher basis, that is, on the assumption that the tax would not be payable on these receipts, because at present in such an instance there would, in effect, be a double charge?
Sir E. Boyle: I cannot answer that question off-hand. I take the importance of the point and I will look into it and give my hon. Friend an answer. This is a matter which we shall take into account when administering the Clause.
Sir H. d'Avigdor-Goldsmid: In view of the assurance which we have had from my hon. Friend and because we have served a useful purpose in ventilating the Government's views on this matter, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

Clause 32.—(SUPPLEMENTARY PROVISIONS AS TO TAX UNDER S. 31.)
Sir Hugh Lucas-Tooth: I beg to move, in page 30, line 22, after "individual", to insert:
"or the widow or widower of an individual".

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This Amendment should be discussed with the Amendment in line 26, after "he", to insert:
"or in the case of a widow or widower her or his deceased spouse".
These Amendments seek to give the widow of an individual who becomes liable for tax under Clause 31 the benefit of earned income allowance after her husband's death, with similar provisions for a widower. If an employer pays a pension to the widow of a deceased employee, that pension is treated as earned income. That is not done on principle but by special statutory provision. No such provision was made in favour of the widows of self-employed people. I do not know what the reason was. I imagine that it was partly technical, because there was no employer, and partly also, no doubt, because of the somewhat advantageous position of the self-employed person which is being corrected by Clause 31. But now that the law is being altered by Clause 31, it seems fair to consider all the supplementary provisions which follow from it.
Subsection (1) of Clause 32 gives the individual earned income allowance on any royalties or other payments received after his retirement, no doubt because such payments are analogous to a pension which would be eligible for earned income relief if he received a pension. It seems to me to be illogical and unfair not to make the parallel complete by giving similar relief to the widow after the taxpayer's death. That is the purpose of these Amendments.
Sir E. Boyle: My hon. Friend has raised quite an important point which we certainly considered when deciding what the final form of the Clause should be. I listened with attention to my hon. Friend, but I am not quite satisfied that the analogy with the pension really holds, because surely the pension which continues in favour of a widow after the pensioner's death really is a pretty special case in our national life. A pension is not, in the normal sense of the word, income derived from property. Furthermore, the destination of continuing pension benefit will have been laid down by the very terms of the pension scheme itself, whereas copyrights, with which we are dealing in the Clause, are assets like any other form of property which can give rise to a regular investment income.
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Whereas the ultimate destination of a continuing pension is something laid down in the pension scheme itself, the author can bequeath a copyright, like any other asset, just as he pleases. If the copyright goes to the widow, she receives it as property. The royalty income which it produces, I should have thought, lacks the character of earned income in such event. It is like leaving any other piece of property.
We have considered this point, but, in my view, to say that we should go as far as this Amendment and as far as my hon. Friend has gone would be unwise in view of the general purposes of this Clause. I think that we must take the line in relation to the Clause that earned income relief is, in general, confined to income from a source which yields income as a direct result of the personal exertion of the person receiving the income. Just how great the personal exertion may be in each case is a matter of argument. It is a general principle and we are bound to stand on it.
Once the source of earned income has come to a end, then that consideration does not any longer arise, and it would not be possible to accept the Amendment without introducing a principle which, I think, would be rather far reaching and which I believe we should be in error in accepting. That is why, while I see the force of my hon. Friend's appeal, I do not think that I can advise the House to accept the Amendment.
Sir H. Lucas-Tooth: While I fully appreciate the force of my hon. Friend's argument, it still seems to me that the widow of a self-employed person is at a disadvantage in comparison with the widow of an employed person. I do not wish to press the Amendment, because I appreciate the force of the argument against it, but I hope that my hon. Friend, in considering it, will "well do it" between now and the next Finance Bill. He may consider that it may be possible to do something on behalf of these widows. In the circumstances, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
11.45 p.m.
Sir E. Boyle: I beg to move, in page 30, line 28, at end to insert:
(2) Where any sum or sums chargeable to tax by virtue of the said section thirty-one

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are received, in any year of assessment beginning not later than six years after the discontinuance of the trade, profession or vocation, by the person by whom it was carried on before the discontinuance, that person may, by notice in writing sent to the surveyor within twelve months after the end of that year of assessment, elect that the tax chargeable by virtue of that section shall, in lieu of being charged for that year of assessment, be charged for the year in which the discontinuance took place; and in any such case an additional assessment shall (notwithstanding anything in section forty-seven of the Act of 1952) be made upon him for the last-mentioned year in the amount on which he is chargeable under the said section thirty-one in respect of that sum or in respect of all those sums, as the case may be, and in connection with that assessment no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of subsection (4) of the said section thirty-one.
This is a long Amendment but a relatively short point. It simply introduces a new subsection to Clause 32 in order to give a taxpayer, who gets in post-cessation receipts of his business in a year beginning not later than six years after its discontinuance, the option to be charged by way of additional assessment for the last year of business instead of for the year in which he gets the receipts.
This suggestion has been made to us by the Institute of Chartered Accountants. The cases in which the suggested option would operate are likely to be pretty rare. It seems to my right hon. Friend, in view of the representations made, that this suggestion is a perfectly reasonable one. The rather complicated wording of this Amendment is due to the working-out of the scheme behind it which I have indicated to the House.
Mr. Millan: I have one small point to raise. It is in connection with the words which appear at the end of this Amendment, which says:
"… no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of subsection (4) of the said section thirty-one."
In subsection (4) of Clause 31 we find that "loss" comes under subparagraph (a) and "allowance" comes under subparagraph (b). There are also mentioned the words "expense or debit". I would have thought that this Amendment would say that no further deductions or relief would be given in respect of "any loss, debit, expense or allowance." Is there a reason why the
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Amendment refers only to "loss or allowance" and does not include "expense or debit"? It is not clear why there should be a distinction here.
Mr. Diamond: It would be churlish of me not to say how much we appreciate that the Government have shown their willingness to receive representations from the Institute of Chartered Accountants. If the Institute—as it may—renews its representations that cases I and II of Schedule D should be treated on a current year basis for companies instead of a previous year basis, are the Government likely to lend a sympathetic ear?
Sir H. d'Avigdor-Goldsmid: The theory, if it existed, that only chartered accountants can get Amendments accepted would be wrong, but in thanking my hon. Friend for this Amendment, which gives an option to the taxpayers—it is not often we can do that in this Chamber—may I draw his attention to the fact that this point was raised first on the Committee stage by my hon. Friend the Member for Wolverhampton South-West (Mr. Powell). His point has, to some extent, been met here.
Sir E. Boyle: Having taken advice, I can assure the hon. Member for Glasgow, Craigton (Mr. Millan) that his point, on this occasion, is somewhat misconceived, because the expenses can only, as I understand it, be claimed after the assessment. I believe that this Amendment will do what we want it to do.
Amendment agreed to.

Clause 37.—(EXEMPTIONS AND RELIEFS IN RESPECT OF TAX UNDER S. 36.)
Sir E. Boyle: I beg to move, in page 35, line 22 to leave out "either" and to insert "any".
Mr. Speaker: I imagine that it will also be convenient to discuss the Amendment in page 35, line 41 at the end to insert:
"or
(c) in the case of a payment in respect of an office or employment in which the holder's service included foreign service, not being a payment of compensation for loss of office, that the foreign service comprised either—

(i) in any case, three-quarters of the whole period of service down to the relevant date; or

(ii) where the period of service down to the relevant date exceeded ten years, the whole of the last ten years; or

627

(iii) where the period of service down to the relevant date exceeded twenty years, one-half of that period, including any ten of the last twenty years".

Sir E. Boyle: If you will allow, Mr. Speaker, perhaps we could also take the next two Amendments, in page 36, line 41 to leave out "and", and in line 42 after "office" to insert "and' foreign service'".
Mr. Speaker: If the House so pleases.
Sir E. Boyle: These Amendments give effect to the intention of an Amendment which was moved in Committee by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), that is, to extend the relief which is given on a voluntary payment, as distinct from a payment of compensation for loss of office, in cases where part of an employee's service has been outside the United Kingdom.
I indicated to the Committee when my hon. Friend raised the point that it was the Government's intention to accept the principle of my hon. Friend's Amendment, and these four Amendments give effect to what we said we would do.
Mr. Millan: I am very surprised and disappointed that the Government have made this further concession in these payments for compensation for loss of office, not even a payment for compensation for loss of office as defined by the appropriate Schedule. There is already a good deal in the Bill which provides concession to people who have been working overseas at some time or other. Clause 37 (2, a), for example, says that if at the relevant date, which is the date on which the event happens for which compensation is paid, the holder of an office or employment was domiciled outside the United Kingdom and was then employed by a company or firm also domiciled outside the United Kingdom, he is excluded from the provision for taxing compensation payments.
A second exclusion or concession is made in the Fourth Schedule in paragraph 6, in that in the calculation of the amount assessable for tax there is deducted proportionately the length of service which the holder of the office spends overseas, as compared with the total length of his service.
All of us have a great deal of sympathy with the person who serves over-
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seas, because he has certain disadvantages, particularly if he loses his employment when he is serving overseas, as he probably has to come back to this country and has various settling-down expenses and so on. No one would wish to deal unsympathetically or ungenerously with people in that kind of position, but the provisions of the Clause exclude many of them and there are also the concessions made in paragraph 6 of the Fourth Schedule, so that there is already a good deal of relief for people of this kind. It seems unnecessary to have this further Amendment, particularly as expressed.
There are three categories of service which will allow people to be excluded. No one would seriously quarrel with the first, which covers people whose period of service down to the relevant date exceeds ten years, the whole of the last ten years' service having been spent abroad. We get on to doubtful ground with the second category and the third category is completely indefensible.
All that is required for the third category is that one-half of the period of service, including ten of the last twenty years of service, should have been spent overseas. It is possible for the last ten of the last twenty years to have been served overseas, but it is also possible for the first ten of that twenty years to have been spent overseas and the last ten in the United Kingdom. That is the theoretical position, and there must be many cases in which something approaching the last ten years' service will have been served in the United Kingdom.
In those circumstances it seems to me that there is no justice in treating the people concerned any differently from those who have carried out their service in the United Kingdom. Considering the concession already given in paragraph 6 of the Third Schedule, it seems completely unnecessary to make this provision, especially in regard to the third category.
I am very surprised that the Government have accepted the argument put forward by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) in Committee. This is quite unjustifiable. We have already commented on the way in which the original intention of the Government to tax these compensation payments has been whittled down in one way or another, by excluding the first £5,000, and by introducing a standard

629
superannuation benefit. This is another concession, and I hope that my hon. Friends will press the Government on this point.
Mr. Diamond: I rise immediately to my hon. Friend's invitation to press the Government on this point, because they are on a bad point here. I take the view that there was no need for the Amendment—as did the Government, in the first place. It was only when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) pressed the matter and put down an Amendment in Committee that the Government decided to give effect to it. Like my hon. Friend, I take the view that the Bill already provides quite a fair method of dealing with this matter, on the basis of the number of years served abroad. I want to underline the difference between subparagraphs (ii) and (iii) of paragraph (c). On sub-paragraph (ii), which one might be prepared to accept, the argument is that if the last ten years of the employment have been served abroad it is sufficient to say. "This man has been employed abroad," and to agree that if he receives a voluntary payment on retirement it is unfair and unjust to say that he should be liable for any kind of taxation on that payment.
But what happens in the case of subparagraph (iii)? The man could have served the last ten years of his twenty years' service in this country, in which case it would be natural to say that his service had been in this country. We do not go so far as to say that the whole amount should be treated for tax purposes, because there would be some proportion of relief in respect of the previous years served abroad, but if the ten years served abroad are to be definitive in themselves surely the same argument should apply here, and it is wrong to suggest that in a case where the last ten years are served in this country there should be a complete exclusion from taxation on the voluntary payment.
I hope the Government will agree to withdraw the third category of case; otherwise we cannot possibly regard them as being serious in dealing with this problem of the "golden handshake."
Sir H. d'Avigdor-Goldsmid: It would be improper if I were to rehearse the argument I used in proposing the Amendment in Committee, but I am a
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little disappointed that the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Glasgow, Craigton (Mr. Millan) have lost that benevolence which they have shown throughout most of the stages of this Bill and should at this late stage express sentiments which are unfair to the people who will suffer if those sentiments prove infectious. The hon. Gentleman said that we had a good deal of sympathy for the class of people who benefit under this Bill. It seems a poor way of showing that sympathy if the hon. Gentleman is recommending the House to refuse an Amendment in their favour which the Government have admitted. I hope that the fact that it was I who proposed the Amendment will not be any bar to the Government sticking to it.
12 m.
Sir E. Boyle: By leave of the House, I should like to reply to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan) and the hon. Member for Gloucester (Mr. Diamond). In view of their speeches, I am a little surprised that they did not put down an Amendment—which would have been in order—to leave out paragraph (iii)—
Mr. Millan: We should have been glad to have done so, except for the question of time, which is something about which we have complained before. As has been pointed out, there are 129 Amendments on the Notice Paper and I should think it was a long time before most hon. Members got to this part of the Amendments.
Mr. Diamond: I only got round to this one at a minute to midnight yesterday.
Sir E. Boyle: I can assure the hon. Gentlemen that these three criteria set down in the Amendment to line 41 are not simply arbitrary and just thought up in connection with this Amendment to this Clause. Having decided on the principle that there should be total exemption in some cases, the criteria we have adopted—I think this was the best course we could pursue—are the same criteria as those, in practice, adopted in dealing with pensions paid to non-resident pensioners by United Kingdom employers or superannuation funds. That practice is set out in paragraph 220 of the Report of the Millard

631
Tucker Committee on the Tax Treatment of Provisions for Retirement.
As I say, these three criteria have some precedent behind them. While I understand that it is a matter for judgment, and one on which hon. Members may take differing views, about exactly what the criteria should be, I do not see how we could have done better than take those which are in practice adopted in dealing with pensions paid to non-resident pensioners by United Kingdom employers or superannuation funds.
Mr. Millan: Surely the point is that these are not payments to non-resident pensioners. The payments under this Amendment are those covered by Clause 36 and may often be payments to people in this country. The thing is entirely different.
Sir E. Boyle: I still think that having decided in principle that there should be some complete exemptions here, we went to what I feel to be a reasonable source in deciding what the criteria for these exemptions should be.
I cannot help feeling that the hon. Member for Craigton is making heavy weather of this. It seems to me beyond question that the principle behind these Amendments is right. I did not detect much disagreement earlier when my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) raised the point. I can see that there will be a difference of view about whether we have these Amendments right, or whether one criterion is too strict or too lax, but in general I am sure that the principle is right and I do not think that the Government will be doing any injustice to anybody if the House agrees to accept the Amendments as drafted.
Mr. Mitchison: I agree with my hon. Friends that the Amendments put down by the Government did not give the Opposition sufficient time. This is one of the later ones and, as we have heard, many of the previous ones are highly complicated. In those circumstances, I do not think it lies in the mouth of the Government spokesman to suggest that their Amendments might or should have been amended. They made it very difficult for us.
What troubles me in this matter is that there are already two exceptions
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under this subsection. One is in relation to the holders of an office or employment domiciled elsewhere than in the United Kingdom, and the second one is in the case of the payment of compensation for loss of office. This is complimentary to the latter one, to paragraph (b). This is in respect of the office or employment but not payment for compensation for loss.
I cannot quite see why on questions of residence and the degree of foreignness—if I may put it that way—in an office or employment there should be this very remarkable distinction. Where it is a question of payment of compensation for loss of office the first condition is that the office or employment must be one which did not require work in the United Kingdom, or, if there was no express requirement as to the place of performance, that the holder did not perform any of his duties in the United Kingdom during the three years immediately preceding the relevant date. When we come to this other type of payment, an entirely different criterion is adopted.
I should have thought that these two payments, compensation for loss of office and payment in respect of the office or employment, were at any rate sufficiently close to call for some similarity between the conditions in which they were excepted and the conditions under which they were not. If we have totally different provisions we shall invite people to get round the provisions by making what is really compensation for loss of office into what is in form and apparently payment in respect of office or employment.
There is not that amount of difference between compensation for losing an office and a pension on its termination, and the two could easily blend into one another. I wonder if the hon. Gentleman, with the leave of the House, if the House gives it, could explain why he has used such different criteria in these cases. We all have a great deal of sympathy with this kind of case, but on the other hand, we feel that the "golden handshake" provisions as a whole were overdue and we regard with some critical attention any attempt to broaden the exceptions to these provisions.
Sir E. Boyle: I speak again by leave of the House. I regret that I cannot add very much to what I have said. I have

633
explained why we have adopted these particular criteria and whence we derive them. In our view, in considering the criteria that were desirable for this Amendment, we went to the best source we could. On that I realise that there is a difference of view in the House, but it is my belief that this Amendment—the principal one of this group—is justified on its merits. I cannot feel that we are seriously watering down the principle of the Clause by proposing this Amendment to the House.
Amendment agreed to.
Further Amendments made: In page 35, line 41, at end insert:
"or
(c) in the case of a payment in respect of an office or employment in which the holder's service included foreign service, not being a payment of compensation for loss of office, that the foreign service comprised either—

(i) in any case, three-quarters of the whole period of service down to the relevant date; or

(ii) where the period of service down to the relevant date exceeded ten years, the whole of the last ten years; or

(iii) where the period of service down to the relevant date exceeded twenty years, one-half of that period, including any ten of the last twenty years".

In page 36, line 41, leave out "and".
In line 42, after "office'", insert "and' foreign service'".—[Sir E. Boyle.]

Clause 43.—(NOTICE OF LIABILITY TO TAX.)
The Solicitor-General: I beg to move, in page 41, line 35 to leave out "without reasonable excuse".
This Amendment goes with the following Amendments, which perhaps, Mr. Deputy-Speaker, you will allow me to refer to together in page 42, lines 1 and 5; page 43, line 3; page 50, lines 32 and 42; page 77, lines 5 and 32.
These Amendments are designed to remove a flaw which, on closer scrutiny, has become apparent in Clause 44 (1). The operative words of the subsection are:
"Where any person … has been required, by a notice … to deliver any return … and he fails, without reasonable excuse, to do so within the time limited by the notice … or such further time, if any, as may be allowed by the Commissioners or officer concerned … he shall be liable … to"
the penalties there set out.
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Let us take the case where there has been no extension of time and a failure with reasonable excuse to deliver the information or return within the time limited by the notice, which is generally 30 days, but no reasonable excuse for failure to deliver it thereafter. It is arguable that in such a case the person is not liable to any penalty at all, and, indeed, it would be very difficult to counter such an argument. There must, of course, be many cases where a taxpayer has a reasonable excuse for not making his return within 30 days, and the provision should certainly not give permanent immunity from proceedings. Therefore, it was essential to correct that flaw.
The primary Amendments are those in page 42, line 1 and line 5 and page 50, line 42. The first two consist essentially in leaving out the words "without reasonable excuse" in two places in Clause 44 (1), and the third replaces them by an expanded provision which does not contain the flaw to which I drew attention.
With regard to the Amendment in page 43, line 3, to leave out from "commenced" to the end of line 6, those words are now unnecessary in view of the new subsection (2) added to Clause 60 by the Amendment in page 50, line 42. I think I ought to make it plain that the omission of the words by the Amendment in page 43, line 3, does not take away any protection which the taxpayer has at the moment. Anything that is taken away is amply covered by the new subsection (2) to Clause 60. Equally, the new subsection (2) renders the words "without reasonable excuse" in Clause 43 (3) and the definition of "neglect" in Clause 60 (1) unnecessary, and they are dealt with in the Amendment in page 41, line 35, and the Amendment in page 50, line 32. The remaining Amendments are similar Amendments to the Profits Tax Schedule.
12.15 a.m.
Mr. Houghton: I confess that I had not discovered the flaw in the first few lines on page 42 of the Bill to which the hon. and learned Gentleman has referred. But has he not undertaken rather a comprehensive change in order to remedy that flaw? It is a new form of dealing with failure without reasonable excuse to separate the fault of failure

635
from the extenuating circumstance of "with reasonable excuse".
With the proposed Amendment, Clause 43 (3) will now read:
"If any person fails to give a notice which he is required to give under this section he shall be liable to a penalty not exceeding one hundred pounds".
Clause 44 (1, b) with the proposed Amendment will read:
"fails to furnish any information …"
Then one must look elsewhere to discover what "failure" means.
I wonder if we have reached the stage when there are departmental versions of failure. The version in the Bill as it stands now is whether a person fails without reasonable excuse, but the version of the Ministry of Pensions and National Insurance in a recent Statutory Instrument is whether a person fails without reasonable cause. Ought we not to have a central authority on the question of failure and the excuses which can be given for it? It is a misfortune that the extenuating circumstance is separated from the operative word "failure". That is the only complaint I can make about it.
The Solicitor-General may say that that Amendment in page 50, line 42, puts the whole thing in intelligible form. It deals with the initial failure and with continued failure after time has been allowed by the authorities for compliance. To that extent it is certainly more satisfactory than the original form, though whether it was necessary to give the fuller explanation of "failure without reasonable excuse" is open to doubt.
Reading the authorities on this subject I find it very puzzling indeed, not being a lawyer, to know whether the word "failure" is necessary. Apparently "neglect" is enough. I understand that "neglect" connotes a state of mind of purposeful neglect of an instruction or an obligation or a statutory requirement. It also denotes failure without reasonable excuse. I have no doubt that, if one looked up the law in detail, one would find many authorities on this.
I wonder whether some of the changes made in the Bill have been imperative or whether a certain fastidiousness of draftsmanship has prevailed in the later stages. This seems to be one instance. Though I have no fundamental quarrel with what it is proposed to do, it is a
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weakness in a Statute when the taxpayer reading it cannot see at once what is the extent of his culpability under a particular Clause but has to look elsewhere to find whether, knowing that he has failed to render a return, there is any excuse for it or any circumstances in which his failure may be condoned, or at least not made the subject of penalty.
I content myself with those observations at this late hour. We seem to have made a nightcap of penalties on several occasions whilst dealing with the Bill, and here we are again.
Amendment agreed to.

Clause 44.—(PENALTIES FOR FAILURE TO MAKE CERTAIN RETURNS, ETC.)
Amendments made: In page 42, line 1, leave out from "fails" to second "or" in line 4 and insert:
"to comply with the notice or precept".
In page 42, line 5, leave out "without reasonable excuse".—[The Solicitor-General.]
The Solicitor-General: I beg to move, in page 42, in line 46, at the end to insert:
"and in relation to a person's failure to deliver any other return or statement it does not include tax assessed in the name of a partnership on so much of the profits or gains assessed as falls to be included in the total income of any other person".
This Amendment reduces the higher penalty in Clause 44, subsection (2), on a member of a partnership who fails to render his personal return. Under the Bill as it stands, the whole of the partnership tax assessed after the end of the year following that in which the return form was served is included in the penalty. The Amendment will reduce the partnership tax to be taken into account to the tax appropriate to the partner's own share of the partnership profit.
Amendment agreed to.
Further Amendment made: In page 43, line 3, leave out from "commenced" to end of line 6.—[The Solicitor-General.]

Clause 45.—(PENALTY FOR FRAUDULENTLY MAKING INCORRECT RETURNS, ETC.)
The Solicitor-General: I beg to move, in page 43, line 16, at the end to insert: "or negligently".
This Amendment goes with Amendments 67, 68, 69, 70, 71, 72, 91, 92, 93,

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and 94, and, with your permission, Mr. Speaker, I propose to discuss them together.
This series of Amendments arise from a point made by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) during the Committee stage. He then raised the question of a taxpayer who made a return which contained both an error due to fraud and one which had an error due to negligence, suggesting that such a taxpayer might be liable to both the penalty of £50 plus twice the amount of the underpaid tax under the fraud provisions and a separate penalty of £50 plus once the amount of the underpaid tax under Clause 46 of the Bill, and my right hon. and learned Friend the Attorney-General promised to consider the matter.
I now tell the House that my right hon. and learned Friend has considered it together with the Chancellor, and I do not think it can be said that we can altogether dismiss the possibility which my hon. Friend the Member for Lang-stone suggested. The Amendments now before the House are designed, therefore, to obviate any possibility of such a construction being urged because it would obviously not be what the committee intended. The Amendments look much more extensive than they are. What has been done is in substance to run together the two Clauses relating to fraud and negligence.
The Clause will read like this:
"(1) Where a person fraudulently or negligently—

(a) delivers any incorrect return …or

(b) makes an incorrect return … or

(c) submits to the surveyor or any Commissioners any incorrect accounts … he shall be liable to a penalty not exceeding the aggregate of—

(i) fifty pounds; and

(ii) the amount or, in the case of fraud, twice the amount of the difference specified in subsection (1) of section forty-seven of this Act.

(2) Where a person fraudulently or negligently furnishes, gives, produces or makes any incorrect information, certificate, document … he shall be liable to a penalty not exceeding two hundred and fifty pounds."
Then subsection (3) will read:
"Where any such return, statement …
and so on as appears in Clause 46 (3).
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Those Amendments, as I say, obviate any doubt on the point that my hon. Friend raised, and I think that from the point of view of drafting it makes a distinct improvement in the Bill.
Mr. Powell: I am obliged to my hon. and learned Friend for having met the anxiety which my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) expressed in Committee. It is a cautioning thought to remember that when my hon. Friend mentioned his fears and doubts in Committee the Attorney-General replied:
"I do not see the least likelihood …"
of this thing happening, and
"I do not think there is the slightest possibility …"
of the things which my hon. Friend apprehended. This illustrates the benefit of a locus penitentiae between the Committee and Report stages. However, I would like also to add that I feel sure that the attention to my hon. Friend's point has also resulted in much superior, neater and more convenient drafting of the whole part of this Bill.
Mr. Houghton: I am sorry that the hon. Member for Portsmouth, Langstone (Mr. Stevens) is not here to celebrate his several victories. I read in the newspaper this morning that when the Division bells rang last night he was found wandering in the precincts in his pyjamas. I do not know in what condition he would be if the Division bells rang now. [HON. MEMBERS: "Try it."]
I quarrel more strongly with the Solicitor-General over this Amendment than the previous one because I think this is a lot of rubbish. The hon. Member for Wolverhampton, South-West (Mr. Powell) has just referred to what the Attorney-General said in reply to the hon. Member for Langstone when he raised this matter earlier on 31st May. The Attorney-General said:
"I certainly do not think that the consequences which he"—
that is, the hon. Member for Langstone—
"suggests could arise. First, the offence under Clause 44 is of delivering fraudulently an incorrect return. A person does not become liable to a separate penalty for each incorrect entry in the return."
He went on a little later to say:
"I should have thought that it would be very remarkable to find fraud accompanied by negligence in the same return."

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Then, as the hon. Member for Wolverhampton, South-West has quoted, he said:
"Again, it is a maximum penalty. I do not see the least likelihood of proceedings for negligence and fraud in relation to the same return, and consequently, I do not think that there is the slightest possibility of these penalty provisions being cumulative in respect of the same returns. I will certainly consider the point between now and the Report stage, but I think that there is no ground for my hon. Friend's fears."—[OFFICIAL. REPORT, 31st May, 1960; Vol. 624, c. 1244–5.]
12.30 a.m.
The promise to consider the matter before the Report stage is common form, especially between Ministers and their hon. Friends. It is usually a device to bring the discussion to an end and get on with other business, with which I do not quarrel in the least. Some of the promises are, perhaps, more seriously intended than others.
What I think is to be criticised is that in meeting this very remote possibility, according to the Attorney-General, the Chancellor has now altered, in my view, the rhythm of the structure of this part of the Bill. Certainly, he has put all the commentaries on the penalty Clauses of the Bill awry because all of them have referred to the convenience of the grouping—failure, fraudulently, negligently, and then aiding and abetting. In the Bill as it was drafted, Clause 44 dealt with failure, Clause 45 dealt with fraudulently, and Clause 46 dealt with negligently, and, although there was necessarily much repetition between Clauses 45 and 46, it set matters out separately and clearly, defining each offence in its own grouping. I thought that that was very convenient, and I am sure that the Chancellor and the original draftsman thought the same.
Now, we are asked to telescope Clauses 45 and 46, to combine fraudulently and negligently, and to provide for the alternative penalties for both within the same Clause. Under the Amendments proposed, the main part of the Clause is scrapped altogether. I think this is a pity. It was certainly more convenient and clear before, and, had it been necessary to guard against this remote possibility—this possibility of which there was so little likelihood—surely it could have been done by a proviso to that effect. I do not view with favour this part of the proposals
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which the hon. and learned Gentleman has put before us. It is much too late at night to be vindictive about these matters and call upon my hon. Friends to show their displeasure in the usual way, but I hope that he has noted the strong comments I have felt it necessary to make.
Amendment agreed to.
Further Amendments made: In page 43, line 28, at beginning insert:
"the amount or, in the case of fraud."
In line 30, after "fraudulently," insert or negligently."
In line 34, after "exceeding," insert:
"two hundred and fifty pounds or, in the case of fraud."—[The Solicitor-General.]

Clause 46.—(PENALTY FOR NEGLIGENTLY MAKING INCORRECT RETURNS, ETC.)
Amendment made: In page 43, line 36, leave out from beginning to end of line 10 on page 44.—[The Solicitor-General.]

Clause 47.—(PROVISIONS SUPPLEMENTARY TO SECTIONS 45 AND 46.)
Amendments made: In page 44, line 21, leave out from "forty-five" to second "of" in line 22.
In line 37, leave out "sections forty-five and forty-six "and insert" section forty-five."—[The Solicitor-General.]

Clause 49.—(ASSISTING IN MAKING INCORRECT RETURN, ETC.)
Amendment made: In page 45, line 2, after second "any," insert "return."—[The Solicitor-General.]

Clause 60.—(INTERPRETATION OF PART III.)
Amendments made: In page 50, line 32, leave out "without reasonable excuse."
In page 50, line 42, at end insert:
(2) For the purposes of this Part of this Act, a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the Commissioners or officer concerned may have allowed; and where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased.—[The Solicitor-General.]

Clause 72.—(RELIEF FROM PURCHASE TAX ON IMPORTATION OF CERTAIN GOODS.)
Mr. Barber: I beg to move, in page 63, line 2, to leave out "to the Treasury"
This and the following Amendment are designed to give a measure of flexibility to the administrative machinery for granting relief from Purchase Tax which is provided for in the Clause. They enable the Commissioners of Customs and Excise, to whom Purchase Tax is payable, to accept applications for relief from Purchase Tax on behalf of the Treasury and similarly to accept the belated claims for relief in appropriate cases.
Mr. Houghton: It the Treasury are left out, may we have an assurance that they will be kept out not only in this connection but in many others, too? May I, on a point of order, point out that the word "Treasury" is not on line 2? Ought that to be rectified?
Mr. Jay: The words "to the" are in line 2 and the word "Treasury" is in line 3. Presumably the Amendment is nevertheless valid.
Mr. Barber: It is the usual way of doing it.
Mr. Deputy-Speaker (Major Sir William Anstruther-Gray): It has been moved in the normal form.
Amendment agreed to.
Further Amendment made: In page 63, line 11, leave out "Treasury" and insert "Commissioners".—[Mr. Barber.]

First Schedule.—(APPLICATION OF PART IX OF ACT OF 1952 TO SPIRITS CONSIGNMENT NOTES.)
Amendments made: In page 67, line 31, leave out "and"
In page 67, line 32, at end insert:
and in paragraph (e) after the word with there shall he inserted the words 'or in connection with'"—[Mr. Barber.]

Fourth Schedule.—(RELIEFS IN RESPECT OF TAX UNDER SECTION THIRTY-SIX.)
Sir E. Boyle: I beg to move, in page 72, line 15, to leave out "income tax chargeable under" and insert "tax chargeable by virtue of"
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This should be considered with the Amendment in page 74, line 4, to leave out "amount of that tax" and insert 'tax chargeable by virtue of that section".
These Amendments implement a promise which I gave in Committee on an Amendment moved by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) to make it clear that the reliefs in this Schedule apply, as is intended, to Surtax as well as to Income Tax.
Mr. Powell: It is in contemplating an Amendment of this sort that one realises what a fine thing it is to be a Parliamentary draftsman, for here in this subtle way is achieved the purpose which I have attempted to achieve by the blunt bludgeon of simply putting in the words" including Surtax" I am grateful to my hon. Friend for doing it and for doing it in this elegant fashion.
Sir E. Boyle: By leave of the House, I should like to say that at another time and at a different hour I shall be glad to explain to my hon. Friend how elegantly these Amendments perform the task which he had in mind.
Mr. Powell: Indeed, I understand.
Mr. Jay: However elegant it may be, it seems that as many words were necessary as in the Amendment of the hon. Member for Wolverhampton, South-West (Mr. Powell).
Amendment agreed to.
Sir E. Boyle: I beg to move, in page 72, line 22, after "charge" to insert "against".
This is a purely drafting Amendment. The word "against" was inadvertently omitted in the printing of the Bill.
Amendment agreed to.
Sir E. Boyle: I beg to move, in page 73, line 39, to leave out from "date" to the end of line 46.
I think that it might be for the convenience of the House to take Amendments 84 and 88 together. They are purely consequential on the Amendments which we discussed earlier to Clause 37.
Amendment agreed to.
Further Amendment made: In page 74, line 4, leave out "amount of that tax" and insert:
"tax chargeable by virtue of that section".— [Sir E. Boyle.]
Sir E. Boyle: I beg to move, in page 74, line 24, at the end to insert:
8. Where the income of the holder or past holder of the office or employment for the year of assessment of which the payment is treated as income includes income, tax on which he is entitled to charge against any other person, or to deduct, retain or satisfy out of any payment which he is liable to make to any other person, the amounts referred to in sub-paragraphs (a) to (c) of paragraph 7 of this Schedule shall be calculated as if that tax were not chargeable in respect of that income.
This Amendment has a certain interest for two reasons. I was going to say that the first reason was that it is the first substantive Amendment to the Fourth Schedule without the advantage of the hon. Member for Glasgow, Craigton (Mr. Millan), but that is no longer true. It is interesting to note that it was a point raised in Committee by my hon. Friend the Member for Shipley Mr. Hirst). There is a case where that hon. Member and my right hon. Friend found themselves in close agreement.
The point is that paragraph 7 of the Fourth Schedule as drafted gives insufficient relief in certain types of case where a taxpayer makes a payment from which he is entitled to deduct tax. The type of case in which paragraph 7, as previously drafted, gives a wrong result is where the annual payment made by the taxpayer exceeds his ordinary income for the year, that is to say, his ordinary income apart from salary which is disregarded in giving relief. In such a case tax at the full Standard Rate might be charged several times on the part of the income used to make the annual payment.
The Amendment puts the matter right by providing that the computation of the relief under paragraph 7 is to be made on the basis of ignoring tax which is used to frank charges. The effect will be that the taxpayer who makes a payment from which he is entitled to deduct tax will be treated in the same way as the taxpayer who makes a similar payment but who is not entitled to deduct tax.
The Amendment actually provides that the computation of relief is to be made on the basis of ignoring tax which the taxpayer is entitled to deduct from someone else. I do not think that the Amendment can be said to widen the scope of the Schedule, but it certainly removes an injustice which would remain if we left it unamended.
Amendment agreed to.
12.45 a.m.
Sir E. Boyle: I beg to move, in page 74, in line 40, to leave out from "than" to end of line 41 and to insert:
"one complete year, or exceeds an exact number of years, it shall be treated for the purposes of this paragraph as one complete year or as the next higher number of complete years, as the case may be".
This Amendment gives effect to the intentions of Amendments put down by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) on the Committee stage but which were not discussed. Its effect is slightly to extend the "top-slicing" relief given under paragraph 7 of the Schedule. Where a payment represents compensation for loss of office, as the House is aware, a claim can be made—"top-slicing," as we say—by reference to the holder's number of years of unexpired service, defined in the Schedule as
"… the number of complete years taken into account in calculating the amount of the payment, being years for which the holder of the office or employment would have been entitled …"
to retain it.
If the period in question is two years and six months, the original intention of the Schedule was that the figure two would be taken for "top-slicing" purposes. The object of this Amendment is to round up rather than round down in these cases. In the example we are taking it would be three rather than two years. Where the period is just less than a complete number of years the Bill, in its original form, was somewhat ungenerous in taking only complete years into account. Although this matter is one of judgment, we felt it was a reasonable point to suggest that in these cases we should round up rather than round down, and that is the purpose of this Amendment.
Amendment agreed to.
Mr. Deputy-Speaker (Sir Gordon Touche): The next Amendment is in page 76, line 10. The Question is—
Mr. Diamond: On a point of order, Mr. Deputy-Speaker. I apologise for putting this to you, but do I understand that discussion on the Amendment to page 76, line 10, has been exhausted?
Mr. Deputy-Speaker: Yes, the hon. Gentleman is correct. The House was invited to discuss this Amendment with

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a previous Amendment and it was agreed so to do. I call it now for decision.
Amendment made: In page 76, line 10, at end insert:
15. In this Schedule "foreign service", in relation to an office or employment, means service such that tax was not chargeable in respect of the emoluments of the office or employment—

(a) in the case of the year 1956–57 or any subsequent year, under Case I of Schedule E;

(b) in the case of any preceding year of assessment, under Schedule E.—[Sir E. Boyle.]

Fifth Schedule.—(PROVISIONS REFERRED TO IN SECTIONS FORTY-FOUR, FORTY- FIVE AND FORTY-SIX.)
Mr. Houghton: I beg to move, in page 76, line 22, column 3, at the end to insert Section 170 (2).
Mr. Deputy-Speaker: It might be convenient to discuss with this Amendment the other Amendment in the name of the hon. Member for Sowerby (Mr. Houghton), to the Seventh Schedule, in page 83, line 18, column 3, at end insert:
In section one hundred and seventy, in subsection (3) the words from "and if" to the end of the subsection.
Mr. Houghton: That would be convenient, Mr. Deputy-Speaker. It is consequential on the one I am moving. This is a relatively small point, but since we are doing a cleaning-up job we might as well do it as well as we can. Much earlier in our discussion of the Bill, through the courtesy of the Chancellor of the Exchequer, I had a list of all the penalties which it was proposed to leave unchanged. The one mentioned here was excluded from the new code of penalties into which the Chancellor rightly proposes to bring as many of the existing penalty Clauses as possible.
Section 170 (2) of the Income Tax Act, 1952, deals with certain returns which have to be made of interest not wholly paid out of taxed income, and there is a penalty prescribed in Section 170 (3) for failure to deliver an account of interest not wholly paid out of taxed income, the penalty being £100. That failure can properly be brought within the provisions of Clause 44 (1, b) and it would take its place, therefore, in column 3 of the Fifth Schedule. The penalty for failure under my proposals would be £50 for the initial failure plus
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£10 a day on continued failure, subject to the provisions of the Clause regarding the authority for the imposition of a penalty.
This will bring into the new code of penalties something which should not be left out. Many others are being left out, but it would be out of order for me to pursue that matter now, although I hope that we shall not give up the quest for the elimination of all unnecessary stragglers throughout the Act which could be brought within the new code, or done away with altogether—some of them are survivals of almost a bygone age and can now be dispensed with completely. This clearly cannot be left out and should be brought into the new code. With others which are left out the penalties are very much heavier than anything prescribed in the new code, so clearly they must remain there.
I hope that this Amendment will be rewarded. It represents our work on and study of the penalty Clauses. Throughout our debates on the Bill I have gained only one point, and that was to double the penalty for failure to notify liability to Income Tax. That is nothing to be proud of and nothing to write home about, but still something. Bearing in mind the string of medals and trophies which hon. Members opposite have received in the course of these debates, I feel a bit deprived, a bit bereft, of proper reward for the work I have done. Here is an opportunity, in the last Amendment to be discussed, at the end of Report stage, after all our deliberations, for the Government to accept an Amendment from this side of the House. If it is accepted, I will count that as a great achievement.
The Solicitor-General: There are four reasons why this Amendment should be accepted. The first, referred to by the hon. Member for Sowerby (Mr. Houghton) as a reward which he expects for all the hard work he has done on the penalty Clauses. The second is that he feels his score should be doubled. The third is that he will feel himself otherwise a deprived person, and the fourth and perhaps most important is that his reasoning for including this penalty in the revised penalties in the Bill is quite conclusive. I therefore advise the House to accept the Amendment.
Amendment agreed to.

Sixth Schedule.—(APPLICATION OF PART III TO THE PROFITS TAX.)
Amendments made: In page 77, line 5, leave out from "and" to "he" in line 8 and insert:
"fails to comply with the notice";.
In line 32, leave out from "commenced" to end of line 35.
In line 36, after "fraudulently" insert "or negligently".
In line 42, at beginning insert:
"the amount or in the case of fraud".
In line 44, leave out from beginning to end of line 2 on page 78.
In page 78, line 10, leave out "paragraphs 4 and 5" and insert "paragraph 4".—[Mr. Amory.]

Seventh Schedule.—(ENACTMENTS REPEALED.)
Mr. Barber: I beg to move, in page 81, line 25, at the end to insert:

6 & 7 Eliz. 2. c. 6

The Import Duties Act, 1958

In section six, in subsection (4), the words from "of Customs" to "Commissioners')".

This is the last Amendment that arises for discussion, and it is purely consequential
Amendment agreed to.
Further Amendment made: In page 83, line 18, column 3, at end insert:
In section one hundred and seventy, in subsection (3) the words from "and if" to the end of the subsection.—[Mr. Houghton.]
Bill to be read the Third time this day and to be printed. [Bill 133.]

ANTI-DUMPING (SODIUM CHLORATE)
12.57 a.m.
The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers): I beg to move,
That the Anti-Dumping (No. 1) Order, 1960 (S.I., 1960, No. 959), dated 1st June, 1960, a copy of which was laid before this House on 8th June, be approved.
This Order imposes an anti-dumping duty of £19 per ton on sodium chlorate originating in the Soviet Zone of Germany. Sodium chlorate is mainly used as a weed-killer. The United Kingdom manufacturer applied to the Board of Trade last August for a duty under the Customs Duties (Dumping and Subsidies) Act, 1957. The Board followed its normal practice of satisfying itself that dumping was actually taking place, and that it was causing, or threatening, material injury to the United Kingdom industry. We made a public announcement last December—once we were satisfied that there was a prima facie case on both counts—inviting representations from interested parties. These representations were carefully considered, along with the evidence from our own investigations.
As a result, the Board reached the conclusion that there was dumping; that it was causing material injury to the United Kingdom manufacturers, and that an anti-dumping duty would be in the national interest. The Customs Duties (Dumping and Subsidies) Act defines dumping as selling at an export price below the fair market price in the country of origin. Ordinarily, the "fair market price" is taken as the selling price on the domestic market in the exporting country. In the present case, however, we had reason to believe that the price in the Soviet Zone of Germany was an arbitrary one. There is, moreover, no free rate of exchange for the East German currency by which the domestic price could be related to the export price, which is quoted in sterling by the East German exporter.
We have therefore used the power in Section 7 (3) of the Act, which allows the Board of Trade to determine the "fair market price" by reference to the price charged by the exporting country for sales in any other export maket. We

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have obtained information about East German prices in several countries in Western Europe and elsewhere in the free world, and it is clear that sodium chlorate has been exported to the United Kingdom at prices substantially lower than those which the East German exporter has been charging elsewhere. We have established the margin of dumping by reference to a figure which seems fairly typical of the price in other markets.
So far as material injury is concerned we are satisfied that sodium chlorate from the Soviet Zone of Germany has been selling here at prices substantially below the United Kingdom manufacturer's costs of production, and that he has been forced to sell at a loss in order to avoid losing too big a share of the market. Even so, East German material has been gaining an increasing share of the market at the expense of the United Kingdom producer and of other traditional exporters to this country. We therefore considered that these imports from the Soviet Zone of Germany represented unfair competition and I hope that the House will agree that this Order is justified.
Question put and agreed to.
Resolved,
That the Anti-Dumping (No. 1) Order, 1960 (S.1., 1960, No. 959), dated 1st June, 1960, a copy of which was laid before this House on 8th June, be approved.

HARDWOOD AND SOFTWOOD (IMPORT)
1.2 a.m.
The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers): I beg to move,
That the Monopolies and Restrictive Practices (Imported Hardwood and Softwood Timber) Order, 1960, a draft of which was laid before this House on 21st June, be approved.
The House will recall that the Board of Trade has power under the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, to refer the supply of goods of any description to the Monopolies Commission for inquiry and report. In the exercise of that power, the Board, on 8th October, 1951, referred to the Commission for investigation and report the supply of imported hardwood, imported softwood and imported plywood timber.
On 23rd July, 1953, the Commission delivered its Report and in it objected to certain exclusive selling arrangements between importers and agents in these sections of the trade. By these arrangements importers in the softwood, hardwood and plywood sections undertook to buy only from agents on approved lists—there was a separate list for each section—and the agents, for their part, undertook to sell only to importers on similar lists.
The Commission found that traders excluded from the lists had little opportunity to deal in these main classes of timber and that the system tended to create an inflexible pattern of trade. It concluded that the agreements and undertakings operated against the public interest, that they should be abrogated and should not be replaced by other arrangements or undertakings having similar effects. As appears from the recitals to the proposed Order, an undertaking or assurance was given in March, 1954, that these recommendations would be carried into effect. That undertaking was given to the Ministry of Materials through the Timber Trade Federation, the principal association of agents, importers and merchants.
Shortly thereafter the Board of Trade took over responsibility for the trade from the Ministry and an assurance was given to the Board that circulation by

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the Timber Trade Federation of up-to-date lists of agents and importers did not conflict with these undertakings. However, between 1954 and 1956 several complaints were made by timber merchants and users that they could not place orders direct with agents but only through importers. As a result, a reference to the Commission was made by the Board under Section 12 of the Act, which enables the Monopolies Commission to investigate whether or not parties have complied with its recommendation.
This second reference was made on 13th February, 1957, and on 24th July, 1958, the Commission reported that the trade had in fact carried out their undertakings to abrogate their old agreements, but that the hardwood and softwood section of the trade had acted contrary to the second part of the recommendation in making fresh arrangements having a similar effect. On that Report, laid before the House on 31st July, 1958, the trade were approached and the Timber Trade Federation assured me that there had been a genuine misunderstanding by their members as to the purport of the recommendation in 1953 and so of their own undertakings, and this assurance I entirely accept.
The Board has accepted that report and, under the authority of its powers under Section 10 (1) of the 1948 Act, as having effect by Section 30 of the Restrictive Practices Act, 1956, has drafted the present Order, for which I now seek the approval of the House. The Order makes unlawful these exclusive selling agreements or arrangements with similar effects, relating to the supply of imported hardwood or imported softwood timber. The House will appreciate that imported plywood is not covered by the Order since the Commission found that that section of the trade had abrogated and not replaced the arrangements which were found in 1953 to be against the public interest.
The Order prevents two or more firms from agreeing or arranging to operate the kind of exclusive dealing arrangements to which the Commission objected. It does not, of course, prohibit the exercise of commercial judgment in deciding with whom business is conducted. The terms of the Order are brief. Article 2 (1) is the general provision making unlawful the making or carrying out of
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agreements or arrangements having effects similar to those condemned. Article 2 (2) deals with agreements or arrangements already made and merely prohibits their carrying out.
The proviso protects such parts of these which would continue to be lawful if contained in a separate agreement. Article 3 is the usual provision exempting agreements between interconnected bodies corporate or partnerships. Enforcement would be by civil suit at the instance of the Board of Trade or other persons aggrieved. The House will be aware that the Order requires an affirmative Resolution of each House of Parliament to come into operation on 8th August, 1960, a convenient time at the end of the present Session.
Some may ask why there has been so much delay. The issue facing the Board was a complicated one. It could be resolved either by way of an Order or by some less formal method, such as further undertakings by the Trade. There were of necessity prolonged discussions with the trade and, as a result of these, we were able to satisfy ourselves that the best way to proceed was by way of an Order. A happy result of this is that the trade recognises the necessity for this step and that we can count on its co-operation. I am now firmly convinced that the Order will not be broken. It has been introduced to make the matter clear and to avoid further misunderstanding. Should, however, further complaint arise, the matter, if reported to the Board, will be looked into as to whether in our judgment it constitutes evidence of breach. Supposing it to do so, the Board would seek compliance with the Order by way of an injunction to preclude the offending agreement or arrangement being carried into effect under Section 11 of the 1948 Act. It is, of course, open to any person to bring civil proceedings for enforcement of the Order. I would wish, however, to reiterate that there is, and can be, nothing done to make any unwilling seller dispose of his goods where he does not desire to do so.
I hope the House will agree that we have taken the proper course in the light of the reports and recommendations of the Monopolies Commission and I ask it to approve the Order.
1.6 a.m.
Mr. Douglas Jay: I am sure the Board of Trade is quite

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right to make this Order. Indeed, I congratulate this Government on having at last made an Order under the 1948 Monopolies Act. This is the first Order they have made in their nine years under the Act. I believe the Labour Government made one Order relating to dental goods in the short time it was possible to do so before the election in 1951. We have at last reached one Order introduced by the present Government, if I am correct.
The Parliamentary Secretary said that there might be some complaints of delay, but I did not think he gave a very effective answer to that objection. It is a little sobering to look at the time sequence which is ending tonight—or, to be strictly accurate, not until 8th August, 1960. I think the Parliamentary Secretary said the original reference of this industry to the Monopolies Commission was on 8th October, 1951. That is when it all started; a rather interesting date. The next thing that happened was that we had the first Report of the Monopolies Commission in July, 1953, nearly a year later, and in March, 1954, an undertaking was given by representatives of the industry to the Board of Trade. It subsequently transpired that this was not being carried out by certain people and a further report was made by the Commission in July, 1958. Tonight we are approving an Order to come into operation on 8th August, 1960. Even if we have reached the final right results and even though there may have been great difficulties and—as I entirely accept from the Parliamentary Secretary—prolonged discussions, this is a somewhat solemn and stately method of legislation and action. I hope it will not take quite so long on another occasion.
I was a little puzzled by what the Parliamentary Secretary called a proviso in paragraph 2. He purported to explain what this meant, but I think he more or less repeated the words in the Order, which says:
"Provided that the said paragraph should not make it unlawful to carry out any provisions contained in such agreements or arrangements aforesaid, being provisions the carrying out of which would, if they were contained in a separate agreement or arrangement, not be unlawful under the paragraph."
Certainly at this time of night—it was the case even when I looked at it earlier—I am not entirely clear what the effect
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of the proviso is and how far it makes things not unlawful—as it apparently does—which would otherwise have been unlawful under the Order. Perhaps the Parliamentary Secretary can help us a little further there.
We ought also to be clear about the relation of this Order to the general procedure now in force under the Restrictive Practices Act. We are now— this is the novelty of it—making an Order under the 1948 Act which originally set up the Monopolies Commission. Since then we have had the 1956 Act, which established the parallel and simultaneous, though entirely different, procedure by which certain arrangements and agreements—the same words as we have used here—of a restrictive character have to be registered with the Registrar and at the instance of the Registrar they have to go before the Restrictive Practices Court, and, as the last stage of that process, the Court can declare them to be illegal and make an order carrying out its decision
What I understand we are doing tonight is making an Order which will, in effect, say that any arrangements or agreements of this kind must not be made at all. We are going much further than if we said that we could say under the other Act that any agreements, if there are any, have to he registered and come before the Court. We are saying that no such arrangements or agreements can lawfully be made at all. But I take it that these arrangements and agreements that we are discussing are of such a character that, were it not for this Order, they would in any case have to be registered under the 1956 Act—that they are that type of arrangements and agreements.
I ask the Parliamentary Secretary this only in order that we may be clear how these two procedures relate to one another. Apart from that, as I have said, I think he is perfectly right to make the Order, and I only hope that if there is another case the process will not be quite so long drawn out as it has been this time.
Sir Harry Legge-Bourke: I imagine that the whole object of the Monopolies Commission was to ensure that the interests of the consumer were properly protected. The one thing that we have not been told—and it is a matter of some importance—is what effect the

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Order is likely to have on the price to the eventual consumer.
1.12 a.m.
Mr. J. Rodgers: I am grateful to the right hon. Member for Battersea, North (Mr. Jay) for the welcome which he has given to the order.
To deal with his second point first, the drill now under the Order is that we should apply to the Court of Chancery for an injunction to prevent an arrangement or agreement which the Order specifies to be unlawful from being carried out. We should support this by a body of evidence which tended to show that such an arrangement or agreement had been arrived at. If the injunction were obtained and this practice still continued, we should apply for an order for committal for contempt of court, the evidence being similar to that in the previous application to the Court of Chancery.
On the first point about the proviso, as I called it, the exact words were:
"The proviso protects such parts of these which would continue to be lawful if contained in a separate agreement."
That was the object. That refers to Article 2 (2) which dealt with agreements or arrangements which are already made and merely prevents their being carried out.
On the point made by my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), I am afraid that I am not in a position to state what effect the Order might have on the price structure to the consumers, but I do not anticipate
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that there will be any change here at all. I do not think that the price will go either up or down as a result of the order.
Mr. Jay: In order to help the hon. Member, would it not be reasonable to assume that the Order could not have the effect of making the price higher than it would otherwise have been? It is an Order which will prevent restrictions on competition. Can we not at least assume that the price cannot be higher as a result of the Order, even if not lower?
Sir Hendrie Oakshott: Before my hon. Friend replies, might I say, having had many years' experience in it, that the timber trade is about the most competitive trade that one could find in this country? Therefore, I cannot imagine that any arrangements like an Order of this sort would have the slightest effect on the price either way. The trade will still remain competitive whatever is done.
Mr. Rodgers: I agree with the right hon. Gentleman that certainly the Order will ensure that the price will not rise. One hopes that it will go down. I agree with my hon. Friend the Member for Bebington (Sir H. Oakshott) that there is great competition in the industry, and therefore the Order will probably not have much effect on prices.
Question put and agreed to.
Resolved,
That the Monopolies and Restrictive Practices (Imported Hardwood and Softwood Timber) Order, 1960, a draft of which was laid before this House on 21st June, be approved.

COASTAL RESORTS (LIFE- SAVING FLOATS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Whitelaw.]
1.15 a.m.
Mr. John Cordle: In the short time at my disposal at this late hour, I want to ask the Minister to examine the possibilities of using a new method of saving life by providing beach or bathing floats around our coasts and inland waters. These floats can be seen in numbers of seaside resorts and are very simple in construction, namely, two ten-foot water-tight floats fixed together by supporting members or struts which provide a seat and footrest for the user. The means of propulsion is by a double-bladed hand paddle. I believe that these floats were first introduced in our resorts as long ago as 1930, becoming a popular pastime for holiday makers to hire at a small cost of 2s. a half-hour or so.
One of my constituents from Mudeford, a Mr. Kenneth Derham, a gallant and brave man who at this year's annual meeting of the Royal National Lifeboat Institution received the silver medal for rescuing two people off shore at Avonbeach, Mudeford, has brought to my attention this simple but practical means of saving life. During recent talks I have had with Mr. Derham I have gleaned from him that at Avon-beach over the last 25 years more than 50 people have been saved by him using these floats.
In Part I of the Medical Tables issued by the Stationery Office, the figures quoted by the Registrar of those who lost their lives by accidental drowning and submersion in this country in 1958 were 695 males and 220 females. In this respect it was recently stated in a Question in the House that in 1954 drowning was the third highest cause of loss of life in this country.
At this time of year when more and more people are going on holidays by the sea, this toll of life will increase unless better means are found of rescue. The leader in the Daily Express recently said:
"Another 1,000 lives will be lost this year unless more people can swim".
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Fundamentally that is the basic cause why so many lives are lost. If every child at our State schools were taught to swim and similarly taught life saving and artificial respiration, this problem would be greatly lessened. It is sad to think that the majority of our swimming pools are used as such only during the summer months and turned into dance halls in the winter. There must be more facilities for our children to learn to swim.
The beach float method of rescue commends itself simply because it is quick to put into the water, quick in the water, simple to use, and well suited to handle persons in the water. The great advantage in this respect is that the float is no doubt on the water line and it is comparatively easy to roll a person on to it. Furthermore, it can be used in almost any weather, and another of its commendable attributes is that anybody can use it.
Mr. Speaker: I do not want to interrupt the hon. Gentleman unnecessarily, but he must satisfy my ignorance about where the Ministerial responsibility lies in this. Perhaps the Minister can help me. I have to restrain his observations to something for which there is Ministerial responsibility.
The Joint Under-Secretary of State to the Home Department (Mr. David Renton): My hon. Friend was courteous enough to give me very full notice of what he was going to propose, and this matter touches upon the responsibility of several other Departments; but the reason why I am replying is that I understand he will make the suggestion that a responsibility should be placed on the police forces.
Mr. Speaker: Then we must see what happens.
Mr. Cordle: I was about to say, Mr. Speaker, that anyone can use the float. It is not necessary, in any sense of the word, to be an experienced seaman to be in control of the float. The maintenance of it is practically nil and it can be mass-produced in the shortest possible time at a very small cost. Perhaps I should say at this stage that I have no financial interest whatsoever in the production or manufacture of such a float.
When people who want to bathe in safety are not properly supervised, then

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I say that those responsible are failing in their duty. Often the English trait shows itself when families find an out-of-the-way cove all to themselves and they put themselves out of the way of safety measures. Nothing can be done for them, but those who use the main beaches and who want to bathe in safety should, in my opinion, have more done for them. The seaside resorts want the visitor's money, and they should provide a measure of bathing safety.
We know that at vulnerable points the local authority provides a life-belt and a line; but is this enough? If beach floats were made available on all public beaches under the supervision of a lifeguard, the police, or a local authority, much would be done to save life. In this connection, it would greatly facilitate their use if a public telephone box was placed on each beach from where urgent messages could be sent, similar to those on the M.1 motorway. At the moment, experience has shown that when there is an emergency, often enough it has been many minutes before messages have been sent, and then by a private subscriber some distance away. When there is an emergency, in nine cases out of ten the public dial 999, and the chances are that if more telephones are provided many more lives might be saved.
In cases of small capsized sailing boats, the drifting offshore of rubber dinghies, tyres, and mattresses, and the like, beach floats would be a certain and speedy method of rescue. It is a tragic fact that 68 boys and 30 girls were drowned last year because insufficient facilities for rescue were available. A young married woman, two or three weeks ago was lying on an air mattress off the east coast when she was blown out to sea. Two hours later the mattress was found, but the woman was missing. Had a float been to hand a life would have been saved.
I should like to make the additional suggestion, which I believe to be a practical one, that the police forces and the local authorities should be equipped with these life-saving floats, which could easily be carried on the top of a vehicle or on a trailer attached to a car. In an emergency, it could be taken to the nearest point of the coast and paddled
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out to the casualty. Numbers of people throughout the country are deeply concerned over the lack of inshore rescue facilities, and I hope that the Minister will investigate the matter even before the present holiday season is over.
1.16 a.m.
The Joint Under-Secretary of State for the Home Department (Mr. David Renton): My hon. Friend the Member for Bournemouth, East and Christchurch (Mr. Cordle), in his most valuable and well-informed speech, has made some constructive proposals which, as I pointed out earlier might be the case, touched upon the responsibilities of several Departments.
For example, the Minister of Housing and Local Government has certain responsibilities with regard to the powers possessed by local authorities in this matter. The Ministry of Transport is responsible for Her Majesty's Coast Guard, which functions primarily as a life-saving organisation, although with certain limitations which I shall mention. Then, so far as the use of telephones might be considered essential, perhaps the responsibility of the Postmaster-General might be engaged.
I am replying to this debate because my hon. Friend has suggested that the police forces have a part to play and, although my right hon. Friend the Home Secretary is not answerable in detail for what may be done by any particular police force, he is, as I understand it, answerable to the House for the powers which the police forces possess.
I endorse my hon. Friend's tribute to the chivalrous and successful life-saving efforts of his constituent, Mr. Derham of Mudeford. His work with the paddle boats is a shining example. We are grateful to my hon. Friend for drawing attention to this important and interesting subject, and we certainly share his anxiety about the loss of life by drowning. Notwithstanding the persuasive tone of his speech, I must, however—and I know this will disappoint him—firmly reject the suggestion that the police should undertake any general responsibility for the rescue of bathers, boaters or yachtsmen in difficulties.
The primary task of the police forces is to maintain and preserve law and order, to prevent and detect crime and

661
to keep our roads and streets clear for traffic. They carry out these vital duties under considerable difficulties today due to the crime wave, the ever-increasing numbers of vehicles on the roads and the shortage in the ranks of the police themselves. We ought not to add further duties which would distract the police from their main tasks.
So far as I have been able to trace, it has never before been suggested that the police have any general responsibility for life saving, and I am sure that it would not be right to place this new responsibility upon them now. It is doubtful whether, along with all their other duties, they could effectively discharge such a responsibility if it were placed or them. It is just not possible for them always to be on the spot soon enough whenever the need for a rescue may arise.
I am glad to point out, however, that the nature of police training is such that any officer who is on the spot is likely to be able to help when someone is in difficulties. Certainly they always do their best to do so; there are many instances of gallant behaviour by police officers, and I am sure the House would wish to pay a tribute to them. During their training, police officers are given opportunity to become efficient swimmers and life savers, and the keenness with which they train in first aid, including artificial respiration, is well known. Ability to swim or capacity for learning to swim is not a condition of recruitment to the police, but all policemen who can swim would certainly do what they could to save a man from drowning if they happened to be there or were able to get there.
Standing at this Box, I can answer only in a general way for my right hon. Friend's views as to the powers which the police forces have or should have, but perhaps I may mention that the local authorities have power under the Public Health Act to provide life-saving appliances where they think fit. Attention was drawn to this responsibility in a Question to my right hon. Friend the Minister of Housing and Local Government on 23rd June last year. In reply, the then Parliamentary Secretary to the Ministry said that he did not think that
662
there was a case for amending the powers of local authorities with regard to providing life-saving appliances, but he was sure that the authorities were well aware of their responsibilities.
Her Majesty's coast guards have an interest when boats capsize, and the coast guards are frequently called upon to use life-saving equipment provided for the rescue of ship-wrecked mariners, and they use that equipment to help bathers and others who are cut off by the tide on the cliffs or who otherwise find themselves in difficulties. The coast guards are able to call out the nearest lifeboat if there is a chance of its being able to help. The gallant services of lifeboat crews are well known, not only in attending big ships in distress but in rescuing people in the smallest craft, even children carried out to sea in dinghies.
Life saving at the seaside and on our rivers has traditionally been left to the care of local authorities and voluntary organisations, and they certainly do valuable work. The Royal Society for the Prevention of Accidents, the St. John Ambulance Brigade and the Royal Lifesaving, Society are at present conducting a water safety campaign, and this should be of great value in drawing the attention of the public to the need for commonsense safety precautions. In addition, for some time now the St. John Ambulance Brigade has been arranging what it calls a "Save the Life" week in various places throughout the country in which special emphasis is laid on the value of artificial respiration and first aid.
Finally, I want to emphasise, particularly with regard to children, that this is a family and individual responsibility. Like my hon. Friend, I speak as a father of young children who takes his children to the seaside every year. The fact that public authorities and voluntary organisations are doing useful work in this matter does not exempt the individual from taking reasonable precautions to safeguard not only his own life and his children's lives but also those lives which may be endangered if rescue has to be undertaken in difficult circumstances.
I hope that the publicity which may be given to this matter as a result of my hon. Friend's initiative tonight will help to prevent reckless and unnecessary hazarding of human life. He has made

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various definite and constructive suggestions which could play a valuable part in saving life. I am sure that all concerned will study them carefully. We are grateful to my hon. Friend, and I propose to invite the attention of my colleagues in the other Departments concerned to what he has said in this
664
debate. The voluntary societies will, I am sure, be particularly glad to consider the paddle float and other methods of rescue to which my hon. Friend has so wisely drawn attention.
Question put and agreed to.
Adjourned accordingly at twenty-five minutes to Two o'clock.

EMPLOYMENT
  Bridgend, Maesteg, Ogmore Vale and Pontycymmer
  Bridgend, Maesteg, Ogmore Vale and Pontycymmer
  Cowdenbeath
  Cowdenbeath
  Building Workers, Scotland
  Building Workers, Scotland
  School-leavers, Scotland
  School-leavers, Scotland
ROYAL NAVY
  H.M.S. "Surprise"
  H.M.S. "Surprise"
BRITISH ARMY
  Houses, Kirkby (Disposal)
  Houses, Kirkby (Disposal)
POST OFFICE
  Policy
  Policy
  Letters, Parcels and Telegrams (Profits and Losses)
  Letters, Parcels and Telegrams (Profits and Losses)
  Space Satellites
  Space Satellites
WIRELESS AND TELEVISION
  East Devon
  East Devon
ROYAL AIR FORCE
  Skybolt
  Skybolt
  Recruiting
  Recruiting
  Cyprus Bases
  Cyprus Bases
  United States Forces, United Kingdom
  United States Forces, United Kingdom
ROADS
  Motorways (Telephone Boxes)
  Motorways (Telephone Boxes)
  Development Proposals (Models)
  Development Proposals (Models)
  Great West Road
  Great West Road
  M.1 (Bridges)
  M.1 (Bridges)
  Selby By-pass
  Selby By-pass
  Tyne Tunnel
  Tyne Tunnel
  Bath Road, Cranford (Subways)
  Bath Road, Cranford (Subways)
  Kingston By-pass (Fly-over)
  Kingston By-pass (Fly-over)
  Birmingham-Preston Motorway (Lancashire Section)
  Birmingham-Preston Motorway (Lancashire Section)
  Pedestrian Subways
  Pedestrian Subways
  Severn Bridge
  Severn Bridge
SHIPPING
  Pontoon Dock Facilities, Aberdeen
  Pontoon Dock Facilities, Aberdeen
MINISTRY OF DEFENCE
  Expenditure
  Expenditure
  Blue Steel
  Blue Steel
HOME DEPARTMENT
  Coloured Children
  Coloured Children
MEDICAL RESEARCH
  Diesel Fumes
  Diesel Fumes
MINISTRY OF POWER
  Oil Pipelines
  Oil Pipelines
SCOTLAND
  Doctors' Prescriptions
  Doctors' Prescriptions
TRADE AND COMMERCE
  Council of Europe (Wines and Spirits)
  Council of Europe (Wines and Spirits)

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of London

NORTH SEA HERRING FISHERIES
2.35 p.m.
LORD BOOTHBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they have considered the suggestion in the Annual Report of the Herring Industry Board for 1959 that there may be a causal connection between the collapse of the East Anglian fishing and the intensive killing of herring by large German trawlers on the Fladen Ground; and whether it is proposed to make any representations to the Government of the West German Republic on this subject.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): My Lords, Her Majesty's Government have noted the suggestion to which the noble Lord refers. While there is some evidence that trawling has been a contributory factor to the changes which have taken place in the East Anglian herring fishery in recent years, the extent of its influence, together with that of other possible causes, needs further investigation. Her Majesty's Government will continue actively to promote the scientific study of the herring fisheries, through the International Council for the Exploration of the Sea and otherwise, and will not hesitate to urge upon any other Governments concerned at the appropriate stage any conservation measures which scientific evidence may clearly show to be necessary. Her Majesty's Government do not, however, consider that they would be justified at
1128
this stage in making representations to the Federal German Government as the noble Lord suggests.
LORD BOOTHBY: My Lords, while thanking the noble Earl for his not very helpful reply, may I ask him whether he realises the great anxiety that is being caused by the virtual disappearance of the herring from the Southern part of the North Sea for the first time since the reign of Henry VIII? Many fishermen believe that this is due to the intensive commercial fishing that has taken place since the war—the killing of immature fish for conversion to meal and oil by trawl nets which have raked the spawning grounds—for there was no scarcity when the principal method of catching herring was the drift net. I should like to ask the noble Earl whether he thinks it is in the interest of any country fringing the North Sea that this once great industry should die, as it now gives every appearance of doing, and whether Her Majesty's Government would give consideration to summoning, as a matter of urgency, an international conference of experts from the countries directly concerned—namely, ourselves, Norway, Denmark, West Germany, the Netherlands, Belgium and France—to consider what joint action can, and should, be taken to save this industry before it is too late.
EARL WALDEGRAVE: My Lords, I am well aware of the anxiety the noble Lord has expressed about this industry, but, though I will bring his suggestion of an international conference to my right honourable friend's attention, I rather doubt whether that is the immediate next step that we ought to be taking. Surely we ought to be relying on the North-East Atlantic Fisheries Convention that we signed last year. It will not be possible to bring that Convention into force until we have ratification from, I think, seven nations. The Republic of West Germany have not yet ratified that Treaty. If the noble Lord, or anybody else, can do anything to get that North-East Atlantic Fisheries Convention ratified, as this country has ratified it, by the other signatory Governments, I think that is the first step towards getting moving on the conservation of the herring in the North Sea.
LORD BOOTHBY: My Lords, I will do my best, if the noble Earl will do his.
LORD SALTOUN: My Lords, may I ask the noble Lord whether I am rightly informed when I am told that modern methods of taking fish, with surface fishing, mid-water fishing and deep-water fishing, will enable a properly equipped fleet to take fish from the Atlantic from Cape Farewell to Gibraltar, and, if that is so, whether it would not be worth the Government's while to consider restoring the great breeding grounds that we used to possess in the Minches and the Moray Firth?
EARL WALDEGRAVE: My Lords, I am afraid that I do not know whether the noble Lord is properly informed, and the hypothesis, therefore, I must leave until I can find out whether he is.
LORD SALTOUN: My Lords, would the noble Earl answer the second part of my question: is it not worth while to restore the old breeding grounds that we used to possess?
EARL WALDEGRAVE: My Lords, I thought the noble Lord wished to hang that on to the first part of the Question, and as I was unable to answer that first part, I was disinclined to answer the second part.
THE EARL OF SWINTON: My Lords, without asking the noble Earl any detailed question about breeding, may I ask a more general question? As it always seems that we make conventions and ratify them first, and nobody else ratifies them at all, would it not be wise for us in future to refrain from ratifying conventions until the other Powers have ratified them, and thereby retain in the meantime our own freedom of action to take such—I suppose it would be offensive to say retaliatory action, but such defensive action as would probably lead other countries to ratify in the first instance?
EARL WALDEGRAVE: My Lords, I will take note of what the noble Earl has said, but I think we should keep a sense of proportion here. As a matter of fact, this Convention can come into force, I understand, when seven signatory Governments have ratified it. Up to date, five have done so. It is understood that the Federal Republic of West Germany is likely to ratify in the near future. So we are nearly home on the orthodox method of procedure.
LORD GREENHILL: My Lords, may I ask whether any other result can be expected when the fishing industry is carried on not for the purpose of feeding the people with fish but for making as much money as possible out of the industry?

BUSINESS
EARL ST. ALDWYN: My Lords, I should like to inform the House that there will be a statement on the Post Office at some suitable moment after half-past three.

THE COMMONWEALTH
2.43 p.m.
LORD OGMORE LORD OGMORE rose to call attention to the increase which will happily take place in the independent membership of the Commonwealth and the steps which should be taken without delay in order to meet the constitutional, economic, judicial and organisational requirements of the situation; and to move for Papers. The noble Lord said: My Lords, the recent Commonwealth Prime Ministers' Conference was not only important, as indeed they all are, but was also, in some ways, unique, in so far as not only were grave issues discussed at the Conference but also we heard a great deal about them. No bromides were published at the end, but quite clearly there had been a clash of opinion, as there was bound to be, and it was only right not only that the Prime Ministers should discuss these grave matters, but also that the public should know about them. There is, I think, in the developing Commonwealth, bound to be a great deal of difference of opinion. It was useless to expect that is a multi-racial Commonwealth extending from on part of the world to another we should all agree on every topic, or that we shall on many topics. But the fact that there was this difference of opinion which was published is evidence of the changing nature of the Commonwealth. As we all believe, it is an invaluable organisation with one Head, with common memories, with a shared history, as diverse in race and world-wide in scope as any organisation there has ever been in the world's history.
Although apartheid and the position of South Africa were discussed at some

1131
length, and have been discussed at considerable length in the newspapers and elsewhere since the Conference ended, it is not the only problem with which we are faced. Perhaps in some ways it is not the most important problem. Therefore, while I have no doubt that many of your Lordships will be raising this question today, I do not propose to do so myself, as I think there are other vital and urgent issues which face us. I may say that I am highly gratified at the very distinguished list of speakers who follow me in this debate, and having regard to those speakers, I think it should prove a debate of great authority.
Up to now, the Commonwealth, as we know, has consisted, first of all, of members whose dominant electorates have had European backgrounds, and, secondly, of more recent members consisting of important Asian and African territories which can more or less stand on their own feet. There have been criticisms—and I should be less than candid with your Lordships if I did not voice them—that Her Majesty's Government in general, and the Commonwealth Relations Office in particular, have been unhelpful to the new members; that they have been cold, aloof and correct—in fact "correct" is the kindest expression which these critics use—"more Foreign Office than the Foreign Office", as it has been expressed. For my part, I believe this criticism to be unfounded. I believe that if a different policy had been pursued by the noble Earl, Lord Home and his colleagues and those who preceded him, there would have been intense criticism from the new members. They would have regarded it to a large extent as an attempt to interfere with their independence and continued freedom.
So much for the past. I would say that this no longer applies. It will not apply in the future because very soon we are to have quite a different type of independent member from those we have had in the past. Apart from Nigeria, which is in a class on its own (I say it does not apply to Nigeria, with 37 million people and a country eight times the size of England), there are territories which do not fall into the category we have known in the past: the West Indies, Tanganyika, Kenya, perhaps Northern Rhodesia and Nyasaland, perhaps the Central Africa Federation, depending how that
1132
works out in Central Africa, Uganda, Cyprus, Fiji, Malta and others. With regard to this type of territory, it seems to me that an entirely new attitude is called for on the part of Her Majesty's Government, the Foreign Office, the Commonwealth Relations Office and the Colonial Office.
The new members will fall into three classes, There will be, first, those members with territories which are non-viable in the immediate or even perhaps the distant future; they will not be able to stand on their own feet economically. The second class will be those who are harassed with severe, or by severe, racial tensions and the third class will be those who are vexed by troublesome tribal problems and jealousies. There is a fourth class with which I am not going to deal to-day, and that is the class consisting of tiny islands in one of the seven seas which no one in his senses, I should imagine, could think would ever be independent in any realistic sense, and whose problems we have not settled yet by any means. But that type of territory is a separate one, and I do not propose to deal with it to-day. I have raised it on several occasions in your Lordships' House in the past.
Previously, when independence has been reached, the Colonial Office has relinquished control, sometimes with an air of self-satisfaction, sometimes with a sigh of relief; and, by and large, new finance, other than loans with substantial rates of interest, and advisory and technical services, other than the limited amount contributed to the Colombo Plan, have ceased. The new member is launched and it is up to him or her to sink or swim. Now, as I have said, the future members will be in a very different case. They will need just as much assistance, if not more, after as before independence, although such assistance, of course, cannot come through the Colonial Office.
I venture to suggest in the terms of my Motion four headings, four considerations which should apply when these new independent members come along. The first is the constitutional one. With 20 or more members, as there may well be within a few years' time, our present lack of a central Commonwealth organisation will be inadequate. In the past, as your Lordships know, there has

1133
been objection to any sort of central organisation, mainly on the part of Canada, but also on the part, to a lesser extent, I think, of India. I do not think that in the future it will be possible to do without some sort of central organisation. A start was made with the Commonwealth Division at the time of Korea. That is the first time there had ever been anything of that kind. More recently there has been an economic organisation, the research organisation set up, or to be set up, at Marlborough House.
The Prime Ministers' Conference may have to be held regionally as well as centrally. Machinery will have to be created for the collection and supply of information, a task which many of these territories are quite incapable of doing themselves. Lastly, on this score, I am sure we ought to consider that in many overseas posts, instead of a multiplication of useless Embassies or High Commissions, some sort of joint Commonwealth Embassies should be created. I do not think I am revealing any secrets when I say that Ernest Bevin, in his very distinguished period as Foreign Secretary, was, I know, concerned about this particular problem. He discussed it with me and others at various times, and he felt that as the nations of the world which would be members of the United Nations increased—for example, they now number over 80 and there may be many more—the proliferation of Embassies and High Commissions and Ministerial posts would create an enormous burden on smaller territories, and even some of the larger ones. So I throw that idea out: it may be a possibility that we could have some sort of joint Embassy, joint High Commission, in some of these countries.
On the economic front it is, I believe, essential to provide financial, educational, technical and managerial assistance to these territories after independence. It will, in fact, although not perhaps in theory, have to come out of assistance from the United Kingdom. There may be a little help from Australia or a little from Canada, but, by and large, it is we who will have to provide most of it; of that I am sure. A move is being made in the direction of a Commonwealth effort just now, and no doubt the Secretary of State will tell us about this and give us more details of it. But
1134
in fact I have a strong feeling that it is the United Kingdom who will have to bear the main burden of economic support in this way.
I should at this stage like to stress the problem of managerial assistance. We have been an industrial country for at least 160 years, and I think we have quite forgotten what it is like more or less to start up an industry, an industrial area, from scratch. In such conversations as I have had recently in Whitehall on questions of this sort, I have found little realisation that just pumping money into a country is not enough. If you have a country with no industrial expertise, no tradition of commerce and industry at all, just pumping in money in the shape of loans is not enough; you must have managerial techniques as well. And this is one of the most difficult ideas to put over, either in the international or the national field.
One of the problems we face is how to help the small territory and the small man in any territory. The overheads are very great. If we want to help a man to enlarge his little fishing fleet—not to catch herrings but other fish—or to help set up a garage to repair motor cars and agricultural equipment, we find that at the present moment internationally or nationally we have very litle means to assist in that way. I feel that we shall have to consider, and the international bodies will have to consider, the creation of small development corporations in these territories for that purpose. A good start was made, I think, in the Commonwealth Teachers Bill, and we could derive a lot of benefit from reading the speech of the noble Earl, Lord Home, on Second Reading, as he touched on this point of assistance in training, which is so essential in these countries. I believe that it is not a matter only for Her Majesty's Government; it is a matter for us all, through our professional organisations, commerce and industry, trade unions, co-operatives and private individuals, this is a matter which we can all tackle, particularly this question of training in the economic field.
I would add this. It is not just a matter of supplying these countries with finance, or even with managerial assistance. There is the question of helping them to find markets, because it is no good developing little industries,

1135
it is no good expanding their agriculture with cash crops, if at the same time we do not help them to find markets. That is one problem which we have always to bear in mind. There is always a chance that when a country begins to develop its industry it affects some industry in this country (it is the same in the United States), and there is immediately a cry that there should be an embargo on their products or that a big tariff should be put on. That is no good. If we want them to develop their industry we must at the same time help them to find markets. Again, there has been a tendency in the developed countries to find artificial products which will compete, often very heavily, with the only products that the under-developed country, can produce. In this field, I would quote both rubber and sisal as cases in point. Both are cases in which the local industries, the native industries, are under heavy competition from artificial products in the developed countries.
Thirdly, there is the question of the Judiciary. This question was raised at the Prime Ministers' Meeting, and a Commonwealth Court of Appeal was mooted by the Ceylon representative. I gather that this proposal did not receive much support, but there was a suggestion that it might be possible to have Regional Courts, which might appeal to some of the countries concerned. I am very glad that when his judicial duties are over the noble and learned Lord, Lord Denning, is going to speak on this point, because I do not imagine many others will. But to my mind this is just as important as any of the others. The Judicial Committee of the Privy Council has been, in fact, so far as the Colonial countries are concerned, the final court of appeal. Unfortunately, but I think naturally in a way, as these territories have become independent they have sometimes ceased—this has happened in four or five instances—to send their cases to the Privy Council on appeal.
That, I think, is due to two reasons: first of all because it is a long way, and it is very expensive to send a case over here, and secondly, because it is, after all, a part of our own judicial service here. So far as I am aware, at the moment there are certainly not many Commonwealth Judges, other than United Kingdom
1136
Judges, who form part of the Court. I think it is a pity that the Judicial Committee did not expand, just as 600 or 700 years ago the King's Judges in Westminster expanded and carried the King's Justice to every part, certainly of England, and established the system of the Judiciary as we know it to-day. Unfortunately, that did not happen in the case of the Privy Council; so that I am afraid that some new Court may have to be created, and that the Privy Council will not be able to develop as one might have hoped.
Such a Court is necessary, first, because the courts of the various States which will be created will not have a wide field of judicial experience to call upon among their own nationals. These small and comparatively sparsely populated countries with educational systems which have only recently begun to flourish, can hardly be expected to call upon a large, or even a small, number of judges of the great eminence which the Privy Council has been able to call upon, because it has been able to call upon Judges from the House of Lords and elsewhere. The second reason why such a Court is necessary is that in most cases, for the reasons that I gave earlier, these countries will have written Constitutions in which will be written—they will be entrenched in them—safeguards on racial and human rights questions. If you have a written Constitution—which of course we have not got—and if you also have human rights and other safeguards entrenched in the Constitution, that presupposes the existence of some Court to interpret those clauses and also, in case of need, to enforce them. This is another reason why, in my view, there will have to be in many of these cases some superior Court of Appeal to which these countries can go.
So far as the organisation is concerned, there are various exciting ideas about just now in Parliament as to whether there should be a merger of the Commonwealth Relations Office with the Foreign Office, of the Commonwealth Relations Office with the Colonial Office, or even of all three. I personally believe that all three Offices will have to stay for some considerable time to come, as I believe that all three are needed. But I think that many of the functions performed by the Colonial Office will have

1137
to be performed certainly by the Commonwealth Relations Office and even, in some cases, by the Foreign Office. For example, the Foreign Office will have to co-ordinate the provision of diplomatic services for the new members in other Commonwealth countries and in foreign countries, and the Commonwealth Relations Office will have to provide the new members with many of the financial, technical and advisory services now provided to them by or through the Colonial Office. I must emphasise here that these services will, of course, be provided only if the new members ask for them. There is no intention on my part that anything should be forced on them if they do not want it. But from such conversations as I have had with the leading members or statesmen from some of these new territories I think they will welcome the opportunity of obtaining these services from the Commonwealth Relations Office.
Then, of course, there is the question of interchange of staff between the Foreign Office and the Commonwealth Relations Office, and, more important I think in some ways, an interchange of staff between the Colonial Office and the other two Offices. At present, we are allowing a large number of good men to drift away, particularly from the Colonial Service, because they see no future. As their territories come towards independence, instead of being retained in the public service, with all their experience and trustworthiness, splendid men as they are, they are allowed to drift away into other things. One meets them in all sorts of peculiar jobs up and down the country, and even the world.
The reason why, in many cases, they cannot be taken into the Commonwealth Relations Office or the Foreign Office may surprise some of your Lordships, when you realise some of the problems they have had to face. It is that they have not a second-class honours degree. That is the bar. A man may speak Swahili or Malay or Kikuyu; he may have had a great reputation for handling those people. But because in his remote youth he either did not go to a university, or while there did not take a second-class honours degree, he is not good enough. I think that at this stage of our history we ought to be able to expand that and take a man if he is really suitable,
1138
as many of them are. We might forgive them the fact that they did not go to university or that, while there, they omitted to take a second-class honours degree.
Finally, a word about Africa. What I have said applies to all the territories, whether Asia, the West Indies or Africa, but it applies with particular force to Africa. The African leaders (I refer to the leaders of those territories coming towards independence, and some of which have recently assumed independence) are just now excited by ideas of a Federation or Confederation of African States. They are thinking in terms of four or five Confederations of African States. In some cases they are aiming at neutralisation and a non-nuclear club. They look eagerly to a Pan-African Council for economic co-operation and mutual development. These great movements may emerge as Africa stretches, like a giant awakening from a long sleep. But what is certain is that, in the present and in the immediate future, there is a new scramble for Africa.
With the withdrawal of British, French and Belgian influence there are a large number of new Codlins protesting that they are the friends, not the old Shorts. The United States, the Soviet Union, China (which is becoming most active in Africa), Japan, Israel, West Germany, Italy and others are crowding into the vacuum created by the withdrawal of the former Colonial Powers. Some may have praiseworthy motives from our point of view; some may not. But I confess that I look upon this particular movement with apprehension. Next year there will be some 25 or 26 independent States in Africa, apart from other States which will not have become independent. Of these 25 or 26 States, 15 will be French-speaking. I believe that in this particular situation—a most dangerous situation for Africa—it is essential that we play our full part, in order to bring sense and order into what may be a dangerous scene.
In Africa at the moment, whilst many of these countries—such as the Soviet Union and China—are prepared to supply arms; are prepared to supply political nostrums, and are prepared to supply even consumer goods, on terms, it is

1139
most difficult for African States to obtain finance for sound economic development. This applies to the London market, as well as to anywhere else. On the New York market it is practically impossible. But at the moment it is most difficult for Africa to obtain any money at all on the London market. The reason for that is that the London market is frightened, first of all, by the happenings in South Africa—all the riots, bloodshed, and so on—and, secondly, by the disturbances in the Congo.
Such economic development as takes place—and it is urgently necessary—must therefore come either from international sources such as the International Bank and the new International Development Association, or from national sources; that is to say, the former Colonial Powers. Here, ultimately, is where I feel we must play our part If the battleground of the future in the cold war is to be in Africa, then we of the West should play our part manfully. But I suggest that our duty does not rest solely, or mainly, on this rather sombre ground. It is both our duty and our interest to help the African States in the Commonwealth to achieve a reasonable standard of living, to make good economic and social progress for their own sakes and not merely for the sake of ourselves or anyone else. We owe that duty to them as well as to ourselves. I beg to move for Papers.
3.11 p.m.
THE LORD PRESIDENT OF THE COUNCIL AND SECRETARY OF STATE FOR COMMONWEALTH RELATIONS (THE EARL OF HOME): My Lords, the noble Lord, Lord Ogmore, has put down a Motion on the Paper which enables your Lordships to review the whole wide field of the Commonwealth and of Commonwealth relations; and you will be indebted to him for the way in which he has moved this Motion. As he has said, it is very gratifying to find so many distinguished noble Lords who are willing to help him—and I hope to help Her Majesty's Government—with their advice during the course of this debate. We shall be able to review the political institutions from which the Commonwealth has evolved and from which Commonwealth countries, one by one,
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are framing their own patterns and their own versions of democracy, the principles of living to which the countries and the peoples of the Commonwealth have subscribed, which enable each member of the Commonwealth to claim that it is part of a whole which is much more than merely an association of convenience.
This Motion will enable your Lordships to review the machinery of consultation and co-operation which makes the Commonwealth a working partnership, the problems of organic growth, which have been given a new impetus now that the Commonwealth is beginning to act together over so many fields of common interest—the latest being the fields of science, industry and education. Our problem is made more urgent by the fact, which I think we have come to realise, that the Commonwealth must set an example in solving the problems which are involved in bringing along those who were late starters and who are classed as underdeveloped countries and trying to help them to bridge the gap and enable them to catch up with the techniques and standards of those more advanced partners who have been long on the road of industrialisation.
I do not think I need rehearse to your Lordships our conviction that the modern Commonwealth can play a profound and very beneficial influence on the world's stage. I believe that that conviction which we hold is shared by the latest recruits from Asia and Africa. The influence of the Commonwealth clearly depends first on the countries being seen to practise nationally and internationally a code of conduct which upholds the values of free men, and secondly, on the Commonwealth being seen consciously to work together and to try to help each other at every point where the interests of one touch the interests of another. The fact that there are one or more Commonwealth countries now in every continent in the world gives the Commonwealth an unexampled opportunity to contribute to the well-being and destiny of man.
In a Commonwealth so varied in character, as the noble Lord, Lord Ogmore, has said, there are certain to be stresses and strains at times. There is the pace at which Commonwealth countries are moving from dependence to independence. I sometimes think

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there has been a tendency to believe that it is possible to move smoothly, so to speak at one leap, from a tribal system to the full paraphernalia of Westminster democracy. That is a very severe test to put on any country or any society, because democracy is not a kind of twentieth century gimmick that can be turned on by a switch or brought into being by pressing a button. We know that from experience, and it is certain that as the Commonwealth expands there will be lapses from accepted standards as we see them from Westminster. If so, what is to be the response of the partners? Is it to be censure, boycott and threats of expulsion? I am quite sure your Lordships would reject that in favour of understanding, persuasion, patience and help back on to the right road.
Again, as the noble Lord has pointed out, there are within the Commonwealth countries where there are very different races and religions, where differing customs and habits have their roots deep in history—Hindu and Moslem, Tamil and Sinhalese, Malay and Chinese, European and African—to say nothing of the tribal differences between countries within Africa itself. These situations will mean that problems will erupt from time to time, and infinite patience will be needed to solve them. The solution must be in the main for the societies and countries themselves; but because the Commonwealth is basically a multi-racial society there will be occasions—and we must face them—when complications within a country may have an impact on the Commonwealth as a whole.
Such an example, as the noble Lord very briefly recalled, is fresh in our minds over the question of the South African Government's doctrine on apartheid. Faced with that situation, what should be the practice of the Commonwealth? I believe that the Commonwealth Prime Ministers gave a lead at their meeting which this House will do well to mark. They insisted on two things: first, that the independence of each Commonwealth country must be respected by all. If there was even a suspicion that Commonwealth membership conferred on the majority the right of inquest into the internal affairs of another country in the Commonwealth, that would be fatal to the whole
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structure, and the Commonwealth would come to an end. I believe we should do well to mark that finding of the Prime Ministers' Conference, and to remember it.
They recognised, too, however, that an internal dispute in one country could have external repercussions on the whole Commonwealth; and at the Prime Ministers' Conference they evolved a procedure which allowed the Prime Ministers to press their advice to the absolute limit which friendship permits; and they went a very long way in doing so. Indeed, the representative from South Africa could not have had any doubt of the view of the rest of the Prime Ministers, and must so have reported to his Government; and he must have reported, too, that in so far as the procedure for South Africa becoming a Republic (if she so wishes) was concerned, the Prime Ministers were not ready to take any decision of any kind until the constitutional processes which the South African Government have chosen had been completed. Therefore I think that in reviewing that aspect of the Prime Ministers' Conference, your Lordships would endorse their findings and approve their practice, and you would add to their counsel that the advice should be heeded by South Africa; and, we should hope, heeded in time.
As the noble Lord, Lord Ogmore, said, it would be a pity if the recent meeting of Prime Ministers was thought to have dealt only with the question of South Africa and the public eye was, so to speak, taken off the other important questions with which they dealt. There was, for instance, a very close identity of view over the whole field of foreign affairs and particularly in relation to disarmament. A joint study was set on foot of the question of the future constitutional development of the Commonwealth, with particular reference to the future of the smaller territories (those territories to which he referred) which can never be economically self-supporting.
An examination was set on foot of the economic needs of the Commonwealth countries in Africa as regards technical aid, and help with administration; and another examination was started of whether a Commonwealth Court, or some adaptation of the Judicial Committee of

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the Privy Council, might play a useful part in the Commonwealth, helping to maintain the law as one of the essential foundations on which the Commonwealth association rests. Progress reports were made on the corporate effort in the field of education started at Montreal and carried further at Oxford. It is difficult to convey to the public outside the amount of practical work conducted in a Prime Ministers' Conference and the important subjects with which they deal and on which they arrive at a considerable degree of unanimity. The communiqué is inevitably disappointing and often an anti-climax; and, indeed, I think it is a matter for serious consideration whether it might not be better without final communiqués at all. I have sometimes myself found them very misleading in the impression which they convey. But all the evidence is that the Commonwealth is now possessed of a very strong corporate sense, and the Prime Ministers' Meeting certainly showed it to be vigorous, progressive and alive.
The noble Lord, Lord Ogmore, went on to argue that as the Commonwealth expands so the organisation of Whitehall must be adapted and must be adequate and efficient to meet the changing needs. If it is the United Kingdom policy—and it certainly is—to contribute to making the Commonwealth a real partnership of independent countries working together round the clock on matters of common interest and concern, each adding to the strength of the whole, then from my observations over the last five years (and the House will acquit me here of any self-advertisement or wish for aggrandisement) I would say that there must be in Whitehall, as part of the British Government, a Secretary of State specially charged with the duty of serving the Commonwealth in the British Cabinet and a Department adequately geared to fulfil all the rôles which the modern Commonwealth requires. The United Kingdom—and for the foreseeable future this rôle must be ours—can give an indispensable service to the whole Commonwealth in this way and contribute to the Commonwealth's cohesion.
I should like to give your Lordships four illustrations of the duties, as I see them, of the Secretary of State—and there are others in this House who are to
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follow in this debate who have filled the office and I shall be interested to hear whether they concur in what I believe the essential duties are. The Secretary of State must see to it that every idea that is circulating in the Commonwealth and every event which takes place in the Commonwealth is evaluated in relation to United Kingdom policy and in relation to general Commonwealth relations. Secondly, he must secure that the Commonwealth aspect of every matter is appreciated by every Government Department in Whitehall, both when they are taking their day-to-day decisions and in the framing of United Kingdom legislation; and he must be certain that the interests and views of Commonwealth Governments are always kept at all times before his colleagues in the Cabinet when they are framing United Kingdom policy. Conversely, he must secure that United Kingdom policies are understood by the Commonwealth Governments, and where there are difficulties—as there are bound to be—that those difficulties are reconciled. In matters of foreign policy he must watch world events always with an eye to their significance for the Commonwealth; and he must—because Whitehall has an eye on international affairs all over the world—give the best assessment possible to the Commonwealth Governments of all events on the world stage.
I have outlined those duties, as I see them, for this reason. There has always been, as the noble Lord, Lord Ogmore, said, opposition to institutionalising the Commonwealth and setting up any centralised directorate or secretariat, and I think that that opposition is still there. But over the years the Commonwealth Relations Office itself has increasingly become a clearing house for Commonwealth affairs and a sort of informal secretariat for an expanding association of nations. My Lords, this development, which I think is of great significance for the United Kingdom, has been made acceptable to the other partners in the Commonwealth because we have scrupulously recognised in all our dealings independence as absolute, and we have provided a service at all times which is comprehensive, which is frank, which is discreet, and which is conducted always with that degree of intimacy which distinguishes partners from any looser form of association. Therefore, I believe that

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the Commonwealth Relations Office can give an increasing service, an acceptable service to the whole of the Commonwealth, to the great advantage of the United Kingdom.
The expansion of the Commonwealth has necessarily brought special problems to my Department, and the contraction of the Colonial Empire, of course, special problems to the Colonial Office. I might say that in the Commonwealth Relations Office we now have to staff more than twice the number of High Commissioner posts which existed in 1946. Sometimes, as has been clear to the House, I have had to go outside my own service in the Commonwealth Relations Office to fill some of the highest posts of the High Commissioners. I should like to say that that is no criticism of the people in the Commonwealth Relations Office, but simply reflects the fact that in the early years the new service has been absolutely stretched to the limit.
A Secretary of State must always retain the right to select the best man he can find, if necessary from outside; because, as your Lordships know full well, the secret of successful diplomatic relations is to put the right man in the right place at the right time. But I can say with confidence that this will become less and less necessary as the years go by, and that the civil servants in the Commonwealth Relations Office have met the expansion which they have had to meet with great imagination and real ability. Nor has there been, I can assure the House, any reluctance to recruit others to the Commonwealth Relations Office to meet the expanding need, and to use sources other than direct recruitment. The Indian Civil Service did us extremely well, and we had many good people from there. The Colonial Office has let us have some people, and besides that it has been our policy to take people from the Indian Civil Service and to reinforce our ranks from the Overseas Service.
LORD OGMORE: Will the noble Earl give an assurance to the House that no educational bar will be imposed on people from the Colonial Service who are otherwise qualified?
THE EARL OF HOME: We will in all circumstances take the man who is fully qualified for the job. I am not quite sure what the noble Lord has in mind as to educational qualifications, but we are
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looking (and this is the point I want to make to the House) for the best men, and when we find the best men we are not going to be narrow-minded as to the source of recruitment.
My Lords, I have no very cut-and-dried view at this moment on the actual shape of Whitehall in the future years, as to how it should be adapted to meet the new demands upon it. I am a little suspicious of those who always want to meet a new situation by creating a new office. But I do know this: that at the present there is more than enough for two Secretaries of State to do; and the function of one of those Secretaries of State is diplomatic, and the function of the other is mostly administrative. The thing to which I believe we have to give urgent attention (I shall come to this in a moment, and my noble friend will deal with it in detail) is the reorganisation of the Overseas Service. That is a matter which the noble Lord, Lord Ogmore, raised, and it is very important. But as for the relationship between the Commonwealth Relations Office and the Colonial Office, we have a period of transition of some duration ahead of us; and clearly we must prepare ourselves in good time against the day when we have to reorganise to meet the needs. I am not prepared to-day to say exactly what form that reorganisation should take.
The noble Lord, Lord Ogmore, has stated the case, very persuasively and very rightly, for extending administrative and technical assistance to Commonwealth countries, and particularly to these countries which are still underdeveloped, following their independence. The arguments which he used are fresh in your Lordships' minds, and I need not repeat them. One thing I think I must repeat, though: Commonwealth countries are independent, and their status in international society depends upon their being seen to be independent. It is important to remember and recognise that. It therefore seems that, when we are considering any schemes of assistance from the United Kingdom which follow independence, the right course for the United Kingdom is, first, to encourage and assist them to establish their own credit in the world, and to do it at the earliest possible moment, and to see that aid given, whether it is in

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the administrative field or in the field of more technical aid, will have that objective always in the foreground. We cannot, as the noble Lord said, thrust administrators upon these countries if they do not want them. Nevertheless, it is perfectly true to say—and I think that those countries which are coming much more quickly towards self-government than even they anticipated are beginning to recognise this—that the great weakness from which they are likely to suffer is a vacuum in administration. Therefore, we must try to find a way to help them.
My Lords, the dilemma, which my noble friend Lord Perth will elaborate, is clear. It is a duty which rests upon any Government of this country to see to it that, if an officer in the Overseas Service, the Colonial Office, wishes to retire, then compensation terms are generous and just. But, of course, the better the compensation terms on retirement, the more people are tempted to retire. Therefore, we have, if possible, to devise a scheme in which there are two essential ingredients: first, the inducement of sufficient pay to attract a man to take on a job under contract from a newly independent Commonwealth Government; and, secondly, an element of security as regards his career.
The Colonial Secretary has on each occasion, from Malaya down to the latest examples of Sierra Leone and Cyprus, devised special schemes to try to meet the special circumstances of each country; and I think that he would say that he has gained a lot in experience, and that probably the last schemes are the best and most satisfactory of all. He is giving the most urgent study to this matter, to see whether he can find a scheme which we can adopt and which will meet the needs to which the noble Lord, Lord Ogmore, pointed. There is no doubt that any scheme of this kind must be expensive; but, of course, the argument is very strong that the cost would be repaid in terms of social, economic and political stability. The Colonial Secretary, then, is studying this matter urgently.
Lastly, I should like to say something on the contribution this country makes to the stability of the Commonwealth through investment and trade; because, as the noble Lord, Lord Ogmore, rightly
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said, we must not neglect the contribution which the United Kingdom market makes to these countries whose produce has to be exported if they are to live and to expand their standards of living. What is the scale of aid and investment that the United Kingdom has to spare? So far as investment is concerned, in 1959, in addition to what we contributed through the International Bank, through the United Nations Technical Assistance programme and through other international bodies, we invested, through Government agencies, roughly £103 million; and through private sources and investments £100 million went overseas, the vast majority of which was to the Commonwealth. Our ability to invest depends upon our earning a genuine and substantial surplus on our annual balance of payments. Provided we can do that, we can expand the money which we can invest overseas in the Commonwealth.
I turn now to trade, as I have noticed a tendency lately to undervalue the benefit of the United Kingdom market to the countries of the Commonwealth, and of the Commonwealth markets to the United Kingdom. My Lords, so far as foodstuffs, drink and tobacco are concerned, your Lordships know that, with very few exceptions, imports come free into this country. So far as basic materials are concerned, half have preference over similar imports from other sources, and half come in free. I gave some of these figures last week, but I should like to repeat them because I think there has been a tendency lately for them to be forgotten.
Imports of food, beverages and tobacco from the Commonwealth, including the Colonies, into this country last year were £721 million in value, representing 47 per cent. of our total imports. Imports of basic materials amounted to £426 million in value, or 46 per cent. of our total imports. If we take the reverse side of the picture, manufactured goods sent from the United Kingdom to the Commonwealth countries amounted to £1,263 million, or 45 per cent. of the total export of our manufactured goods. I think it is well, at this time, when we are considering future markets for the United Kingdom and the Commonwealth, that we should remember that the Commonwealth is a very formidable and impressive trading organisation in itself. We must be very

1149
careful not to damage it. We must do everything to expand it.
As the Commonwealth expands and changes its nature, I think that we can look forward with faith. We shall be faced with many political difficulties, but there is no reason why, with flexible and adaptable policies, we should not meet the changing needs of the day. I see no reason either why we should not adapt our institutions, particularly the organisation of Whitehall, to meet the needs of the changing Commonwealth. I think that our record has been good in this matter. I have been at the centre of affairs at the Commonwealth Relations Office for over five years, and I think that I can say that I have no fear about the wisdom and understanding with which these challenges can be met.
At the end of his speech the noble Lord, Lord Ogmore, referred to the one particular challenge of 1960—the challenge which comes in Africa, deriving from the increased pace of the movement of the dependent territories to self-government and independence. I hope from what he said that we shall have the noble Lord's support in pursuing a policy of progress to self-government, combined with order and stability. I believe that the experience which this country has had of watching events in Africa during the last few months has helped everyone to understand that there are no facile solutions. Certainly no solution can come from striking attitudes in terms of black nationalism or white nationalism. We want great patience in settling this matter, but I believe that with the help of Parliament and of the Monckton Commission, we may be able to settle the situation in Central Africa and put the Central African Federation on the road of peaceful, orderly and acceptable progress this year.
As for the other matters which your Lordships will discuss to-day, I shall listen with the greatest attention to what is said, because I know that the speeches of noble Lords will be inspired by the desire to help the Government to enable the United Kingdom to play the fullest part as leading partner in the Commonwealth association, an association which contributes so much to United Kingdom influence in world affairs, which adds so much to the stature of each partner and which, if it is wisely
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guided, can act as a network of stability, of order and of peace for spanning the whole world.
3.44 p.m.
EARL ATTLEE: My Lords, I find myself very much in agreement with the noble Earl who leads the House, probably because I have had somewhat the same experience that he has had. I do not think that anyone can be at the Commonwealth Relations Office without finding it a most fascinating office. The Commonwealth is something that has grown up in our own time, and it is important to remember that it is a living entity which is growing and changing all the time. There is the greatest danger in thinking that we here can restrict its growth or give it Constitutions. It is an extremely British thing, the Commonwealth, because so much of it depends on the unspoken—the unspoken assumptions and way we work. We must remember that it is not just "our" Commonwealth. We do not own the Commonwealth any more or less than does Canada, Ghana or any of the other constituent parts. Sometimes there is a tendency to think, as we find in foreign countries, that the Commonwealth is merely a change of name for our old Empire. It is something entirely different.
I confess that I am always a little suspicious when people try to make constitutional changes. I saw the other day that someone was complaining that when we have a Commonwealth Conference we do not end up with any decisions. It is even suggested that we ought to have majority decisions. This is to misunderstand the whole genius of the Commonwealth. The Commonwealth is not a kind of alternative United Nations: it is essentially a family gathering. You do not take decisions by counting heads in a family—at least, not in my experience. Anyway, how can we know how to weigh the various members of the Commonwealth?
To-day we are facing some new problems. We faced them with the advent of our Asian friends and now with the advent of our African friends. I thought that the noble Earl was very wise in suggesting that we must expect difficulties. At first, we are bound to have an over-stressing of independence, but as time goes on I think that the demand for independence will change to a

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realisation of the necessity for interdependence. I have seen this in my own time with some of the older members of the Commonwealth. There was a time when our Canadian friends were extremely suspicious of anything we did. It was a kind of reversion of colonialism. They were difficult and stand-offish. But I have seen that attitude change a great deal. I think that we shall find with all the new members of the Commonwealth that at first they are bound to stress independence, and it will be only later that, feeling secure in their independence, they will join more readily in co-operative enterprises of all kinds.
For this reason, I am a little chary when I hear suggestions about new pieces of machinery. It has been suggested that we need some kind of Commonwealth Court. I agree when it is said that it is a pity the Judicial Committee of the Privy Council has been "thrown over" by some members of the Commonwealth. The Judicial Committee is a very remarkable tribunal, with Judges drawn from different races and countries, and it deals with different codes of law. However, it is settled here in this country. If a court of this kind is wanted, I think that, with our modern travel conveniences, it should be a peripatetic court; and its judges should be drawn from the various parts of the Commonwealth. But when we come to look at the matters with which this proposed new court should deal, I am doubtful. There is great danger of getting a clash between a Commonwealth Court and the courts of the particular parts of the Commonwealth.
I have also seen it suggested that there should be some kind of Rights of the Individual—an excellent thing—and that these should be somehow enforced by a Commonwealth Court. You are in great danger there, when you begin to interfere between a Government and its citizens on the spot. So far from necessarily strengthening the position of the individual, you may do just the opposite, because the fact that there is some external body may lessen the feeling of responsibility inside. To quote a parallel case, I remember that in the Army there was a great deal of talk about welfare officers. That is very nice. But the point is that every officer ought to be a welfare officer, and if you put in a welfare
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officer then perhaps you do not get the troop commander being a welfare officer, as he should be. I think you have to look at that very carefully.
I should look much more to the close relationship we have between the lawyers in every part of the Commonwealth. I do not think you can overstress the importance of the Inns of Court in this matter. We all know the lists have come out, and it is often difficult to see whether there are any English, Scottish, Irish or Welsh in those long lists of Inns of Court of the Bar. It is an invaluable training in law, and I should not like to see that broken down. That is one of the matters that is not in any Constitution; it has just grown up and is there. Therefore, I look especially to that kind of development.
I think, as the noble Lord has said, that you have a difficult transitional period between the Commonwealth Relations Office and the Colonial Office. Sometimes I see proposals that they should be merged, but I feel that it would be a retrograde step and I am sure it would not please the Commonwealth. The Colonial Office has done great service, but it does stand for the past and is bound to diminish more and more. The difficulty is to see how you are to take advantage in the new state of affairs of that old experience which you have in the Colonial Office. I wonder sometimes whether you may not do it by developing some inter-Commonwealth organs. Take, for instance, the question which was raised by the noble Lord, of the difficulty that grows up about civil servants with the ending of one system and the beginning of another: the danger of losing experienced people, and the danger of recruiting where there is uncertainty. There is much to be said for trying to build up a kind of cadre of officials who will be ready to serve anywhere in the Commonwealth. It would not necessarily mean a career in one particular part of the Commonwealth, but there should be a Commonwealth career.
After all, soon we shall be beginning (I think we are already) to draw from our developed Dominions. It is a great mistake to think that the only part of the Commonwealth which can supply service is the United Kingdom. Australia, Canada and New Zealand are rapidly growing up and developing, and I think

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we must tend to see in the years ahead those great communities taking the lead. I think we are already seeing that in the case of Australia. I was interested in what was said the other day about the developments going forward in New Guinea. When one looks at the Commonwealth as a whole, one finds that there is not only one focal centre, the United Kingdom, but there are other focal centres: there are Australia and New Zealand out in the Pacific, and there is India in the heart of Asia. One looks to those, so to speak, senior members to be helping the younger ones on.
Quite frankly, I do not like the suggestion made by the noble Lord, Lord Ogmore, that somehow or other there can be substituted for the present individual representatives of our Commonwealth members some sort of Commonwealth representation abroad. I think that that would blur the position altogether. It is not always easy to get foreign countries to recognise that the members of the Commonwealth are free and equal and independent. It is a great strengthening where you find, as you do, a representative of different parts of the Commonwealth in foreign countries. They are separate nations, but there is still that close co-operation. I have noticed it when travelling abroad. If you travel abroad you go to a place where there are Commonwealth representatives and get together with them, and you always find that you begin to talk about "what we want"; there is that close unity of outlook, whether they are from Australia, India, Pakistan or elsewhere. So that you have, in a way, a kind of little Commonwealth representation in a foreign country.
There are one or two other things I should like to mention, and particularly this question of economic development. The great advantage of being in the Commonwealth is that a member can receive assistance without strings. There is a lot to be said for the making of particular organs for dealing with such matters as economic affairs. It should not be just a United Kingdom show. It should be in the interests of the Commonwealth as a whole; and support for the less developed members of the Commonwealth, whether it is in service, in money or in supplies, should not only come from the United Kingdom but be as widely dispersed as possible.
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Finally, in this matter we must remember that this thing is growing all the time; that we are only part of it; and that with its expansion we are bound to have difficulties. Some people get disturbed because they find that in the transition from a Colony to a self-governing Dominion there at once arise differences between one part of a territory and another. We must expect that. After all, we have more or less sat on top of them for many years, and when nobody was ruling there was not so much trouble. But directly you take off the Imperial pressure you are bound to get other pressures arising, just as there were in India, with the Hindus and the Moslems, and as happened in Africa owing to old tribal rivalries. We must expect that to happen. We cannot expect that in a great, growing organisation like this we shall not have trouble of that kind. I attach great importance to two things, in particular. One is our Commonwealth Parliamentary Association. The meeting of the Parliamentarians is, I think, vitally important, because there are so many countries now that have had a transition from tribal rule almost straight to Westminster. It is a great thing that they come here and mix with us.
The other thing which I think of the utmost importance is the constant meeting together of Prime Ministers; not just a parade of speeches and not wonderful reports in the Press. It is annoying to the Press, because they do not get any disastrous things coming out; and the Press lives on misfortune. The fact is that they look on a Commonwealth Conference as dull because there is not a lot of trouble. As a matter of fact, you thresh out troubles there and, if you are wise, they do not get any publicity. I recall very well some difficult ones we had in my time, when the Kashmir problem was very alive, when we did a lot of useful work. Even then we did not manage to solve it. The same is happening to-day in these difficult problems in Africa. But if you start off by having a series of speeches, all reported, every Prime Minister is bound to take up a position and he will not go ahead. I want to preserve our Commonwealth structure and our Commonwealth practice in the way in which it has grown up, which is, I believe, a natural way for the British people and the British Commonwealth.

POST OFFICE TARIFFS
4.1 p.m.
LORD ST. OSWALD: My Lords, with the leave of the House, perhaps I may make a statement on Post Office charges, similar to that which is being made by my right honourable friend, the Postmaster General, in another place. My right honourable friend wants to encourage the use of residential telephones, especially during off peak periods when existing plant is not fully used. He has decided, first, to reduce to 2½d. the local call charge for residential subscribers. The charge of 2d. for local call units payable by people in areas with subscriber trunk dialling will continue unchanged; secondly, to reduce from 2s. 6d. to 2s. the charge for 3 minutes in the cheap rate period for trunk calls of more than 125 miles, connected by an operator; thirdly to reduce from 1s. to 9d. the charge for 3 minutes in the cheap rate period for timed trunk calls of less than 35 miles, connected by an operator, and, fourthly, to apply the cheap rate period throughout the whole of Sundays.
My right honourable friend has also decided to reduce by 12½ per cent. to 25 per cent. the rentals for certain sizes of private automatic branch exchanges. The extension of the cheap rate period on Sundays will apply as from July 10. In general, the other reductions will take effect from September 1. My right

Following are the details of the changes:

POST OFFICE TARIFFS

INLAND TELEPHONES

Present Charges

New Charges

Local calls from Residence telephone, without coin box, except those in areas with Subscriber Trunk Dialling.

3d.

On accounts due after 1st September, 1960: 2½d.

Timed Trunk calls connected by an operator in the Cheap Rate Period:—

over 125 miles

2s. 6d. for 3 minutes (2s. 9d. from a call office)

From 1st September, 1960: 2s. for 3 minutes (2s. 3d. from a call office)

up to 35 miles

1s. for 3 minutes (1s. 3d. from a call office)

From 1st September, 1960: 9d. for 3 minutes (1s. from a call office)

Cheap Rate Period on Sundays

2 p.m. to 6 a.m.

From 10th July, 1960: From 6 p.m. Saturdays until 6 a.m. Mondays

Private Automatic Branch Exchanges:—

Type No. 1:—

up to 15 automatic extensions

£200 a year

From 1st September, 1960: £160 a year

25 to 35 automatic extensions

£280 a year

From 1st September, 1960: £240 a year

honourable friend also intends to restore quarterly accounts to all subscribers. This will require a phased programme over the next four years. He believes that the public will welcome a return to quarterly telephone accounts.
As from September 1 the charge per word for the Radio Telegraph Service with ships at sea at the standard rate will be 1s. 8d. instead of 1s. 6d.
My right honourable friend has come to the conclusion that the inland registered service does not satisfactorily meet public requirements, and he has decided to provide a cheaper alternative to it for articles, such as documents, where it is more important to be able to prove delivery than to secure compensation in case of loss. This new service—the "Recorded Delivery" service—will require a supplementary fee of 6d. only, as opposed to 1s. for registration. It will provide for a receipt both on posting and on delivery. Compensation will be limited to £2. At the same time, the minimum fee for both the inland and overseas registration services will be increased from 1s. to 1s. 6d. These changes will take effect at about the turn of the year and should make the services generally economic. My right honourable friend has no intention at present of increasing the charges for inland telegrams.
Full details of these and some other minor changes will be circulated in the OFFICIAL REPORT.

Present Charges

New Charges

Type No. 2:—

up to 15 automatic extensions

£240 a year

From 1st September, 1960: £200 a year

25 to 35 automatic extensions

£320 a year

From 1st September, 1960: £280 a year

Type No. 3 (privately installed):—

For every 50 extensions

£120 a year

From 1st September, 1960: £90 a year

For each switchboard position

£60 a year

From 1st September, 1960: £50 a year

Experimental Radiophone service in South Lancashire:—

Calls in Service area

2s. 6d. for 3 minutes

From 1st September, 1960: 1s. 3d. for 3 minutes

Calls to or from places outside Service area

Trunk charge plus radio fee of 2s. for 3 minutes

From 1st September, 1960: Trunk charge plus radio fee of 1s. for 3 minutes

VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am sure that Parliament will welcome very much the progress which the Government have made in this matter of reducing charges and in doing something which I think should be really effective in popularising the telephone service in general. I should feel a little happier if they were able to say at the same time that they were confidently expecting to wipe out the arrears of applications for the installation of services. Nevertheless, we welcome the statement at large. I should like to ask whether, in considering these various stages, the Postmaster General has taken into account the question of reducing the rental for residential subscribers, which I gather has been rather a burden and has, in some cases, especially in rural areas, led to the resignation of some residential subscribers from the service. I hope that that point may still be considered. At any rate, I think it would be helpful, if not now, perhaps as soon as the noble Lord could arrange for us to have it, for us to have some idea of the loss of revenue in general which these alterations will mean and what is expected to be the all-round effect of it. Perhaps that may wait for a day when we have a less important debate on the agenda.
LORD REA: My Lords, may I support what the noble Viscount has said? I think that not only Parliament but the people in general will be grateful to Her Majesty's Government for this announcement. After all, these services, postal, telephone and otherwise, are very much part of one's daily life. I think the impression had rather got around that the charges had been fixed and were static and there was nobody imaginative enough to change them. Therefore it is refreshing to know that these changes are coming about. I agree with the noble Viscount that it would be desirable, if the Minister wants to encourage the use of telephones, that the arrears of so many people who have been waiting so long for telephones should be cleared. I hope also that the intention behind these reductions is not to increase the deficit but that, by increasing the turnover, the Post Office will in the end benefit by the changes.
There is only one small criticism I should like to make. I heard the Minister state that the Postmaster General has no intention at present of
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increasing the charges for inland telegrams. I think we feel that the charges are remarkably high. There are some of the older generation who still say, "I will go and send a 6d. telegram", but when they go to the Post Office they think two or three times and finally send a letter and take no further step. I hope that, while not considering increasing the charge, he will consider decreasing it.
LORD ST. OSWALD: My Lords, I am grateful for the response from both noble Lords to this statement. My understanding is that so far as the questions put by both noble Lords are concerned—although the answers are available—it is not the wish of the House that this important debate should be further interrupted, but I will arrange for answers to be given to them.

THE COMMONWEALTH
4.8 p.m.
Debate resumed.
VISCOUNT BRUCE OF MELBOURNE: My Lords, I greatly welcome the Motion which the noble Lord, Lord Ogmore, has put down. I observed with great interest the discussion which took place in another place on Monday last on exactly these problems, because I believe that they are vital problems to all of us. The interest which has been shown in the speeches which have been made and which are to be made shows clearly that there is a great desire to find the answer to all the problems that will arise in this expanding Commonwealth. I think we should sometimes ask ourselves exactly why we are so interested in the continuance of this Commonwealth. After all, it is not purely sentiment. I believe it is because we recognise that, with its member countries acting in co-operation, the Commonwealth will be able to play a great part in the realisation of the ideals for which we all stand—namely, peace, liberty, rule of law and human rights. Clearly, as a United Commonwealth we can play a much greater part than we can individually. I think that is basically why we are all so keen to find an answer to all these problems.
There are innumerable problems, and a great number have been raised to-day. I propose to confine myself to two,

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which stand above all the initial problems that arise, and which I regard as fundamental. Those two are the questions of the Commonwealth's power in relation to international politics and the Commonwealth's power in relation to the economic situation in the world to-day. I will make one suggestion later as to how we might have continuous consideration of all the other problems as they arise, but I want mainly to deal with those two particular subjects.
Taking the political side, and why it is essential that we should try to get a common understanding and work together as a Commonwealth, we know what the position is to-day. On one side there are Russia and the satellite States, and on the other side the free nations. What the situation will be in future, when the colossus China comes into the ring really seriously, Heaven alone knows! But we know what the situation is to-day. On the side of the Free World the United States of America is the only country that has the stature of Russia. The result is that, in a sense, America tends to become the predominant partner; that American views have great weight attached to them and often, in my view, prevail, sometimes immaterially but sometimes, I venture to suggest, disastrously.
On the other hand, if we had a really united Commonwealth it would make a tremendous difference to that position. The Commonwealth as a whole can more than measure up to the United States. And if we had that co-operation, the voice of Britain—which must remain for some time the predominant partner—would carry very much more weight. But I venture to suggest that in the general affairs of the world the voice of the smaller nations would also be greatly strengthened, because most of them are members of the United Nations. They must have found by bitter experience there that they can affect practically nothing as individual States. Whenever they affect anything it is because they find people with like views with whom they link up, and then their ideas get a certain amount of weight attached to them. I have had a great deal of experience of international conferences, and I know very well that if I had to link up with anyone I would certainly choose the Commonwealth nations rather than
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any other group I know of. So it does seem to me that if we can build up a real understanding on these great questions on which we all see eye to eye, and if we could really use our force in the councils of the nations as a whole, we might bring immeasurable benefit to the whole world by the part we would be able to play. That is one side that I want to deal with.
The other side is the economic one. Again the British Empire and the British Commonwealth, in its turn, were not built up only on sentiment; they were built up on trade. The noble Earl the Leader of the House has given us some of the picture of that situation as it is today. The United Kingdom market, incomparably the greatest market for primary products in the world, has to the developing Dominions and Colonies been their sheet anchor; on the other hand, these growing and expanding young communities overseas have been an extraordinarily good outlet for British manufactures.
I think that Britain can take great pride in the part that she has played not only in providing the market but in the financing of development plans. She has done it for the Colonies; she has done it for the Dominions, and if your Lordships think a little further back you will recall that she did it for the United States of America and a good many other countries in the world: her record is a very good one. The incidence and the sacrifice of the two wars has changed Britain from being the great creditor nation, and the sceptre has passed into the hands of the United States. But if we are going to have this Commonwealth as we want it, that great united force in the world, Britain must remain in, and maintain, that position she has held throughout her history as the great market for our overseas sister countries' exports, and must remain the great provider of capital.
If we are going to do all these things in foreign affairs, economics or anything else, we have somehow to have consultation. In the past, suggestions for machinery for consultation have not been very happily received. On the part of the United Kingdom, she would never like to force it, because it would have appeared that she was coercing the Dominions or younger countries. On the other hand, the younger countries

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were reluctant to show any enthusiasm for this co-operation and machinery because they had the feeling that it meant Whitehall domination. I was very interested to hear Lord Attlee say that even Canada had suffered from that—she appears to have got over it now. I have lived all through this from 1923 onwards; and of course Canada had the most frightful inferiority complex. It is a strange thing but my own country, Australia, has never suffered from it.
I venture to say that at this stage of our development this feeling of Britain's that she must not press the point, and the anxiety of the younger countries that they might get Whitehall domination, both appear to me to be completely out of date. It is now absolutely established that any one of us, any country inside the Empire, as soon as we come to maturity, has the right to self-government and independence. What is more, we can enjoy that privilege either inside or outside the Empire. In those circumstances it passes my imagination why anybody should be afraid of creating the necessary machinery. I believe it is necessary to create it.
The Secretary of State for Commonweath Relations gave us a view of how admirably his Department are doing; how they are reviewing all these problems; how they make sure the independence of the countries concerned is maintained; how they will supply them with information—they will do anything. But, to my mind, that is a little dangerous. That is the good old Whitehall getting into the ring, seeing the thing slipping out of its grasp, creating this machinery so that it will continue to dominate the position. I admit that that is possibly an unfair criticism, but having had a good deal to do with the susceptibilities of the younger nations I believe that we should do much better if we did create a machinery. I am not going to go into the question of what the machinery should be, but will merely say that I think it should not be beyond the wit of us all to devise some sort of Secretariat; and that Secretariat, which would be staffed not exclusively from the United Kingdom but from other parts as well, would keep under constant review every problem as it emerged in relation to the developing Dominion, and could provide well-informed information as to all
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the arguments for and against any particular course. What we are doing at present is to have a stab spasmodically at these problems that are approaching us. We have a debate to-day, and another place had a debate on Monday; but probably everybody forgets the subject for the next six or nine months, or some other period. I think that it has to be constantly under review. I do not insist that the only way to do it would be by a Secretariat, but I believe that that review must be carried out by something that is Commonwealth, and not United Kingdom, in its character, however admirably the United Kingdom might do the job.
In addition, I suggest that there should be attached to this Secretariat two bodies dealing with the two angles of the problem I am looking at, and, first of all, international political problems. There, I think we should have a group of experts from all over the Commonwealth who would keep these problems under constant review and would supply information to all the different countries concerned. That might prove invaluable to some of the younger countries who, in their initial period, would not find it possible to create a foreign service that could really keep them well advised on development and all the international problems. I throw that out on that side.
Now I come to the rather more difficult part of my observations, the economic side. There must certainly be attached to the Secretariat an economic section manned by experts from all over the Commonwealth who would keep the economic problems under constant review. The basic requirement in the question which I have already posed is that Britain must in future, as it has in the past, remain the king-pin. Britain is the place that matters most if, on the economic side, we are to continue to get closer and closer unity in the Commonwealth. The noble Earl the Leader of the House has referred to the fact that we must go on providing capital for these countries; that it is essential—
THE EARL OF HOME: My Lords, may I interrupt my noble friend on the matter of economic services, because his argument interests me? Of course, we have nearly got something of the kind for which the noble Viscount is asking. At the Montreal Conference we set up a Commonwealth Economic Advisory

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Council which is composed of representatives from all the Commonwealth countries. The officials meet twice a year and the Finance Ministers once a year; so round the annual clock, so to speak, there is in existence a Commonwealth economic machinery surveying Commonwealth economic affairs all the time.
VISCOUNT BRUCE OF MELBOURNE: I am much obliged to the noble Earl. I had a suspicion that the position was exactly as he has said, but I do not know how many of your Lordships find that when you are out of the ring you get some grasp of what is happening but are always a little suspicious that you may have got it wrong. I thought there was no harm in putting this idea to you; and I am most happy to think that some progress has been made towards what I have suggested.
Now we come to the very difficult point: can Britain really continue to play her part in the Commonwealth as she has played it before? That is the issue we have to face and to think out for ourselves. I am finding it a little difficult, because I am afraid I shall have to be slightly crisp on one or two points—I am sorry, but I cannot help it. I personally believe she can. But I think she must have inspired leadership to do it. I think she must reverse a number of policies which she has pursued, and there has to be an amount of clear thinking that we have recently rather lacked. I say that because, if Britain is to retain her part, first of all there are certain things she must do. She must remain a great Power; her domestic economy must be on a sound footing; there must be opportunities for employment for all her people under decent conditions, and she should be progressively advancing her standards of living. If she is to achieve all those things and to continue to be the country that is supplying the greater part of the finance required for all the great developments that are going on, unquestionably she has to be prosperous—she could not do it if she were not.
The questions I want to pose are these. Is Britain prosperous at the present moment? If she is, is she likely to remain so? From all one reads and hears, there is no doubt that Britain is extremely prosperous at the moment.
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That view is based on the employment position, the balance of payments, the cost of living and the gold and dollar reserves. I am not going to traverse all those four points. I content myself by saying that I am not nearly so happy about the position as most other people appear to be, and I will tell your Lordships why. When we look at the position and consider whether we are likely to remain really prosperous, I think there are a number of things which must cause us a lot of anxiety. For example, although our industrial production last year increased by 5 per cent. other countries, our rivals, did better. The output per man in Britain rose 8 per cent. last year, but the rise has averaged only 2 per cent. over five years—and that at a time when there was a high volume of capital investment. That must make one a little anxious. Exports increased a little last year and this year, but, unhappily, all our principal rivals increased their exports to a greater percentage than we did.
When we come to consider the share of the increased exports of manufactures that are going into world trade now, we find that the position is that for the first quarter of this year the United Kingdom had an increase of 17 per cent. Over the same period last year, we find that Germany had an increase of 29 per cent., France of 53 per cent., Italy of 56 per cent., Sweden of 31 per cent., and Belgium and Luxembourg of about 32 per cent. I venture to say that, however optimistic one may be, all those facts must make one wonder whether we are going to be able even to maintain our position against countries which have all done better than we have recently in a competitive world.
And when we realise that Russia is just on the brink of coming into the consumer and ordinary markets of the world as another competitor, that also must make us a little anxious. Then, when we think of industrialised China with her millions, it must again make us at least anxious, if it does nothing more. I cannot think that anybody can remain very complacent in face of the facts I have given. I do not want to appear to be making now any kind of attack upon Her Majesty's Government. Coming from another country, I

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belong to no Party, so I will preface what I am going to say by stating that I am sure that either the Labour Party or the Liberal Party would have been just as open to censure as, I venture to say, Her Majesty's Government are slightly open to censure for their performance over the last nine months, since the Election.
These are the facts which I see. The Government then had a great opportunity. They had an outsize majority and apparently a very long period of office before them. I believe that when they came in they should have told the people the hard facts about where we stand. If your Lordships remember, we had then an atmosphere of everything being splendid and that there was to be a boom. I will deal with that in a moment. I believe that the facts which the people ought then to have been told were these: that competition for our exports was getting heavier and heavier and that that competition was going to increase very considerably; that Britain lives by her exports and that the employment the people enjoy and the social benefits they receive are all dependent upon them; that the Government were not prepared to imperil the employment of the people and the benefits they had received and that they would take any drastic action, even to the point of cutting off from the people some of the benefits they were already enjoying, to save them from disaster in the future. The people should have been told that they had to show restraint, exercise self-discipline and accept self-sacrifice. Finally, the Government should have said that exports would have priority over everything else.
I agree that a flat statement of that kind would have slightly startled the nation; there is no doubt of that. But if it had startled them out of what I believe is a dangerous and complacent mood, I do not think it would have done anything but good. It might also have shaken their belief that full employment, higher wages, mounting profits, increased social benefits and a higher standard of living are theirs by Divine Right and that there is no need for them to earn those things by their own efforts and by the sweat of their brow. I believe that that would have done this country an
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incredible amount of good. It might even have called a halt to what I believe is a drift, undermining progressively the character, independence and basic virtues of the British people.
Forcing the British people to face realities would not have been at all popular, but I have sufficient faith in them to think that, with the leadership and confronted by the facts, when they knew that they were up against something they would have responded in just the same way as they always have in the past. That is my complaint: that the Government did not follow that course.
I do not believe that the Government can be very happy about their economic record in 1960, up to date, because they were returned to power at a time when inflation was halted for the first time and it looked as though they could advance on a firmer basis of stable prices.
The Government urged industry to raise its sights and accelerate investment for higher productivity and lower costs. That was the whole atmosphere at the time; and industry responded. But industry had hardly made its plans to get on with the good work when they were urged to hold back and postpone their plans. The reason for this volte face was that the Government discovered that private demand and public expenditure exceeded the supply of goods and services available—a thing which it had been predicted would happen.
The Government have given priority, as they did in the last Budget, to current Government spending, and signalled industry to curtail. I venture to say that that is hopelessly wrong in this country, where exports are so vital. Three-quarters of British production and all her exports are produced by private enterprise, and the Government should have given priority to anything contributing to exports which the country needs to buy its esential imports. Even while the gold and dollar reserve is nowhere near high enough, private industry has to take second place to Government expenditure.
When the Government came to power we appeared to be moving towards a boom. So unhappily has the situation been handled, in my view, that we are now choking off the boom before it has eventuated, and are talking in terms of

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restriction and restraint. I am sorry if I appear to be slightly drastic in my observations, but I feel all these things so deeply; and believing, as I do, that the whole future of this Commonwealth depends on the position of the United Kingdom, I have felt compelled to make them, much as I have disliked doing so.
What I have been saying in the latter part of my speech relates solely to the economic situation in the United Kingdom. Some noble Lord may remind me that this is a Commonwealth debate and not a debate on the United Kingdom, but I believe that the prosperity of the United Kingdom is so inextricably linked with the future of the Commonwealth that one cannot deal with this matter without facing up to the United Kingdom's position. I would conclude by saying that nobody will be happier than I am if someone will refute all the facts I have given and show that I have been talking nonsense; that there is not the slightest necessity for my apprehension. On the other hand, if that cannot be shown, I would suggest that Her Majesty's Government should take some notice and some action.
4.40 p.m.
THE MARQUESS OF SALISBURY: My Lords, last week we were concerned with changes in the international situation. This week we are concerned with changes in the Commonwealth—changes which I believe are equally far-reaching and perhaps, in some ways, even more perplexing. It was just about twenty years ago that I was appointed to the position which the noble Earl the Leader of the House holds with such distinction today. I became what was then called Dominions Secretary and is now called Secretary of State for Commonwealth Relations. Already then there were signs that changes were beginning; but the description of the Imperial structure in the Report of the Imperial Conference of 1926 was still pretty accurate. I should like, if I may, to remind your Lordships of the wording of that famous paragraph:
"Autonomous Communities within the British Empire, equal in status, in no way subordinate to one another, in any respect of their domestic or external affairs, though united by a common allegiance to the Crown, and freely associated as members of the British Commonwealth of Nations."
That was the definition given by the Imperial Conference in 1926, and it
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could have stood, I think, practically without any amendment in 1941. There were still only five members of the Commonwealth, with much the same background. All of them were European, and three of them, I think one may say, were of purely British origin. All of them were powerful modern States, very well able (to use the phrase of the noble Lord, Lord Ogmore) to stand on their own feet, economically self-supporting and bred in a long tradition of democratic government. It was very much what has been termed to-day a family party; and it was, above all, bound together by a common allegiance to the Crown.
That was the Commonwealth, the cohesive Commonwealth, which stood alone against all the might of Germany in the early days of the war. That was the Commonwealth whose representatives I, as Secretary of State, met practically every day—the noble Viscount, Lord Bruce of Melbourne, was one of them—to hear the latest news of the war as I got it direct from the Cabinet. And below it there were, of course, the fifty or so States of the Colonial Empire who were gradually climbing the ladder of self-government.
LORD PETHICK-LAWRENCE: My Lords, perhaps I may interrupt the noble Marquess. When he says that it was this body of persons in the Commonwealth which stood alone against Germany, he will not, of course, ignore the fact that there were 2 million Indian troops who were then part of the Commonwealth, through the United Kingdom, and who played a very important part, a very vital part, in the victory we obtained.
THE MARQUESS OF SALISBURY: My Lords, I am grateful to the noble Lord. I was, in any case, going to mention them later in this particular connection. When I came back after the war to what had become the Commonwealth Relations Office the picture was already very much changed. The party had grown in size. To the five older members had been added India and Pakistan, who had a different background and, in many ways, rather a different viewpoint.
And, since then, as we all know, into the comity of the Commonwealth there has come a flood of new States, of all races, religions and colours—some big, some small; some advanced, some only

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just emerging from the primitive conditions in which we found them 70 or 80 years before; but all claiming, and most of them admitted to, full membership of the Commonwealth. Nor does that flood, even now, show any sign of abating. Already to that little party of five to which I have referred there has been added, as well as India and Pakistan, Ceylon, Malaya, Ghana and Nigeria; and looming up just above the horizon there are yet more: Uganda, Tanganyika and Sierra Leone. Somebody has mentioned Kenya this afternoon; and I suppose there are the Federation of the West Indies and possibly Cyprus, and there may be more that other noble Lords could mention.
It is the custom nowadays to regard this development as wholly good and to say, rather as we used to say of the United Nations, "The more we are together the merrier we shall be." I only hope it may be so. Certainly it has always been our proudest boast in this country, in the past, that British institutions are evolutionary, empirical, and capable of constant adaptation to meet changing needs. But, my Lords, this particular situation is assuredly going to face us with the sternest test we have ever had to meet. It is folly to suppose that the present Commonwealth is animated by quite the same family feeling as that old one to which I referred earlier. I doubt even whether many of the new members regard it as especially British. Moreover, what is still more important, the majority are no longer bound together by what has been in the past the strongest unifying force; common loyalty to the Crown: and I submit that nothing can take the place of that—nothing! Nothing can take the place of personal loyalty of the subject to his Prince. For personal loyalty has this supreme merit; that the worse things become, the more brightly that loyalty shines out.
Why did so many Irishmen join the British Forces in the last war, though their country was neutral? It was not for love of England; it was because of their loyalty to him whom they still regarded as their King. Why did the 2 million Indians, to whom the noble Lord, Lord Pethick-Lawrence, so rightly referred just now, volunteer to take part in that conflict? It was because their
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King Emperor was at war; and they came to help him in his need. But now, State after State among the members of the Commonwealth, by becoming a Republic, has repudiated that allegiance.
I do not emphasise this point just because I am hankering after "the good old days". Whatever one may think of those days, we must all recognise that they have gone past recall. I do it because it is, I think, only right that we in this House should recognise where we and the Commonwealth stand to-day. That allegiance to a common Crown, which was the strongest cement of the Commonwealth, has not indeed, I hope, gone from the hearts of its peoples, but it has gone from the Constitutions of a great many, perhaps most, of its members. The Commonwealth is to-day, for many of the members, merely a combination of States which depends for its unity not on common loyalty but on common interest. It is, too, as I see it, a combination of States whose interests and ambitions not only differ from, but often directly conflict with, each other. That is the team, my Lords, that we are at present attempting to pilot forward, as a team, into an unknown and unpredictable future.
It is, if I may say so with all deference, the great merit of the Motion of the noble Lord, Lord Ogmore, that, while welcoming the increasing number of the members of the Commonwealth, he faces up courageously and objectively to the formidable nature of the task that confronts us, instead of reiterating, like Dr. Pangloss, that, "All is for the best in the best of all possible worlds". The noble Lord, Lord Ogmore, has faced up to the problems, in all their stark reality, and has tried constructively to see how they can be surmounted. How, for instance, he has asked us, in these new circumstances, are we to deal with the problem of the Prime Ministers' meetings, which posed itself for the first time in an acute form at the meeting this year? That is, of course, as I think the noble Earl the Leader of the House indicated, a question which needs most careful thought. In the very nature of things those meetings, I think, cannot be quite as intimate as the meetings of earlier days.
Take, for example, the subject of the co-ordination of defence, one of the most

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important subjects for discussion at past meetings, before the recent extension of membership. In earlier days, broadly speaking, the members of the Commonwealth were always not merely members of the same family: they were allies in the fullest sense of the term, having the same outlook and pursuing, broadly speaking, the same foreign policy. It was of the first importance to them to meet and discuss, in absolute confidence, defence measures necessary to carry out that policy. But now, my Lords, more than one of the countries of the Commonwealth are, if not members of the Afro-Asian Group, at any rate sympathetic to it. One should not complain of that. They are free, independent States, and they have a perfect right to orientate their policy exactly as they wish. But that does not alter the fact that the policy and aims of the Afro-Asian Group are in many respects widely different from our own; and where wide differences of outlook of that kind continue it is inevitable, so far as I can see, that talks on subjects of the kind of which I have been speaking must tend to become either of a very general character or limited to certain members. It is no good blinking that fact.
What does, at any rate, seem essential is to ensure, so far as that is possible, that meetings of the Prime Ministers do not become mere forums for the airing of grievances and for the riding of hobbyhorses. That would be disastrous. For there would, I believe, be a real danger that the older members of the Commonwealth, who have been accustomed to something more serious and more constructive, would begin to write off these meetings as futile, and ultimately might not come at all. Actually, I agree, I think, with every other speaker who has addressed your Lordships this afternoon—that these meetings can still do most valuable work, especially in the economic sphere. Moreover, as I think the noble Earl the Leader of the House very wisely said, they give an opportunity for the newer members of the Commonwealth to learn how in practice the institution works and, in particular, the principles of toleration and interdependence, to which the noble Earl, Lord Attlee, rightly referred as being inherent in its whole structure. For those reasons alone, I am sure we shall all agree that it is of the first importance that these
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meetings of Prime Ministers should continue, if that is in any way possible.
Then there is the problem mentioned by the noble Lord, Lord Ogmore, of those smaller and more backward States who are now getting Commonwealth status but who are, in fact, independent more in name than in reality and certainly are not economically independent. What is to be done about them? Are the British people, who are already so heavily taxed, to continue to pour out money on these countries, although they no longer have any real control over the way in which their money is to be spent? I have always felt great difficulty about this question—more, I think, than the noble Lord, Lord Ogmore, himself feels. There is no doubt at all, I think, that the countries in question will expect it. They will no doubt continue to say, in effect, "We are quite able to stand on our own feet, so long, of course, as you prop us up." It is the measure of the immaturity which they still have that they expect the best of both worlds. But it does seem hard on the British people, even in their present prosperous condition.
On the other hand, my Lords, it can, no doubt, be argued with great force that the present position of these nations is largely as a result of our own policy. It is we who assumed the responsibility of training them up for self-government. Ought we, now that they have reached the top of the ladder—even though it is perhaps sooner than a great many of us would have thought wise—to shirk the implications of our policy? It may very well be held that we ought not. I feel that probably the right answer to this very difficult problem is that there should be no standardised policy. We should judge each case on its merits. In one case it will be right, in the other wrong; but we should certainly not lay it down as a fixed rule that we must always help every emergent country just because it is emerging. As I see it, the same kind of consideration applies to all those agencies—medical, agricultural and others—which have been available to these countries in the past. There can, of course, be no question at all of intrusion by the United Kingdom Government into the internal affairs of countries which have gained Commonwealth status. That would be contrary to the whole principle on which the British

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Commonwealth is based. Whether such agencies continue to operate or not must be entirely a matter for the Government of the country in question. But if these agencies are wanted—and I believe that in many cases they will be—then I personally think that we should do our best to make them available.
Finally, my Lords, there is the further question, also raised by the noble Lord, Lord Ogmore: Is the machinery for dealing with the Commonwealth, here in London, appropriate for the new conditions under which it now has to operate? This is a question of course, as the noble Earl the Leader of the House knows very well, that has exercised the minds of those who concern themselves with Commonwealth questions for a great many years now. The word "colony" (why, I still do not quite know) has become a term of contumely, and even of abuse. Such being the case (so, I understand it, goes the argument), would it not be better to do away with the Colonial Office altogether and have a single office dealing with all the territories of the British Commonwealth and Empire, self-governing and non-self-governing? The idea has considerable attraction. It would do away with that inferiority complex which makes colonial territories so frantic to achieve Dominion status, often before they are at all ready for it. On the other hand, I am sure that it would certainly not be liked by some, at any rate, of the existing members of the Commonwealth, who would again find themselves lumped together with the Colonies. Moreover, there is, as I see it, this additional practical difficulty. Up to now, at any rate, the Colonial Office has been mainly an administrative Department and the Commonwealth Relations Office, except for the High Commission Territories in South Africa, has been almost purely a diplomatic Department. To combine these two functions on a large scale in a single Department might, I am afraid, raise great practical problems of staffing and so on, which might, in the case of so important a move, prove almost insuperable—I do not say, "impossible"; but I believe that any such change would need a great deal of hard thinking before the decision was taken.
There is another possibility, which I believe was at one time favoured by
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General Smuts. That is to have three Departments: one dealing with Africa, one dealing with Asia and the Pacific, and one dealing with Canada and the West Indies. The Ministers in charge of these three Departments would have the task of co-ordinating policy in all the territories of the Commonwealth and Empire that came within their particular sphere, in consultation, of course, with other members of the Commonwealth situated in those areas: and possibly there might be, at the top of the edifice, one super-Minister to co-ordinate policy over the whole imperial field, rather as the Foreign Secretary does over the whole foreign field. That is one possibility.
Then the noble Lord, Lord Ogmore, made what I thought were some very interesting suggestions which I should like to read more carefully, about a new inter-relationship between the Foreign Office, the Commonwealth Relations Office and the Colonial Office. Certainly I do not want to dogmatise—I do not suppose that anyone would at this stage—over all these possibilities. As I understand it from the extremely wise portion of the speech of the noble Earl who leads the House, in which he dealt with this particular question, he does not contemplate immediately any drastic alteration in the present machinery. But I feel sure that he will take careful note of the many practical suggestions that have been put forward to-day.
Now I have done. I owe the House an apology for detaining it so long, but the canvas is so vast that it takes time to cover it, even with the broadest brush. One thing, however, I suggest, emerges from any consideration of this subject. Numbers of members are not everything. The Commonwealth will endure only if it has a common purpose and a common faith. If it has that—heterogeneous though in many respects it may be—it can survive. Without it, I fear that it will not. And the only faith I, like the noble Viscount, Lord Bruce of Melbourne, believe, that can be capable of welding together the very varied States which compose the Commonwealth—the only faith that can possibly do it—is love of liberty.
If any State within the Commonwealth wants independence only as a means to enable it to set up a dictatorship in

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its own land, then I should not regret its departure. Indeed, I believe that the Commonwealth would be much stronger without it; for by staying it will only rot the fabric and destroy the unity of that great company of new States, the creation of which has been our greatest contribution to the peace and civilisation of the world. But if all the States of the Commonwealth have a real love of liberty in their hearts, that I firmly believe, can give them a common basis for action and a common loyalty—a wider loyalty, perhaps, even than loyalty to the Crown. It is for that that I feel we must work in the years that lie ahead.
5.3 p.m.
LORD CASEY: My Lords, I join with other noble Lords who have expressed their obligation to the noble Lord, Lord Ogmore, for initiating this debate and giving us an opportunity of speaking on Commonwealth matters, because I am one of those who believe that there has been too little discussion and thought given to Commonwealth affairs in any part of the Commonwealth in recent years. And in that perhaps I might include London—the capital of the founding member of the Commonwealth, the fons et origo of the whole.
I must admit to a certain despondency in recent years about the lack of what appears to me to be Commonwealth-mindedness in many parts of the Commonwealth. I do not speak so much of the Governments of the Commonwealth countries as of the Press, perhaps of the Parliaments, and certainly of the extent to which Commonwealth matters are discussed among groups of people. A number of books and learned articles have been written about the Commonwealth, but largely from the point of view of the past. I should like to see some contemplative books on the future structure and function of the Commonwealth. I only hope that appropriately qualified individuals may arise to give us the benefit of constructively minded prognostications about the future of the Commonwealth, because I think we shall all agree that sentimentality and nostalgia can get us nowhere.
The future structure and function of the Commonwealth is a hard practical matter to which, I believe, all the constructive thinking any of us can give to it would not be too much. The simple fact is that the rapid growth of the number
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of self-governing parts of the Commonwealth—from five, twenty years ago, to ten to-day, and to fifteen in a few years time—has been accompanied by a lack of the unity which signalised the Commonwealth in the generations before 1940. I think that we must accommodate ourselves to the fact that that unity will never be restored, at any rate to anything approaching the form which we knew twenty years ago. That is not to say that the Commonwealth has no importance for the future. I believe that it has a high importance for the future as a free association of free countries of people of like mind in respect of national and international conduct. But I believe that if this is going to happen, a great deal of constructive thought has to be given to it.
I think it is true to say that there is no country in the world to-day that has not as its principal aim survival. I believe that the cement of the Commonwealth of the future will be this urge to survive, and that all the present self-governing members of the Commonwealth—and I expect those who will join it in the years ahead—probably take the view that they are more likely to achieve this wholesome aim of survival in this free community of people of like mind. Survival, of course, entails a great many material things—defence, relations with other countries, developmental aid and many other material things; but at the same time there is a non-material thing, which is not the least of the factors that one hopes will ensure survival of individual countries and of the democratic world as a whole. This immaterial thing is what goes on in men's minds, public opinion among thinking people in all the independent and self-governing parts of the Commonwealth. So far as I am aware, that is a matter to which no great deal of thought has been devoted. I believe that the cohesiveness of the Commonwealth of the future will depend largely on the growth of a satisfactory climate of men's minds. If the thinking people in the Commonwealth countries are convinced of the importance of the cohesiveness of the Commonwealth, then I believe that the Commonwealth has more chance of expressing itself in world councils as something closely approaching one single entity.
I believe that no good purpose is served by attempting to paper over the cracks

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of the discussions about the Commonwealth. There are many things (although one need not repeat them) that reflect our difficulties in the Commonwealth to-day, as compared with the Commonwealth of twenty years ago. They are well known to us all. There is the fact that the countries of the Commonwealth are spaced widely apart, almost worldwide—a fact which I think has its plus and its minus. I believe that there is both strength and weakness in the widespread geographical nature of the Commonwealth to-day. To my mind, perhaps the most important weakness arising from the remoteness of many parts of the Commonwealth from each other—one of the minus factors—is the fact that many individual members of the Commonwealth are obsessed with their own regional problems, problems which in almost all cases did not exist twenty years ago. They are so obsessed with regional problems that the bolder Commonwealth pattern of thought comes second to their consideration of these problems.
I believe that the people, as apart from the Governments, of one country of the Commonwealth are inadequately informed about the problems, in the broad, of most of the other parts of the Commonwealth. I hasten to say that both the noble Earl the Leader of the House and the great Office which he represents, the Commonwealth Relations Office, are intimately informed of the problems of all parts of the Commonwealth. But I am not speaking of that. I am speaking of the people, of the Press, of the books that are written and of the state of mind of the thinking people in other parts of the Commonwealth. I do not believe that the principal problems of, say, a country like India, that are obsessing the minds of the average intelligent Indian almost to the exclusion of anything else, are adequately appreciated in other countries of the Commonwealth. That, I think, is a bad thing.
I have noticed since I have been going round the countries of the Commonwealth, which I have done for many years, the beginnings of what one can only interpret as resentment in some countries at the fact that the major problems obsessing the minds of some of these countries are, as they see it, almost unknown and unappreciated in other countries of the Commonwealth.
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They regard this as apathy or indifference to the problems that seem to them to be filling the whole horizon. If I am right in this, I think we should take note of it, and steps should be taken not to create more governmental machinery—which I do not think is needed at all—but to try to cope with this problem of creating and guiding a Commonwealth public opinion in each of the self-governing countries of the Commonwealth.
The noble Earl, Lord Attlee, recently pleaded in a most interesting speech for more contact between the ordinary people, as he called them, of the various parts of the Commonwealth. That was answered by the noble Earl the Leader of the House, who I remember said that something like 1,000 people from other parts of the Commonwealth were invited to Great Britain from their own country in any one year. One thousand is a lot, but against the background of the numbers of the populations of the Commonwealth countries it is very small. Indeed, when you come to think of it, I do not believe it is possible to get the ordinary people of each Commonwealth country in any degree of important contact with the ordinary people of other parts of the Commonwealth.
This is a matter to which we, in our much smaller sphere in Australia, have given some thought in the past, and we attempted to reach a solution by inviting people who might be called opinion formers in other Commonwealth countries, and particularly the Asian Commonwealth countries, to come to Australia for a few weeks at a time, at our expense of course, and see the country and the people and make up their minds objectively as to whether the policies of Australia are good, bad or indifferent. By "opinion formers" I mean, more particularly, Parliamentarians and the Press: they, I believe, are the opinion formers in any country. People in Australia like to believe that this policy of inviting a regular and continuous series of small groups of Pressmen and Parliamentarians from other, principally Asian, Commonwealth countries has been carried out with considerable advantage to the understanding and appreciation in Asia of the Australian people, their policies and outlook on the world.

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I would suggest, with respect, that thought might be given, if it has not already been given, to this business of inviting groups of opinion formers, who on their return to their own country would speak and write of the institutions they have encountered and of the experiences they have been through. If that were done on a sufficient scale—and it would have to be done on quite a considerable scale—I think we should develop in a reasonable period of time a much better informed and, I believe, more sympathetic public opinion in each of the Commonwealth countries.
A moment or two ago I spoke about regionalism, in the sense that the regional problems of many individual Commonwealth countries were appearing to them more important than the problems that might reflect the broad pattern of Commonwealth thinking. I believe that to be the case, and I think we might be wise to take regionalism into account in the future rather more than we have done in the past. By that I mean that, possibly in the course of Prime Ministers' Conferences, I can envisage the Conference starting with a plenary session or sessions and then dividing up into regional, geographical groups of Prime Ministers, holding conferences of these regional groups, and then gathering again in a plenary session or a series of plenary sessions. In that way the problems of individual geographical parts of the Commonwealth might be more closely considered than they are at the present time.
I have spoken a little about constructive thinking, and that made me welcome very much the paragraph in the communiqué of the recent Prime Ministers' Conference which read:
"The Ministers reviewed the constitutional development of the Commonwealth, with particular reference to the future of the smaller dependent territories. They agreed that a detailed study of this subject should be made for consideration by Commonwealth Governments."
That I welcome. If that were carried out, as I am sure it will be, it would be of enormous benefit and really would provide the constructive thinking for which I have been pleading. But I would say this to the noble Earl the Leader of the House. It says:
"with particular reference to the future of the smaller dependent territories",
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but I should hope that the work of this body, when it is formed, would not by any means be confined to the smaller countries, coming up the road, as one might say, towards independence. I should hope that the survey would be as broad as possible, and take into account possibly many of the things that have been said by your Lordships in this debate to-day.
May I attempt to sum up briefly what I have been saying? I feel that there is no single magic button that any Government can press that will result in the improved integration of the Commonwealth for the future. All of us, each Government and country, need to give all the aid we can and direct all the developmental investment capital we can towards the countries most in need of it. But I believe that one of the important things is the generating of more widespread interest in the Commonwealth and in the problems of every part of the Commonwealth; and I should hope that in the course of that none of us would shrink from expressing warm, sympathetic interest in the affairs and problems of other parts of the Commonwealth. In fact, if I had to pick one word to express what is in my mind and what I have been trying to say, it is that I believe we want more warmth in our Commonwealth relationships. We can all remember the past with pride, but we should be wise to concentrate on the future. We should not allow the Commonwealth to become the subject of elegant books and articles dealing with the past. The past is gone, good though it may have been, and the future is the thing that concerns us. Let us try to make this Commonwealth conception part of the bloodstream of all thinking people in each self-governing part of the Commonwealth.
I would end by suggesting to your Lordships that none of us, in any part of the Commonwealth, whatever the attitude of each of our countries may be at the present time, should let our loyalty to the Commonwealth be taken for granted. May I be allowed to end with a quotation that seems to me to be very apposite, from Her Majesty The Queen, who said:
"The Commonwealth bears no resemblance to the Empire of the past. It is an entirely new conception, built on the highest qualities of the spirit of man: loyalty and the desire

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for freedom and peace. To that new conception of an equal partnership of nations and races I shall give myself, heart and soul, every day of my life."
That is a very noble statement which I think all who are concerned with the Commonwealth would be glad to have said and would warmly echo.
I apologise for the fact that I am unable to remain in my place to hear noble Lords who follow me in this debate, owing to what is, for me, an inescapable engagement outside the House—an engagement which, I may say, is not in any way of a social nature.
5.21 p.m.
LORD SHEPHERD: My Lords, in the British Parliament Members have turned their attention this week to Commonwealth affairs, and each will make his special contribution. Having listened to the speeches that have gone before me, I cannot help feeling that already we can say that this is a most remarkable debate. All the speakers who have gone before have held senior posts in the Governments of their country. We on this side take particular pride and pleasure in listening to the noble Earl, Lord Attlee; for we are particularly proud, not only of his leadership but of the fact that during the period of the Labour Government he was largely instrumental in transforming the Commonwealth into what it is to-day. We have heard the speech of the noble Viscount, Lord Bruce of Melbourne, to which I listened with the greatest interest. I would invite him to come to this House for the debate on the Finance Bill. I only regret that he made his speech today, because I think that it would be extremely pertinent to the Finance Bill debate and would certainly demand a reply. I think that the speakers we have had illustrate the uniqueness of this House and its growing importance.
The noble Lord, Lord Ogmore, has moved his Motion in fairly wide terms. He first of all calls for a welcome for the growth of the independent countries within the Commonwealth. Let it be said—for it cannot be said too often—that all these countries within the Commonwealth are there of their free will and by the consent of their friends within the Commonwealth. We naturally welcome the newcomers. We shall welcome
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Nigeria in the late year; and hope also that Cyprus, when she becomes a Republic, will decide to remain within the Commonwealth. We are naturally anxious to hear from the noble Earl, Lord Perth, on his conversations in Malta, for the situation in Malta has always given this House considerable concern.
With the growth of the Commonwealth, I think we must recognise, as it has been recognised this afternoon, that the bonds that bind us together are becoming more complicated, more fragile, and more obscure. The noble Lord, Lord Ogmore, recognised this fact when he placed his Motion before the House. I think the noble Lord appreciates that the Commonwealth has reached one of its crossroads in its path through history, and that urgent and vital decisions have to be made. What frankly concerns me is that there is little sign from the Government that they realise the difficult situation, the dangerous situation, that is building up within the Commonwealth; and they have not put before us concrete solutions.
The whole conception of the Commonwealth has changed. It is made up to-day of races and religions with different outlooks on life and different standards of progress. We are no longer a white Commonwealth, looking with affection and nostalgia to the Crown and "the Old Country". As we have heard, from time to time these sentiments have held the Commonwealth together—loyalty to the Crown in the time of war. But the Commonwealth has changed. I cannot help feeling that, to the vast majority of the peoples of the Commonwealth to-day, the Commonwealth and the Crown are something mysterious and obscure; because for the majority to-day the world is bounded by their villages or places within a day or so's march. Therefore, if the Commonwealth is to survive, we must make the Commonwealth mean something special to every man and woman within the Commonwealth.
I should like to pay a tribute to the Queen and to the other Members of the Royal Family. I believe they have shown the Crown in countries which they have visited as something that is real, genuine and kind. I am particularly pleased that Her Majesty has accepted the invitation to visit Ghana, and then India and Pakistan. We saw at the cinema the welcome

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of Mr. Khrushchev and President Eisenhower to India. I do not doubt that the welcome Her Majesty will receive will transcend all welcomes that any visitor to India and Pakistan has ever received.
The noble Marquess, Lord Salisbury, spoke with some regret when he said that countries were becoming Republics; that they ceased to be a form of Monarchy. I suppose it comes as a shock to those who have been brought up with tradition. But I think we should not criticise. We should recognise that we in this country also have a need, a focus for our loyalty, and it is so in the countries that are now emerging. They have very few traditions, and they are trying to create a focus point on which the peoples' loyalties can be given. Loyalty can be given, as I see it, only if the people can understand and see that focus point. Unfortunately, the Crown is in London. To many of these countries the Crown is something that is not quite understood, and therefore loyalty is hard to give. Therefore, I would not criticise these countries who wish to become Republics. Rather should we be satisfied that they have adopted, and are going to maintain, the standards we have tried to give them, both in the form of democracy and in service to their country. I believe, as I have said, that the Commonwealth is at its cross roads. Economic difficulties abound. I have spoken—no doubt I shall speak again—about the great division that exists between the rich and the poor; the countries that have food and the countries that starve; the countries that have industrial and economic growth and those which stagnate. Those countries are in the British Commonwealth.
The noble Earl, Lord Home, quite rightly drew our attention to the contributions this country is making. But what we contribute is rather like a raindrop in the desert. It may appear to some, in India, Singapore, in Africa, that the contributions we are making are little better than the crumbs from the rich man's table. I am quite sure that this country, if it were given, as the noble Viscount, Lord Bruce of Melbourne said, an inspired leadership, could make a much greater contribution to the development of these countries. The noble Marquess, Lord Salisbury, wondered whether we should call upon our
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people to make what must inevitably be a sacrifice. But if they were asked, I have no doubt at all what the answer from the people of this country would be. We saw their contribution to World Refugee Year, a contribution that exceeded all possible expectations. I earnestly beg the Government to see what more effort they can divert from our economy to give investment in these countries. For whilst we on this side of the House may condemn political slavery in South Africa, what is liberty to a man or woman who is starving in India, in the streets of Calcutta? What is liberty to the man or woman suffering from tuberculosis, denied the medicine, denied the food that could save their lives? Liberty means very little when the stomach is empty. There are many empty stomachs. Much can be done, and the driving force, I believe, must come from this country.
I would not put the whole responsibility on the shoulders of the British people. If we believe in a Commonwealth of brothers this is a Commonwealth responsibility. Therefore, I should like to see a greater effort, co-ordination by Her Majesty's Government with the Governments of the richer countries. Already there is some co-operation with the Colombo Plan, providing officers, advisers; but what is needed is money for investment. I quite agree with the noble Lord, Lord Ogmore, that there is no point in just pumping money in. What is needed is managerial experience, and the Government have that managerial experience at their call. One part of it, of course, is the Colonial Development Corporation, which we shall be debating in a few days' time. As things stand at the moment, the Colonial Development Corporation will be barred from development work in Nigeria, because Nigeria will become an independent country. Nigeria not only needs money but she needs skilled advisers, and that is going to be denied them because they have obtained their political independence.
THE MINISTER OF STATE FOR COLONIAL AFFAIRS (THE EARL OF PERTH): If the noble Lord will allow me to intervene on that, he is wrong. In fact although the Colonial Development Corporation may not be allowed to put more money into Nigeria, it has

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management there of which Nigeria, if it wishes, can certainly make use.
LORD SHEPHERD: I thank the noble Earl. But the point surely is that the Colonial Development Corporation will be unable to expand its existing work and, I presume, to provide further staff.
I should like to say just a few words on the question of South Africa. I agree with the noble Lord, Lord Ogmore, that we do not wish this debate to become controversial in this matter. But I think something should be said from this side. South Africa is a very lovely country. I remember having happy days passing through. I also remember the South African soldier in the desert. But I cannot, in spite of my affection for that Dominion, accept the racial policies of that Dominion. I must say that I am utterly at a loss to understand how it is that persons who are Christians cannot worship in the same church as their brothers. The noble Earl, Lord Home, asked us for patience, asked us for tolerance. I believe that we have had our share of patience. Apartheid is not only an attack upon the coloured people of South Africa; it is regarded as an attack upon all the Asian people, not only those within the Commonwealth, as I well know from my experience in Bangkok when the news of the Sharpsville killings came through. The people were horrified and they wanted to know what the British Government and the British people were going to do about it.
My Lords, we have been patient. I hope that the Government will continue to make, in the clearest terms possible, their stand in regard to this matter. I hope they will not agree to any changed membership of South Africa in the Commonwealth until there has been a radical change in the policies of that country—because I understand that the racial policy adopted by the South African Government is not entirely supported by the white population of South Africa. There are many, not of the Left Wing, not of the Radical, nor from big business, who see where these steps are taking them. I believe that this country and its Government must make well known to the South African Government, and to the people of South Africa, where we stand; for I believe that this
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is one of the issues which must be settled if the Commonwealth is to continue to expand and to live in peace and harmony.
5.41 p.m.
LORD TWINING: My Lords, I join with other speakers who have welcomed this Motion, not only because of its importance but because of the wide terms in which it has been phrased. I had my most recent experience in East Africa, and my remarks will be largely concerned with that area. These African territories have been promised that they will achieve self-government, and ultimately independence, at the right time, and it is to be hoped that they will elect to apply to join the British Commonwealth. If they do, they would, of course, do so of their own free will. With the increasing number of free countries which join the Commonwealth, it is hoped that it will not lead to the new ones being regarded as a second eleven.
There have been criticisms about our going too fast in the granting of self-government to these East African territories. The African National political leaders have not been slow to reply. They have replied quite sharply—that who are we to take an objective view as to when they are ready to look after their own affairs? They say that they are interested in self-government, not good government; and they say that if they make a mess of it it will be their own mess. I do not think we should take these arguments too seriously so as to allow them to affect our responsibilities in the matter. We have great responsibilities and we must ensure that the leaders with whom we negotiate are the real leaders—responsible leaders who have the backing of the people of their territories. There are other responsibilities: to see that if independence is to be real these territories have an economy which can raise the revenue to maintain them in a real, independent way; and for them to have an adequate number of staff available to run their countries.
I am heartened that in my old territory, Tanganyika, there is a leader of moderation, responsibility and goodwill, who has gone out of his way to assure the minorities in the Territory that their rights will be assured when he comes into power and that they will have similar

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rights to any other citizens of Tanganyika. I believe that, if he remains responsible in the way that he has already done, Tanganyika can influence affairs both north and south.
Now I touch on a somewhat delicate matter. Various Ministers, in speaking about the future of the East African territories, have said that the constitutional reforms are to be based on the introduction of Westminster Parliamentary democracy. I feel sure that we all agree with that. I think it is one of our most cherished institutions, and we want to offer them only what is best. But we must ask the question: will the Westminster model, when exported to African soil, work? I cannot resist the temptation to say that the export model has nothing in it which resembles your Lordships' House.
I have my fears that in the early years it may not work as we should wish. There are various reasons for this. First, there is a lack of public opinion on a national scale in the East African territories. There is an emotional influence—"Uhuru", or freedom; but there are few who could really discuss seriously what the meaning is or what it implies. There are local opinions, on a village or even on a district basis, about who owns a certain water-hole. Though the Press and broadcasting are developing quite rapidly in the East African territories, they have not yet reached the stage where one can say that they have built up a national opinion.
Then there is the fact that most of the political leaders have said that they feel that African nationalism must be based on a one-Party system. I have always been taught that the Westminster Parliamentary model can work effectively only if there is an Opposition which is effective. Thirdly, there is the question of intimidation. There is overt intimidation and there is covert intimidation. Covert intimidation is much more widespread than is realised by people who have perhaps not lived in these countries. It is based on secret societies and on witchcraft, and it affects the population. Finally, the most important reasons why the Westminster model may not work for some time is that the Africans are always saying that they want to build up an African personality: they do not want imported alien institutions; they want to evolve something which is their
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own. But I hope that they will accept the Westminster model, and that they will try to make it work, with our sympathetic understanding.
Now I turn to economic aid. So much is needed in Africa that it is most difficult to decide what the priorities should be. There are big schemes and little schemes, but the big schemes usually attract the headlines—the Kariba Dam, the Volta River scheme, and so on. There are a number of small schemes which have been designed to deal with areas which are rather intractable for want of water and where the people are somewhat backward. These are excellent in their way, but quite inadequate, and I feel sure that what are required, if we are going to avoid a disparity between those who live in the most favoured areas, where God has blessed them with good climate, good soil and good rainfall, and those who live in semi-arid areas, are thousands of these schemes, modest in themselves, which will help to build up the standards of the whole of the African population. In the past, Colonial Governments have been rather inclined to spend their money in the most favoured areas because they brought the quickest results. I believe that that is going to cause a dangerous situation, where you have some areas where the people can afford to pay for their educational advancement, and other areas which, unless something is done, will always be backward.
Now there is the question of where the money is to come from. United Nations technical agencies are doing a certain amount of very valuable work in the East African and other Territories, both in money and personnel. The World Bank has made various surveys, including one of Tanganyika, and I hope will be prepared to provide some money. But I believe that, with the suspicions which there are in the hearts of so many African leaders about colonialism, and the fact that they want to be neutral and not attached to one camp or another, the aid which is given should be on an international scale. Your Lordships' House the other day gave its approval to a measure called the International Development Association Bill. That goes some way, but I do not believe it goes far enough; and if there is not sufficient

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money on an international scale, these countries, when they get their independence, will turn either to the dollar or the rouble; and they will think (whether it is true or not) that they are being inveigled into one camp or another.
I turn with some trepidation to the judicial aspect. It is taken for granted in this country that the Judiciary and the Executive should be independent. We have given to those countries which we have administered another of our cherished heritages, the Common Law. But for some time now it has been apparent that this is another of our institutions which cannot be exported without considerable modification. Conflicts can arise between the imported law and the native customary law which can lead to serious, even tragic, results. These conflicts become particularly serious when they affect matters closely related to the lives of the ordinary African population, such as marriage, divorce, inheritance, land tenure and water.
At the end of last year, a Conference was held in London under the distinguished chairmanship of the noble and learned Lord, Lord Denning, to discuss the future of law in Africa. It was attended by Chief Justices, Attorneys-General and others from territories of Africa that we administer and also by representatives of the Sudan and Liberia. I believe that this Conference recognised the need to reconcile these conflicts if newly independent countries are to inherit a system of laws acceptable to the public. It is perhaps to be regretted that the Conference did not see fit to recommend the setting up of a commission of distinguished lawyers from the Commonwealth to consider these problems more fully. The problem is of fundamental importance, and a sense of urgency seems to be lacking. The Conference, however, did recommend that a committee be set up without delay to consider what should be done in the sphere of legal education, though I do not know what action, if any, has been taken.
I feel that legal training is most important. Any laws we leave behind could be destroyed in a sweep by an irresponsible act, but it is not so easy to destroy a well trained legal profession. In the East African territories there are few
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Africans who are qualified lawyers, and it is inevitable that for some years to come judges and professional magistrates must continue to be recruited from overseas. This should give an opportunity for local candidates to be trained in our traditions; and we have proof, in West Africa and elsewhere, that this can be done. It is important that local law societies and Bar associations should be established on a sound and proper basis.
I turn now to the question of the Colonial Service. I do not think that this is an occasion on which I should dwell on the sorrows of the Colonial Service—or, to give them their correct title, Her Majesty's Overseas Civil Service. There are still thousands of them doing a devoted, even a dedicated, job of work for these people, in conditions which are not very comfortable, with few amenities. They do the work because they believe in it and because they get a response from the people for whom they are working. It is the uncertainties, not only of their own position but of the work which they are doing and how it will be maintained, which is irking them. They are feeling the matter very keenly.
I have seen that the issue has been confused sometimes by the fact that there is also a demand for more pay and better terms of service. I hope that in East Africa, at any rate, that will be resolved by the Commission which has been recently appointed. But it is the future of these officers which is the main issue, and I feel that the Government have a responsibility not only to them but also for seeing that good administration is maintained, at least until the day of the hand-over, and, we hope, afterwards. We are told that some of these officers have the stigma of the term "Colonial Service" attached to them. I believe that this argument is rather exaggerated. In my experience, the African population have very great confidence in, and affection for, the administrative and field officers who go about their daily lives working for the people's welfare; and they would be sorry to see them go.
It is natural, however, that the political leaders, once the country gets independence, will want to replace those officers as soon as possible with their own people. What are we doing about it? There has been the difficulty that the educational system has not developed as

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rapidly as constitutional proposals, and therefore there are relatively few Africans or locally educated men and women who possess the requisite academic qualifications on which the Colonial Office have always insisted in those wishing to become members of Her Majesty's Overseas Civil Service. Some Governments (and perhaps I should hardly say "wisely", because I have had some responsibility) tried an experiment—a device, if you like—in introducing an intermediate grade, men with suitable personal qualities but without these academic distinctions, putting them into a grade called "assistant district officers", in which they did precisely the same work as district officers, who were in the senior service, but did not get paid as much. They have become part of the administrative life of that country and have achieved what I believe is a hallmark in being trusted by Government with magisterial powers and authority to sign Treasury vouchers.
I believe we must face up to this problem and that it is our duty to do so. The first thing is to make an approach to the responsible African political leaders and get them to see the problem and to work together to find a solution to their satisfaction. It is, of course, a question of representation—how it is to be represented to them; but I believe it can be done and that it would have a very good effect.
Then there is a situation which I believe is undesirable although I do not know how Government can interfere with it. In each of these three territories there are three civil service associations, each a racial one. Surely for the future it would be far better for the officers themselves, and for the Service, if there were one association on a non-racial basis. The educational system, particularly Makerere College, is likely during the next few years to turn out a number of young Africans who, I think, will be particularly suited to undertake Government posts. In fact, I think that some of them will be up to the standards of some of those expatriate officers who are recruited in this country. But there is a necessity for them to be trained.
I should like to see Her Majesty's Government tackling this problem, too, by taking these people on the lower grade I have mentioned, and also these
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young men coming out from Makerere and other educational establishments, and sending them on the courses which have been organised, and are still organised, for the young cadets of the administration who are recruited in this country and sent on a Colonial Service course to Oxford or Cambridge. They would learn much. They would learn sophistication; they would have the pride of having gone to Oxford or Cambridge, and I think they would go back as men of higher stature. What is more, it would be an earnest of our intention to be helpful and to try to find a solution to their problems. I must apologise for having been so long, but I feel that we should approach this adventure of giving self-government with our eyes open.
6.2 p.m.
LORD DENNING: My Lords, when the noble Marquess, Lord Salisbury, ended his speech this afternoon he spoke of the need for a common faith, and he would find that in the love of liberty. May I suggest that a practical link towards that end is already found in the great common legal tradition which runs throughout the countries of the Commonwealth, a common legal tradition expressing common principles of law handed down by judges who have gone out from here, and now by students who come here—and I am told that there are three to four thousand of them here at this moment studying at the Inns of Court and taking out from here our legal traditions to these countries.
May I try, in a few words, to express the principles which I have found to-day run through these countries that adopt the common law? There are the fundamental principle to protect the individual from arbitrary power, whether on the part of the Government or anyone else; the instinct for justice, which means that right and not might is the true basis of society; and the instinct for liberty, which means that free will and not force is the true basis of government. Those are the traditions which have been handed down by the men who have gone out and those who have come back; and, indeed, it is shown even in the costumes, the robes, they wear. Only a few weeks ago I was in Sierra Leone, and there were the Judges wearing the red robes and wigs, the red robes that have come down as

1195
cassocks from the time of 800 years ago; and barristers in wigs and gowns of the eighteenth century. These traditions are carried on in many countries throughout the Commonwealth.
In many of the new Constitutions now being framed we shall find provisions for safeguarding fundamental rights: freedom from arrest, freedom of speech, no discrimination and no property to be taken without compensation, and all the others. We have not needed them to be written down in this country. The Judges have been able to protect them by their decisions from the Executive. When the Constitutions were set up of the great countries of Canada, Australia and, significantly, South Africa, there were no provisions for safeguarding fundamental human rights. They relied on our system under which the Judges were able to protect the citizens or their principles. But the Judges of this country have no protection against Legislatures. It is assumed and understood by all the people of the country that the Legislature, the Parliament of this country, will not infringe fundamental human rights. But in the new countries which are emerging and coming into this great Commonwealth it is seen in country after country that there must be provisions written down to safeguard fundamental human rights, with the enforcement of which the Judges are entrusted, so that the Judges can strike down acts of the Legislature which infringe fundamental human rights.
That started with India in 1949; Pakistan in 1956; Malaya in 1957, and Nigeria in 1959. Your Lordships will see Sierra Leone and Kenya both stipulating that in their coming Constitutions there shall be a code for protecting fundamental human rights, a thing which the United States of America learnt many years ago with their Amendments. You must have written down provisions for protecting fundamental human rights which the Judges can enforce, and they will strike down acts of the Legislature which infringe them, because it is now seen that Legislatures may become subservient to an all-powerful Executive when there is no effective Opposition.
May I stress the important part that the Judges will have to play in these new Constitutions? To take an instance, it is provided that the right of every person
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to his private and home life, his family and his correspondence, should be respected. If that is to be limited, for instance, by powers of police to tap telephones, or whatever it may be, who is to decide, in these new Constitutions which follow in the form, whether the limitation is reasonably justifiable in a democratic society, so that there is freedom of the Press where the Press, as in America, claim to be able to comment on any trial whatsoever? In these new Constitutions the freedom of the Press is limited only by what is reasonably justifiable in a democratic society. In case after case under these new provisions the Judges will be entrusted with that decision. They cannot help being involved, perhaps as the United States Supreme Court has been, in questions which are almost of a political character and of a policy character.
My Lords, here is the importance of ensuring the independence of the Judges, so that they cannot be removed by the Executive. Indeed, until recently the Judges of the Colonial Territories could be dismissed at pleasure, according to the law. But I am glad to see that in the new Constitution in Nigeria Judges are protected in this way: there has first to be an inquiry by a tribunal in the country; and no action is to be taken on it, no Judge is to be removed, in any of these countries under the Constitution unless the case has been referred to the Judicial Committee of the Privy Council.
That brings me to the part which the Judicial Committee of the Privy Council perhaps ought to play. We know that shortly after the war India, Pakistan, and now Ghana, abolished, or are abolishing, the rights of appeal to the Privy Council. But not all—Nigeria wishes to keep it; Sierra Leone wishes to keep it, and other countries are keeping it. Indeed, if these great constitutional questions arise, is it not desirable to have a body remote from local, maybe political, influences? At the recent Conference of the Prime Ministers, Senator Coovay from Ceylon made a suggestion which was very apposite for Ceylon and which he said would apply to other countries. Ceylon, in becoming independent, becoming a Republic, may no longer wish for appeals to come to a Judicial Committee sitting here in London, with too close an identification with England.

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What he suggested was that it should be re-formed, re-constituted, into a Commonwealth Court which should be manned, not only by Judges from England and Scotland but also by distinguished members from other parts of the Commonwealth, and that a panel could sit, say, three in each territory in turn, or as occasion demanded.
Even as a lesser project, my Lords, why should not the Judicial Committee of the Privy Council go on circuit? Let me draw a parallel with the way the Judges of England consolidated our Common Law when there were different customs all over the country. The Judges of England rode round the circuits facing the hazards, as there were then. Indeed, when they got to Newcastle they had to have armed troopers to protect them; and even to-day they get danger money to pay for the troopers to protect them from those hazards. Moreover, the length of time taken in those days on those journeys was far more than the length of time taken to-day in going in an aeroplane to South Africa, or to any other part of the world. Cannot the Commonwealth be consolidated in that way? Cannot we look forward to a Commonwealth consolidated, whether by an itinerant Council or, as Senator Coovay suggested, by a Commonwealth Court in which all could have confidence? Should we not in that way be providing a valuable link on that side?
One word on legal education, which my noble friend Lord Twining has mentioned. If there is any matter as urgent as any other it is that the lawyers of these new countries should be properly trained and equipped for their tasks—and at the moment the facilities are woefully inadequate. The great majority of them—as I have said, 3,000 to 4,000 of them—are over here training at this time, and well trained they are. But we need improvements. We need more improvements in the facilities for practical education, particularly as regards such things as trust accounts, bookkeeping and so on. There should be set up in the African territories law schools and other such places for legal education. In East Africa, for instance, there is no law school at all, except in the Sudan, where there is the old Gordon College in Khartoum. The students have either to come to this country or go to India, with the result that
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very few Africans are practising as lawyers in East Africa to-day, although they form the great majority of the population.
My Lords, the Committee which my noble friend Lord Twining has mentioned, over which I had the honour to preside, recommended that that was a most urgent task, and I believe that steps are being taken, I hope quickly, to set up a Committee to that end. But if we take these steps as to the judicial requirements, the constitutional requirements, by insisting on fundamental human rights and by providing proper training for lawyers, surely we shall do something to maintain, not only the rule of law but the love of liberty, and to provide a great bond throughout all our countries.
6.14 p.m.
LORD DELAMERE: My Lords, I should first of all like to say how grateful I am to the noble Lord, Lord Ogmore, for moving to-day's Motion, and how grateful are the people who, like myself, have made their homes in and are determined to stay in one of the emergent countries (in my case Kenya), to feel that deliberations are already taking place to see how we can best be fitted into the Commonwealth. I should like to take up a few moments of your Lordships' time to point out that, so far as emergent countries such as Kenya are concerned, the formative years are going to be the years of the transition period before independence is gained. So far as Kenya is concerned, the success or failure of those years will depend entirely on the economic situation of the country. As your Lordships are well aware, all new countries, whether in Africa or elsewhere, are developing ones. They live by development, and it is essential that that development should continue. Despite the efforts of the local population to stimulate that development, I believe that for many years to come outside assistance, both financial and technical, will have to be provided from overseas; and I cannot believe that, unless the economy of those countries is soundly and properly based, that help will be forthcoming.
In Kenya we have seen lately how political reforms, however essential and necessary they have been—and I consider them certainly so to be—because at the time, perhaps, they were not linked with economic proposals, have really had

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a retarding effect on the progress which they were designed to bring about. So far as the immigrant communities are concerned, the tremendous fall in land values and the catastrophic fall on the local stock exchange in the value of the shares in the local companies have not helped matters at all; and, so far as the Africans are concerned, the reemergence of Mau Mau oath-taking and intimidation—and, indeed, violence—which unfortunately has been directed in the main to those loyal Africans who supported the rule of law and order during the emergency, has not by any means sustained or helped the confidence of the African people.
Therefore, my Lords, it would seem that a certain pattern must be adopted if these emergent countries are to come through this period of tuition and are eventually to achieve the proper status necessary to take their place in the Commonwealth. The first point seems to me to be that we must have, as has been pointed out by many other noble Lords, British justice and law and order; secondly, that we must have a contented Civil Service, the members of which, because they are secure in their own personal positions, will be willing to guide that essential tuition of Africans during this formative and vital period; and, thirdly, and perhaps most important of all, that Her Majesty's Government must formulate an economic policy which is certain to bring a prosperity to the country, so that we do not fail in that direction. There is no doubt that prosperity is a tremendous assistance, as we have seen in our own country. It helps an independent Government to function; whereas, if there is not prosperity, I do not think things will be very pleasant.
In conclusion, I would say that if, by any chance, the provisions that I have outlined—law and order, a secure Civil Service and economic development—are not provided, I do not think that a country such as Kenya will emerge as an independent State in a satisfactory position. Moreover, it is quite possible that the Africans, if things do not go right, will blame the British people for what has happened and will not wish to continue in association with them after they have gained independence.
6.20 p.m.
LORD HASTINGS: My Lords, I had considerable sympathy with the noble Lord, Lord Casey, when he said at the beginning of his speech that he was rather despondent about the lack of interest and lack of discussion about the Commonwealth in most Commonwealth countries, including England. When I entered your Lordships' House some four years ago I started talking about the Commonwealth and the Colonies and I have been going on ever since, but I well remember that there was a period when there was not a single debate on the Commonwealth and the Colonies for a whole year, at precisely a time when we should have been debating the matters we are discussing this afternoon. Fortunately, that period is over and we have had many debates on this most important of all subjects, important not only for the future of our own country and of the Commonwealth but also for the future of the world.
It is a pleasure to find ourselves discussing the practical problems that really matter, because, in the words of the noble Marquess, Lord Salisbury, we have taken the broad brush over the vast canvas on several occasions, but it is not often that, in common parlance, we have got down to brass tacks. That is what we are doing to-day. I was interested by the insertion of the word "happily" in the noble Lord's Motion. The only speaker who has cast any doubts upon its use was the noble Marquess, Lord Salisbury. All I would say is that whether independence will prove to be happy for the people themselves will depend very much on the way we carry out our duties in solving the practical problems which are enumerated in the Motion before us. I do not think that we can accept that independence is automatically a happy state. If we look around the territories in Africa, I think it would be difficult to conclude that independence for, let us say, the French Cameroons or French Guinea and now possibly for Belgian Congo, is necessarily a happy step forward, if it is a step forward at all.
This brings me to the constitutional side, which has hardly been mentioned this afternoon, except by the noble Lord, Lord Twining, although we talked a good deal about constitutional developments in the debate we had in

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March on Kenya, when considerable doubt was poured upon the suitability of the Westminster pattern. I suppose I was one of the main speakers who did the pouring on that occasion. I still maintain that to expect universal adult franchise to marry happily with the Westminster pattern of democracy at the present stage of development is probably asking too much; and we should not hesitate to look at other systems, such as those which have now been started in Ghana or Pakistan. I hope that the Government will not tie their hands in this respect.
I was interested in a phrase used by the noble Earl the Leader of the House—"different patterns of living". This reminded me of an interesting article in The Times about a fortnight ago, entitled, "Why Indonesia Hates the Netherlands". The article pointed out that during three hundred years of colonial rule, not only by the Dutch but by ourselves and the French, Siam remained the only country which had not come under direct colonial rule. Now all the other countries have their independence and Siam, although not better off than the other countries, is not much worse off, if at all. The article pointed out that the colonial period has left little impact on the pattern of living and on the fundamental outlook of the peoples of those areas.
Coming to Africa, I think it would be altogether astonishing if the impact of colonial rule had left a much greater impression there than it has in Asia. Therefore we must be willing to accept other forms of Government, other attitudes towards life, and compromise to the best of our ability with them, provided that we can maintain those fundamental virtues which we have passed on—the principles of liberty enshrined in the Common Law and human justice.
I do not want to go over the ground which has been adequately covered by so many noble Lords, so I will turn straight away to the question of the Commonwealth Relations Office, the Colonial Office and the Overseas Civil Service. In the past, I have been rather confused about the real situation and what might be done, and had suggested the common idea of amalgamation between the Commonwealth Relations Office and the Colonial Office. I have gone into this question more thoroughly since, and this
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afternoon we have had a very clear explanation from the noble Earl the Leader of the House, in defining the duties and the development of the Commonwealth Relations Office. It is interesting to hear that it is developing into a sort of special Department for Commonwealth interests, which can evaluate events everywhere in the Commonwealth in relation to United Kingdom policy and the policies of other parts of the Commonwealth, and which can represent these evaluations forcibly before the United Kingdom Cabinet.
However, this was not quite sufficient to satisfy the noble Viscount, Lord Bruce of Melbourne, who feels that a new organisation should be set up which would be definitely Commonwealth and not United Kingdom in character. It is true that the Secretary of State for Commonwealth Relations represents the British Government and not the Commonwealth Governments, but he can do no other. There is considerable food for thought there. Of course, it is a matter which must be threshed out between the Commonwealth Governments, but there is a very big future, and it requires a dynamic outlook in the Commonwealth Relations Office, as well as in the Commonwealth as a whole, to bring about the reform which is clearly needed.
Turning to the Colonial Office, I would remark that it has been said already that there is plenty for the Commonwealth Relations Office and the Colonial Office to do, each on their own account, and I have come to the conclusion that there is no doubt whatever about that. Like many other people, I have had the idea that the Colonial Office would work itself out of a job comparatively soon. I asked the Colonial Office for a few figures, which I have been kindly given, and I was very much surprised at the result. In 1956—that is to say, before the independence of Ghana and Malaya and before the Federation of the West Indies was set up—the establishment of the Colonial Office was 1,276, and now it is still 1,214. After the independence of Nigeria, which, as has been pointed out in another place by the Colonial Secretary, will take away half the total numbers of colonial subjects, halving them from 74,000,000 to 37,000,000, the reduction in the Colonial Office establishment will be 17. So you see, my Lords, it is not

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the number of subjects, but the number of countries, which counts.
Obviously, within the Colonial Office all the research organisations are still needed, the people running Colonial Development and Welfare are still needed, and the number will not be reduced in proportion to the number of subjects being administered from Whitehall. I am not holding this against the Colonial Office. The truth has dawned on me at last, and I thought that perhaps it might interest your Lordships to know what the situation is. So there is evidently plenty for the Colonial Office to do, and they still require plenty of people to do it, quite apart from the fact that, as has already been pointed out, the amalgamation of the two Offices would be unacceptable to the new independent Commonwealth countries. For practical reasons alone, I think that at the Whitehall end there is no case for amalgamating the two Offices, but merely for reforming and (shall I say?) putting a little more dynamic into the Commonwealth Relations Office.
I return now to the last leg of this trio, as it were, which is the Overseas Civil Service. I think that when many of us have asked for a reorganisation of the Colonial Office and the Commonwealth Relations Office, what we have had at the back of our minds has been really the security of the Overseas Civil Service; and not only the security of the individuals, but the welfare of the territories they have been serving, which we feared might be left without sound administration and without the necessary technical assistance. This is probably the most serious problem with which we are immediately faced, because it is a question of responsibility not only to these individuals, but to the territories for which we have been responsible. Without wishing to seem patronising in any way, it is clearly to the interests of those territories when they become independent that they should have the best advice possible; and that I think is becoming increasingly recognised.
The Minister of State for Commonwealth Relations made a speech not long ago in which he suggested that these new independent countries did not want the colonial civil servants, simply because, in the words of the noble Lord, Lord Twining, they had "colonial taint", and
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that they turn more naturally to other countries. That is only the case, so far as I can make out, in Ghana—and in respect of Ghana I have some figures which are interesting. On the introduction of the compensation scheme in Ghana in July, 1955, there were 770 pensionable overseas officers; immediately after independence, 473 were left; and now, three years later—and this is the figure that I want to bring out—of the 473 who remained after independence, there are only 80. That does not take into account people working on contract, but only the pensionable officers. There are grounds for believing that these people have been replaced with people not only from other parts of the Commonwealth, which is a good thing, but from other parts of the world, though I believe on the whole from the Western world: in other words, from Europe. But I do not think that that holds good for the other territories. I think we might say that Ghana would like some of her British civil servants back.
Better arrangements have been made in Nigeria and also in British Somaliland. In Nigeria, in the Eastern Region, there were 220 of these pensionable officers in 1957, reduced now to 100; in the Western Region, 300 reduced to 120; and in the Northern Region and the Federation there were 1,760 officers, most of whom have joined the Special List B and are expected to stay on after independence. In addition, there are over 1,800 officers on contract there. That is certainly a much more encouraging picture. In British Somaliland, out of 111 pensionable overseas senior officers they have asked 75 to stay on, and I believe that all but half a dozen of them have agreed. So I think that the noble Lord, Lord Twining, is right in saying that this colonial taint is not quite so strong as perhaps we have been led to believe by the Minister for Commonwealth Relations, amongst others. I hope that that may be the case.
But we have still to decide what is going to be done in future. I picked up a remark in the speech of the noble Earl the Leader of the House, who said that the Colonial Secretary was working on this and that any scheme would be expensive; but he went on, I think, more or less to suggest that it would be worth

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it. I wonder whether that is rather a hopeful straw in the wind. Your Lordships will remember that under the Commonwealth Teachers Scheme, which was discussed in this House only a short time ago, we have agreed to subsidise Commonwealth teachers and pay the difference in their salaries, pay for their pensions and all the rest of it, so that colonial territories will be put to the cost only of the average wage the teachers get in their own countries. That is a form of indirect aid, of course; and we have been talking to-day a great deal about the economic aid that is necessary. I wonder if it is possible to carry this sort of scheme into the Overseas Civil Service, because one of the great difficulties—apart from all the colonial taint business, which I think has been exaggerated—is for these new territories to pay the expatriate officers: they need a higher salary than the local men; they must have home leave, higher pensions and all the rest of it. If we are able to give indirect aid by paying the differential, I think that is going to be one of the best investments that this country has ever made. I hope that a plan of that nature will be acceptable to the Government.
I do not intend to go on much longer, but I want to end on a note which will be slightly critical. It is not critical of my noble friend who is going to wind up the debate, or of the Colonial Office; it is not their fault. This is not a new problem. When my noble friend comes to reply no doubt he will say that it is receiving serious consideration. But I hope he will reply in such a way that we get the impression that it is going to lead to some urgent and definite action, and that it is not "serious consideration" in the normal Civil Service sense.
This problem has been with us certainly, if not since immediately after the independence of India, at least immediately after the new Constitution for Ghana, the Gold Coast as it was, in 1951. To be very generous, I will say that anyhow we have had seven years to think about this problem. The remarkable thing is (it seems remarkable to those of us on these Back Benches who are interested in the problem, and to those of my friends I know in another place who feel strongly about it) that, in spite of the very efficient and dedicated Secretaries of State for the Colonies and
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Commonwealth Relations we have had, they have not been able to solve this problem; and they have not been able to do that, it is my belief, because there has been a most serious obstruction which they have not been able to remove.
I can only suggest that that obstruction is somewhere else. Whether it is in the Treasury or whether it is in the Home Civil Service, who I feel have not been able to appreciate the enormous importance of the Commonwealth and have not been able to foresee the expansion of the Commonwealth or to visualise the problems on the spot—a point which was brought out by previous speakers—I do not know. But wherever that obstruction is, I ask the Government to break it down, and to break it down soon. If it is going to take a first-class row at the highest level to do it, the sooner that row is had the better; and I believe that it may rest even with the right honourable gentleman the Prime Minister himself. If he is unable to solve this problem I do not think that any other Prime Minister will ever have the chance, because it will be too late.
6.42 p.m.
LORD MCCORQUODALE OF NEWTON: My Lords, I apologise to noble Lords who have preceded me, who have contributed to what has been such an enlightened debate this afternoon, if I do not follow them in their speeches, not even, if I may say so, the noble Lord, Lord Hastings, in his researches which I thought at one time had a slightly Parkinsonian flavour. The noble Lord, Lord Ogmore, mentioned the question of training officers and instructors, and I think it is as well to have on record that at the present time in this country there are over 40,000 young men and women studying, the bulk of them from the British Commonwealth, and that under the United Nations programme for technical assistance there are more holders of fellowship awards who come to study in Great Britain than in any other country in the world. I know it is only touching the fringe of the problem, but I do not think that, in the efforts we are making, we in this country have anything of which to be ashamed.
I wish to intervene for only a few moments to relate some rather recent personal experiences to your Lordships while they are very much in my mind.

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A few weeks ago I returned from the International Labour Organisation Conference in Geneva, where I had the privilege to be the employers' delegate. There is no need for me, in this House, to relate to your Lordships the achievements over the last 40 years of the I.L.O. in its remarkable existence. But I would remind your Lordships that it is a tripartite organisation, the only one in the whole field of United Nations activities of this nature, where there are delegates from workers—mostly trade unions—delegates from the Governments, and also from the employers.
That brings me to a point which I would emphasise about the I.L.O. in so far as we have had a good deal of talk this afternoon about international aid for the less developed countries. I myself am wholly convinced that the I.L.O., with its tripartite approach, is the international body best able to carry out our desire, which is to improve the standard of life in these less developed countries. Alone amongst international organisations the I.L.O. can attack the problem on what I might call a three-pronged basis. Through its Government representatives it can guide inter-Governmental financial policy, which is essential. At the same time, through its workers and trade union delegations, it can do much to safeguard workers' standards; and through its employers' delegations it can encourage conditions under which private capital can be usefully employed and enterprise can flourish. It is on a tripartite scale such as this that I believe the problem of raising the standards of the less developed countries can be best faced.
I would refer, if I may, in this Commonwealth debate to something a little more personal. We had at the I.L.O. Conference something like 82 nations represented in full membership, and five or six more sending observers—nations like Nigeria who hope within a short time to become full members. Indeed, it was calculated that by next year probably no fewer than 90 nations would be represented. The point I wish to emphasise is the striking way in which, amongst this vast throng of peoples, the Commonwealth nations seemed automatically almost to come together as a family. It is often asserted that mutual self-interest holds the Commonwealth
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together, and I have no doubt that that plays a part. But, it was quite apparent to anybody who had the privilege of being a delegate to Geneva at this Conference that the Commonwealth means much more than that.
I wish your Lordships could have been present at our Commonwealth dinner during the period of the Conference. That dinner, which is given by the employers' delegation to all the Commonwealth delegates—those of the workers, Governments and employers alike—and their ladies was a truly remarkable occasion. We had no fewer than fourteen Commonwealth nations represented, many in their own colourful garments. We had over 240 people present. We sent a telegram to the Queen which was unanimously and joyfully suggested. We had a gracious reply from Her Majesty, signed by herself, and we had occasion to see that everybody who wished could have a copy. They naturally drank the Loyal Toast with acclamation, and we ended up—and they did it very well, because we had the words printed on the programme—by singing "Auld Lang Syne." I endeavoured in my remarks which I, as host, had the privilege to make to say how struck I had been by the whole family atmosphere, both at this dinner and outside, and how we had all found ourselves almost driven together among so many foreign nations. Afterwards in conversation those who were present were good enough to say that they cordially agreed with the sentiments I had endeavoured to express.
The other impression with which I came away from this Conference was the desire of our Commonwealth delegates, and indeed of the great majority of the delegates, that the United Kingdom delegations, of employers, Government and trade unions, should show a lead—and they said so with no uncertain voice. So my colleagues and I all came away from the Conference, with a heightened realisation of the truly spiritual as well as material basis of our family of nations.
6.50 p.m.
LORD MILVERTON: My Lords, in saying a few words on the subject of this debate, I should like to begin by saying that I have no intention of going over again the question which has been

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dealt with adequately already by the noble Lord, Lord Hastings, and that is the position and treatment of the Overseas Service in relation to what they could do to help Commonwealth countries in the future. It would be wasting your Lordships' time if I tried to repeat, in perhaps less adequate language, what has already been said by the noble Lords, Lord Twining and Lord Hastings.
I propose, so far as I can, to try to deal with this Motion, in so far as it relates to the state of the Commonwealth at the moment and in the future, without going into the past or some of the qualifications of the new members. I would start by saying that in my view there are no concrete solutions of what are called Commonwealth difficulties. The Commonwealth is based, as we all know, on a sense of belonging together and working out independent policies in general harmony. We may not have a single foreign policy or a fixed pattern of co-operation, but we have a common purpose: the defence of free institutions and the democratic way of life.
Perhaps I ought to say, instead of "we have", "we had", because the advent of non-European members has raised the question of the effect of the addition of members with so different a background in history and in tradition. The addition of those members makes us look. At present the Commonwealth, consisting of free and independent countries, precludes by its very nature the possibility of any central administration laying down a common foreign economic or defence policy. As I see it, every member nation enjoys a complete control over its own foreign policy and is solely responsible for the international obligations into which it enters.
It is, of course, vital that on matters of common concern there should be the greatest possible amount of harmony and community view. Hence an elaborate system of communication has already grown up and is in existence, of the most frank and intimate character. Apart from correspondence from Government to Government there are periodical meetings of Ministers and officials and daily personal contacts between representatives of the Governments. It is generally understood, too, that any member contemplating action should inform or consult with others liable to be affected. This
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consultation does not mean either commitment or agreement. Mutual tolerance and willingness to co-operate are considered to thrive more easily on an atmosphere of freedom than on any compelling regulations.
I made out for my own information recently, and was surprised to find their number, the number of this network of committees, standing organisations which are already in existence to spread knowledge of the Commonwealth and promote discussions between adequately qualified people in the Commonwealth with each other; there are innumerable visits, apart from visits of Prime Ministers and at that altitude. There are conferences of civil servants and technical officers and education officers and every other kind of officer. And one might remember, too, that 40 per cent. of the world's international payments are financed in sterling, and the fact that these countries, with the exception of Canada, belong to the sterling area, is in itself a great bond.
As I look at the Commonwealth, I regard it as a kind of leaven in the world. Perhaps the best example of that is the Colombo Plan itself, which had a Commonwealth initiation but which includes both within that region and without that region many countries who are not at present, and perhaps not likely to be, members of the Commonwealth. There are in the region Cambodia, Nepal, Indonesia, Laos, Vietnam, Thailand and the Philippine Republic, and outside of it there are Japan and the United States. They are all assisting in that plan.
My Lords, peace and prosperity for the human family depends upon the progressive elimination of poverty from the world. I suggest that this means more than anything else in relation to the Commonwealth. It means that capital, skill and industry must be applied. We can provide some of this. But no race can confer liberty on another. It can give it only freedom of choice, which is what the recently made members of the Commonwealth have been given; they are free to choose not necessarily democracy; they can, if they please, choose dictatorship or even chaos. There is nothing to stop them except the influence of other members of the Commonwealth. The results of expanding the Commonwealth are not easily predictable. There

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are now, or there will be at the end of this year, five European, four Asiatic and three African members. There is no doubt that in future membership of the Commonwealth will be numerically predominantly non-European.
The material benefits of Commonwealth membership are indeed many. But unless they are controlled and inspired by the simple principles which constituted its original strength, this increasing membership might easily be the cause of a danger of its disruption. If it succeeds in keeping the ideals that are its final binding force, then it could easily be the nucleus of a real League of Nations. The members of the Commonwealth have advanced far themselves on the road to a better world. They have outlawed war between their members and have survived the strain of Kashmir, and are now surviving the strain of the South African Government's domestic policy of apartheid. In that connection, I would say that I do regret the reference which was made by the noble Lord, Lord Shepherd, to the policy of the South African Government. I do not propose to enter into that subject myself other than to say that it would be only fair, if one must criticise that Government's policy, to remember, too, how much lies on the credit side for that Government in what they have done for African welfare in their country.
The testing time of the Commonwealth lies ahead. Can some of the new members, present and prospective, maintain economic and political stability? Can they produce in their administrators, their civil servants and their politicians, the ability and integrity and understanding necessary to manage a complex economy in the modern world? And is the belief in individual freedom and the democratic way of life really deeply rooted, sufficiently deeply rooted to make them wish to remove barriers between men of equal ability wherever such barriers exist? Or are some of them just suffering from a lethal overdose of Western civilisation?
One gets tired of repeating it, but it is none the less true, that democracy is a set of values, and institutions are merely a way of safeguarding them. In Africa, it is only too often the view that the institutions are the real thing, without
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appreciating fully what lies, or should lie, underneath. If I may refer to it, the United Nations stands as a warning to the Commonwealth. In all its philanthropic and welfare schemes, in its health work and scientific research, its success has been enormous; but in its main object, of bringing peace and good will among men, of outlawing war and dispelling the fears which beset mankind, I think it is fair to say that up to date it has had little success. If we want our dreams to come true we must first wake up. Tolerance and understanding, and a refusal to meddle in the internal affairs of constituent Members of the Commonwealth, are part of the very strength itself of the association. One may ask: But what if the internal affairs of a country sometimes assume a wider world significance? That is indeed one of the problems which requires wisdom and tolerance; and perhaps it is as well, in examining such problems, to reflect also on parallel conditions in one's own country.
The question arises, can the Commonwealth survive the continuous succession of fresh members with a naturally different outlook on life? I think the reply is: Yes, so long as we leave to the past its ashes, and retain only the fire of faith, the belief in liberty and order and human dignity, and the long discipline which gives a people self-possession and self-mastery, and a reverence for law which will not fail when that country itself becomes the maker of the law. It is no use (this, I think, was the moral which the noble Lord, Lord Casey, drew) bringing a tribal mind to international problems. The trouble over dealing on a world view with the affairs which come before the Commonwealth is that so many of its members must inevitably, for many years to come, be supremely concentrated on their own domestic affairs.
Up to date the Commonwealth has consisted of States which history has drawn into close association and which have evolved similar institutions—Parliamentary forms, independent courts, free universities, systems of law and so forth. It is an association, and always has been, which offers its members an opportunity of detailed and frank discussions of problems which affect them all. It may be that this compelling

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blend of sentiment and self-interest is one of the most important links in the Commonwealth. But in practice perhaps the most important thing, as I see it, is the existence of the Commonwealth Parliamentary Association, representatives of which are continually meeting all over the world. A bare look at the list of the subjects discussed at these Conferences will show how great an interest there is, and how educational must be its value, in most of the problems which confront the members of the Commonwealth.
In conclusion, my Lords, may I say that these bonds of union are nebulous, almost invisible, but still strong. I know that people with a tidy mind would like to have a central Secretariat and a sort of supervisory authority. But I personally think that any attempt to formalise what the Commonwealth stands for, to imprison its spirit in regulations, would inevitably harm its growth and, indeed, would probably kill it. If you try to imprison the spirit of the Commonwealth in this way it would probably be the end of the ideals for which it stands. I believe that the future of the world depends upon the successful future of what is known as the British Commonwealth of Nations.
7.6 p.m.
LORD BIRDWOOD: My Lords, I will detain your Lordships for only a few minutes. I have noticed a technique creeping into our debates by which, when noble Lords rise to speak, they sometimes refer to their qualifications to address the House on the particular subject. I think that happened in our Foreign Affairs debate. Alongside the list of distinguished speakers who have come before me (I notice that the noble Earl, Lord Swinton, was to have followed me) my own contribution will be extremely humble. It so happens, however, that I once spent a year or so in a job known as "civil liaison", which was liaising between the military authorities and the civil Administration in India. In that work I found myself in close association with no fewer than 11 district commissioners. In passing, I may note that the best or the worst of them could have been either an Englishman or an Indian, since I regard the breed of the district officer as the same breed all the world over.
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I thought perhaps I could usefully add a footnote to what has been stressed by the noble Lord, Lord Ogmore, and I think by the noble Lords, Lord Twining and Lord Hastings, in regard to the fate of the men of the Oversea Civil Service. I think that two approaches have come out of this debate in regard to the future. One approach, which has not been mentioned but was inherent in some of the things that have been said by speakers on this side, is the approach of a group, under the chairmanship of Lord Colyton, which recently studied the Commonwealth and which published a paper called Wind of Change. The other approach has been stated, not so much by that broad and splendid statement which the noble Earl the Leader of the House gave us—a broad picture of the Commonwealth—as the address made by the Minister of State to the Royal Commonwealth Society on May 26.
As I see it, the first view states that with the sovereign independent sector of the Commonwealth more and more dominating the future at the expense of a shrinking Colonial sector, the time has come for a single control. The implication is that the Colonial Office would be absorbed into the Commonwealth Relations Office; and a further implication which I read into that situation is that there would be a common Commonwealth Service serving the needs of either the independent or dependent sectors. As I understand it, Her Majesty's Government are against any formal amalgamation or absorption of Colonial Office functions into the Commonwealth Relations Office. I would agree that we should never seek change merely for the sake of change, but in this rather passionate desire to preserve this—what I believe the noble Lord, Lord Milverton, termed the "nebulous quality" of the Commonwealth of which we are all so proud—I wonder whether we are not also sometimes in danger of a somewhat obstinate refusal to recognise the need for structural change when in fact, to my mind, it becomes rather obvious.
Coming back to the immediate fate of the Oversea Civil Service, Mr. Alport, the Minister of State, stressed in his address the difficulties, and referred to them as more psychological difficulties than anything else. For example, the question was asked: what happens when

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Englishmen continue to serve in countries that have passed over to independence? An African may say before the passing of independence that he wants to retain their services; but the fact is that after independence the presence of Englishmen becomes in the mind of the African—and I am stating it completely objectively—the symbol of a status which he seems very anxious to forget. In these territories Ministers may be reluctant to protect Englishmen. We had the case in a Western African territory the other day where the Minister prefaced a remark to a Parliamentary Question with the observation: "Since my Permanent Secretary has not taken the trouble to provide me with the right material, I am trying to answer the Question myself." There is also the natural desire for the local talent to fill the vacancies, to draw the salaries and, indeed, to serve their country. I would agree with the noble Lord, Lord Ogmore—and I believe the noble Earl the Leader of the House also stressed this—that there can be no question whatever of forcing the services of these men on to territories; and I presume that whatever measures are taken to preserve the availability of these very fine men would be taken within the context of a general agreement between all members of the Commonwealth.
Others more experienced than myself, such as the noble Lord, Lord Hastings, have stressed the consequences of a sudden break and a hurried exodus of the Oversea Civil Service. The lack of confidence created would frighten away capital investment, and there would be the danger of a vacuum, to which the noble Lord, Lord Ogmore, referred, which might be filled by aid from those whom we should least wish to see supplying aid to these countries. I understand that Her Majesty's Government are fully aware of all these factors and that they have certain measures in mind. My own limited experience leads me to believe that round a table of Commonwealth Ministers, discussing matters of common Commonwealth interest it should not be difficult to find support for something in the nature of an Overseas Commonwealth Service.
Recently at the United Nations it was my privilege, about once a fortnight, to
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attend Commonwealth discussions on the agenda, and although I believe it is true to say that on very few occasions did we agree unanimously on any particular issue, the thought processes by which we agreed to disagree were all the same. In other words, there was a relaxation, a tolerance, a friendliness about our discussions which I am quite certain was absent in the case of the more formidable and more noisy blocs such as the Afro-Asians. It is for such reasons that I should always hope that a Commonwealth forum would be the right place at which to settle matters such as the future of an Overseas Commonwealth Service—in principle, if not in actual administrative detail.
My own plea is still for a fully-fledged Commonwealth Service, mainly because I believe that nothing less than that will give these very good men the sense of security and of being looked after which they are entitled to seek. I would suggest that, in time, such a Service could be regarded in terms of the suggestions of the noble Earl, Lord Attlee—sufficiently flexible for an Australian to be sent to Nigeria, and a Nigerian, perhaps, to New Guinea. Hitherto, we have only begun to scratch at the surface of the possibility of what is referred to as Commonwealth "cross-fertilisation".
If Her Majesty's Government, in their wisdom and after full Commonwealth consultation, conclude that a Commonwealth Service is not, in fact, a practical proposition, then at least let the loose arrangement be one by which the individual good man can be retained when and where he is required. The point on which I am hazy is this: I would say that his retention should be covered by a contract with the British Government and not with the Government of the territory concerned. If that involves placing an extra burden on the shoulders of the British taxpayer, by all means let the British taxpayer be informed straight away of the situation. Enough has been said to drive home the point that these 4,000 or so men of the Oversea Civil Service are deserving of a practical expression of our appreciation of their work. They have been referred to as "the salt of the earth", and I believe that that is no understatement.
There is just one other aspect of this situation, my Lords. If we have to face

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the day when an Englishman can no longer go out and give of his best in distant and sometimes uncomfortable lands, we ourselves—in a national, collective sense—will be the first losers. There is, of course, a psychological adjustment necessary. A new rôle has to be thought of, as exacting and exciting an experience in the future as was the rôle of executive administrative responsibility in the past. And, provided that in the background there is certainty of tenure of appointment and material security in old-age, I can see no reason why the same type of men who went out to these countries in the past should not go out in the future. If they do, then I do not think that either they or we need make any apology for that process to which the noble Marquess, Lord Salisbury, referred—the process of colonialism.
I think we can both understand and forgive terms such as "the casting off of shackles" and "the seeking of freedom from the yoke of oppression" when those terms come from those who suffer, for the moment, under a persecution complex. I believe that the noble Earl, Lord Attlee, was quite right when he said that it is only for the moment. They mellow and lose these complexes. To our own people in these countries who use these terms I would say: "The implication of what you say is that if we had never contaminated distant people in a distant land with our contact, those people by their own exertions would the more quickly have discovered Western technique; the more quickly and effectively have mastered the elements of law and order, have mastered political structures and so on; and they would have done those things better, in fact, than they have been able to do through our contact. If, however, all Australians were to leave New Guinea tomorrow, the people of that country—a people whose technique, I understand, is sometimes to put a visiting policeman into the pot and cook him—would, through the release of some suppressed, inhibited enlightenment, suddenly find that enlightenment".
My Lords, if all that is accepted for the nonsense which it is, it should follow that, where within the Commonwealth good men are both available and willing to work for the advancement of
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their less fortunate brothers—and I repeat I am thinking in terms of the availability of Africans and Asians, as well as of ourselves—in a Commonwealth career then, as the noble Earl, Lord Attlee, has said, they should be given a chance to do so. To that end I would hope, and believe, that Her Majesty's Government are taking a long look at the existing machine, not necessarily to create a new machine but to give a new look to the old machine; and that much, I think, is what the men of the Oversea Civil Service can both expect and deserve.
7.20 p.m.
THE EARL OF LUCAN: My Lords, we are indebted to the noble Lord, Lord Ogmore, for setting out in a very neat way the four headings of this Motion; and, broadly speaking, I think that the speakers have kept to those headings and have dealt with all of them. There is not time, neither am I the person, to sum up a debate contributed to by so many noble Lords of such great distinction and experience; so I should like to deal with only one or two points arising out of the Motion. Before I do so, may I say that I have been asked by my noble friend Lord Attlee to express his apologies to your Lordships because he has to leave in a few minutes for an engagement with the British Broadcasting Corporation, where he is to pay a tribute to the late Mr. Bevan, and he will not be able to be here for the close of the debate.
My Lords, "constitutional, economic, judicial and organisational requirements of the situation" were what the noble Lord, Lord Ogmore, directed our attention to. On the constitutional side a remarkable group of White Papers has been issued recently, from which we see that in each of the four months February to May there was a constitutional conference dealing with one of the colonial territories, one of the dependent territories: Sierra Leone, Somaliland, British Guiana and British Honduras. Those are among the smaller of the colonial territories, and they are the ones, I think, which can be classed—two of them certainly, the two in the Western hemisphere—as those which can hardly hope to achieve the full power and status of independent nations.

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This problem of the smaller territories, which the Prime Ministers' Conference announced was being investigated by a special body, was, I may say, dealt with by the Labour Party some years ago, and they published a small pamphlet on the special problems of these smaller territories. The problem is a very real one—I do not think it has been referred to this afternoon—because we have in these countries territories of all sizes down to that of a small village. There is Tristan da Cunha with 250 inhabitants; there is Pitcairn Island with rather less; there are territories like Gambia with a quarter of a million inhabitants, and the Falkland Islands with about 2,000. Those smaller territories present a very serious problem if we believe, as we certainly do, that every territory, however small, ought to have the right of self-determination.
We believe that, however small a country, it should progress towards autonomy; and although it cannot, when autonomous, stand on its own feet in the way that a larger country can, it should have the option, then, to determine its own future. It should be entitled to opt for secession from the Commonwealth, for joining with a neighbouring country, such as has in fact happened in the case of the former British Somaliland. It should be able to opt to be associated with some nearby, some neighbouring, Commonwealth country, or left to have self-government in association with the United Kingdom, in which case the United Kingdom would be responsible for its foreign relations and its defence. But the point that I hope will be recognised by the Government is that every one of the citizens of the dependent territories ought to be able to look forward to the highest degree of autonomy possible.
Then we come to the economic question—because I would not dare to venture on the judicial position. We have heard the views of the noble Lords, Lord Twining and Lord Denning, and there have been interesting suggestions for a development of the Judicial Committee of the Privy Council which I am sure Her Majesty's Government are considering, but it is not for a layman to propose developments of that kind. But what I should like to deal with is the
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economic problem. These countries, emergent territories, are achieving—we are granting them—political independence on political grounds; and, let us face it, we are not waiting until they are economically viable or have the full resources to stand on their own feet before we grant them self-government. We grant them self-government because we have taught them in the course of the years they have been dependent on us that man's right to determine his own future is the most important thing for him, and we have held out before them the aim of governing themselves and deciding their own future.
We have given them independence, for the most part, when the demand has become so insistent that to refuse it would cause intolerable strains and stresses. So, it is quite unreal to say that a country, when it becomes independent in the Commonwealth, must be capable of standing on its own feet in the markets and in the life of the world and be economically self-supporting. These countries do not change their status and their power overnight with the grant of self-government, and they must continue to receive help from any sources that will give them help.
Her Majesty's Government evidently recognise this, because in the White Paper No. 974, called Assistance from the United Kingdom for Overseas Development, there is set out the financial and other help which independent Commonwealth countries and the newly independent territories can get. There is the new policy of the Commonwealth assistance loans, for which any country is eligible, and the emergent territories can continue to receive, after independence, the unexpended part of the Colonial Development and Welfare grants that have already been authorised. Moreover, the Colonial Development Corporation can continue projects that were started before independence and can increase the capital allotted to those projects. We think—and we shall have an opportunity of discussing it in a week or two's time—that something more is needed, and that there should be some freedom for the Colonial Development Corporation to add new projects to those which are already in existence. But there it is, my Lords—loans, grants and development projects, all of which can continue after a country is independent.

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That leads on to the last heading of the noble Lord, Lord Ogmore, which is organisational; because it follows from the continuance of economic aid that somebody must assist these countries to obtain the help to which they are entitled, and that body, of course, after independence, is the Commonwealth Relations Office. Therefore the Commonwealth Relations Office must be staffed in such a way that it has people qualified to examine the conditions in these territories: and that, I maintain, adds another function to those which the noble Earl the Leader of the House gave us as the functions of the Secretary of State for Commonwealth Relations. He must surely have in his Department an element which is to some extent advisory and administrative.
Now that is something new since the emergence of the smaller territories, because previously the function of the Commonwealth Relations Office was, of course, mainly diplomatic; and, as he said, it has been staffed, and very ably staffed, by officers brought from various branches of the Government service—from the old Indian Civil Service and the India Office, the Foreign Service and the home Civil Service. No one would quarrel with that, or with the work of the Department, but it seems to me that there is a need for officers experienced in administration in underdeveloped countries, who know what it is all about—this question of the development of backward countries in Africa and elsewhere. That is where, I suggest, there is a need for officers with experience, and an opportunity to make use of the experience of so many of the officers in the Colonial Service who see the possibilities for their careers shrinking.
I agree with the noble Lord, Lord Twining, that the idea that there is a stigma of colonialism attached to an officer who has served in the administration in a dependent territory is very much exaggerated, and I would suggest that any officer who wants to continue in his career, and who volunteers, will realise, before he makes up his mind, that his function in the future will be that of an adviser rather than a paternal governor, and that he will have to serve as adviser to the elected Government of whatever territory it may be—Nigeria, Sierra Leone or any other territory. So I
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suggest that the Commonwealth Relations Office would benefit from the infusion of a certain number of officers of this experience and with this ambition to go on helping in the development of these backward countries. I hope that there is nothing in the statement of the noble Lord, Lord Ogmore, that there is some academic qualification which is insisted on for officers before they can serve within the sacred portals of Downing Street.
We have heard enough from various noble Lords to show that there is great anxiety in your Lordships' House about the future of officers in the Overseas Civil Service. I believe that the noble Earl, Lord Perth, is going to tell us about that. I hope he will be able to tell us that, in spite of the changing balance in the Commonwealth, and of the diminishing opportunities for service, it will still be a worth-while career that can be offered to any young men who want to take up that kind of living. We cannot see the Service die from the stifling of all opportunities for advancement, and we hope that Her Majesty's Government have plans in hand whereby the great traditions of the Colonial Service can be carried on in the future.
7.38 p.m.
THE EARL OF PERTH: My Lords, this has been, I think, a fascinating debate, and I am glad to be able to thank the noble Lord, Lord Ogmore, for introducing it, and to thank all the noble Lords who have taken part. They have made suggestions which range over a very wide field. I know that those suggestions will be studied here most carefully, and I feel confident that the Commonwealth Relations Office, as part of the duties which you have heard my noble Leader say are theirs, will see that they are also studied elsewhere in the Commonwealth. When I think of the noble Lords who have taken part in the debate this afternoon, and of their vast experience—and, as I say, of the wide range that we have covered—I am a little hesitant of my ability to carry this through, but I will do what I can.
I am very sorry—and I express the feelings of all noble Lords here—that the noble Earl, Lord Attlee, cannot be with us now, and for the reason for it—namely, that Mr. Bevan has died. Whatever we may have felt about the views

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that he held, whether we agreed with him or not, we are surely all the losers by his death.
My Lords, the noble Earl, Lord Attlee, made the point that the Commonwealth is not ours alone. It is not, as it were, our own property—something which we can just run to suit our own interests. He went on, to stress the danger there was in trying to over-organise the Commonwealth, and to get it into what might be formal and organisational channels. Rather did he stress the importance of such bodies as the Commonwealth Parliamentary Association and the value of constant meetings of the Prime Ministers, Finance Ministers, and officials of the Commonwealth. The noble Lord, Lord Milverton, felt much the same. In particular, the meetings of Prime Ministers offer opportunities for developing a community of interests which might lead to political action of the type which the noble Viscount, Lord Bruce of Melbourne, was anxious to see the Commonwealth follow more positively. The noble Lord, Lord Casey, said that he felt there was a real need of comprehensive action; and, interestingly enough, the noble Lord, Lord McCorquodale of Newton, gave what I thought was a good example of how that worked out in practice when he talked about what happened at meetings of the International Labour Organisation. So that a great deal of what we wish to see in this field happens without the need of special organisation as such.
Turning for a moment to the economic side, I am sure that the noble Viscount, Lord Bruce of Melbourne, would not expect me to enter into an economic argument. I do not think that my right honourable friend the Chancellor of the Exchequer could be accused of complacency during the last few months. In other respects, I feel it more appropriate for the Treasury to study the noble Viscount's remarks. But I would make this one point. For many years Her Majesty's Government have stressed the immense importance of exports, not only for this country itself but also in order that we may lend to the Commonwealth. We have, in fact, done that to a great amount over the last few years; indeed, there is a danger that we might overdo it. If we lent too much and brought about a weakness in our exchange position,
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that would be a disaster to the whole Commonwealth, which is part of the sterling area.
The noble Marquess, Lord Salisbury, did the House a service in bringing out into the open the fact that the growth of the Commonwealth which we have seen over recent years means that the functions of the Commonwealth must change in some ways. He gave the example of the different approach we now have to defence questions. I was glad that he too was very much in favour of continuing the Conferences of Prime Ministers.
The noble Lord, Lord Casey, said he felt that more warmth was needed. I think that he will find examples of that in many of the things we are doing. I think that he was particularly stressing the importance of our knowing about the problems of other colonial territories. The noble Lords, Lord Shepherd and Lord Hastings, also stressed the importance of this. I think that we already do a great deal in this connection. By that I am not saying that we ever can do enough, but may I give a few examples? Among the Commonwealth Weeks which are held throughout the year, in one part of the country or another, was a recent Commonwealth Week at Liverpool, where 80,000 schoolchildren went to the Commonwealth exhibition. We also help what the noble Lord, Lord Casey, called opinion-formers. We often have delegations from the Press and other opinion-formers of the Commonwealth. We give a large number of scholarships to Commonwealth students—35,000 a year. All these students are opinion-formers. They get to know about us, and we get to know about them. I do not think that I need develop this aspect further, except to say that we are very much aware of the need to know more about Commonwealth problems and are trying to do as much as we can.
In the debate, a great deal has been said about the Oversea Civil Service. I can understand the anxiety of the noble Lord, Lord Milverton, and other noble Lords. I have always been of the view that one of the most valuable legacies we can make to a country which is about to become independent is to leave it with an efficient public service which

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has already a fair number of locally recruited officials. I noted that the noble Lord, Lord Delamere, said that this was one of the three essentials in going ahead with leading territories to independence. The example of India shows the importance of this. But in India we had well over 100 years in which to build up a Civil Service. The position in many of the African territories is very different. Time is short and, unhappily, potential recruits are few, owing to the lack of suitably educated candidates from the territories themselves. I will not dwell on this handicap beyond saying that in every territory we are trying to improve and increase secondary education. Here I must correct the noble Lord, Lord Twining. We are to-day actually providing special training in our own Civil Service training courses in this country; and we provide scholarships which are increasing the number of educated candidates. In addition, we are trying to work out what I would call "crash programmes" on the spot to spur the locally recruited candidates along. But, of course, these things take time.
In leading colonial territories towards independence, Her Majesty's Government seek to discharge three responsibilities in regard to the public service. The first is the building of a local public service which in time will belong to, and be responsible to, the Government of the independent country. The second is the establishment of proper principles governing the public service when the country becomes independent. The third is the carrying out of the obligations to the Oversea Civil Service, together with an encouragement to its members to continue to serve as long as they are wanted. I will examine these three principles at some length, because I think that this is something about which many noble Lords have expressed anxiety, and it is of great importance.
First, with regard to building up a local public service, I have already mentioned the problem of training and recruitment. I want to emphasise that we want to build up a service for a particular territory; that the officers are its officers and belong to its service. We have to instil into a service that it is a Kenya service or a Tanganyika service, and not one which is to a large degree coming from this country and which, therefore, would
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not have the proper loyalty to the country which its members are serving. This is a very important point, as I think the noble Lord, Lord Birdwood, who stressed this matter, would agree.
Several noble Lords have put forward the suggestion of a pooled overseas service covering territories now in the care of the Commonwealth Relations Office and the Colonial Office. But as the noble Marquess, Lord Salisbury pointed out, the functions of these offices differ greatly. Then, if you had such a central service and its job was to serve the countries overseas, you again would run into the difficulty that the officers concerned would be more inclined to look to home for their livelihood; and the Ministers of the colonial territory who are shortly to run their own government could not fail to be aware of this. The question of building up the service on the spot is a difficult one, and I do not rule out that in trying to help with it in the future there may be some possibility of more centralisation here. We are all the time looking at it, and I am grateful to noble Lords for the various suggestions they have made this afternoon.
Let me now turn to the second responsibility, which is the establishment of a proper principle to govern the public service when a country becomes independent. The vital principle, of course, is that that service should be independent of political control. We manage to arrange this through setting up an Advisory Public Service Commission. I need not develop in detail the steps that are taken to achieve this independence of political control, but we do see that safeguards are put into the Constitution: that, for example, such things as the salaries of the public service commission may not be attacked by the Government of the country.
In this connection, it is perhaps worth while remembering that what we take for granted—the independence of the public service generally, whether it is the Administration, the police or the Judiciary—is not something that comes naturally to the territories that we are leading to independence, but is something which has to be carefully developed and nurtured. It is one of our greatest aims to ensure that that is achieved at the time of independence.

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I must say, in that connection, that in the constitutional conferences in which I have taken part I have always been struck by the anxiety of representatives of the countries concerned that something should be written into the Constitution which ensures this independence. I very much agree with the noble and learned Lord, Lord Denning, when he talks about the importance of the judges: not only how they should be independent, but also the important rôle they can play in interpreting the Constitution and safeguarding the rights of the individual. He went on to stress the possible value of having some appeal, when these questions of human rights arose, to a Commonwealth Court. I cannot go into that in any detail this evening, even if I were competent to do so, but I think the noble and learned Lord knows that this is something which at this moment is being looked at by the appropriate people here, with a view to making a report to the Commonwealth Prime Ministers subsequently.
I come now to the third responsibility that we try to carry out on these occasions—namely, the obligation to those who have served overseas and those who wish to continue to serve, if they are wanted, when a country becomes independent. Both the noble Lords, Lord Twining and Lord Birdwood, touched on this. We have given general undertakings in respect of members who are serving in territories approaching self-government, and the details can be found in Colonial Paper No. 306, published in 1954. Broadly, the undertakings are that officers prematurely retired as a result of constitutional change will receive compensation from the territory concerned; that their pensions and other benefits will be safeguarded; and that the continuity of service of those still serving will not be adversely affected by the change.
In order to ensure that these undertakings are carried out before any territory becomes independent, Her Majesty's Government enter into a Public Officers' Agreement with the territory concerned. I would hasten to say that these undertakings have been scrupulously observed, not only by Her Majesty's Government but by all the territories which have so far achieved
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independence. Compensation schemes which come up under the Public Officers' Agreement cover not only those officers who are leaving but also those who are staying on. I can assure your Lordships that in every one of the following territories—Ghana, Malaya, Singapore, Nigeria, Cyprus, British Somaliland, Sierra Leone and some of the West Indian Colonies—such an arrangement has been negotiated. Indeed, it has been argued that these compensation agreements are too generous, and that, as a result, at the time of independence officials wish to leave the service. It is a difficult issue, but clearly the solution does not lie in our being ungenerous: that would not be defensible, either contractually or morally.
We have therefore tried to work out devices to induce these officials to stay. In Nigeria, for example, there was what is known as the Special List B scheme; in Sierra Leone there are new variations; and we are learning all the time. I will not go into the details of the various devices we use, but I think we are meeting with considerable success, as was confirmed by my noble friend Lord Hastings in the figures that he gave. But we are always looking to see whether something more can be done in this respect, and also to ensure that those countries who want these people can have them. Your Lordships would not expect me to add anything to what my noble leader said earlier about what is being studied by my Secretary of State. Perhaps in due course something will emerge, but not to-night.
We in the Colonial Office engage officials for the countries nearing independence more and more on contract terms, and in colonial territories the existing recruitment is now mainly on a contract basis. That is really natural development, when one thinks that what we are trying to do is to build up the local recruitment of these services. The noble Lord, Lord Birdwood, and, I believe, the noble Earl, Lord Attlee, made the suggestion that there should be a Commonwealth Service. That, I think, is a difficult thing. But we already have the benefit in our own service of Commonwealth recruits. For example, I remember well when I visited the Borneo territories that many

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of the officers there were in fact either from Australia or New Zealand. Again, we find in the communiqué issued by the Commonwealth Prime Ministers this statement:
"They trusted that employers in Commonwealth countries—whether Governments, statutory bodies or private companies—would be ready, wherever possible, to encourage members of their staffs to undertake a period of public service abroad and would do their best to ensure that their prospects in their home countries would not thereby be prejudiced."
So you see, my Lords, that in this way, on an ad hoc basis which I think is the best way, each of the Commonwealth territories is being encouraged to work for all the others.
Let me turn from Overseas Service questions to the question of what happens when countries reach independence, and to the criticism I think the noble Lord, Lord Ogmore, together with one or two other noble Lords, made, that we more or less abandon them financially at that time.
LORD OGMORE: My Lords, I want to make this quite clear. I made no criticism at all. In fact, I said that I thought that up to now the policy had been right, and that if the Government had not pursued this policy it would have caused great trouble. I am saying that a different approach now wants to be made.
THE EARL OF PERTH: My Lords, I am glad of that, because I was going to say that it just is not the case. We have done a great deal, as I want to show, because there is one point which I think it is very important to make. If we are going to give a country independence, this must have some real meaning. If a country, apart from the capital it might need for development expenditure, cannot stand on its own feet—cannot, that is to say, meet the recurrent expenditure of its budget—then it is not independent by any stretch of that word. If every year for its ordinary recurrent expenditure it has to get money from whatever source as a regular contribution, I think it is not truly an independent country. I should join issue with the noble Earl, Lord Lucan, on this point, because, in fact, so far as I can recall, there is not one single case of any territory that we have launched to
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independence which is in the position to-day of depending on us to meet a recurrent budget deficit.
THE EARL OF LUCAN: Would the noble Earl allow me to interrupt him? When I said that, I did not mean necessarily that they were going to have deficits on their budget. What I meant was that there was much development still needing to be done which could be done only by outside capital.
THE EARL OF PERTH: I am grateful for the clarification on that point. Then we all apparently think alike, because, of course, there is a different problem when it comes to capital expenditure. All the same, even there we hope that before long these territories may be able in large measure to stand on their own credit. But we recognise that establishing credit takes time, and it is with that in mind that we have developed such things as the Commonwealth Assistance Loans. There is the example of Nigeria, to whom we have promised £12 million of such loans for her next development programme. Apart from that, at the time of making an independence agreement with a country, we have often had to make a general financial settlement, which might not only include a promise of Commonwealth Assistance Loans but also make some degree of grant to take account of the special difficulties that it might face in the first few years. For example, in the case of Malaya the settlement was, I think, an extremely generous one—and rightly so, because they had the particular problem of the emergency to deal with. Thus we do recognise that there is in each case a special problem and we do, in fact, follow the suggestion made by the noble Marquess, that we should treat these things ad hoc as they arise.
I do not think we should underrate the importance of newly independent territories getting money from international sources, such as the World Bank or the International Development Association, or perhaps something like the American Development Loan Fund. The very fact that a territory is independent gives it a better chance of getting money from these sources than it would have when still a colonial territory. With the best will in the world, we cannot "go it alone". We cannot by ourselves give

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all the aid these countries need; and it is right that, once they become independent, they should look elsewhere for help. I suggest that there is a real difference between our responsibilities to territories once they are independent and our colonial territories. The colonial territories depend on us to a far greater measure, and we have a direct responsibility for their development and well being. I remember the noble Lord, Lord Delamere, making that point in relation to Kenya. I would say one thing to him. We were very much aware of the economic importance of this at the Lancaster House Constitutional talks on Kenya, and we appreciate that constitutional progress and economic development go hand in hand.
I have been speaking at some length on the money side, but there are, of course, other ways in which we can help. We have Technical Aid agreements, which make provision for the supply of particular experts to cover particular fields. Then we often have those development corporations which the noble Lord, Lord Ogmore, mentioned, which means that industrial companies are interested; for example, the Commonwealth Development Finance Company and also the Colonial Development Corporation have been putting money into these development corporations. This provides a good opportunity of getting expertise from the City of London, which, of course, is so necessary for these countries. We also often provide special help in equipping and training their armed forces at the time of independence. And I hardly need mention all that we try to do, and are doing, in relation to education, scholarships and so forth.
My Lords, I think I have said enough to show that we do not neglect these territories at the moment of launching them into independence, and are very conscious of our continuing interest and responsibility in the case of those younger members of the Commonwealth whose upbringing has been our task. It is a happy thing to see that the Commonwealth as a whole has recently shown more and more anxiety to help its individual members. We have the example of the Colombo Plan, and at the recent Prime Ministers' Conference the subject
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of help to the African Territories was discussed. And we have also the educational arrangements which were made by the Commonwealth as a whole after the Montreal and Oxford Conferences.
As various noble Lords have said, it is, of course, all very well to help financially, but perhaps what is more important is being ready to take some of the exports from these newly developing countries. Here again, in the Prime Ministers' Communiqué we find that all of them, not just this country, recognised
"that an important condition of the prosperity of these countries was their ability to develop their export trade."
On the subject of the smaller territories, upon which the noble Earl, Lord Lucan, touched, he will find that this too is mentioned in the Prime Ministers' Communiqué, where it says:
"The Ministers reviewed the constitutional development of the Commonwealth, with particular reference to the future of the smaller dependent territories. They agreed that a detailed study of this subject should be made for consideration by Commonwealth Governments."
There is not much more for me to add at this late hour. The very fact that the Commonwealth is growing and is so much alive leads naturally to what I suppose one might call "growing pains". From being a small number of countries composed of British and European stock, there is now a predominance of Asian and African members. That, in this fast developing world, is its particular strength and its greatest challenge. But I was glad to find that no noble Lord showed any despondency about this development. Indeed, they all looked at the future with confidence and certainty, adding, of course, that there are very many problems which we have to overcome.
The Commonwealth is the most outstanding example of multi-racialism that the world has ever seen. It is a true partnership of independent and equal members, with Her Majesty the Queen at its head. I think, as the noble Lord, Lord Shepherd, said, that even though some of them may become republics, which we may or may not feel is a system that we would favour, nevertheless when Her Majesty makes a tour of these territories, republic or not, the welcome which she has and the recognition of her position that is given shows where true loyalties lie. Yet I think it is good,

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too, that one should think of even wider loyalties, as the noble Marquess mentioned, such as that of liberty. While the Commonwealth's future depends on each member individually as well as on all combined, we, as the founder member and main provider of capital and experience, have a special rôle to play. We will continue to do all we can to strengthen the ties of the Commonwealth and to assist its individual members in whatever way they may wish.
8.12 p.m.
LORD OGMORE: My Lords, before referring to the debate, I should like to express, as other noble Lords have done, my sorrow at the sad news of the death of my fellow countryman, Mr. Aneurin Bevan. He had great gifts of oratory, imagination and courage, and his passing will be a sore loss to Parliament and to the country.
Dealing with the debate, I should like just to say this. I have listened with the greatest interest to all the speeches that have been made. It was a list, as others have said, after my own contribution, of particularly distinguished speakers, and it seemed to me that they carried the debate to a high level and that it has been very worth while. I should like to thank all the speakers who have taken part, including, and, perhaps particularly, the two noble Earls who have replied for the Government. I thought that perhaps
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there was a gleam of hope in the speech of the noble Earl, Lord Home, Secretary of State for Commonwealth Relations. I should like to read carefully what he had to say. It is not always easy to pick up the nuance of a speech, but I gathered that at all events his mind was not closed to the various suggestions I had made. I hope that he—in fact all the Government; but particularly he and his two fellow Secretaries of State at the Foreign Office and the Colonial Office—will, as a matter of urgency and prime importance, look at the various suggestions that have been made in the debate, to see whether they can bring about the sort of proposals that we have made. There is nothing left for me to do but again thank all those who have taken part and all those who have listened so patiently to the debate during the course of the afternoon and evening. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

STATUTE LAW REVISION BILL [H.L.]
Reported from the Joint Committee on Consolidation Bills, without amendment, and committed to a Committee of the Whole House.
House adjourned at a quarter past eight o'clock.