Sitting of 22 May 1962

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

    British Railways (Mail Charges)
    Mr. Marshallasked the Postmaster-General what was the rate charged by the railways for carrying the Royal Mail in 1926; and what is the rate now charged by British Railways.
    The Assistant Postmaster-General (Miss Mervyn Pike): There is no simple rate for payments to the railways. But I can tell my hon. Friend that the total amount paid in 1960–61 was about five times that paid in 1926–27 whilst the traffic had nearly doubled.

    Mail Deliveries, Knutsford
    Sir W. Bromley-Davenportasked the Postmaster-General if he is aware that letters posted from London on Friday by the country post do not reach the Knutsford division until Monday morning; and what steps he is taking to improve this service.
    Miss Pike: My right hon. Friend is very sorry about these delays which have been due to failures to carry out prescribed circulation arrangements. Special checks are now being made on the mails from London to Macclesfield and Knutsford, and I understand that in recent weeks the service has improved. We shall do everything we can to avoid further failures.
    Sir W. Bromley-Davenport: Is my hon. Friend aware that for the past 17 years I have been complaining about this bad service and that there has been no improvement whatsoever? Is she further aware that before the war letters posted in the Knutsford division used to
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    reach London by first post the same day? Therefore, from that, would my hon. Friend not further agree that the end product is always the same from any nationalised industry to the consumer—worse service at increased cost?
    Miss Pike: I am aware of my hon. and gallant Friend's complaints and I gather from what he has said that prewar we did the impossible.

    New Office, Blyth
    Mr. Milneasked the Postmaster-General what progress has been made in regard to a new post office at Blyth.
    Miss Pike: My right hon. Friend has nothing to add to the reply of 20th March about a new office in Blyth but plans are being made to enlarge and modernise the main office there.
    Mr. Milne: I welcome that reply, but does the hon. Lady realise that this virtually amounts to breach of a promise based on her reply to my Question on 28th March last when she said that she would look into the matter on the spot? We extended an invitation to her to do so, but we are still awaiting her visit. If the jobs which the President of the Board of Trade has promised my constituency and which are in the pipeline at the moment are to materialise, then additional Post Office facilities—
    Sir W. Bromley-Davenport: Get on with it.
    Mr. Milne: Mr. Speaker, is it in order—
    Mr. Speaker: I think that hon. Members are uneasy if supplementary questions are put at length. Perhaps the hon. Gentleman will remember that
    Mr. Milne: The point I was making when I was rudely interrupted was that if the jobs which the President of the Board of Trade promised my constituency are to materialise, then the Post Office facilities to back those jobs up will have to be much better than they are now.
    Miss Pike: I assure the hon. Gentleman that there is no question of breach of promise as far as he and I are concerned. I intend to come to his constituency.

    Contracts, Scotland
    Mr. Rossasked the Postmaster-General what is the estimated cost of telehonic cables for the current financial year; and how much of this will be spent in Scotland.
    Miss Pike: My right hon. Friend expects to spend about £14 million on the purchase of telephone cables in the current financial year, of which approximately £150,000 will be spent on orders placed in Scotland.
    Mr. Ross: Even on the Goschen formula this would not be counted as very satisfactory. Will the hon. Lady give a good example and ensure that, wherever possible and all other things being equal, these contracts are placed where employment is urgently needed, since this would encourage other Departments to do the same and assist the Government in their proclaimed policy in regard to employment?
    Miss Pike: I assure the hon. Gentleman that we do that. There is one difficulty in regard to telephone cables in that there is only one cable manufacturer in Scotland.
    Mr. Rankin: Then get another.
    Mr. Willisasked the Postmaster- General what is the estimated expenditure on Post Office uniforms in 1962; and what percentage of this will be spent in Scotland.
    Miss Pike: My right hon. Friend expects to spend about £l¼ million on Post Office uniforms in the current financial year. About 13 per cent. of this will be spent on orders placed in Scotland.
    Mr. Lawsonasked the Postmaster-General what percentage of Post Office telephonic equipment is manufactured in Scotland.
    Miss Pike: Just over 1 per cent.
    Mr. Lawson: Does not the hon. Lady agree that a large Government spending Department ought to use some of its spending power to help the Government in their overall policy? Private firms do this sort of thing; they ask other firms to do what they want them to do. Could not the Post Office see to it that it used its spending power to ensure that there was a more equitable distribution
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    of the type of industry about which we are all concerned?
    Miss Pike: I appreciate the point the hon. Gentleman makes. Perhaps he will remember that, small though it is, the proportion is twice as large as it was when he asked the question last time.
    Mr. Gourlayasked the Postmaster-General what is the average annual expenditure on Post Office mail collecting boxes; and what percentage of this is spent in Scotland.
    Miss Pike: Average annual expenditure over the past five years has been £65,000, Sixty-six per cent. of this has been spent on orders placed in Scotland.
    Mr. Gourlay: I am glad to hear of the larger percentage in respect of these articles compared with some of the others mentioned today, but is the hon. Lady aware that many people who were previously employed in the foundry industry in Scotland are at present unemployed? Could not she assist her right hon. Friends the President of the Board of Trade and the Secretary of State for Scotland in placing still more orders in Scotland?
    Miss Pike: We are well aware of the special difficulties in Scotland.
    Sir Richard Pilkington: In view of all these Questions today, could not Scotland be given colonial status?

    Offices
    Mr. Spriggsasked the Postmaster-General how many post offices are situated a half-mile or less from another post office in the United Kingdom.
    Miss Pike: My right hon. Friend is sorry the information is not available, and it could not be obtained without disproportionate expense.
    Mr. Spriggs: Does the hon. Lady recall that one post office was mentioned in correspondence I had recently with her, and will she be prepared to make the best use of an official pair to visit the district to see whether she can agree to give us a sub-post office?
    Miss Pike: I receive very many attractive invitations to visit different parts of the country and I do my best to fall in with hon. Members' wishes.

    Telephone Directories (Agency Entries)
    Mr. Chatawayasked the Postmaster-General whether he will continue to accept entries in the telephone directory from agents of building societies, even where the agency does not constitute the whole of a firm's business.
    The Postmaster-General (Mr. Reginald Bevins): To prevent the London telephone directory from becoming even more unwieldy than it is, I have had to discontinue separate entries for agents under the name of the society they represent. I am, however, examining the case to which my hon. Friend has drawn my attention, and I will write to him at an early date.
    Mr. Chataway: Will my right hon. Friend accept that it is not worth making the telephone directory smaller if the information that people want is not there? Are there not firms which really need to have entries under two separate headings in the telephone directory?
    Mr. Bevins: Yes, but, of course, the size of the London telephone directory is increasing at the rate of 5 to 10 per cent. every year and, obviously, it cannot go on indefinitely. There are special cases, and this may well be one of them.

    Household Letter-boxes
    Sir S. Storeyasked he Postmaster-General what steps he has taken to encourage the use of household letterboxes conforming to the specification of the British Standards Institution.
    Miss Pike: Publicity in many forms has been used to encourage installation of boxes conforming to the British Standards Institution specification. We have had a cartoon film on television, posters in post offices and in ironmongers' and newsagents' shops, displays in post offices and at successive building trades exhibitions as well as at the Buildings Centre in London. Local authorities have been supplied with leaflets for attachment to all building plans which they approve. A copy of the leaflet has also been sent to people whose existing letter box is particularly troublesome. Finally, my right hon. Friend has written quite recently to all local post
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    office advisory committees seeking the help and co-operation of the members in keeping the B.S.I. specification constantly before the public.
    Sir S. Storey: May I ask my hon. Friend why, when her right hon. Friend wants a standardised letter box with an 8-inch opening, he sends out a circular in an envelope 9 in. by 11½ in.? Why is he sending out a circular letter using a heavy quality envelope which is designed for re-use?
    Miss Pike: That is another question.
    Sir W. Bromley-Davenport: Is not this yet another example of a nationalised industry? However many letter boxes may be installed, is it not a fact that the end product will always be the same— a worse service at increased cost?

  WIRELESS AND TELEVISION

    Television Licences (old-age pensioners)
    Mr. Frank Allaunasked the Postmaster-General if he will allow old-age pensioners to pay a reduced television licence or to pay it in quarterly instalments.
    Mr. Bevins: I have carefully considered these suggestions from time to time but have decided against them. The grant of a cheaper television licence to retirement pensioners would be unfair because it would be indiscriminate. To allow the fee to be paid by quarterly instalments would add unduly to the costs of collection.
    Mr. Allaun: While believing that the real solution is an adequate old-age pension, may I ask the Minister how he thinks that a pensioner living alone, who would probably enjoy T.V. more than anyone else, can afford £4, or, as has been suggested, £5 to £6? If a car licence can be paid for quarterly, even if it is slightly more than the quarterly part of the charge to cover the expenses of administration, why cannot T.V. licences be similarly paid quarterly?
    Mr. Bevins: Not all retirement pensioners rely on the retirement pension. The great majority do not. There is no parallel between the quarterly payment

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    of the Road Fund licence and the television licence because, as the hon. Member knows, many motor cars are laid up during the winter.
    Mr. W. R. Williams: In view of the fact that quite a large number of local authorities, and indeed some private enterprises and football and cricket clubs, try their best to do something to concede some privileges to these old people, may I ask the right hon. Gentleman whether he cannot think of some way in which a big Government Department could do the same?
    Mr. Bevins: Frankly, I think that the only conceivable way in which it could be done would be on the basis of quarterly payments, as suggested by the hon. Member for Salford, East (Mr. Allaun), but, of course, this figure of £5 to £6 for a television licence which has been bandied about is pure speculation. I do not know what will happen, but if there were a change on that pattern obviously the case for doing something would be strengthened.

    Cigarette Advertising
    Mr. Frank Allaunasked the Postmaster-General when he will announce Her Majesty's Government's decision regarding cigarette advertising on commercial television.
    Mr. Bevins: As the hon. Member knows there are now no cigarette advertisements on television until the advertising interval before the 9 o'clock news on weekdays, and at about the same time at weekends. The Authority is examining the type and style of cigarette advertisements on television. Meanwhile the Government are urgently considering this problem, but I cannot yet say when decisions will be announced.
    Mr. Allaun: Since it is now ten weeks since the Royal College of Physicians issued its Report, may I ask how much longer it will be before the Government make up their mind on this matter? I hope that the Minister, if he does anything, will not merely restrict the time during which these advertisements are shown, when many people think that they should not be shown at all. Is the right hon. Gentleman aware that while the Government are making up their
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    mind damage to health is continuing because those advertisements of a romantic type aimed deliberately at young people are still continuously appearing?
    Mr. Bevins: I can assure the House that the very wide range of suggestions in this Report are being considered as a matter of urgency and I.T.A. is discussing the matter with its Advertising Advisory Committee, which may recommend a complete ban. If it does, that advice would be mandatory on I.T.A. I have power, if I decide to use it, to ban all cigarette advertising on television, but I would not dream of doing that precipitately until Ministers have had a full opportunity of considering all the implications.
    Mr. Stodart: Will my right hon. Friend direct his particular attention to the advertisement which offers gift vouchers to those who buy cigarettes of a variety which I happened to see advertised last Sunday, since, having regard to the terms of the Report, this appears to be undesirable?
    Mr. Bevins: Yes, Sir.
    Mr. Fell: Will my right hon. Friend bear in mind that nobody is forced to smoke and that the advertisements do not force people to smoke? Will he assure the House that Her Majesty's Government will not follow the bad example of Italy in this matter?
    Mr. Bevins: I do not happen to know what the example of Italy is, but I assure my hon. Friend that the Government will not jump to conclusions in this matter.

    Television Sets and Licence Holders
    Mr. J. Howardasked the Postmaster-General what is his estimate of the number of television sets currently in use and what is the present number of television licence holders.
    Mr. Bevins: Nearly 12 million combined sound and television licences were in force on the 31st March, 1962. No doubt more sets are in use, because some people have more than one set, and others illegally use sets without a licence.

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    How many of the latter there are I can not estimate, but I am continuously trying to reduce the number.
    Mr. Howard: What steps are being taken to reduce the difference, by way of detector vans and so on, and can my right hon. Friend give an idea of how much revenue is being lost to his Department by pirates?
    Mr. Bevins: We are continuously trying to track down cases of this sort. It is not possible to say how many people are evading the licence fee, but I can tell my hon. Friend that last year the Post Office launched about 13,000 successful prosecutions.

    Emergency Radio Communications Service, Birmingham
    Mr. Cleaverasked the Postmaster-General whether he will allocate a frequency for the Emergency Radio Communications Service which is being pioneered in Birmingham by the Industrial Police Association.
    Mr. Bevins: A two-frequency channel was assigned to this service in 1959. I am sorry that I cannot allot a channel to the service for their exclusive use because the demand for channels in the Birmingham area is so heavy.
    Mr. Cleaver: Is my right hon. Friend aware that the channel which he has allocated is used by taxi firms and bulldozer contractors who carry on very long conversations which render the channel quite unsuitable for security purposes? In view of the satisfactory way in which the scheme started originally, ought not he to do something about it and go even further to try to extend it all over the country?
    Mr. Bevins: I think there is a little misunderstanding here, because an exclusive channel does not guarantee secrecy from unauthorised listeners. There are similar security services in the Midlands with channels which they are also obliged to share. The fact is that there are simply not enough frequencies to enable small private mobile radio services of this kind to have exclusive channels of the kind my hon. Friend wants.
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    It is a hightly matter, and I shall be delighted to write to my hon. Friend to explain the matter in detail.

  TELEPHONE SERVICE

    Kiosks, Scotland
    Mr. J. Robertsonasked the Postmaster-General how many telephone kiosks he expects to instal during the current year; and what percentage of these will be made in Scotland.
    Miss Pike: My right hon. Friend expects that about 1,200 kiosks will be installed during the current financial year, and that all of them will be made in Scotland.

    Sedgefield
    Mr. Slaterasked the Postmaster-General how many applications there now are from the Sedgefield parliamentary constituency for the installation of telephones; and what period such applications cover.
    Mr. Bevins: In addition to applications under inquiry or in course of being met, 63 applications are on the waiting lists for the exchanges serving the Sedge-field constituency. Of these, 16 were received before 31st March, 1961, and 8 before 31st March, 1960.

  TECHNICAL CO-OPERATION

    Voluntary Service Overseas (Grant)
    Mr. Gardnerasked the Secretary for Technical Co-operation what was the annual grant by Her Majesty's Government to Voluntary Service Overseas in each of the financial years 1958–59, 1959–60, 1960–61, and 1961–62, respectively; and what annual grant is now proposed for 1962–63.
    The Secretary for Technical Co-operation (Mr. Denis Vosper): In 1958–59, no help was asked for. In later years, grants have been and are being made as follows:

    £

    1959–60

    …

    …

    …

    11,000

    1960–61

    …

    …

    …

    2,000

    1961–62

    …

    …

    …

    17÷500

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    The amount for 1962–63 is under consideration.
    Mr. Gardner: Is my right hon. Friend aware that, in the light of the wonderful work which is being done by Voluntary Service Overseas, these grants are lamentably small and that they come to £34,000 in all since 1959? Is my right hon. Friend aware that the American Government last year gave to the American Peace Corps, which was directly inspired by our Voluntary Service Overseas, 30 million dollars, and that this year that sum is likely to be increased to 60 million dollars? Will my right hon. Friend see whether the grant made by our Government cannot be increased in a similar way?
    Mr. Vosper: I am in agreement with what my hon. and learned Friend says about the wonderful work of Voluntary Service Overseas, but this is one organisation in one aspect of overseas service. I have been having talks with all the voluntary bodies concerned, and I am having a further meeting tomorrow and will bear in mind what my hon. and learned Friend says.
    Mr. Mayhew: Is the Minister aware that this organisation has tremendous possibilities for development, but that at the moment the bottleneck is finance? Will he bear in mind that Members on both sides of the House look to the Government to give a bigger lead in supporting this organisation?
    Mr. Vosper: I have been having talks with all the voluntary bodies, and I am meeting them again tomorrow, when I hope I shall have something further to say.
    Mr. Marten: Would not my right hon. Friend agree that it is a better principle to devote sums of money to this sort of thing and take off a little from some of the grants or loans which we give to these countries, so as to use this money to help people going out there rather than let these countries invest in something which may not be of such lasting value?
    Mr. Vosper: Yes, but part of my task is to meet the requests of overseas countries for technical people, which cannot be met on a voluntary basis.

  LOCAL GOVERNMENT

    Blyth (Loans)
    Mr. Milneasked the Minister of Housing and Local Government and Minister for Welsh Affairs what were the amounts spent on interest charges in repayment of loans by Bedlingtonshire Urban District Council, Seaton Valley Urban District Council and Blyth Borough in each of the years from 1951 to 1961.
    The Minister of Housing and Local Government and Minister for Welsh Affairs (Dr. Charles Hill): As the Answer contains a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Milne: While I am grateful to the right hon. Gentleman for arranging to do that, may I ask him if he will take notice that at the moment these interest charges are having an adverse effect on the housing arrangements of these councils? Is he aware that it takes almost as much as the cost of three houses to pay the interest charges on one?
    Dr. Hill: I note the hon. Gentleman's point, but the figures which he will find in the OFFICIAL REPORT Will reflect both the expansion of capital investment financed by loans as well as the interest rates.
    Mr. Frank Allaun: Is the right hon. Gentleman aware that following the Bank Rate reduction there has been no reduction at all in interest charges which local authorities are having to pay? What does he propose to do about that?
    Dr. Hill: The interest charges which local authorities pay are much more a matter of long-term borrowing, as the hon. Gentleman knows.
    Mr. Emrys Hughes: Is the right hon. Gentleman aware that Switzerland is lending I.C.I. an immense sum of money—£5 million—at a lower rate of interest than that at which it can be borrowed in this country? Will he make arrangements for local authorities troubled about high interest rates to borrow from Switzerland?
    Dr. Hill: I am grateful for the tit-bit of information which the hon. Gentleman gives.
    Following are the figures*:

    PAYMENTS OF INTEREST BY

    Year

    Bedlington-shire U.D.C.

    Seaton Valley U.D.C.

    Blyth Borough

    £

    £

    £

    1950–51

    …

    54,633

    61,702

    64,095

    1951–52

    …

    59,356

    66,175

    71,967

    1952–53

    …

    68,569

    72,911

    83,909

    1953–54

    …

    78,797

    80,164

    104,454

    1954–55

    …

    90,567

    91,448

    119,810

    1955–56

    …

    102,972

    103,388

    135,506

    1956–57

    …

    117,703

    114,782

    156,546

    1957–58

    …

    143,648

    119,708

    167,836

    1958–59

    …

    184,138

    123,882

    174,725

    1959–60

    …

    208,005

    127,876

    179,810

    1960–61

    …

    229,504

    145,401

    188,757

    * Source— of Accounts.

    Leicester Boundaries (Inquiry)
    Mr. Farrasked the Minister of Housing and Local Government and Minister for Welsh Affairs (1) what he estimates the total cost of the public inquiry into the boundaries of Leicester, commencing on 28th May, will be;
    (2) how the cost of the public inquiry into the boundaries of Leicester, commencing on 28th May, will be apportioned between the Exchequer, Leicester city ratepayers and Leicestershire county ratepayers.
    Dr. Hill: The greater part of the cost of the inquiry will consist of fees paid to counsel by authorities who choose to be so represented. Since these fees are matters for private arrangement, I am not in a position to estimate the overall cost of the inquiry. The general arrangement for such inquiries is that my Department bears its own costs, and the parties appearing at the inquiry bear theirs.
    Mr. Farr: Is my right hon. Friend aware that there are many ratepayers and taxpayers in Leicester and Leicestershire who object to providing this fortnight's paid spree for the legal profession? [HON. MEMBERS: "Hear, hear."] Would not my right hon. Friend agree that, as it was the Government's Boundary Commission which in the first place rather like a bull in a china shop
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    initiated these proposals, possibly all the cost of the inquiry should be met from the Exchequer?
    Dr. Hill: Whether an authority is represented by counsel or not is a matter for the authority. Indeed, in three major inquiries recently authorities were not so represented, but if authorities do decide to be so represented I think they should bear the cost.

    Oxford Road Scheme
    Mr Dribergasked the Minister of Housing and Local Government and Minister for Welsh Affairs on what date he reached his decision on the Oxford Road scheme.
    Dr. Hill: Shortly before the decision was issued on 15th March.
    Mr. Driberg: In that case, was it not a providential coincidence that there was a Question down for Written Answer on Friday, 16th March—perhaps an arranged Question? In view of the very great interest in this matter, would it not have been better for the right hon. Gentleman to have told the House about it orally?
    Dr. Hill: I gave the Answer as soon as possible after the decision. It was a providential arrangement that a Question was put down enabling me to give the Answer.
    Mr. M. Stewart: When the right hon. Gentleman says that it was a providential arrangement, does he mean that he arranged it?
    Dr. Hill: It was a matter of cooperation.
    Mr. Dribergasked the Minister of Housing and Local Government and Minister for Welsh Affairs if he will publish in HANSARD a summary of the various proposed solutions of the Oxford traffic problem, including Sir Roy Harrod's suggestion of a tunnel, together with his reasons for rejecting all those proposals which do not involve a road across Christ Church Meadow.
    Dr. Hill: I would refer the hon. Member to the summary of Sir Frederick Armer's Report following the inquiry in December, 1960. Copies of the Report are available in the Vote Office. The

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    suggestion of a tunnel was dealt with in the evidence of the city council summarised in paragraph 55 of the report. My Department's letter of 15th March to the town clerk setting out the reasons which led to the conclusion in favour of the Meadow Road deals with the main factors affecting this and other possible solutions. I am sending a copy to the hon. Member and placing others in the Vote Office.
    Mr. Driberg: Could the right hon. Gentleman say why, in his answer of 16th March, he said there was "no doubt" that the destruction of the Meadow was the most effective way of dealing with the problem? Surely there is doubt about it? It has been hotly argued for a good many years. Can he also say what he meant by
    "—any measures which will reduce the impact of the road "—[OFFICIAL REPORT, 16th March. 1962: Vol. 655, c. 200.]
    Dr. Hill: I have said there was no doubt, because there was no doubt in the mind of Sir Frederick Armer, who reported, and in my own mind, for I had to reach the decision.
    Sir G. Nicholson: How can my right hon. Friend say that there is no doubt about this matter? Is not he aware that his decision has caused a great deal of consternation? Would not he be prepared to agree that the beauties of Oxford should be held in trust for posterity? Whether this is necessary or not, to say that there is no doubt about it is a moot point. Will my right hon. Friend carry his responsibilities a little more seriously?
    Dr. Hill: The word "doubt" was used in this connection. I said:
    "… there is no doubt that this is the most effective way to provide the relief so badly needed in the centre of the City and the University."—[OFFICIAL REPORT, 16th March, 1962; Vol. 655, c. 200.]
    That I believe to be true.
    Mr. Driberg: Could the right hon. Gentleman answer the second part of my supplementary question? What does he mean by "any measures which will reduce the impact of the road on the Meadow", in view of the fact that this Meadow is prized not only by Christ Church but by all the people of Oxford and by thousands of visitors?
    Dr. Hill: One of the measures referred to was the sinking of the road, a matter left open for future consideration.

    Local Government Reorganisation (Essex)
    Mr. A. Lewisasked the Minister of Housing and Local Government and Minister for Welsh Affairs whether he will make a statement about his recent discussions with a deputation from Essex councils concerning Her Majesty's Government's proposals for local government reorganisation.
    Dr. Hill: I would refer the hon. Member to the reply I gave on 18th May to a Question about the boundary of Greater London from my hon. Friend the Member for Esher (Sir W. Robson Brown).
    Mr. Lewis: Is the Minister aware that at no time during the last ten years have the Government ever had a mandate for these proposals and that at each by-election and council election, particularly the last one, the Government have lost the confidence of the people? Why are the Government intent on carrying out these proposals when they have no mandate for them? Will not the right hon. Gentleman leave them until after the next General Election to see whether the people support them?
    Dr. Hill: When the Bill comes before the House, the hon. Gentleman, like other hon. Members, will have an opportunity of making his views known.
    Mr. Ede: Will the Minister put somewhere in the House a map showing the effect of the alterations which he announced last Friday so that they can be checked?
    Dr. Hill: Yes, Sir.

  HOUSING

    Slum Clearance (Fit Houses)
    Mr. McCannasked the Minister of Housing and Local Government and Minister for Welsh Affairs if he is aware of the effects of Section 60 of the Housing Act, 1957, whereby tenants of a fit house in a clearance area are precluded

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    from payments in respect of well-main-tamed houses; and if he will introduce legislation to end this anomaly.
    Dr. Hill: I assume the hon. Member has in mind the compulsory purchase of a fit house under slum clearance powers. The owner of a fit house receives market value compensation. A payment for good maintenance, which can be added to site value in the case of an unfit house, cannot therefore be made in addition.
    Mr. McCann: Is not the Minister aware that when a well-maintained payment is made the local authority has the right to allocate the compensation between the tenant who has spent the money and the landlord, but that if the house is declared fit all of the money goes to the landlord thereby depriving the tenant of his rights? Does the right hon. Gentleman think that this is right?
    Dr. Hill: What happens in the case of a fit house, which is set, like the hon. Gentleman's example, in the middle of a clearance area, is that what is paid is paid in the same way, and to the owner, as if the house were disposed of in the ordinary way.
    Mr. McCann: The Minister is missing the point. Is he not aware that the local authority can make a well-maintained payment for an unfit house and give the whole of it to the tenant who has paid the money, but that if the house is declared fit the tenant who has paid the money loses all his rights because the money is paid to the landlord?
    Dr. Hill: I will look into the hon. Gentleman's point, because he is right in saying that there is a mode of distribution for the good maintenance payment. The good maintenance payment cannot be paid in respect of a fit house bought at valuation in the ordinary way.

    Excessive Rents (Compulsory Purchase)
    Mr. Sorensenasked the Minister of Housing and Local Government and Minister for Welsh Affairs how many applications have been made to him by local authorities in the Greater London area for the compulsory purchase of houses for which excessive rents have been demanded by landlords from sitting
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    tenants; on how many cases the applications have been refused; and if he will indicate the range in rent increases that led to those applications by local authorities.
    Dr. Hill: Forty-seven compulsory purchase orders have been submitted for confirmation in response to Circular 45/60. Eighteen of them have since been withdrawn. Of the remaining 29 I have refused to confirm 12, but in five of these the rent was not in dispute.
    On the last point, under the terms of the circular, what is necessary to justify compulsory purchase under Part V of the Housing Act, 1957, is that, as the result of exorbitant rents being demanded, tenants are in danger of becoming homeless.
    Mr. Sorensen: Is the right hon. Gentleman aware that in my district and in other districts exorbitant rents are being demanded by property corporations? In one case in particular in my area rents have increased from £2 a week to about six guineas a week. May we have an assurance that the right hon. Gentleman will sympathetically consider any application made by the local council for the compulsory acquisition of property in this category?
    Dr. Hill: A local council is fully entitled to make an order and to submit it in respect of cases covered by the circular. But the hon. Gentleman will appreciate that it is impossible for me to make any general statement which could be held to cover individual cases.
    Mr. M. Stewart: Could the right hon. Gentleman answer more precisely the last point in my hon. Friend's supplementary question? We would then have a better idea of what the Government regard as an exorbitant rent.
    Dr. Hill: May I take two typical examples in a recent application. It was proposed to increase the rent of a two-roomed flat from 28s. to 35s., an increase from 4÷5 to 5·6 of gross value, and to increase the rent of a three-roomed fiat from 30s. to 45s.
    Mr. Sorensen: Would not the Minister agree that if a rent is treble what it was originally that is an extremely exorbitant increase?
    Dr. Hill: The hon. Gentleman will appreciate that I am bound by the circular within existing law. Only when tenants are in danger of becoming homeless as a result of exorbitant rents is an application granted.

    Land, Essex
    Mr. Sorensenasked the Minister of Housing and Local Government and Minister for Welsh Affairs what is the present average cost per acre of land acquired by local authorities for domestic building purposes in the extra-metropolitan districts of Essex, compared with similar costs in 1938, 1946, and 1952.
    Dr. Hill: I am afraid that records of land cost have not been kept separately.
    Mr. Sorensen: Surely the Minister has some sort of information on this very important aspect of housing. Surely he is aware that the cost of land for housing has increased constantly and is still increasing. Cannot he give some indication about how that affects building costs?
    Dr. Hill: That is the breakdown which I do not have. A Question to the Chancellor of the Exchequer about the records of the Valuation Office might supply the answer.

  NATIONAL FINANCE

    Richard Thomas and Baldwins Ltd.
    Mr. Callaghanasked the Chancellor of the Exchequer what are his intentions with regard to the sale of Richard Thomas and Baldwins' assets.
    The Chancellor of the Exchequer (Mr. Selwyn Lloyd): I have nothing to add to previous statements on this matter.
    Mr. Callaghan: To which of the previous statements has the Chancellor nothing to add? Is it the statement that the assets will be sold before the General Election, which was made by one Minister, or the statement that they will not be sold before the General Election, which was the statement made by Lord Mills?
    Mr. Lloyd: Perhaps the hon. Gentleman will read what I said on 27th October, 1960. That, in particular, is
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    one of the statements to which I have nothing to add.
    Mr. Callaghan: Is not the right hon. and learned Gentleman aware that there is a great deal of concern about the future of this enterprise in South Wales? Can he be clear about this? Is it the Government's intention to sell the assets of Richard Thomas and Baldwins Ltd. before the next General Election or at some time in the immediate future? People have a right to know the Government's plans on a matter of this sort.
    Mr. Lloyd: With regard to the relationship of this sale with the next General Election, there is plenty of time. I understand that there need not be an election until October,1964. We have said again and again that our intention is that the concern should be de-vested, but when depends on the circumstances. I think that the important factor is to judge the time at which a fair price can be obtained, and that depends on the development plan, which is not yet completed.
    Mr. M. Foot: Does the right hon. and learned Gentleman really think it fair to treat a great steel firm in this fashion? If it was proposed to nationalise a firm, would the Government leave it in doubt what was to happen? Surely the right hon. and learned Gentleman must be aware that his statement to which he referred the House was flatly contradicted by Lord Mills last year. Is it not a fact that the real reason why the Government will not state their intentions in public as Lord Mills stated them in private is that they are in a blue funk about what the hon. Member for Kidderminster (Mr. Nabarro) might say about them.
    Mr. Lloyd: I do not accept what the hon. Gentleman says, nor do I understand his argument about uncertainty. Most of British industry, which is now in private hands, would be in a state of uncertainty in the dreadful event of the Socialist Party returning to power.
    Mr. Peyton: Does not my right hon. and learned Friend agree that if Lord Mills said in private what the hon. Member for Ebbw Vale (Mr. M. Foot) thinks he said, then the hon. Gentleman should be the first to give three cheers for Lord Mills?
    Mr. Lloyd: I understand that there was an Adjournment debate on that topic. I stick by what I said in October, 1960.
    Mr. Jay: Is the Chancellor of the Exchequer aware that, under his policy, steel shares have fallen so much that most steel company shareholders are hoping for renationalisation?
    Mr. Lloyd: That is the sort of very specious statement which the right hon. Gentleman would make.
    Mr. Jack Jones: Is the Chancellor aware that this very well-run, nationally-owned concern is a revenue-earning concern? In view of the fact that he is putting 15 per cent. on kiddies' sweets to get money, he had better leave this concern alone so that he obtains the revenue which he wants for the nation from such a flourishing concern.
    Mr. Lloyd: The fact is that the development programme has not yet reached maturity and the extent to which it is a flourishing concern cannot yet be determined.
    Mr. Callaghan: As a result of these exchanges, are we to take it that the Government do not know when they will sell this company, that they still intend to sell it but are unable to reassure people working in the industry about their future, and that the only thing they are determined to do is to ensure that the £80 million of profit made for the nation shall be dissipated to the steel masters?
    Mr. Lloyd: I do not accept at all what the hon. Member has said. We have stated our policy again and again. That policy has been confirmed by the electors again and again and we shall judge the time at which a fair price can be obtained.

    Capital Investment, Hong Kong (Textile Industry)
    Mr. D. Jonesasked the Chancellor of the Exchequer how much British capital is invested in Hong Kong; and how much of that amount is invested in the cotton textile industry.
    The Financial Secretary to the Treasury (Sir Edward Boyle): I regret that figures of the total amount of
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    United Kingdom capital invested in Hong Kong are not available; the annual amount of direct investment by the United Kingdom in Hong Kong is of the order of £1–£2 million a year net. Figures of the annual amount of other private investment are not available, nor are any figures on the amount invested in the cotton textile industry.
    Mr. Jones: Is the Minister aware that these figures ought to be available in view of the serious deterioration in the cotton textile industry? Is he further aware that I have a deep personal interest inasmuch as my constituency—Burnley—is most seriously affected? If these figures are not available, ought they not to become available so that we can see the extent of the effect upon our vital industry?
    Sir E. Boyle: I assure the hon. Member that there are real difficulties about making these figures available, as was clearly shown in the relevant section of the Radcliffe Report. If the hon. Member wishes, I will send him the sections of the Radcliffe Report which point out the considerable magnitude and complications of the task of obtaining the figures.
    Mr. S. Silverman: Will not the Minister further consider this matter? Is he not aware that if British capital is employed to any large extent in building up the cotton textile industry in Hong Kong, it is at the dire expense of a major industry in this country that is rattling fast to catastrophe? Is it not the Government's duty at least to ascertain the facts so that they may consider what their policy should be?
    Sir E. Boyle: Certainly, within the limits of my previous supplementary answer, we will look at the question of these figures again, although there are real difficulties in the matter. The hon. Member's supplementary question raises, however, a general economic issue which is rather too wide to discuss at Question Time.
    Sir C. Osborne: Can my hon. Friend confirm that the greater part of the money invested in the Hong Kong textile industry came from China and really came from the Shanghai-owned mills, and that competition with Lancashire is not a matter of how much

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    capital there is there but how quickly it is turned over and use is made of it in the two respective countries?
    Sir E. Boyle: I cannot answer the first part of that supplementary question without notice. With regard to the second part, there is a good deal in what the hon. Member says.
    Mr. W. R. Williams: Reverting to the lack of information, would it not have been necessary for the Prime Minister to have this information available before he met the leaders of the textile industry last week to discuss the future of the cotton industry with them?
    Sir E. Boyle: There is no desire on the part of the Government to hide these matters. Some figures have been published for past years by the Board of Trade. The figures are necessarily incomplete and, as I have said, the Radcliffe Report has explained the great difficulty of obtaining precise figures when one is considering a census of assets overseas owned by British companies. We will do our best, but this is a more difficult matter than hon. Members opposite suppose.

    EUROPEAN ECONOMIC COMMUNITY
    Ql. Mr. Wyattasked the Prime Minister whether he will arrange a meeting with Chancellor Adenauer and President de Gaulle in order to overcome objections currently raised by West Germany and France to Great Britain's entry into the Common Market.
    The Prime Minister (Mr. Harold Macmillan): No, Sir. Negotiations in Brussels are proceeding in accordance with the agreed programme.
    Mr. Wyatt: Is not the Prime Minister concerned by the fact that both President de Gaulle and Dr. Adenauer have recently made very slighting references to the British prospects of joining the Common Market? Would it not be as well to try to clear the ground, because there is obviously a great difference between what their officials are saying and what the heads of the respective countries are thinking?
    The Prime Minister: No. The negotiations are proceeding according to the
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    programme. I am having the opportunity of seeing President de Gaulle in a week or two's time and, naturally, this subject may be discussed. By far the best thing is to proceed with the negotiations, which are going along as we expected.
    Mr. Pentland: Is the Prime Minister aware that it is being extensively publicised in the national Press that as a result of the position adopted by President de Gaulle Her Majesty's Government have now reached a critical stage in the negotiations concerning the Commonwealth? Therefore, will the Prime Minister tell us whether it is his intention when he meets President de Gaulle to make it clear that he is not prepared in any circumstances to move away from his original position of seeking full safeguards for the Commonwealth countries?
    The Prime Minister: That is what the negotiations are about.

    NUCLEAR TESTS
    Mrs. Castleasked the Prime Minister whether he will request President Kennedy to make available to Her Majesty's Government the evidence, in the possession of the United States Government, on the basis of which the American seismologist, Professor Lewis Don Leet, claims that he has discovered a fool-proof method of detecting underground nuclear tests in order that Her Majesty's Government's scientific advisers may study it.
    The Prime Minister: There are regular exchanges of information between Her Majesty's Government's scientific advisers and those of the United States Government. The United States and British Governments have spent a great deal of time and money over many years in an attempt to find a satisfactory method of detecting and verifying underground tests, so they are naturally disposed to study hopefully any claim by a reputable scientist that the problem has been solved.
    The Government's scientific advisers will study any evidence made available by Professor Lewis Don Leet.
    Mrs. Castle: Is the Prime Minister aware that if Professor Don Leet's claims

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    are correct, the differences between the Soviet Union and the West on inspection can be resolved and a test ban treaty negotiated? Is he not aware that the Russians are about to resume another round of tests and that we all deplore this? Will he not, therefore, urge both the Russians and the Americans to postpone all further tests until Professor Don Leet's claims have been tested?
    The Prime Minister: No, Sir. We have not any detailed information, and this may be an interesting addition to the scientific knowledge on this subject, but, of course, the fundamental problem remains of how, when a challenge is made, it is to be resolved.
    Mr. Grimond: Is the Prime Minister advised that simply by underground testing any nation can make such an overwhelming advance as to alter the whole balance of power without testing in the air?
    The Prime Minister: We have tried this in various ways. First, we suggested a ban on atmospheric tests. The Russians rejected that and said that they could accept only a complete ban. We replied, "All right, let us study how to have a complete ban". Then they said," We will not deal with the problem of underground tests when they are thrown up". And so we are still working. I do not consider it a fair picture to suggest that the British and Americans are the people who have held this up. We have done everything we can to be as flexible as possible.
    Mr. Gaitskell: Reverting to the claim by Professor Lewis Don Leet, can the Prime Minister say whether this is now being examined by the United States Government's scientists and whether our own scientists have yet been consulted on the matter?
    The Prime Minister: I am having it looked into by our own scientists.
    Mrs. Castle: Is the Prime Minister aware that Professor Don Leet claims to have 90 per cent. certainty of detection at 1,500 miles from the point of explosion, 95 per cent. certainty a little nearer and 100 per cent. a little nearer still? Does not this mean, therefore, that what the Prime Minister is insisting upon in the way of inspection is not
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    necessary and that the world could be relieved of the shadow of these terrible tests if every effort were made to take these claims seriously and to stop tests in the meantime?
    The Prime Minister: No, Sir, I do not accept that as a fair representation of what we have been trying to do. We are perfectly ready to look at this or any new discovery. The problem still remains that when something has happened and it is not certain whether it is from artificial or natural causes, there is still the need to make an on-site inspection. It may be that that problem will be overcame, but even that stands upon the ipse dixit of the country. What happens if we say to a country, "Our scientists say you have made a test" and that country replies, "No, we have not"? There must be some agreed method by which the job can be done.
    Mr. Shinwellasked the Prime Minister whether he has studied the further evidence sent to him by the hon. Member for Easington in regard to the radioactive fall-out consequent on the forthcoming atomic tests; and if he will call for a further examination of the problem by his scientific advisers in the light of this evidence.
    The Prime Minister: The right hon. Gentleman sent me a letter signed by a number of biologists which appeared in the Press last week. This letter contained no evidence about the effects of fall-out which has not already been published by the Government. These matters remain under continuing examination by the Government's scientific advisers.
    Mr. Shinwell: As Professor Wadding-ton and his friends are eminent biologists, does not this indicate a conflict of opinion about radioactive fall-out? In the circumstances and in view of that conflict of opinion, would it not be advisable for the right hon. Gentleman to submit Professor Wadding-ton's letters, and any additional evidence that he may care to put forward, to his scientific advisers and then inform the House about their conclusions?
    The Prime Minister: No doubt our scientific advisers are fully conversant with these views. It all comes down to one point. Of course we deplore these tests, and of course we want to bring

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    them to an end. The only question is the balance of duty, and it is a hard duty to decide whether in the interests of defence and the situation in which we found ourselves a few weeks ago we must agree with our American friends to continue the tests or whether we should not do so. We have debated this matter, and we have discussed it. [HON. MEMBERS: "Not here."] We have discussed it in Question and Answer. I have made my statements, and I understand that it can be debated in two days' time.
    Mr. Shinwell: Will the right hon. Gentleman appreciate that I raised not the question of tests but the question of the consequences of tests, and that all I am asking—I think it is a perfectly reasonable submission—is that his scientific advisers should take note of any evidence that Professor Waddington, an eminent biologist, can adduce?
    The Prime Minister: Yes, Sir; of course we will do that. I will see that the evidence is studied by those whose duty it is to advise me.

    INTERNATIONAL CONFERENCES (PARLIAMENTARY DELEGATES)
    Mr. A. Lewisasked the Prime Minister if he will state on what basis Members of Parliament are selected to attend the Council of Europe at Strasbourg and other international conferences; and what action he takes to ensure that these visits are shared among all Members.
    The Prime Minister: As I said in reply to my hon. and gallant Friend the Member for Lewes (Sir T. Beamish) on 19th April, I am responsible for the appointment of the delegation from the United Kingdom Parliament to the Consultative Assembly of the Council of Europe and the Assembly of Western European Union. I also said that the appointments of Labour and Liberal representatives and substitutes had been made on the basis of nominations by the leaders of those parties.
    The selection of delegates to conferences of the Inter-Parliamentary Union and of the Commonwealth Parliamentary Association is organised by those bodies.
    Mr. Lewis: Is the Prime Minister aware, with regard to the conferences for which he is responsible, that it is very often the same little group that have been circulating these visits among themselves on both sides of the House over the past few years? Is he aware that there are many hon. Members, excluding myself, who have been here for 20 years or more and have never been on any of these visits, and they feel it is about time that these visits were shared out not on the basis of giving them to the yes-men of either party, but in a way to give all hon. Members a chance to take part in such proceedings?
    The Prime Minister: I have great sympathy with the hon. Gentleman's point of view, but I do not see how I am to resolve my difficulties. I have the duty of appointing these delegates. It seems to me not unnatural to ask the leaders of the parties to make their appointments, and so far as my party is concerned, I make my own. We might, of course, do it by some other method, such as ballot, but so far I do not think that what I have tried to do has been regarded as unfair by the parties in the House. I am only trying to carry out what has seemed to me to be my duty.
    Mr. Bellenger: Can the Prime Minister say whether he is responsible, or whether the usual channels are, for the selection of those small groups of favoured Members of Parliament who seem to be constantly going to the other side of the Iron Curtain?
    The Prime Minister: I should like to be consulted, but I have not been up to now. I do not know whether the Leader of the Opposition has.
    Mr. Jeger: Would the Prime Minister bear in mind that these international gatherings to which perhaps a score of countries send their representatives offer an unrivalled opportunity for political contact-men to exercise their influence and tout for contracts on commission? Would he, therefore, exercise the greatest care when making his selections and bring the same influence to bear on the leaders of the other parties?
    The Prime Minister: I think it would be more in accordance with the traditions of this House if the hon. Member, when having a charge to make, made it directly and not by innuendo.
    Mr. Jeger: Is the Prime Minister not aware that these charges have already been made and published in the Press and not denied?
    Mr. Shinwell: Why does not my hon. Friend prove them?
    Mr. Lewis: On a point of order, Mr. Speaker. Can you advise hon. Members generally and myself in particular what the position is with regard to jibes and innuendoes which are constantly made by my hon. Friend the Member for Goole (Mr. Jeger)? He is making innuendoes which are not true. He knows them to be untrue. Yet these things are continuously said. Would it be in order for me to say that my hon. Friend is earning money by being the manager of a striptease theatre? It happens to be the case that my hon. Friend is the manager of the theatre which introduced striptease to England. Surely that is not a question which should be raised on the Floor of the House?
    Mr. Speaker: In so far as this involves a point of order, to make imputations against the private characters of hon. Members, particularly in a question, is out of order, but if it is put in a general form I cannot so rule it because I do not know to whom it is attached. If the hon. Member was naming another hon. Member to make the kind of imputation which he suggested, I should be obliged to rule about it.
    Mr. Jeger: On a point of order Mr. Speaker. I was named by my hon. Friend the Member for West Ham, North (Mr. A. Lewis), who referred to me as having introduced striptease to Britain. I am not sure where he got his facts. I did not introduce striptease to England. Nor am I the manager of a striptease theatre.
    Mr. Speaker: In no circumstances, even if irregular imputations were made, would this be the right moment to debate the matter or argue about it. I suggest to the House that we should get on with our Questions.
    Mr. Gaitskell: I leave those personal exchanges, Mr. Speaker, and come back to the original Question. Is the Prime Minister aware that with regard to nominations from this side of the House, far from the people being exactly the same
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    every year, they are changed regularity every two years? In fact, we continually get complaints because we do not keep delegates on long enough.
    The Prime Minister: This is a rather difficult problem, but I should have thought that on the whole we try to combine a certain degree of continuity, which is valuable in these European Assemblies where friendships are made and contacts of important kinds are maintained, with a reasonable degree of variation. That is what I think all of us try to do in making our nominations.

    THAILAND
    Mr. Rankinasked the Prime Minister what consultations Her Majesty's Government had with the co-Chairman of the 1954 Geneva Conference before agreeing to send troops to Thailand.
    The Prime Minister: None, Sir. The present—
    Mr. Rankin: On a point of Order, Mr. Speaker. The Question as printed refers to "co-Chairman". It should be" co-Chairmen".
    The Prime Minister: Despite that vital correction, my Answer will not be seriously affected. None, Sir. The present Geneva Conference is concerned with the settlement of the Laotian question. As I said in the House on 17th May in reply to a Question from the right hon. Gentleman the Leader of the Opposition, the objective of our Air Force contingent, if it is sent to Thailand, will be to defend that country if it is attacked. That is quite a different matter from the subject of the Geneva Conference and the question of consulting the Soviet co-Chairman of that Conference did not arise.
    Mr. Rankin: Would not the right hon. Gentleman agree that the 1954 Conference devised a formula Which would have brought peace and security to South-East Asia, but that it seemed to be retarded because too many troops came in to spoil the broth, particularly from the West? Would it not appear that Thailand, too, is now of the view that she does not want more troops? Would

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    the right hon. Gentleman therefore not reconsider his offer to send British forces to Thailand.
    The Prime Minister: No, Sir. Our offer and the offers of Australia and New Zealand have been a stabilising influence. Whether those offers are accepted or not rests with the Thai Government, and I have made that clear. I am not without hope that, after many disappointments, we shall make some advance towards what we are trying to do, which is to get a settlement by the creation of a neutral Government. We hope by that means to keep Laos a neutral country.
    Mr. Gaitskell: Can the right hon. Gentleman say whether any proposal has been made by Her Majesty's Government to the Soviet Government that the International Control Commission should examine the facts of the breaking of the cease-fire? Can he also say whether or not it is possible for the Geneva Conference itself to consider again the situation in Laos with a view to obtaining the settlement mentioned by the right hon. Gentleman?
    The Prime Minister: We have, of course, considered reconvening the Conference, but I am not sure that that would be the best thing to do at the moment. The Conference did reach a conclusion, and it was very satisfactory that it did. The difficulty has been to implement the conclusion, which was to try to set up a neutral Government representing these various sections, and that is what we are trying to do. If we can succeed, we shall have succeeded in carrying out the purpose of the Conference.
    Mr. Gaitskell: Would the right hon. Gentleman answer my Question about the Control Commission?
    The Prime Minister: The International Control Commission's duty is to try to re-establish the cease-fire. We have been in touch with the Governments concerned, and we hope that this will be possible to achieve. By far the best thing would be if the conference which I believe is now going to take place succeeded in making the new Government. Then I think we would have done far the best thing to settle things in that part of the world.
    Mr. Rankin: In view of what the Prime Minister has just said, does it not seem that the Conference is a far more important matter than sending troops which, it would appear, Thailand does not want? Would he therefore not reconsider sending them from the point of view that it would be a better contribution to the Conference and to peace to keep the troops here?
    The Prime Minister: This was an offer of troops for which the Thai Government are grateful, and they will decide whether to take it up or not.

HONG KONG (CHINESE IMMIGRANTS)
The following Question stood upon the Order Paper:
38. Sir W. TEELING: To ask the Secretary of State for the Colonies why Chinese refugees from the mainland are being refused entry to Hong Kong; and if he will make a statement.
The Secretary of State for the Colonies (Mr. Reginald Maudling): I will, with permission, Sir, answer Question No. 38.
Restrictions are necessary because there is a limit to the number of immigrants from mainland China that Hong Kong can now absorb, while there is virtually no limit to the number of Chinese who may seek entry. More than 1 million Chinese have entered Hong Kong in the past twelve years, and with a total population of 3·2 million, Hong Kong is very overcrowded. Nevertheless, about 60,000 still enter the Colony, legally or illegally, every year.
Sir W. Teeling: In thanking my right hon. Friend for that statement, may I ask whether he can suggest what can be done for these refugees? One million—or as many of them as are coming out—is surely a very small proportion of 600 million. Is it not possible that there may be some political meaning in this sudden rush? Is it not possible that the idea is to drive in a kind of Trojan horse to try to get some Communists into Hong Kong and cause further trouble there?
Formosa already had a population of 5 million, which has increased to 11 million over the last ten years. Surely

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it is impossible to get many more there. Again, they would be Communists going to an anti-Communist country. Can my right hon. Friend do anything internationally, through Geneva or through America?
Mr. Maudling: This is a difficult problem. It is hard to be certain what the reason is. Very few other countries have so far shown any particular desire to receive large numbers of Chinese, and the Hong Kong authorities have done extremely well. Whatever may happen in the future, we must have effective control of the numbers coming into Hong Kong.
Mr. G. M. Thomson: Whilst we appreciate the difficulties of Hong Kong in this matter, is the right hon. Gentleman aware that there is a great deal of concern that so many refugees wishing to leave China, for whatever reason, should have to be turned back? Will he therefore take up with the American Government, perhaps through the United Nations, the question whether something could not be done to provide a place for more of these refugees to go, and also perhaps to provide some of the food surpluses in the developed parts of the world to help to alleviate the famine conditions in China?
Mr. Maudling: Those are wider questions. The trouble is that the potential numbers are so colossal. Whatever happens in the future, we must be absolutely certain of having control of immigration into Hong Kong.
Mr. Ridsdale: Is there any evidence of malnutrition among the refugees?
Mr. Maudling: I understand that there is very little evidence of malnutrition.
Mr. Grimond: The performance of Hong Kong in this respect has been quite remarkable, and deserves the thanks of the civilised world. Can the right hon. Gentleman give us an idea of the number of Chinese now going through Hong Kong, where they are going, and whether America has suggested taking any of them in America itself?
Mr. Maudling: I am grateful to the right hon. Gentleman for what he has said about the Hong Kong authorities. He is perfectly right in his tribute. At the moment, the permitted number is
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50 a day and any numbers in excess of that we are holding up and turning back. Very few other countries have shown any inclination to receive substantial numbers of Chinese.
Dame Irene Ward: For a long time we have been led to believe that famine has, so to speak, been eliminated from China, so before we decide on what we can do to help if the people are really hungry, can we have a factual statement as to the food situation inside China?
Mr. Maudling: I am not sure that even the Chinese Government are quite certain about that.
Miss Lee: Would the right hon. Gentleman keep in mind that although there is doubt about the extent of famine or otherwise in China, doubt about the degree of malnutrition among the refugees and doubt about whether there is any political motivation, there is no doubt that these refugees are in very great distress? Will he make all possible representations to other Western Governments, beginning with the United States Government and our own, to see that the maximum help is given to them, and also bear in mind that we could turn a very awkward situation into an opportunity for the West if we showed that kind of humanist reaction to the situation?
Mr. Maudling: I think that the reaction of Hong Kong has been humanist, but it would not be humanist to accept a flood of people for whom one could not care. Our first contact must be with the Chinese authorities. It is hard to know precisely what is the significance of this development, and how long it will last.
Mr. S. Silverman: Can the right hon. Gentleman give any information about the alleged refusal of the United States to sell its surplus wheat to China for hard international currency? If this attitude were changed, might it not have an effect on the flow of refugees? Moreover, would the right hon. Gentleman explain why, since it was so morally wrong to build a wall in Germany to keep refugees in, it is right in Hong Kong to build a wall to keep them out?
Mr. Maudling: The question of American wheat sales is not for me, and, in any case, it could have no effect on

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the immediate position. There is nothing particularly moral in allowing a vast number of refugees to swamp a Colony which is already overcrowded.
Mr. Gaitskell: Has the right hon. Gentleman really no idea why this flood is coming in suddenly? Is it not possible to find out what is happening from those allowed through? Have we any information from our Mission in Peking?
Mr. Maudling: The policy of the Chinese border guards has changed, and that is well known to us. I think that the policy of the Chinese Government and the motives for their actions are no better known to the individual Chinese than they are known in Hong Kong.

DIVISION No. 194, 21st MAY (CORRECTION)
Mr. Rankin: On a point of order. I find, on consulting today's House of Commons Papers, Mr. Speaker, that in Division No. 194 I have been registered as voting Tory. I trust that in due course this deep wrong will be rectified.
Mr. Speaker: I am obliged to the hon. Member for Glasgow, Govan (Mr. Rankin) for mentioning the matter. A correction will be evident in tomorrow's issue of the OFFICIAL REPORT. It will be corrected in the bound volume and an erratum slip will appear with the appropriate Division List.
It is highly mysterious, because HANSARD prints the list from exactly the same information as that from which the Division List is printed. HANSARD got it right and had the hon. and learned Member for Epsom (Mr. Rawlinson) in the place, in this instance, apparently occupied by the hon. Member for Govan. I regret the mistake. It will be corrected.

STANDING COMMITTEE B (SITTINGS)
Mr. Loughlin: On a point of order. I wish to raise with you, Mr. Speaker, a matter of importance to some hon. Members, perhaps of greater importance than it appears on the surface because of the increasing tendency of
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the Government to insist upon additional sittings of Standing Committees. Perhaps hon. Members will see the significance of that in a moment. I have informed the Minister of Power and the Chairman of the Standing Committee concerned that I was raising this matter with you.
In Standing Committee B we are dealing with the Pipe-lines Bill [Lords] and this morning we passed a Motion which calls upon the Committee to sit on Tuesday mornings, Tuesday afternoons at four o'clock and on Thursday mornings. The effect of the Motion is that the Committee is due to begin its proceedings for the afternoon session at four o'clock this afternoon. Some hon. Members were not present at this morning's meeting because of other parliamentary duties, and the House will readily accept that on some occasions even the most attentive Members are unable to get to Committee meetings.
I raised with the Chairman of the Standing Committee and the Minister the position in which those Members found themselves. They were called upon, almost on the spur of the moment, to attend a meeting at four o'clock this afternoon without having what I regard as due and adequate notice of the meeting. I received from the attendants of the House a notice of that meeting, which was handed to me at three minutes to two o'clock today. I may have received early notification, or late notification, but it is a gross abuse of the procedure of the House to expect hon. Members to attend Committee meetings at one or two hours' notice.
There is one other additional factor about which I should like your Ruling. The Standing Committee is discussing Amendments in the names of my hon. Friend the Member for Ashfield (Mr. Warbey) and my hon. Friend the hon. Member for Deptford (Sir L. Plummer). In fairness to the Committee, both those hon. Members ought to be present this afternoon. But it so happens that Amendments in the names of those two hon. Members are being discussed in Committee on the Finance Bill on the Floor of the House this afternoon, immediately we go into Committee. It is physically impossible for those two hon. Members to do both jobs. The

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issue is whether they have a responsibility to their constituents to participate in discussion of the Finance Bill, which is the most important Bill to come before the House in the course of a Session, or go to the Standing Committee.
These difficulties were explained to the Minister concerned, but he could not care less. It is incumbent upon hon. Members to safeguard themselves against abuses by the Executive and I ask you for your Ruling, especially on the question of adequate notice of the meeting of a Committee.
Mr. Warbey: I support the submission of my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) as one of the two hon. Members who are personally involved in a particular difficulty arising out of this situation.
As my hon. Friend has said, my hon. Friend the Member for Deptford (Sir L. Plummer) and I have our names to an Amendment which is now before Standing Committee B and on which discussion will be resumed in a quarter of an hour. The hon. Member for Deptford and I also have our names to Amendments which are under discussion in Committee of the whole House on the Finance Bill. We started discussing those Amendments last evening and the Committee adjourned until today. We shall be asked to resume discussion on those Amendments in a few moments.
Can you tell us, Mr. Speaker, how it is possible for two hon. Members, who are called to attend two Committees meeting at precisely the same time in order to move and discuss and divide on Amendments which are being considered by those Committees simultaneously, both raising matters of considerable constitutional importance, to perform their duty to their constituents?
Mr. Speaker: I rule on the only point of order which I can see to arise, and which is the adequacy of notice. I do not officially know what happens in Committee, but I understand that the Committee reached its decision about afternoon sittings at about twelve noon. So far as the Officers of the House are concerned, notice of that decision was available from 12.30 onwards. I do not think that we could do it better than
232
that. There would be no irregularity involved in notice in those circumstances.
Hon. Members will appreciate that the rest of what has been said does not produce any point of order for me. I would have added on the question of notice that although I do not know officially what happened, it would rather appear that the question of having these afternoon sittings began to be discussed in the Committee last Thursday, so that members of the Committee following the matter might have had a hint that it would be going on today. I might be wrong about that. The essence of the point for me is about giving notice as early as possible. That I have done. For the rest, there is no appeal to me from the decision of the Committee which ought to have taken these matters into account before reaching its decision.
Mr. T. Fraser: I think that the question of notice is a matter for the House as a whole, Sir. On Thursday of last week, the Minister proposed that we should meet on Tuesday afternoons, and last Thursday evening a notice was sent out to every member of the Standing Committee originally intimating that the Committee would meet this morning at half-past ten and this afternoon at four o'clock. But before the notice was sent out last Thursday, the authorities of the House had perforce to score out the information that we would meet at four o'clock this afternoon, so that every member of the Committee really got an intimation last Friday that the Committee would not meet at four o'clock this afternoon, because the reference to four o'clock was scored out in red ink.
This morning we continued with a discussion which terminated at about twelve o'clock, by which time the Committee had decided that it would meet again at four o'clock. The Motion did not say four o'clock this afternoon, but merely four o'clock on Tuesday afternoons.
I submit that as a notice had to be printed after that and was, in fact, delivered by hand to those who were available within the Palace of Westminster at two o'clock, hon. Members who were not within the Palace at that time have not had adequate notice of this meeting at four o'clock this day.

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If a Committee decides in the forenoon to sit in the afternoon of that day, I think that it would be in accordance with the dignity of the House and of Standing Committees if the afternoon sitting took place the following week and not in the afternoon of the day in which the decision was taken, so that hon. Members might have timely notice of the intentions of the Committee.
Mr. Speaker: I am obliged to the hon. Gentleman. I hope that he will not confuse my function with those of others in this context. I think I rightly say that as far as Officers of the House under me are concerned the most adequate notice possible was given. I do not think that anybody could dispute that. The decision was taken at twelve noon, and the notification was given as soon as possible thereafter. We could not do better.
I think that the other argument which the hon. Member was putting to me would be more properly addressed to the Chairman in Committee as a ground for adjourning when the Committee meets this afternoon. I cannot, because it would not be proper to do so, express a view about the merits of the case.
Mr. Loughlin: I should like to make it plain, Sir, and I ought to have done before, that I did not intend to cast any reflections on the action of the Officers of the House. They got the information out more speedily than I would have expected them to do in the circumstances.
The point that I want to reinforce is that made by my hon. Friend the Member for Hamilton (Mr. T. Fraser), that it is an abuse of the proceedings of the House for a Minister to insist on a
234
Committee meeting when it is possible that some members of the Committee will not be available.
Mr. Speaker: Order. The interests of the House in general must be considered. The hon. Gentleman has made his point, which has been heard. This is not a matter on which I can assist him.
Mr. S. Silverman: Without wishing to press the matter too hard, has it not always been the custom of Committees when they decide, contrary to the normal practice, to meet in the afternoon, to make the decision operative only at the succeeding meeting of the Committee and not on the day when the decision is taken, precisely to avoid this embarrassment?
Mr. Speaker: I cannot purport to have any knowledge of the practice of Standing Committees. I think that that goes back to the suggestion I made to the hon. Member for Hamilton (Mr. T. Fraser).

NEW MEMBER SWORN
Hugh Emlyn Hooson, esquire, for Montgomery.
BILL PRESENTED
  JAMAICA INDEPENDENCE
  Bill to make provision for, and in connection with, the attainment by Jamaica of fully responsible status within the Commonwealth, presented by Mr. Maudling; supported by Mr. Sandys and Mr. Iain Macleod; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 117]
ORDERS OF THE DAY
  WAYS AND MEANS [21st May]

    INCOME TAX AND PROFITS TAX (PENALTIES AND ASSESSMENTS)
    Resolution reported,
    That it is expedient to make further provision as to the operation of Part III of the Finance Act, 1960, with reference to happenings before the commencement of that Act.
    Resolution read a Second time.
    Question, That this House doth agree with the Committee in the said Resolution, put forthwith, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions), and agreed to.
    Instruction to the Committee on the Finance Bill that they have power to make provision therein pursuant to the said Resolution.

    FINANCE BILL
    Further considered in Committee [Progress, 21st May].
    [Sir WILLIAM ANSTRUTHER-GRAY in the Chair]

    Clause 9.—(CHARGE TO INCOME TAX AND PROFITS TAX.)
    Amendment proposed: In page 10, line 27, leave out subsection (2) and insert:
    (2) In respect of tax chargeable by virtue of this section there shall be allowed relief, called "lapse of time relief", in accordance with the provisions of the Schedule (Charge on gains from acquisition and disposal: lapse of time relief) to this Act.—[Mr. Mitchisonl]
    Question again proposed, That the words proposed to be left out, to "three" in line 29, stand part of the Clause.
    3.56 p.m.
    The Chairman: We are discussing together with this Amendment the following Amendments: in page 10, line 29, to leave out "three" and to insert "two"; in line 29, to leave out "three" and to insert "ten"; in line 31,
    236
    to leave out "six months" and to insert "five years"; and the proposed new Schedules:

    CHARGE ON GAINS FROM ACQUISITION AND DISPOSAL: LAPSE OF TIME RELIEF
    1. In this schedule the word "year" means a period of twelve calendar months and also includes an incomplete year immediately before disposal.
    2. The gain accruing from the acquisition and disposal of a chargeable asset, being gain taxable under section nine of this Act, is divided by four times the number of years between acquisition and disposal and the quotient so obtained is hereinafter called a "taxable unit".
    3. A number (hereinafter called "the taxing number") is computed by reference to the period between the acquisition and the disposal of the chargeable asset, that is to say, by adding—

    (a) in the case of a chargeable asset consisting of land,

    (i) the number four for each of the first three years after acquisition,

    (ii) the number three for each of the fourth and fifth years after acquisition,

    (iii) the number two for each year after acquisition from and including the sixth year to and including the tenth year,

    (iv) the number one for each year after the said tenth year, or

    (b) in the case of any other chargeable asset,

    (i) the number four for the first year after acquisition,

    (ii) the number three for the second year after acquisition,

    (iii) the number two for each of the third, fourth and fifth years after acquisition,

    (iv) the number one for each year after the said fifth year.

    4. The tax chargeable in respect of the said gain shall be the tax on the taxing number of taxable units and the relief (in the Act called "lapse of time relief") shall be the difference between the tax so chargeable and the tax which would have been chargeable on the gain if this schedule had not been enacted.

    CHARGE ON GAINS FROM ACQUISITION AND DISPOSAL: LAPSE OF TIME RELIEF
    1. In this schedule the word "year" means a period of twelve calendar months and also includes an incomplete year immediately before disposal.
    2. A percentage of any gain accruing from the acquisition and disposal of a chargeable asset, being gains taxable under section nine of this Act, shall be disregarded for all the purposes of Chapter II of this Act other than the furnishing of information; and the percentage so disregarded is in that Chapter called "lapse of time relief".
    3. The percentages to be so disregarded shall be those set out in the following Table:—

    TABLE

    Years between acquisition and disposal

    Percentage where the disposal is of land

    Percentage in any other case

    1

    Nil

    Nil

    2

    Nil

    12½

    3

    Nil

    25

    4

    5

    30

    5

    10

    35

    6

    15

    40

    7

    20

    45

    8

    25

    50

    9 and 10

    30

    55

    11 to 13

    40

    60

    14 to 16

    45

    62½

    17 to 20

    50

    65

    21 to 25

    55

    67½

    26 to 30

    60

    70

    31 to 40

    65

    72½

    41 to 100

    70

    75

    over 100

    75

    Before calling the hon. Member for Cardiff, South-East (Mr. Callaghan) to continue the debate, I must make one point clear regarding the separate Divisions which were promised on the Amendment in the name of the hon. Member for Brierley Hill (Mr. Talbot), that in the name of the hon. Member for Enfield, East (Mr. Mackie), and the Amendment in line 31, if the Committee so desires. We shall have no difficulty in having a Division on the Amendment to line 31, but the position regarding a separate Division on the Amendment to line 29 in the name of the hon. Member for Enfield, East is not so easy, because that will depend on whether the Amendment in the name of the hon. Member for Brierley Hill is moved or not.
    If the Amendment in the name of the hon. Member for Brierley Hill is moved and a decision is taken, with or without a Division, in the sense that the word "three" should stand part of the Clause, then we cannot immediately proceed to another Division on that identical question of the word "three" standing part of the Clause. It would mean that the Amendment in the name of the hon. Member for Enfield, East could not, in that event, be called for a Division. The fate of this Amendment is, therefore, dependent on what may or may not happen to the first Amendment to line 29, which may, in fact, not be moved at all, according to what is intended.
    Mr. John E. Talbot: Arising out of your statement, Sir William, may I say that I would have no wish to press the Amendment in my name to a Division, and that at the appropriate time I shall ask leave to withdraw it or have it negatived.
    The Chairman: I take it that the hon. Gentleman does not wish to move his Amendment, and I think that this will meet the convenience of the Committee.
    Mr. James Callaghan: In resuming the debate I should like, first, to thank the Chancellor of the Exchequer for introducing into the Bill Clauses which give us the opportunity of discussing a capital gains tax because, as the right hon. and learned Gentleman truly said, his tax is not a genuine capital gains tax. It is a political gesture designed to appease certain people in this country, which it has entirely failed to do. It bears no resemblance at all to a strict capital gains tax.
    The Amendment proposes to substitute for this imitation in the Bill a genuine capital gains tax. I hope it is clearly understood that that is our intention. We believe that this presents an opportunity for broadening the tax base by taxing a number of transactions which yield a substantial profit, which at present yield no revenue at all to the nation, but which provide an adequate reservoir of taxable capacity.
    We see no reason at all, on grounds of morality or expediency, why such transactions should not yield some revenue to the nation if it is administratively possible to arrange this. I should like to hear what philosophical objections there are to the notion that any income in anybody's hands, no matter how derived, provided that it can be administratively collected, should not, if it is equitable, yield something to the Revenue for other purposes.
    Mr. Frederic Harris: Does that mean that the Labour Party would definitely tax pools wins?
    4.0 p.m.
    Mr. Callaghan: It is remarkable—and perhaps a sign of guilt—that hon. Members opposite should, now for the third time in the couple of hours' debate we

    239
    have had on this subject, seek to turn the whole of the discussion away from the tax of genuine capital gains into a discussion about football pools where they hope to play on the fear of the small investor so that by throwing out the proposed tax they might be left to their gains. If the hon. Member for Croydon, North-West (Mr. F. Harris) will possess his soul in patience and remain in the Chamber, he will find that I shall come to that point later.
    It seems typical of the approach made by the Conservative Party throughout the whole debate that the first question, almost the only question, they have asked is not how we should deal with the vast profits arising out of land speculation and the vast gains made on the Stock Exchange which should yield some revenue to the nation, but whether they can frighten the football investor into throwing out this idea through being afraid for his own wins. I hope that we can raise the level of discussion beyond that, but I shall come to that point later and I shall deal with it.
    There seems to be no argument that large gains have been made in this way. Some people would argue whether they derive from any particular skill. They certainly derive from very little sweat, but, if income is taxed, I cannot see any reason at all why capital should not be taxed. There has been the traditional distinction, thought up by a horticulturist, that the basis should be taxation of the fruit but not of the tree. True capital is supposed to represent a tree and income is supposed to represent the fruit. If we pursue that analogy a little we see how clearly inadequate it is. It is astonishing how a very clever metaphor can hide the truth from the nation for a long time.
    If I pursued it I would say that certainly, in my gardening pursuits, if I want good fruit I must prune the tree. If I allow the tree to grow unchecked I cannot get good fruit from it. To continue the horticultural reference, there is no reason why we should not prune the tree as well as taking the fruit. The argument put up by hon. Members opposite bears no relationship to the reality of the situation. Large capital gains have been made which are escaping
    240
    taxation and, as the Chancellor of the Exchequer will readily acknowledge, will continue to escape under his proposals.
    Another reason why I support a proposal of this sort is that it would help to decrease tax avoidance. I am sure the Chancellor will not claim that for his proposal. Our Amendment would certainly make it mare difficult to avoid the payment of tax. I hope that the Chancellor will agree that that is a desirable thing. Tax avoidance has reached the level of a national sport. It has assumed such degrees that, to use the words of the Chancellor, some of the best brains in the country are engaged in finding ways of avoiding taxation. If I recall correctly, he used that very phrase about the capital gains tax when he refused to introduce it. I think that he will agree that the best brains in the country do not need to be engaged to avoid his taxation.
    Even those of us who are not expert on Stock Exchange affairs can see that if we pay tax only on gains realised in the space of six months, by waiting for six months and a day we can avoid the tax altogether. I would not say that this tax was designed to be evaded, but I can see no easier tax to avoid than this one. A permanent capital gains tax levied on securities and land would yield a substantial sum and would be much more difficult to avoid because, by its very nature, it would be a permanent tax.
    I hope that this argument will continue if the Government continue to oppose a capital gains tax. Let us continue the discussion in the country and see what the people think about the rights and wrongs of the situation. This is a challenge I should like to take up. I should like hon. Members opposite to take it up and argue on it because I believe that there is a very fruitful revenue yield to be derived from it. What could we do with that revenue? We could embark on some of the projects which the Financial Secretary told us yesterday he wants to see.
    The hon. Gentleman agreed with me that he wanted to relieve people earning five guineas a week from payment of tax. He would like to assist a married couple who pay about 5s. a week in tax and have an income of only £8 10s. a week. I am suggesting to the Chancellor

    241
    ways in which he could begin to do that. If I am asked whether I think that a capital gain made by buying a piece of land, holding it for a few years and then selling it, should yield a revenue to be used to relieve the poorest in the country, I have no doubt what my answer is. I should have thought that those on the Government benches should answer in the same way if they really believe in equity. I would be possible if we had a Conservative Chancellor, or, indeed, any other Chancellor, to consider the burden of direct taxation, of Income Tax itself.
    We have got into a bit of a tangle in discussions about this matter. If I am partly responsible, I accept my share of responsibility. There seems to have arisen the idea that we hold the view that the direct taxpayer is not paying his full share. That is not my view. My view is that the distribution of the burden within the total amount of Income Tax paid is wrong, that the people at the bottom of the scale pay too much and people at the top pay too little. That has been so ever since 1955–56, when the big reliefs started to have effect in payment of Surtax and Income Tax. [An HON. MEMBER: "It was before that."] I agree that there was a reduction in Income Tax before that, but the real slide was undoubtedly after the 1955 General Election. Statistics show that quite clearly. Whether hon. Members opposite were rejoicing in their majority so much that they did not care about the country's situation I do not know, but the fiscal consequences are quite clear to anyone who studies the figures.
    The Government have so distorted our fiscal system that they have made the poorer people—by that I mean anyone earning £15 to £20 a week—pay more and those in the Surtax bracket pay less. I am suggesting that a way in which we can recover some of that revenue is to adjust the burden inside the Income Tax field. When I consider the reaction which many people have had to this idea, I have no doubt at all that the country would find this socially acceptable. Indeed, it would blame the Government for not having taxed this fruitful field earlier.
    It is not as though we were unique in considering this matter, or that it is
    242
    the first time it has been considered. Estate Duty has been with us for many years, we have had legacy duty and succession duty and a whole series of taxes of that sort. Other nations do not hesitate to put a tax on capital. It is well known to everyone that in the United States there is a short-term tax such as that proposed by the Chancellor and there is a long-term tax as well. In Germany and in Switzerland capital gains are taxed.
    I mention those countries because I want to meet in advance the arguments which I suppose will be put and which it is difficult to answer because the arguments are hypothetical, that a capital gains tax is a discouragement to investment. If that is so, how do we account for the situation in Germany, in Switzerland and in the United States? Clearly, a capital gains tax can be a discouragement to investment, but it depends on what kind of capital gains tax it is. It depends on the rates, whether we abate the amount of capital which has accumulated and a number of things, but that a capital gains tax can yield a substantial amount of revenue and, at the same time, not be a discouragement to genuine savings and investment, there can be little doubt.
    In discussion of the Amendment, the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), speaking last night, said that it would freeze wealth and stop the sales of land. I just do not believe that for a moment. I doubt whether he had understood the full purport of the Amendment.
    I do not want to attach any undue significance to the Amendment. It is a useful peg on which to hang this debate, because it serves as an illustration of how a capital gains tax could be devised. I attach no greater and no lesser weight to it than that. If I were asked to bind myself to the rates of tax or the number of years contained in the Amendment, I should have to refuse, for natural and obvious reasons. It would be foolish for the Opposition to try to construct a tax without the help of the Board of Inland Revenue and other experts, which we would have if we were the Government. I want to make quite clear that this Amendment is for the purpose of illustration.
    To meet the point made by the hon. Member for Walsall, South, let us see

    243
    what these illustrative figures would do. I take two examples under the Amendment which, he says, would stop the sale of land and slaw down, if not stop, the sale of securities. The first concerns a piece of land bought for £500 and sold ten years later for £1,500. That is not an unusual figure; indeed, it is a very modest figure. That is a capital appreciation of £1,000.
    Under our Amendment we have, first, a disregard far the length of time that it has been held. It would mean, in this case, £300. We would then tax the balance at the standard rate of 7s. 9d. in the £, as it is at the moment. The tax payable on £700 at 7s. 9d. in the £ would be £270. So, out of a capital gain of £1,000, he would be left with £730, if the standard rate of tax had not altered meanwhile. If it had gone up, or down, naturally, the resulting sum would be more, or less. Will anyone tell me that this would freeze the sale of land? If a man bought a piece of Land for £500 and there is an interval of ten years between the buying and the selling, because it is not proposed to make the tax retrospective, will anyone tell me that he will not sell it because he will get only £1,200 instead of £1,500 for it? If so, I shall not believe it.
    Let me take the case of a security. Under our Amendment, if it were bought for £400 and sold in eight years' time for £1,000—a modest rate of appreciation in present-day terms—the capital gain would be £600. Under the table which we have put in, we would disregard 50 per cent. of that £600. The investor would pay tax on £300, which, at the standard rate, assuming it to be 7s. 9d. in the £, would be £116. The net gain that such a person would be left with would be £484.
    I ask hon. Members to accept those figures for the moment. They can check them later. I am saying that under the Amendment a security bought for £400 would still yield, after payment of the capital gain, even under the table which we have constructed for the purpose of illustration £884 instead of £1,000. Will anyone tell me that that will ruin the Stock Exchange or stop investment? It so, I shall not believe a word of it.
    The simple truth, as I understand this, is that hon. Members opposite are
    244
    massed here this afternoon to reject the Amendment, and I have no doubt that they will succeed in doing so. But the Chancellor has opened up a very fruitful financial vein, which could yield very great profit to the nation. It is one which would enable us to do a great many things which would assist both in the redistribution of wealth and in the creation of a number of fruitful enterprises that we cannot afford to finance at present. It is for these reasons that I have deployed at some length the case for a genuine capital gains tax.
    I was asked earlier—indeed, the only question asked so far by hon. Members opposite—about football pools. A number of considerations come up straight away. If we have a capital gains tax, then, in theory, we should tax every capital gain, whether it is pictures, jewellery, football pools, or anything else. That, I think, is the theory of a capital gains tax and, indeed, that is the practice in a number of countries. Nevertheless, for the reasons which I shall give, I do not believe that it would be right to apply that in this country without adjusting a great deal of other taxation.
    4.15 p.m.
    One reason—it is a very important reaon—is that the football pool stakeholder pays at present a very considerable amount of revenue into the Treasury. He pays 33 per cent. duty on every stake. That is the contribution before we start. It is a very substantial sum. In fact, out of total stake money of £110 million, £33 million goes in duty —the amount of duty being the same as the percentage. This, to my mind, is a very considerable sum to mulct from this industry. I do not know whether hon. Members opposite want to tax football pools or not, but by their interest in them I begin to suspect that they do.
    I say, for reasons that I shall give, that it would be unfair to do so in this case, and I also believe that it would be administratively impossible. How would hon. Members opposite envisage taxing every small gain of ls. 3d., £5, £10 or £15, all the dividends that accrue every week? If we did that, we should have to allow the stake money on which they did not get the dividend as a loss. Hon. Members opposite must answer this question if they are serious about this matter. I do not think that they are

    245
    serious. I think that they are trying to use the football pools as a red herring to destroy the serious case that has been made from this side. It is administratively impossible, in my view, to tax football pool winnings in this way, nor, in view of the amount of tax taken out by means of a direct impost of this sort, would It be right to do so. The sum of £33 million out of £110 million is very substantial. I dismiss this because I believe that it is a red herring.
    What we would like to do is what the Government are doing, but to make it a permanent tax, namely, tax securities and land gains in the way described in the Bill, but make it a genuine capital gains tax. I hope that that is clear. If any hon. Member opposite who is interested in football pools thinks that I have not made the position clear, I am ready to give way so that a question may be asked.
    Mr. Edward du Cann: Would not the hon. Gentleman agree that there is a great deal more in this than mere mathematics? What is important primarily is the psychology of the matter. There are many of us who feel very strongly that, on the whole, it is quite wrong to encourage betting in any way. Indeed, I think that it would be right to discourage the populace if it is tending to become a nation of bettors. It would be much better if it became a nation of people concerned in putting their money into productive industry for the national economy.
    Mr. Callaghan: I should have thought that there was sufficient discouragement to the pool stake holders when the Government take 33 per cent. of everything that they put in.
    Mr. du Cann: It does not seem like it.
    Mr. Callaghan: If it does not seem like it, the hon. Member will have to do something about it. No one on the Stock Exchange is told that, if he invests his money, 33 per cent. will go to the Chancellor of the Exchequer, irrespective of whether he gets anything from it or not. The scales are already heavily weighted against the football pool investor and very heavily in favour of the Stock Exchange investor, even taking the Stamp Duty into account.
    Mr. F. Harris: If the hon. Gentleman reads HANSARD tomorrow he will find that he said that tax, in his opinion, should apply wherever profit is derived, so how can he leave out football pools and things like that?
    Mr. Callaghan: If the hon. Member will look at the Finance Acts, he will find that they are studded with exemptions. The next Clause deals with the relief of taxation on the payment of Army bounties. It is exactly the same proposition. I do not know whether hon. Members opposite intend to make propaganda in the country about this or not, but I suspect that they will. If so, they will be telling deliberate falsehoods, in view of what I have said. I hope that they will meet the case on its merits. It is a very strong and difficult case to meet, if they do argue it on its merits and not on the basis of red herrings.
    Sir Cyril Osborne: It is unfair of the hon. Gentleman to say that we shall make deliberate propaganda and tell falsehoods when he does not know whether we are to make propaganda.
    Mr. Callaghan: The hon. Gentleman knows very well that the Prime Minister won the last General Election on a falsehood.
    Sir C. Osborne: Face the issue.
    Mr. Callaghan: Do not ask me to face the issue. I am facing it strictly.
    What I am frightened of is that hon. Members opposite will try to dodge it by talking about football pools all the time. The only questions we have had from hon. Members on the other side so far have been about football pools. Are they not interested in anything else? If they were, surely the discussion would turn on those other questions. It is rather shabby that hon. Gentlemen should spend all their time discussing football pools.
    I have made quite clear what we would do. Let them state what they would do in these circumstances. Let them answer the case for a capital gains tax in the form in which I have put it. I believe that there is no answer to it. The right hon. and learned Gentleman's proposal is puny, weak, flaccid and irritating. He himself says that it will

    247
    yield no revenue. In my view, it is a tax which bears no resemblance to the needs of the situation or what could be got. As the right hon. and learned Gentleman said, he has deliberately imposed it so that the wage earners should feel that there was fair treatment between the two sides of industry. But he is not going to raise any revenue from it. This is a foolish thing, both to say and do. Political taxes of this sort will not satisfy anyone.
    We are meeting here today on the very day on which the Ministry of Labour's index of retail prices has had the largest increase that it has had within my recollection for eighteen months.
    Mr. Douglas Jay: For ten years.
    Mr. Callaghan: I can hardly believe that, but my right hon. Friend will no doubt look it up. It may well be right that it has not gone up two points in a single month.
    What is true is that during the last twelve months it has increased by at least 5 per cent. The ordinary wage earner, who is being asked either to accept no increase in pay or to limit his increase to 2 per cent., is facing an increase in the cost of living of at least 5 per cent. He is being asked to face today a genuine reduction in his real standard of living because of the increase in the index of retail prices.
    I cannot discuss an incomes policy today, because I would be out of order. If we are to have sacrifices like this, we on this side of the Committee have the right to ask that where there is taxable capacity, and it can be made to yield a source of revenue which would be available to meet the Chancellor's needs, it should be taxed. That is the case for a capital gains tax. It has been demonstrated in many countries that it can be done. It could be done here. What the Chancellor has proposed is merely a pale and feeble imitation of it. It is for that reason that we are pressing this Amendment this afternoon.
    Mr. Frank Bowles: I had hoped to speak on this subject on the Second Reading of the Finance Bill, but at that time I was not able to complete
    248
    sufficient studies to enable me to say what I wanted to say. When I was in America during the Christmas Recess I discussed with two lawyers, one in Washington and one in New York, how the capital gains tax worked there. As we are discussing this subject, I think the Committee might be interested to realise that nobody seems to be offended by it. There have always been controversies and arguments about whether capital gains should be taken into account in their system of income tax.
    It is argued, for example, that a capital gain resulting from a decline in the interest rate has little in common with a gain attributable to profits being retained by a company. Another view is that capital gains should not be construed as income but should be completely free from taxation. The capital gains tax was said, in the arguments which have been going on for years, to be especially discouraging to the employment of risk capital. It has been said that it would block economic progress.
    An additional argument has been that capital gains are usually the result of gradual capital growth over the years. Therefore, taxation of such a gain in any one year as though it were income accrued in that year is regarded as grossly unfair. In many cases capital gains do not indicate increased ability to pay taxes—for example, all those gains which arise from changes in prices.
    As lawyers probably remember, in the post feudal Europe all land was usually entailed. Therefore, there was no possibility of selling land out of the family. In those days there was a conception that capital was a res—a thing. For example, a Government bond would be a res. So would land. They regard any fluctuations in the value of a Government bond as being no change in the investment. The bond would still be there, unless it was sold. In exactly the same way, the increased value of the bond would be rather like land where certain water had receded. The result would be that there was more land but the thing—the res—would be just the same.
    The United States of America followed this conception of Europe. It was thought there, however, that a capital gains tax would be unconstitutional in

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    the years when the Acts were first passed, unless the capital gains were realised.
    Some people would make no differentiation between capital gains and other forms of income. It is pointed out that exemption benefits mainly the wealthier taxpayer. In the United States the federal tax on capital gains for many years represented a middle ground between the two views. From 1942 onwards only one-half of long-term gains has been taken into account in arriving at net income. The payer may elect to have long-term capital gains taxed at a special rate in lieu of the regular rates. Therefore, no long-term gain is taxed above 25 per cent. Short-term gains of six months or less are paid at the regular rates of income tax and surtax. Losses from sales of capital assets can be offset only against capital gains plus 1,000 dollars of other income.
    Five categories of assets are excluded —inventories, property held for sale to customers in the ordinary course of the taxpayer's trade or business, depreciable business property, real property used in a taxpayer's trade or business, and obligations of federal and state governments issued after 1st March, 1941, on a discount basis and maturing in not more than one year.
    In 1942 many industries—metals and metal products, machinery and accessories, automobiles and accessories, textiles, etc.—were asked this question, "Do you regard the present tax provisions covering capital gains and losses as reasonably satisfactory?" I need not go through them all. Metals and metal products returned 56 per cent. of affirmative replies. Textiles returned 65·2 per cent. of affirmative replies. Automobiles and accessories returned 33·3 per cent. of affirmative replies. Paper and paper products returned 71·4 per cent. of affirmative replies. Out of the total number of replies, 56·1 per cent. were in favour of this capital gains tax. In their opinion, it had worked satisfactorily.
    4.30 p.m.
    I might point out to the Chancellor that the difference is that the tax on long-term capital gains is not more than 25 per cent. It is not the full rate of Income Tax and Surtax, and it is very important to remember that. The view
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    was that it was the extraordinary wide gap between the rate of capital gains tax and the rates of ordinary Income Tax which diminished the deterrent influence of the former and brought more realisation of capital gains. There seems little doubt that the 25 per cent. capital gains tax there now looks low as compared with the taxes on ordinary income. It was, therefore, a smaller psychological obstacle to sales than the absolute level might suggest. Because it was widely regarded as a bargain rate it probably gave some investors a positive stimulus to "take" the capital gains. In other words, the impetus for selling would not exist if capital gains were subject to the same high rates as dividends.
    A capital gains tax has been in force in the United States for either 60 or 80 years—
    Mr. Callaghan: Sixty years.
    Mr. Bowles: Yes, I thought that it was sixty years. A Revenue Act introducing a tax on gains from stock was passed in 1862, but that was held to be unconstitutional unless the gains were realised.
    As I say, this form of taxation has been going on in America for sixty years, and my hon. Friend the Member for Cardiff South East (Mr. Callaghan) has mentioned European countries where it also applies. Many people say that if we went in for this capital gains tax, our economy would go bust. The United States economy has not bust. It has done exactly the opposite—it is robust. There is therefore no need for the terror that hon. Members opposite appear to have of this very modest Amendment.
    Throughout the history of this tax there have always been people finding loopholes in it. That occurs in the United States, and it will probably occur here when we get it into force. There will be those who, all the time, will be advising their clients how to get round it, and I hope that the Treasury's advisers, and the very learned Parliamentary draftsmen, will try to be just as clever in stopping up the loopholes in future Measures so that the tax will be really efficient and effective.
    I have not gone into the social arguments of justice, and so on, because those have been already put forward,

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    but I thought that it might be useful to show that the history of the tax in the United States demonstrates that there is no evidence that such a tax deters investment.
    Yesterday the hon. Member for Walsall, South (Sir H. d'AvigdorGoldsmid) said of these Amendments:
    "The force of them is to freeze the situation as it exists today."
    A little later he said:
    "But the Amendment is not designed to achieve that object. Indeed, it will produce exactly the opposite result. If, by some strange stroke, the Amendment is adopted, people who own land will do nothing at all with it. Thanks to the guidance which we have been given. they will know that the best thing is for them to do nothing with their land, for seventy-five years according to the Amendment of the hon. and learned Gentleman, …".—[OFFICIAL REPORT, 21st May, 1962; Vol. 660, c. 157.]
    The history of the working of the tax in the United States of America and elsewhere shows that statement to be nonsense, and I hope that the Chancellor of the Exchequer, who shows great courage, although I disagree with him, will next year legislate for a tax not only on short-term but also on long-term capital gains.
    Mrs. Barbara Castle: I support the Amendment moved by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) because it seems to be the only way in which we can bring any kind of sense at all into this Clause. I am interested to see that since my hon. Friend successfully laid, once and for all, the bogy of football pools on which hon. Members opposite have been so anxious to concentrate, they seem to have lost a considerable amount of interest in the Clause.
    We are being asked to agree to the introduction of a new piece of taxation which, if the Clause goes through in its present form, is absolutely mystifying. I am quite genuinely bewildered as to what this tax is supposed to do, or what the Government think they are achieving by it. We know that the tax is not being levied to raise revenue. The Chancellor himself in his Budget speech said, "I can't tell you the yield but, in any case, I am not interested in the yield. That's not the idea behind this tax."
    That, to begin with, is a rather astonishing admission for a Chancellor
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    to make. For a Chancellor of the Exchequer to say that he is not interested in the yield of a tax is rather like a bookmaker saying that he is not interested in the odds. Neither is running a philanthropic institution. We do not have an elaborate tax structure except to raise revenue. We are told that this tax is to have a political effect, but how can tax which does not raise any revenue at all have any political effect? How can something which does nothing do anything?
    It might be argued that, once again, the Government have introduced the tax for the sake of appearance, but this tax has fooled nobody. It certainly has not fooled the Stock Exchange. In fact, the day after it was introduced, there was an absolute boom in property shares, indicating the relief of the property investors when they found that this short-term speculative gains tax was completely phoney, and would not reduce their income at all.
    Since the tax was introduced, The Times index of share values has continued to rise steadily. It rose the day after the tax was announced, and it has gone on rising—
    Mr. du Cann: As a simple matter of fact, it is not true to say that the index of ordinary shares has shown a consistent rise since the introduction of this tax. The market has been particularly weak very recently. One of the immediate effects that the introduction of the speculative gains tax has had on the Stock Market—which many of us want to make the finest market in the world, particularly if we go into the Common Market—has been to decrease turnover, which is much to be deplored.
    Mrs. Castle: The Times index of share values stood at 132·61 immediately before the Budget, rose to 133·45 at the end of the day after the Budget announcement, and had risen to 134 at the end of April, three weeks after the Budget.
    It is perfectly true that there are constant admissions of economic failure and disaster peppering, as it were, the lifetime of this Government from month to month, but it is fairly clear, taking these three figures together, that the psychological effect of the tax was not one of alarm and despondency.
    Mr. A. R. Wise: From the figures which the hon. Lady produced, I should not consider that there was a boom in share prices if there was a total rise of only 1¼ per cent.
    Mrs. Castle: Had we had the introduction of a tax which was going to make capital gains pay their fair contribution to the income of the economy I am sure that the hon. Member for Rugby (Mr. Wise) would have expected share values to decrease and not to rise.
    In addition to what I was saying earlier, I do not believe that the tax has fooled even hon. Gentlemen opposite. I wonder if hon. Members now present heard the moving speech made yesterday by the hon. Member for Brierley Hill (Mr. Talbot). He had no illusions about it having any fiscal or psychological effects. He said:
    "… let us have no more talk of social justice. The spring of justice in this place "—
    has been running—
    "through the muddy waters of expediency…" —[OFFICIAL REPORT, 21st May, 1962; Vol. 660, c. 153.]
    What, therefore, is the tax supposed to be? My hon. Friends and I are getting accustomed to having the Government steal our policies, distort them and then introduce their version because they know that our philosophy and economic analysis is irrefutable. To prop up their tottering administration they must borrow some of the main planks of our policy. We saw that happen over superannuation. We produced a national superannuation scheme of such obvious fairness that the Government had to rush through their distorted graduated pension scheme. Then we had planning. Despite what we had said, we were sneered at by the Prime Minister at one election after another about our being nationalisers and planners while he spoke of Tory freedom. Now we have "Neddy".
    4.45 p.m.
    For a considerable time we have agitated that a fair capital gains tax should make a contribution to the Revenue. The Government found this argument irrefutable and they have become known as the "copy-cat Conservatives" and they have, therefore, produced a copy-cat edition of the capital gains tax. As I say, they produced their graduated pension scheme and now
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    "Neddy" is an edition of the real thing. The Government are not pretending that this is a capital gains tax, for we have heard the Attorney-General and the Chancellor of the Exchequer saying, in effect, "No, this is not a capital gains tax"—so what on earth is it supposed to be or to do?
    It is not much use having a fig leaf so transparent as this one, for it is carrying political indiscretion—I am tempted to say indecency—to terribly great lengths. Yet the Government know perfectly well that one must, if one is attempting to introduce an incomes policy, have a capital gains tax to balance it. That is why they are making this half-hearted parade. If the Amendment is not accepted what will be the economic trend over the next few years? The Government are seeking to enforce an incomes policy, but so far it has merely taken the form of restraint on wage increases. Every time the Government are successful in denying to any section of the community—whether nurses, probation officers or engineers—an increase in wages they are enabling industry to make higher profits that will go to the people whose incomes are already very high.
    No one can suggest that the Government have been proposing to offset that by equivalent restraint on dividends. In the Budget debate the Financial Secretary to the Treasury said that the Government do not believe in a policy of limiting dividends as one might limit wages. But even if they were prepared to limit dividends that would not get to the kernel of the matter, because it would merely mean that the dividends were ploughed back so that the shareholder would be merely postponing his increased enjoyment.
    A wage denied is a wage lost for ever. A wage increase that is not enjoyed today is not put in the bank. We do not still have the post-war credits system and. anyway, some people arc still waiting to cash theirs. When the Government say to the nurses, "You shall not have the increase for which you have asked", they are denying them that consumption for ever. That denial is being made at a time when they are giving an immediate increase of enjoyment to other people. It is being done in such a way that the Government are

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    increasing the long-term enjoyment of those who will stand to benefit from that wage restraint.
    This is the overwhelming case for a capital gains tax. Hon. Gentlemen opposite know in their hearts that the Government are today carrying through an incomes policy in a free society, with a free trade union movement with free bargaining machinery and are, at the same time, saying to the workers, "Your restraint, sacrifice and patriotism will increase our profits." The Government can carry through such a policy only if they say, "Your restraint, sacrifice and patriotism will accrue to the benefit of the whole community."
    There is only one way to make sure that the increased prosperity of industry that will come from the wage restraint of the community will benefit the whole community, and that is by taxing the capital gain. A successful incomes policy in this country will mean an enormous increase in share values and, therefore, an incomes policy without a capital gains tax merely means the stimulating of the process of concentrating the wealth of the nation into fewer hands.
    My hon. Friend the Member for Ash-field (Mr. Warbey) pointed out yesterday that 45 per cent. of the private wealth of Britain is today in the hands of 2 per cent. of the population. If this Government's one-sided incomes policy goes through that process will be carried further still and that is why my hon. Friends have moved an Amendment to introduce a permanent and genuine capital gains tax, for it is only on this basis that any Government can ever hope to properly implement an incomes policy.
    Mr. Alan Hopkins: The hon. Lady the Member for Blackburn (Mrs Castle) made the point that the Conservative Government in past years had taken over from the Opposition various of their policies. I sincerely hope that my right hon. and learned Friend the Chancellor of the Exchequer will not on this occasion take any lesson or pay any heed to the sort of capital gains tax to which the hon. Lady has referred.
    The hon. Member for Nuneaton (Mr. Bowles) described extremely well the effects of the American capital gains
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    tax and some of its history. He has obviously studied it and I am sure that he would agree with me that it is extremely complex.
    Mr. Bowles indicated assent.
    Mr. Hopkins: The regulations enacted pursuant to the internal revenue code of America are some of the most complicated forms of administrative regulation that exist today. I suggest that this is one good reason for not seriously considering the specific Amendment moved by the hon. and learned Member for Kettering (Mr. Mitchison). It suggests a complicated formula. I readily concede that it can work and I accept the figures given to us earlier, but it will be of undoubted difficulty to the individual investor and to the professional advisers and accountants who have to see that the affairs of the individual investor are arranged and ordered properly.
    The duration of time to which the Amendment refers imposes undoubted hardship upon certain types of investors. The hon. Member for Cardiff, South-East (Mr. Callaghan) gave the illustration of a share purchase held for ten years. He said that the tax by then would be just over £100 and the gain would be just over £400. But during that period of time, of course, it might well be that the value of money had declined. In an extreme example it might well be the case that the resulting purchasing power left to the investor after payment of tax might be less than he started with initially. This would be an undoubted hardship on the investor.
    Another effect which we can learn from the American capital gains tax, which has now been in operation effectively for twenty years—the preceding legislation was rescinded for a period of time before the war—is in the case of shares in companies which are not actively quoted on the Stock Exchange. In that case marketability becomes very difficult.
    The hon. Lady the Member for Blackburn referred to the small percentage of the population who own ordinary shares. I agree with her that this percentage is far too small. I would not want in any way to impose any tax or anything that could operate to reduce the spread of share ownership. I know that my hon. Friend the Member for Taunton

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    (Mr. du Cann), who is interested in this matter, would agree that the capital gains tax in America has been seen adversely to affect the direct spread of stock ownership. The Amendment calls for a process which, by reason of the duration factor in it, could result in a substantial change in the nature of the original investment purchased, by involuntary conversion and by the issue of other classes of shares. This does not seem to have been taken into consideration by the hon. Member for Nuneaton. This is a lesson from the capital gains tax of America which has proved administratively extremely complex, and I suggest that the formula proposed by the Opposition would not cater for it.
    Mr. Bowles: It may be true that there is complexity, but there is no serious suggestion that the American capital gains tax should be withdrawn, is there?
    Mr. Hopkins: Not at all. I think that the American capital gains tax is generally as effective a way of running a capital gains tax, if one wishes to have one, as there is.
    Mr. Jay: In that case, would the hon. Member not agree that, assuming the American form of capital gains tax, there should he a tax on long-term gains as well as on short-term gains?
    Mr. Hopkins: That is certainly in the American tax and, as far as I would accept that it is a good system of taxation of capital gains, I would accept that.
    The cost of collection of the capital gains tax in America is extremely high. I do not have the figures with me, because I did not think that this would be a point at issue, but it is segregated in reports published annually by the United States Internal Revenue Department and it is by far the highest of all costs of tax collection in America.
    Mr. Roy Jenkins: I do not know that it matters a great deal whether the hon. Member for Bristol, North-East (Mr. Hopkins) approves or not of the American capital gains tax, but if he does he might tell us and not merely, when questioned, take refuge by saying, "If I accept the tax I might accept this or that view". It would have been more interesting if the hon. Member had told us what was
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    his starting point and had said whether he was in favour of or against such a tax.
    I do not want to deal at great length, however, with that point, but I was surprised that, calling in aid the hon. Member for Taunton (Mr. du Cann), who certainly knows a great deal about these matters, the hon. Member said he thought that the American system of capital gains taxation had restricted the spread of ordinary share-owning in the United States. It would be difficult to determine, but it might be that the spread of ownership would be wider without a capital gains tax. Certainly, with the tax it is wider in the United States than it is in this country without the tax. Therefore, it does not seem to me to be a very obvious or overwhelmingly powerful point to be made on this Amendment.
    I agree with my hon. Friend the Member for Blackburn (Mrs. Castle) that the capital gains tax proposed to us under the Clause is an extremely weak substitute for a real capital gains tax. When I heard it proposed in the Budget statement and defended, so far as it was defended, in the Budget debate, I took the view that if the tax did anything at all it was most likely to discredit the idea of a capital gains tax. Nobody who has studied this matter thinks that this is a real capital gains tax, but I think that there is a vague hope on the part of some people that those who have not studied the matter may think that something approaching a capital gains tax was introduced in the 1962 Budget and that it did not produce any revenue and was rather complicated, and that they would ask whether it was worth bothering about.
    This is an important new field of taxation which we ought to approach and consider very seriously. I do not think that there can be any dispute that a real capital gains tax with teeth in it would produce a sizeable amount of revenue. Obviously, there is dispute about exactly how much revenue it would produce. In the majority and minority Reports of the Royal Commission on the Taxation of Profits and Income varying views are expressed about it. I should have thought that the fairly high estimates in the minority Report of the Royal Commission were very well supported by the evidence.

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    However, leaving that aside, there is no doubt that a real capital gains tax would produce an appreciable amount of revenue. The Chancellor himself disposes of the idea that this is a real capital gains tax when he says that he does not expect it to produce any sizeable amount of revenue.
    5.0 p.m.
    My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) called attention to the fact that the Chancellor of the Exchequer has said that whatever system of taxation one produced the best brains in the country would be able to defeat it. However, for that effort at defeat to be called forth, one really needs a tax which shows some signs of having been devised by the best brains in the Treasury. This tax shows no such signs. I imagine that some of the most mediocre brains in the country will be able to defeat this tax, and that there is no need to call into the battle the best brains in the City or the best accountancy brains. It will be quite easy to do it without any problem of that kind.
    In my view, the distinction between short-term and long-term capital gains is a rather artificial one. I do not really like the American system of taxation. It is much better than what is proposed here, but it is not ideal because, in my view, one cannot draw any true distinction between again which is realised within six months and a gain realised over a longer period. It is better to tax the longer-term gain at some rate than not to tax it at all, but, even if one does tax it at some rate, the distinction is essentially an artificial one.
    In strict equity, though, perhaps, from a rather abstract point of view, I consider that the whole distinction between realised gains and accrued gains is artificial. However, from the point of view of making a practical approach to the matter, one probably does have to draw a distinction, although I do not think it has any validity in theory. One has to tax realised gains and not accrued gains. I think that it would be very much better not to draw this distinction in time. I said in my speech in the Budget debate that I thought that the rates of tax are to some exert too high. I should prefer rather lower taxes of tax but more effective rates, without
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    this entirely artificial distinction between very short-term gains and real gains.
    In a sense, the tax now proposed reflects in miniature a defect in our present system of taxation. What we are only too inclined to do is to erect very high rates of nominal taxation upon an extremely narrow tax base and then convince ourselves that we have a thoroughly egalitarian system of taxation. I think that it would be a good deal better to have a wider tax base and, if necessary, rather lower rates of tax. This tax falls to the ground entirely from that point of view, and it has made very little contribution to a more logical system of taxation. It is designed much more to discredit the idea of a capital gains tax—though I do not think that many people wll be convinced—than to make a real contribution.
    The Chief Secretary to the Treasury and Paymaster-General (Mr. Henry Brooke): I have no doubt at all of the importance of the controversy on this subject, an importance not fully reflected by the somewhat sparse attendance on both sides of the Committee.
    Mr. William Warbey: I wonder whether—
    The Temporary Chairman (Mr. John Arbuthnot): Order. If the Minister does not give way, the hon. Gentleman must resume his seat.
    Mr. Warbey: The right hon. Gentleman has now given way, Mr. Arbuthnot. I am much obliged. He has just referred to the sparse attendance in the Committee. I remind him that this is due partly to the fact that some hon. Members, including myself, have to be in two places at once. I have just come down from the Standing Committee—
    The Temporary Chairman: Order. We cannot go into that now.
    Mr. Brooke: We have been debating this subject for three hours, and I think that it would be the wish of the Committee to hear a Treasury Minister on it. We have under discussion a variety of Amendments. I shall not be so discourteous to hon. Members opposite as the hon. Member for Cardiff, South-East (Mr. Callaghan) was when he described the Amendment in the name of his hon. Friend the Member for Enfield, East (Mr. Mackie) as wishy-washy. That was not

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    the description I should have given to an Amendment which, as far as I can judge, would be likely to subject to Income Tax and Surtax a capital gain on land acquired up to ten years beforehand.
    Of course, Amendments of that kind throw into high relief the difficulty inherent in making subject to Income Tax and Surtax in one year a capital gain which has accrued over several years. This is the weakness in all the proposals substantially to retain the idea that the gain should be subject to Income Tax and Surtax as ordinary income and yet that the period of the holding of the asset should be lengthened far beyond that indicated in the Chancellor's proposal.
    My hon. Friend the Member for Brierley Hill (Mr. Talbot) went in the other direction. He suggested that the three years proposed in the Bill for capital gains on land should be shortened to two years. Two years, I suggest, is too short because land is not easily negotiable and transferable like securities. One can ring up a stockbroker and sell or buy a share at a moment's notice, but transactions in land, which necessarily refer to a particular piece of land, are usually fairly long drawn out. I fancy that, if my hon. Friend's Amendment were adopted, there would be cases where the negotiations for sale would be started almost as soon as the land had been acquired, and it would go too far in rendering it unlikely that there would be any yield at all from the tax.
    The hon. Lady the Member for Blackburn (Mrs. Castle) and other hon. Members opposite alleged that the Chancellor was not hoping for any revenue at all from this tax. Of course, he is. What he said in his Budget speech was that it was quite impossible at this stage to estimate or evaluate the amount of revenue it would bring in. But this is a tax which is intended to bring in revenue, though he would be more than a speculator himself who attempted to say what amount of tax revenue it would realise.
    The Amendment moved last night by the hon. and learned Member for Kettering (Mr. Mitchison), the main Amendment, is designed to continue the
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    liability to Income Tax and Surtax on capital gains, but at a tapering rate, over one hundred years. If I were introducing a permanent capital gains tax, I should try to avoid the sort of mathematical conundra involved in the first of the two Schedules. But I do not want to argue that point nor to consider whether, under the first Amendment, a piece of land which has been held for eleven years would enjoy a rebate of 37½ per cent. whereas under the second Amendment it would enjoy a rebate of 40 per cent. The fact is that, under both those Schedules, as the hon. and learned Gentleman said, whereas at the beginning the Income Tax and Surtax would fall on 100 per cent. of the gain, as the years went by it would taper down to 25 per cent.
    There are certain similarities between the hon. and learned Gentleman's proposal and the tapering arrangements in Sweden. If I may say so, I thought that the hon. Member for Cardiff, South-East was incorrect when he prayed Germany in aid. My information is that the Federal German Government do not have a long-term capital gains tax such as the Opposition wish to introduce. They have a short-term gains tax which is rather less severe in its incidence than that which my right hon. and learned Friend is proposing.
    There is a clear-cut difference of approach between the two sides on this whole matter, and I do not seek to minimise it. It was fully recognised last night by the hon. Member for Gloucester (Mr. Diamond). He said perfectly fairly that the Chancellor was not proposing a capital gains tax, but that he is proposing something else; in fact, a tax on money which could easily be spent as income, because it comes in very much as income does, but which, at the present moment, happens to escape taxation. The hon. Member for Gloucestershire,West (Mr.Loughlin) said last night that the professionals would not pay it, but the real professionals in this field do pay, because they have to pay tax on the profits of their trade.
    I do not seek to conceal the fact that somebody can avoid paying this tax by holding on one day, a few days or even a few months beyond whatever is the appropriate period for the type of property in question, but, nevertheless, I think that the Chancellor is right in

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    saying that it is land held for a period of less than about three years and stocks and shares held for a period of less than about six months which are the normal subjects of speculation. I am certainly not saying that every sale that takes place within such a period is a sale following a purchase which was made with speculative intent. Nor am I saying that there are not speculative transactions which continue beyond these periods. I do not think that my right hon. and learned Friend the Chancellor himself would say that we could prove by absolute logic that six months, rather than five or seven months, would be appropriate or three years, rather than two-and-three-quarter years or three-and-a-half years, but one has to take what appears to be a reasonable period in each case.
    The hon. Lady the Member for Blackburn—I am sorry she is not in her place—sought to inject into this discussion the subject of wage restraint and incomes policy. I do not demur at her doing so, but so that there may be no misunderstanding, I want to make it absolutely clear that the incomes policy envisaged by the Government is not a policy the necessary result of which is to inflate share values. Indeed, we can have a thorough-going incomes policy, with restraint on increases of salaries and wages, and, at the same time, a fall in prices, or, at any rate, stability of prices, which would in fact be a more desirable result than the kind of thing which the hon. Lady was envisaging.
    The hon. Member for Cardiff, South-East, in effect, said "Here is taxable capacity; therefore let us tax it". There are a very great number of other fields where we can say that there is taxable capacity, but, for good reasons, Chancellors of the Exchequer of all parties over the years have decided not to tax them, because they have seen either that there would be unfairness in the operation of the tax or economic disadvantages flowing from it.
    Mr. Bruce Millan: Would the right hon. Gentleman care to specify those fields of taxable capacity, apart from capital?
    Mr. Brooke: I can tell the hon. Member at once that the whole field of
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    advertisements has been discussed, and that successive Chancellors have rejected it, including one Socialist Chancellor, who decided that he could not carry out a project of his predecessor.
    5.15 p.m.
    The Government's conception is that we should impose a liability to Income Tax and Surtax on short-term gains which are regarded as income and which are commonly used as income. Longer-term gains are not normally used as spending money; they are normally regarded as capital. If, therefore, we tax these longer-term gains, as the Opposition desire to do, what we should, in effect, be doing is to tax savings. There is no doubt, therefore, that a long-term capital gains tax of that kind is bound to be to some extent a disincentive to savings. I would also judge that it would be a disincentive to economic growth, because a capital gains tax, as its effects in America and elsewhere have shown, discourages changes in property ownership. In general, I believe that economic growth postulates a willingness to buy and sell, and that it is thoroughly undesirable in this country in its present position that owners of property should have a tax incentive to hold on to property on if they sold, they would find themselves liable to a substantial tax.
    Mr. Jay: Could it not be argued that this tax is an incentive to savings, because as it falls only on realised gains and not on unrealised gains, it is an incentive to people not to sell their capital?
    Mr. Brooke: We can argue this at length, and I think I should be right in saying to the right hon. Gentleman that at the end of this debate, whether it goes on for four or five hours or not, there will still be a great deal to be said on both sides. Perhaps the right hon. Gentleman will now allow me to put the other side of my argument.
    If the suggestion is that long-term gains are not used as capital, but are spent as income, then it would appear that the Opposition are looking upon their capital gains tax as a tax on expenditure. The answer to that is surely contained in the majority Report of the Royal Commission on Profits and Income, which shows how unfair it

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    would be as between one person and another. It would be unfair in the case of two people who were seeking to enlarge their current spending power by selling off their property, if the man who sold a piece of property that had increased in value, was liable to tax, whereas the man who sold an equivalent amount of property that had not increased in value was free from tax. It was on that and similar grounds that the Royal Commission concluded that a capital gains tax would not achieve a more equitable distribution of the tax burden.
    Mr. John Diamond: Is not that a complete fallacy, if one assumes, as one is bound to assume, in the case of any reasonable, full-scale capital gains tax, that every property is realised sooner or later, and that the property which the second man in the right hon. Gentleman's illustration did not sell would be realised, at all events, no later than the point of his death?
    Mr. Brooke: If we go into Estate Duty, we shall make this matter even further complicated. The fact remains that if the hon. Gentleman is suggesting that if at any one time a person who has property of different kinds has no choice as between selling that which has increased in value and selling that which has not increased in value, he is rather far from reality.
    May I now turn in greater detail to the Opposition Amendment? It was made clear by the hon. Member for Cardiff, South-East and others that the Opposition regard this as an opportunity for additional taxation. There was no suggestion in any of the speeches from hon. Members opposite that I can remember that the revenue that would be brought in by their capital gains tax should be used to reduce other forms of taxation. The suggestion was made very clearly in his speech by the hon. Member for Cardiff, South-East that the additional tax would enable the Government to find more money for a number of things.
    Mr. Mitchison: I must correct the right hon. Gentleman there. I said quite definitely in my speech that what I should like to see would be a reduction of Income Tax at the bottom end of the
    266
    pay scale, and, for that purpose, the basis of taxation ought to be broadened. As I see it, this is a valuable and useful means of broadening it.
    Mr. Brooke: One thing which is certain about a long-term capital gains tax is that it will not bring in a regular sum of revenue. Everyone who has examined this matter agrees on that. Most people who have seriously examined it have come to the conclusion that the average revenue over the years would be disappointingly small. It certainly would not be an amount which the Chancellor of the Exchequer could count on, year in and year out, in order to achieve substantial tax remissions elsewhere.
    The Amendment envisages a long-term capital gains tax, and in the Table one can see the periods up to one hundred years. Do hon. Members opposite really think that, ninety-nine years hence, one could take two pieces of property, one which had been acquired in January, 1962, and one which had been acquired in May, 1962, and say that the latter was subject to tax and the former was not? This is the essential weakness in their proposal. They have not faced the most difficult task of all in bringing in a capital gains tax, and that is what should be done about all the existing property. Such a tax is bound to be unfair unless it is spread over property which is held at the time that the tax is first introduced.
    Mr. Mitchison: I do not think that this is a very good argument, but I foresaw it because I did not stop at one hundred years. The right hon. Gentleman has not read the table properly. I should love to live to well over a hundred years, but I do not think the chances of my doing so are high. Nevertheless, companies go on.
    Mr. Brooke: I agree. I am not sure that the Opposition have really given their attention to the difference between companies and individuals. Companies go on whereas individuals do not, and individual estates are subject to Estate Duty throughout.
    The Opposition are suggesting that, by this Amendment, they are bringing before Parliament a capital gains tax which would be fair. My point is that that is not so, because the Opposition

    267
    are failing to consider how it can be done. It would obviously be unfair if, after a number of years have passed, property acquired after Budget day, 1962, was taxable while property acquired before Budget day was not taxable.
    Mr. Mitchison: The position is the same under the Government's proposal.
    Mr. Brooke: It does not matter under our proposal because the period is so short. It is when we try to turn this, which is not a capital gains tax, into a full capital gains tax that we come up against this insuperable obstacle.
    Quotations from American experience were made by hon. Members on both sides. It is one thing to carry on with a capital gains tax which has existed from the beginning and which was introduced in America as a mitigation of income tax and another thing to introduce an entirely new capital gains tax. I am sure that hon. Members familiar with tax matters know that, when considering the tax system of a country, there must always be a strong presumption in favour of carrying on with existing taxes as against introducing new ones because of the terrible complexity of introducing a tax of this kind for the first time.
    To be fair, a capital gains tax would have to involve a valuation of all property which might be subject to the tax at a given date. That is what the Amendment fails to do. My feeling about the Opposition's plan, which is offered as a serious alternative to the Government's plan, is rather that of the Irishman who was asked the way to Sligo and who replied, "If I was going to Sligo, I should not be starting from here." That is the real trouble about the Opposition seeking to take the Government's plan, which is not a capital gains tax, and turn it into a capital gains tax.
    Mr. Mitchison: These are rather gross errors. Our scheme no more involves a valuation than does the Government's scheme.
    Mr. Brooke: Provided it is content to be increasingly unfair, it does not involve a valuation. But as years go by people will not accept as fair that there should be different tax treatment
    268
    between property acquired before 9th April, 1962, and property acquired after that date. I ask the hon. and learned Member for Kettering to ponder on that.
    Another point which hon. Members opposite have not addressed themselves to is the difficulty about changes in the value of money. They have assumed that any increase in money value will provide taxable capacity. Suppose that a piece of property acquired fifty years ago has doubled in money value. Is there any taxable capacity there? The real value of that property will be less than it was when first acquired. In trying to think out a permanent capital gains tax, one simply cannot ignore the factor of changes in the value of money.
    Mr. Jay: Would the right hon. Gentleman apply that argument to death duties?
    Mr. Brooke: I have my own views about death duties, but I do not think that this is the time to canvass them.
    Mr. Roy Jenkins: Since the right hon. Gentleman puts these points forward as though they have never been considered, may I ask him whether he has read the minority Report of the Royal Commission, in which this issue was dealt with extremely fully?
    Mr. Brooke: I have read that Report. It was discussed fully with the majority and failed to convince the majority. I am not aware that there has been an increase since 1955 in the number of people who agree with the minority Report as against the majority Report. This is arguable. I say willingly that we cannot in this debate take to a final conclusion all the factors and principles which require discussion in the course of settling what should be done about a capital gains tax. I am trying to reply to a limited Amendment which is put forward by the Opposition, not as the ideal way of producing a capital gains tax, but as the best way that they can think of to transform my right hon. and learned Friend's proposals, which, admittedly, are not a capital gains tax, into a permanent capital gains tax.
    Mr. Roy Jenkins: Since the right hon. Gentleman rests his case solely on the intellectual ground that a majority is a

    269
    majority and a minority is a minority, why does he go on speaking? Why not have the Division straight away?
    Mr. Brooke: That is an idea which had occurred to me. The sooner we have the Division, the better.
    I therefore propose to conclude by saying that, as against the Opposition claiming that here is a field of untouched taxable capacity, the Government are entitled to contend that savings and wise investment are at the heart of this country's increased prosperity and that we must be exceedingly careful before, ill advisedly, we do anything which may interfere with those savings and that investment. There has been very little criticism of the sound structure of my right hon. and learned Friend's proposals in this debate, and I therefore hope that the Committee will reject the Amendment.
    Mr. Douglas Houghton: The Chief Secretary must not despise minorities. Those who advocate the right course are nearly always in the minority to begin with. As time goes on, the public will realise the inadequacies of the Government's proposals and will conic round to our view that the only sound and equitable basis of a capital gains tax is to extend it very much further than is proposed in the Bill.
    5.30 p.m.
    The differences between the two sides on this matter are not only important, but are fundamental. The right hon. Gentleman has defined some of them. We do not believe that it is enough to tax only short-term speculative gains. It is true that the Chancellor is doing exactly what he said he would do—no more and no less. He never promised a long-term capital gains tax. He rejected the concept of this tax and confined himself to considering a tax to bring short-term gains within the existing structure of Income Tax and Surtax.
    There is enough experience throughout the world in this branch of taxation to dispel some of the fears that hon. Members have expressed about the effect of a long-term capital gains tax. The United States has had one for many years. I do not think that it is an ideal system, but such accounts as one can read of the effect of the capital gains
    270
    tax in the United States certainly do not lend support to some of the fears that have been expressed this afternoon.
    I have before me an article by Mr. Walter A. Everitt in the Statist of 19th January, 1962, on the American capital gains tax. He states:
    "Paradoxically, the capital gains tax has helped the American investor to become richer. No one likes to pay taxes, and there is no easier way of avoiding the payment of capital gains tax than not to sell, and not selling has been the right policy in the past twenty years."
    That at least gets rid of one idea about the American capital gains tax that it has been a disadvantage to investment in the United States.
    There are a number of commentators on the principle of a capital gains tax, including the Board of Inland Revenue, who have seen no distinction in principle between the short-term and the longer-term capital gains. That was argued fully in the memorandum submitted by the Board of Inland Revenue to the Radcliffe Commission and in the minority Report of that Commission.
    The hon. Member for Taunton (Mr. du Cann) is not in his place, but in an article in the Statist of 24th November, 1961, he said:
    "Many believe that the only acceptable capital gains tax will be one which treats short-term and long-term gains alike."
    Our Amendment does not propose to treat short-term and long-term gains alike, at least not in the sense that they would be taxed on exactly the same basis. Our proposal, as the Chief Secretary has pointed out, provides for a tapering off of the amount of the assessment as the period between acquisition and disposal lengthens. That was to take account of the longer period of accrual of the capital gain and to make a set-off against the ultimate tax on realisation of the asset.
    A good deal that has been wrong with our taxation system in recent years would not have needed this remedy had our definition of income not been so narrow. In that respect, our system of income taxation differs from many systems in other parts of the world. Some countries do not have a distinctive capital gains tax. They have a

    271
    more comprehensive definition of taxable income. We have not had a definition of income which embraces the sort of transactions to which the new tax and our tax are proposed to be applied.
    Over forty years ago, the Royal Commission was concerned about the transactions that were escaping Income Tax, transactions upon which the Commission thought that the badge of trade might fairly be put. The Commission recommended that any profit recognisable as a business transaction—that is, any transaction in which the subject matter was acquired with a view to profitseeking—should be brought within the scope of the Income Tax. The Radcliffe Commission considered that recommendation many years after it was made and concluded that the decisions of the courts in many particular cases had gone a long way to remove some of the criticism of the weakness of the definition of Income Tax for tax purposes.
    As the Chief Secretary and the Committee know, decided cases do not always govern the liability of comparable cases arising thereafter. Many of these cases have escaped taxation in the past because the local Commissioners of Income Tax have decided against them. Unless a case is stated for the High Court, that is the final conclusion of the matter. There is general public opinion in favour of widening the scope of taxation on gains which are at present outside the scope of the narrow definition of Income Tax. Our view is that any asset which is disposed of creates thereby expendable resources. An asset is disposed of, money is therefore in the hands of the holder and the question is whether the tax gatherer should take any part of the realisation of the asset.
    The right hon. Gentleman said a few moments ago that he considered it unfair that an asset realised as a profit should pay a tax whereas an asset realised for the same amount of money as was paid at the time of acquisition should not attract tax. If in selling an asset a man merely gets his money back, we would not propose to tax it. If, however, he makes money on the transaction, if it is over a short period we, as in the case of the Government proposal, would propose to tax it in full. If he had held the asset for a longer
    272
    period, we would propose to reduce the amount of the assessment of the capital gain.
    Whether the effect of this new tax will dissuade people from speculative activities on the Stock Exchange or in land one cannot say, but there are some remarkable happenings in the last few hours on an issue which has just been put on the market. In the Evening Standard of 14th May, there was a question mark after the heading Harder times for stags". One wondered what effect the new tax would have on those who were getting ready to fill up their forms to get an allotment in Ready-Mixed Concrete—which seems to be a suitable title for Her Majesty's Government. The stags, apparently, have been busier than ever This issue was oversubscribed sixty times.
    Whereas it was anticipated a few days ago that the shares would open at a premium of ls. or 2s., they seem to have opened at a premium vastly in excess of that. Those who applied for 400 shares and were successful in the ballot were allotted 100. They will pay 24s. for each share. The shares opened this morning at 37s. 6d., they rose in the course of the day to 41s. 3d. and have settled down this afternoon at 39s. 6d. The Press says that this is a "bright light". We now have a guiding light and we also have a bright light. The guiding light is for the restraint of incomes and the bright light is for those who will make profits by stagging. Everyone who was successful in the ballot and was allotted 100 shares will have netted on the sale of the shares this afternoon £77 10s. This is the first harvest the Inland Revenue will have under the Government's new tax proposal. The tax has not dissuaded anyone. If I could have made £77 10s. this afternoon by filling up a form I should not have minded it having Income Tax on it. Obviously, many people are prepared to act in the same way.
    That is the sort of thing the Government's proposals are intended to catch. Our proposals are intended to catch this kind of thing in respect of those who hold their shares for more than six months or a little longer than that. We see no obection in principle to the taxation of the longer-term capital gain, though on a reduced basis for the reasons that I have given.

    273
    The right hon. Gentleman said that it would be unfair to construct a long-term capital gains tax on transactions which began after Budget day. One has to make a start somewhere if one is to introduce a new tax at all. If we had proposed to have a valuation of all assets or, retrospectively, to go back to the date of acquisition and attempt to value them at the acquisition price, we should have had a thunder of objection from the benches opposite about retrospection and all the other charges that they would have made.
    If we are to have a capital gains tax which will really stand up to criticism and, indeed, will meet with approval, it will have to be something better than that proposed by the Government. Also, the Government will have to make a beginning some time. Those who embarked on these transactions after the appointed day would know that the tax applied to them and it would be known that it would not apply to those who acquired their assets before the appointed day. That would govern the behaviour of individuals. I see no escape from that if we are to embark on a tax of this kind. If we are to adopt the philosophy of the right hon. Gentleman, we shall have to stick to the taxes we have and shall never be able to enlarge the scope of Income Tax and never be able to adjust it to the obvious social injustice and fiscal inequity of allowing large-scale expendable assets to go tax free while the earnings of the professional man, the executive and the worker generally are taxed up to the hilt.
    Therefore, we have no hesitation in strongly pressing our Amendment on the Committee. We believe it to be the best thing we can devise as an alternative to the Government's proposals. This would at least make the beginning of a satisfactory tax. The proposals of the right hon. and learned Gentleman do not stand up and will not stand up. I believe that when the political purpose of the
    tax diminishes it will go the way of the Excess Profits Levy introduced by the right hon. Member for Woodford (Sir W. Churchill) when he found that complaints were arising because of profit making out of rearmament. It lasted only two years. Whenever the political value of this tax goes, I believe that the tax will go with it. We propose one which would endure, would be modelled on the systems of other countries, and could be adjusted to the public conception of a better tax than the right hon. Gentleman is proposing.
    Mr. B. T. Parkin: The Chief Secretary has made it clear that he is not open to conversion by the minority.
    I rise only to lodge a strong protest against his murderous misuse of the English language in the earlier sentences of his speech where he described the problems outlined by my hon. and right hon. Friends as "conundra". I imagined the right hon. Gentleman describing the Trooping of the Colour to his nieces and explaining that some of the soldiers were beating "kettledra" some "side-dra" and others "bigdra". This word was not found in the English language, or in any other, before the 16th century. When Disraeli and Morley used the term in this House they used the plural "conundrums".
    The Minister's claim to the fastidious use of Latin is as bogus as his pretence to an understanding of economics. We are accustomed to economists inventing their jargon as they go along, but if they are to murder Latin in the same way, there may be room even at this late hour in the discussion for a vigorous protest from a back bencher.
    Question put, That the words proposed to be left out, to "three" in line 29, stand part of the Clause:—
    The Committee divided: Ayes 264, Noes 188.

    Division No. 195]

    AYES

    [5.46 p.m.

    Aitken, W. T.

    Bennett, F. M. (Torquay)

    Black, Sir Cyril

    Allan, Robert (Paddington, S.)

    Bennett, Dr. Reginald (Gos & Fhm)

    Bowen, Roderic (Cardigan)

    Amery, Rt. Hon. Julian

    Berkeley, Humphry

    Box, Donald

    Atkins, Humphrey

    Bevins, Rt. Hon. Reginald

    Boyd-Carpenter, Rt. Hon. John

    Baln'el, Lord

    Biffen, John

    Boyle, Sir Edward

    Barber, Anthony

    B'ggs-Davison, John

    Bromley-Davenport,Lt. -Col. Sir Walter

    Barlow, Sir John

    Bingham, R. M.

    Brooke, Rt. Hon. Henry

    Barter, John

    Birch, Rt. Hon. Nigel

    Brooman-White, R.

    Bell, Ronald

    Bishop, F. P.

    Brown, Alan (Tottenham)

    Browne, Percy (Torrington)

    Hirst, Geoffrey

    Peel, John

    Bryan, Paul

    Hobson, Sir John

    Percival, Ian

    Buck, Antony

    Holland, Philip

    Peyton, John

    Bullard, Denys

    Hollingworth, John

    Pickthorn, Sir Kenneth

    Bullus, Wing Commander Eric

    Holt, Arthur

    Pike, Miss Mervyn

    Burden, F. A.

    Hooson, H. E.

    Pilkington, Sir Richard

    Butcher, Sir Herbert

    Hope, Rt. Hon. Lord John

    Pitman, Sir James

    Campbell, Sir David (Belfast, S.)

    Hopkins, Alan

    Pitt, Miss Edith

    Campbell, Gordon (Moray & Nairn)

    Hornby, R. P.

    Pott, Percivall

    Carr, Robert (Mitcham)

    Hornsby-Smith, Rt. Hon. Dame

    Prior-Palmer, Brig. Sir Otho

    Cary, Sir Robert

    Howard, Hon. G. R. (St. Ives)

    Pym, Francis

    Channon, H. P. G.

    Howard, John (Southampton, Test)

    Quennell, Mist J. M.

    Chataway, Christopher

    Hughes Hallett, Vice-Admiral John

    Ramsden, James

    Chichester-Clark, R,

    Hulbert, Sir Norman

    Redmayne, Rt. Hon. Martin

    Clark, William (Nottingham, S.)

    Hutchison, Michael Clark

    Rees, Hugh

    Cleaver, Leonard

    Iremonger, T. L.

    Rees-Davies, W. R.

    Cole, Norman

    Irvine, Bryant Godman (Rye)

    Renton, David

    Collard, Richard

    James, David

    Ridley, Hon. Nicholas

    Cooke, Robert

    Jennings, J. C.

    Ridsdale, Julian

    Cooper-Key, Sir Neill

    Johnson, Dr. Donald (Carlisle)

    Roberts, Sir Peter (Heeley)

    Cordeaux, Lt.-Col. J, K,

    Johnson, Eric (Blackley)

    Robertson, Sir D. (C'thn's & S'th'ld)

    Corfield, F V

    Johnson Smith, Geoffrey

    Robinson, Rt. Hn. Sir R. (B'pool, S.)

    Costain, A P

    Jones, Rt. Hn. Aubrey (Hall Green)

    Robson Brown, Sir William

    Coulson Michael

    Kaberry, Sir Donald

    Ropner, Col. Sir Leonard

    Courtney, Cdr. Anthony

    Kerans, Cdr. J. S.

    Royle, Anthony (Richmond, Surrey)

    Craddock Sir Beresford

    Kerr, Sir Hamilton

    Russell, Ronald

    Cowder, F. P.

    Kershaw, Anthony

    Scott-Hopkins, James

    Cunningham, Knox

    Kimball, Marcus

    Seymour, Leslie

    Currie, G. B. H.

    Kirk, Peter

    Sharpies, Richard

    Dalkeith, Earl of

    Kitson, Timothy

    Shepherd, William

    d'Avigdor-Goldsmid, Sir Henry

    Lagden, Godfrey

    Skeet, T. H. H.

    de Ferranti, Basil

    Lambton, Viscount

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

    Donaldson, Cmdr. C. E. M.

    Lancaster, Col. C. G.

    Smithers, Peter

    Doughty, Charles

    Legge-Bourke, Sir Harry

    Spearman, Sir Alexander

    Drayson, G. B.

    Lewis, Kenneth (Rutland)

    Speir, Rupert

    Drayson, G. B.

    Lilley, F. J. P.

    Stanley, Hon. Richard

    du Cann, Edward

    Lindsay, Sir Martin

    Stevens, Geoffrey

    Duncan, Sir James

    Litchfield, Capt. John

    Steward, Harold (Stockport, S.)

    Duthie, Sir William

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

    Stodart, J. A.

    Eden, John

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Storey, Sir Samuel

    Elliot, Cant. Walter (Carshalton)

    Longden, Gilbert

    Studholme, Sir Henry

    Elliott,R. W.(Nwcaetle-upon-Tyne, N.)

    Loveys, Walter H.

    Summers, Sir Spencer

    Emmet, Hon. Mrs, Evelyn

    Lubbock, Eric

    Tapsell, Peter

    Errington, Sir Eric

    Lucas-Tooth, Sir Hugh

    Taylor, Edwin (Bolton, E.)

    Farey-Jones, F. W.

    Mac Arthur, Ian

    Taylor, Frank (M'ch'st'r, Moss Side)

    Farr, John

    McLaren, Martin

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

    Fell, Anthony

    Maclean, SirFitzroy(Bute&N.Ayrs.)

    Teeling, Sir William

    Finlay, Graeme

    McLean, Neil (Inverness)

    Temple, John M.

    Fisher, Nigel

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

    Thatcher, Mrs. Margaret

    Fletcher-Cooke, Charles

    Macpherson, Niall (Dumfries)

    Thomas Leslie (Canterbury)

    Freeth, Denzil

    Maddan, Martin

    Thompson, Kenneth (Walton)

    Gammans, Lady

    Maginnis, John E.

    Thornton-Kemsley, Sir Colin

    Gibson-Watt, David

    Manningham-Buller, Rt. Hn. Sir R.

    Thorpe, Jeremy

    Gilmour, Sir Jonn

    Markhatn, Major Sir Frank

    Tiley, Arthur (Bradford, W.)

    Glyn Sir Richard (Dorset N)

    Marlowe, Anthony

    Touche, Rt. Hon. Sir Gordon

    Goodhart, Philip

    Marshall, Douglas

    Turner, Colin

    Gough, Frederick

    Marten, Neil Mathew, Robert (Honiton)

    van Straubenzee, W. R.

    Gower, Raymond

    Matthews, Gordon (Meriden)

    Vane, W. M. F.

    Grant, Rt. Hon. William

    Mawby, Ray

    Vaughan-Morgan, Rt. Hon. Sir John

    Grant-Ferris, Wg. Cdr. R.

    Maxwell-Hyslop, R. J.

    Vickers, Miss Joan

    Green, Alan

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

    Wade, Donald

    Gresham Cooke, R.

    Mills, Stratton

    Walder, David

    Grimond, Rt. Hon. J.

    Miscampbell, Norman

    Walker-Smith, Rt. Hon. Sir Derek

    Grosvenor, Lt.-Col. R. C.

    Montgomery, Fergus

    Ward, Dame Irene

    Gurden, Harold

    More, Jasper (Ludlow)

    Watkinson, Rt. Hon. Harold

    Hamilton, Michael (Wellingborough)

    Morrison, John

    Wells, John (Maidstone)

    Harris, Frederic (Croydon, N.W.)

    Mott-Radclyffe, Sir Charles

    Williams, Dudley (Exeter)

    Harris, Reader (Heston)

    Nabarro, Gerald

    Wills, Sir Gerald (Bridgwater)

    Harrison, Brian (Maldon)

    Nicholls, Sir Harmar

    Wilson, Geoffrey (Truro)

    Harrison, Col. Sir Harwood (Eye)

    Nicholson, Sir Godfrey

    Wise, A. R.

    Harvey, Sir Arthur Vere (Macclesf'd)

    Noble, Michael

    Wolrige-Gordon, Patrick

    Harvie Anderson, Miss

    Nugent, Rt. Hon. Sir Richard

    Wood, Rt. Hon. Richard

    Hastings, Stephen

    Oakshott, Sir Hendrie

    Woodhouse, C. M.

    Heald, Rt. Hon. Sir Lionel

    Orr-Ewing, Sir Ian

    Woollam, John

    Henderson, John (Cathcart)

    Osborne, Sir Cyril (Louth)

    Worsley, Marcus

    Hiley, Joseph

    Page, Graham (Crosby)

    Yates, William (The Wrekin)

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

    Page, John (Harrow, West)

    Hill, Mrs. Eveline (Wythenshawe)

    Pannell, Norman (Kirkdale)

    TELLERS FOR THE AYES:

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

    Partridge, E.

    Mr. Batsford and Mr. Ian Fraser.

    Hinchingbrooke, Viscount

    Pearson, Frank (Clitheroe)

    NOES

    Ainsley, William

    Hayman, F. H.

    Parker, John

    Albu, Austen

    Healey, Denis

    Parkin, B. T.

    Allaun, Frank (Salford, E.)

    Henderson, Rt.Hn.Arthur(Rwly Regis)

    Pavitt, Laurence

    Awbery, Stan

    Herbison, Miss Margaret

    Pearson, Arthur (Pontypridd)

    Bacon, Miss Alice

    Hewitson, Capt. M.

    Peart, Frederick

    Baxter, William (Stirlingshire, W.)

    Hill, J. (Midlothian)

    Pentland, Norman

    Beaney, Alan

    Holman, Percy

    Plummer, Sir Leslie

    Bellenger, Rt. Hon. F. J.

    Houghton, Douglas

    Popplewell, Ernest

    Bence, Cyril

    Howell, Charles A.(Perry Barr)

    Prentice, R. E.

    Bennett, J. (Glasgow, Bridgeton)

    Howell, Denis (Small Heath)

    Price, J. T. (Westhoughton)

    Benson, Sir George

    Hoy, James H.

    Probert, Arthur

    Blackburn, F.

    Hughes, Cledwyn (Anglesey)

    Randall, Harry

    Blyton, William

    Hughes, Emrys (S. Ayrshire)

    Rankin, John

    Boardman, H.

    Hughes, Hector (Aberdeen, N.)

    Reynolds, G. W.

    Bottomley, Rt. Hon. A. G.

    Hunter, A. E.

    Rhodes, H.

    Bowden, Rt. Hn. H. W.(Leics, S.W.)

    Hynd, H. (Accrington)

    Roberts, Albert (Normanton)

    Bowles, Frank

    Hynd, John (Attercliffe)

    Roberts, Goronwy (Caernarvon)

    Boyden, James

    Irvine, A. J. (Edge Hill)

    Robertson, John (Paisley)

    Braddock, Mrs. E. M.

    Irving, Sydney (Dartford)

    Robinson, Kenneth (St. Pancras, N.)

    Brockway, A. Fenner

    Jay, Rt. Hon. Douglas

    Rodgers, W. T. (Stockton)

    Broughton, Dr. A. D. D.

    Jeger, George

    Ross, William

    Brown, Rt. Hon. George (Belper)

    Jenkins, Roy (Stechford)

    Royle, Charles (Salford, West)

    Brown, Thomas (Ince)

    Johnson, Carol (Lewisham, S.)

    Shinwell Rt Hon E.

    Butler, Herbert (Hackney, C.)

    Jones, Dan (Burnley)

    Short, Edward

    Callaghan, James

    Jones, Jack (Rotherham)

    Silverman, Sydney (Nelson)

    Castle, Mrs. Barbara

    Jones, J. Idwal (Wrexham)

    Skeffington, Arthur

    Chapman, Donald

    Jones, T. W. (Merioneth)

    Slater Joseph (Sedgefield)

    Cliffe, Michael

    Kelley, Richard

    Smith, Ellis (Stoke, S.)

    Collick, Percy

    Key, Rt. Hon. C. W.

    Sorensen, R. W.

    Collick, Percy

    King, Dr. Horace

    Soskice, Rt. Hon. Sir Frank

    Craddock, George (Bradford, S.)

    Lee, Frederick (Newton)

    Spriggs, Leslie

    Cronin, John

    Lee, Miss Jennie (Cannock)

    Steele, Thomas

    Crosland, Anthony

    Lever, L. M. (Ardwick)

    Stones, William

    Cullen, Mrs. Alice

    Lewis, Arthur (West Ham, N.)

    Strachey, Rt. Hon. John

    Darling, George

    Loughlin, Charles

    Strauss, Rt. Hn. G. R. (Vauxhall)

    Davies, G. Elfed (Rhondda, E.)

    Mahon, Dr. J. Dickson

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

    Davies, Harold (Leek)

    McCann, John

    Swain, Thomas

    Davies, Ifor (Gower)

    MacDermot, Niall

    Taylor, Bernard (Mansfield)

    Davies, S. O. (Merthyr)

    Mclnnes, James

    Thomas, Iorwerth (Rhondda, W.)

    Diamond, John

    McKay, John (Wallsend)

    Thompson, Dr. Alan (Dunfermilne)

    Dodds, Norman

    Mackie, John (Enfield, East)

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

    Donnelly, Desmond

    McLeavy, Frank

    Wainwright, Edwin

    Ede, Rt. Hon. C.

    MacMillan, Malcolm (Western Isles)

    Warbey, William

    Edwards, Rt. Hon. Ness (Caerphilly)

    Mapp, Charles

    Watkins, Tudor

    Edwards, Robert (Bilston)

    Mason, Roy

    Weitzman, David

    Edwards, Walter (Stepney)

    Mayhew, Christopher

    Wells, William (Walsall, N.)

    Evans, Albert

    Mendelson, J. J.

    White, Mrs. Eirene

    Finch, Harold

    Millan, Bruce

    Whitlock, William

    Fitch, Alan

    Milne, Edward

    Wilkins, W. A.

    Fletcher, Eric

    Mitchison, G. R.

    Willey, Frederick

    Foot. Michael (Ebbw Vale)

    Monslow, Walter

    Williams, D. J. (Neath)

    Forman, J. C.

    Moody, A. S.

    Williams, LI. (Abertillery)

    Fraser, Thomas (Hamilton)

    Morris, John

    Williams, W. R. (Openshaw)

    Galpern, Sir Myer

    Moyle, Arthur

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

    George, LadyMeganLloyd(Crmrthn)

    Mulley, Frederick

    Wilson, Rt. Hon. Harold (Huyton)

    Gourlay, Harry

    Neal, Harold

    Winterbottom, R. E.

    Greenwnod, Anthony

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

    Woodburn, Rt. Hon. A.

    Grey, Charles

    Oliver, G. H.

    Woof, Robert

    Griffiths, David (Rother Valley)

    Oram, A. E.

    Wyatt, Woodrow

    Griffiths, Rt. Hon. James (Llanelly)

    Oswald, Thomas

    Yates, Victor (Ladywood)

    Griffiths, W. (Exchange)

    Owen, Will

    Zilliacus, K.

    Gunter, Ray

    Paget, R. T.

    Hale, Leslie (Oldham, W.)

    Pannell, Charles (Leeds, W.)

    TELLERS FOR THE NOES:

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Pargiter, G. A.

    Mr. Lawson and Mr. Redhead.

    Amendment proposed: In page 10, line 29, leave out "three" and insert "ten".—[Mr. Mackie.]
    Question put, That "three" stand part the clause:—
    The Committee divided: Ayes 257, Noes 194.

    Division No. 196.]

    AYES

    [5.57 p.m.

    Aitken, W. T.

    Barter, John

    Biffen, John

    Allan, Robert (Paddington, S.)

    Batsford, Brian

    Biggs-Davison, John

    Amery, Rt. Hon. Julian

    Bell, Ronald

    Bingham, R. M.

    Atkins, Humphrey

    Bennett, F. M. (Torquay)

    Birch, Rt. Hon. Nigel

    Balniel, Lord

    Bennett, Dr. Reginald (Gos & Fhm)

    Bishop, F. P.

    Barber, Anthony

    Berkeley, Humphry

    Black, Sir Cyril

    Barlow, Sir John

    Bevins, Rt. Hon. Reginald

    Box, Donald

    Boyd-Carpenter, Rt. Hon. John

    Hiley, Joseph

    Pearson, Frank (Clitheroe)

    Boyle, Sir Edward

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

    Peel, John

    Bromley-Davenport,Lt.-Col.SirWalter

    Hill, Mrs. Eveline (Wythenshawe)

    Percival, Ian

    Brooke, Rt. Hon. Henry

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

    Peyton, John

    Brooman-White, R.

    Hinchingbrooke, Viscount

    Pickthorn, Sir Kenneth

    Brown, Alan (Tottenham)

    Hirst, Geoffrey

    Pike, Miss Mervyn

    Browne, Percy (Torrington)

    Hobson, Sir John

    Pilkington, Sir Richard

    Bryan, Paul

    Holland, Philip

    Pitman, Sir James

    Buck, Antony

    Hollingworth, John

    Pitt, Miss Edith

    Bullard, Denys

    Hope, Rt. Hon. Lord John

    Pott, Percivall

    Bullus, Wing Commander Eric

    Hopkins, Alan

    Prior-Palmer, Brig. Sir Otho

    Burden, F. A.

    Hornby, R. P.

    Proudfoot, Wilfred

    Butcher, Sir Herbert

    Hornsby-Smith, Rt. Hon. Dame P.

    Pym, Francis

    Campbell, Sir David (Belfast, S.)

    Howard, Hon. G. R. (St. Ives)

    Quennell, Miss J. M.

    Campbell, Gordon (Moray & Nairn)

    Howard, John (Southampton, Test)

    Ramsden, James

    Carr, Robert (Mitcham)

    Hughes Hallett, Vice-Admiral John

    Redmayne, Rt. Hon. Martin

    Cary, Sir Robert

    Hulbert, Sir Norman

    Rees, Hugh

    Channon, H. P. G.

    Hutchison, Michael Clark

    Rees-Davies, W. R.

    Chataway, Christopher

    Iremonger, T. L.

    Renton, David

    Chichester-Clark, R.

    Irvine, Bryant Godman (Rye)

    Ridley, Hon. Nicholas

    Clark, William (Nottingham, S.)

    James, David

    Ridsdale, Julian

    Cleaver, Leonard

    Jennings, J. C.

    Roberts, Sir Peter (Heeley)

    Cole, Norman

    Johnson, Dr. Donald (Carlisle)

    Robertson, Sir D. (C'thn's & S'th'ld)

    Collard, Richard

    Johnson, Eric (Blackley)

    Robinson, Rt. Hn. Sir R. (B'pool, S.)

    Cooke, Robert

    Johnson Smith, Geoffrey

    Robson Brown, Sir William

    Cooper-Key, Sir Neill

    Jones, Rt. Hon. Aubrey (Hall Green)

    Ropner, Col. Sir Leonard

    Cordeaux, Lt.-Col. J. K.

    Kerans, Cdr. J. S.

    Royle, Anthony (Richmond, Surrey)

    Corfield, F. V.

    Kerr, Sir Hamilton

    Russell, Ronald

    Costain, A. P.

    Kershaw, Anthony

    Scott-Hopkins, James

    Coulson, Michael

    Kimball, Marcus

    Seymour, Leslie

    Courtney, Cdr. Anthony

    Kirk, Peter

    Sharpies, Richard

    Craddock, Sir Beresford

    Kitson, Timothy

    Shepherd, William

    Crowder, F. P.

    Lagden, Godfrey

    Skeet, T. H. H.

    Cunningham, Knox

    Lambton, Viscount

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

    Currie, G. B. H.

    Lancaster, Col. C. G.

    Smithers, Peter

    Dalkeith, Earl of

    Legge-Bourke, Sir Harry

    Smyth, Brig. Sir John (Norwood)

    d'Avigdor-Goldsmid, Sir Henry

    Lewis, Kenneth (Rutland)

    Spearman, Sir Alexander

    de Ferranti, Basil

    Lilley, F. J. P.

    Speir, Rupert

    Donaldson, Cmdr. C. E. M.

    Lindsay, Sir Martin

    Stanley, Hon. Richard

    Doughty, Charles

    Litchfield, Capt. John

    Stevens, Geoffrey

    Drayson, G. B.

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

    Steward, Harold (Stockport, S.)

    du Cann, Edward

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Stodart, J. A.

    Duncan, Sir James

    Longden, Gilbert

    Storey, Sir Samuel

    Duthie, Sir William

    Loveys, Walter H.

    Studholme, Sir Henry

    Eden, John

    Lucas-Tooth, Sir Hugh

    Summers, Sir Spencer

    Elliot, Capt. Walter (Carshalton)

    MacArthur, Ian

    Tapsell, Peter

    Elliott,R.W.(Nwcastle-upon-Tyne,N.)

    McLaren, Martin

    Taylor, Edwin (Bolton, E.)

    Emmet, Hon. Mrs. Evelyn

    Maclean,SlrFitzroy(Bute&N.Ayrs.)

    Taylor, Frank (M'ch'st'r, Moss Side)

    Errington, Sir Eric

    McLean, Neil (Inverness)

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

    Farey-Jones, F. W.

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

    Teeling, Sir William

    Farr, John

    McMaster, Stanley R.

    Temple, John M.

    Fell, Anthony

    Macpherson, Niall (Dumfries)

    Thatcher, Mrs. Margaret

    Finlay, Graeme

    Maddan, Martin

    Thomas, Leslie (Canterbury)

    Fisher, Nigel

    Maginnis, John E.

    Thompson, Kenneth (Walton)

    Fletcher-Cooke, Charles

    Manningham-Buller, Rt. Hn. Sir R.

    Thornton-Kemsley, Sir Colin

    Freeth, Denzil

    Markham, Major Sir Frank

    Tiley, Arthur (Bradford, W.)

    Gammans, Lady

    Marlowe, Anthony

    Touche, Rt. Hon. Sir Cordon

    Gibson-Watt, David

    Marshall, Douglas

    Turner, Colin

    Gilmour, Sir John

    Marten, Neil

    van Straubenzee, W. R.

    Glyn, Sir Richard (Dorset, N.)

    Mathew, Robert (Honiton)

    Vane, W. M. F.

    Goodhart, Philip

    Matthews, Gordon (Meriden)

    Vaughan-Morgan, Rt. Hon. Sir John

    Goodhew, Victor

    Mawby, Ray

    Vickers, Miss Joan

    Gough, Frederick

    Maxwell-Hyslop, R. J.

    Walder, David

    Gower, Raymond

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

    Walker-Smith, Rt. Hon. Sir Derek

    Grant, Rt. Hon. William

    Mills, Stratton

    Watkinson, Rt. Hon. Harold

    Grant-Ferris, Wg. Cdr. R.

    Miscampbell, Norman

    Wells, John (Maidstone)

    Green, Alan

    Montgomery, Fergus

    Williams, Dudley (Exeter)

    Gresham Cooke, R.

    More, Jasper (Ludlow)

    Wills, Sir Cerald (Bridgwater)

    Grosvenor, Lt.-Col. R. G.

    Morrison, John

    Wilson, Geoffrey (Truro)

    Gurden, Harold

    Mott-Radclyffe, Sir Charles

    Wise, A. R.

    Hamilton, Michael (Wellingborough)

    Nabarro, Gerald

    Wolrige-Gordon, Patrick

    Harris, Frederic (Croydon, N.W.)

    Nicholls, Sir Harmar

    Wood, Rt. Hon. Richard

    Harris, Reader (Heston)

    Nicholson, Sir Godfrey

    Woodhouse, C. M.

    Harrison, Brian (Maldon)

    Nugent, Rt. Hon. Sir Richard

    Woollam, John

    Harrison, Col. Sir Harwood (Eye)

    Oakshott, Sir Hendrle

    Worsley, Marcus

    Harvey, Sir Arthur Vere (Macclesf'd)

    Orr-Ewing, C. Ian

    Yates, William (The Wrekin)

    Harvie Anderson, Miss

    Osborne, Sir Cyril (Louth)

    Hastings, Stephen

    Page, Graham (Crosby)

    TELLERS FOR THE AYES:

    Heald, Rt. Hon. Sir Lionel

    Panned, Norman (Kirkdale)

    Mr. Michael Noble and

    Henderson, John (Cathcart)

    Partridge, E.

    Mr. Ian Fraser.

    NOES

    Ainsley, William

    Awbery, Stan

    Beaney, Alan

    Albu, Austen

    Bacon, Miss Alice

    Bellenger, Rt. Hon. F. J.

    Allaun, Frank (Salford, E.)

    Baxter, William (Stirlingshire, W.)

    Bence, Cyril

    Bennett, J. (Glasgow, Bridgeton)

    Holt, Arthur

    Peart, Frederick

    Benson, Sir George

    Hooson, H. E.

    Pentland, Norman

    Blackburn, F.

    Houghton, Douglas

    Plummer, Sir Leslie

    Blyton, William

    Howell, Charles A. (Perry Barr)

    Popplewell, Ernest

    Boardman, H.

    Howell, Denis (Small Heath)

    Prentice, R. E.

    Bottomley, Rt. Hon. A. G.

    Hoy, James H.

    Price, J. T. (Westhoughton)

    Bowden, Rt. Hn. H.W. (Leics. S.W.)

    Hughes, Ciedwyn (Anglesey)

    Probert, Arthur

    Bowen, Roderic (Cardigan)

    Hughes, Emrys (S. Ayrshire)

    Randall, Harry

    Bowles, Frank

    Hughes, Hector (Aberdeen, N.)

    Rankin, John

    Boyden, James

    Hunter, A. E.

    Rhodes, H.

    Braddock, Mrs. E. M.

    Hynd, H. (Accrington)

    Roberts, Albert (Normanton)

    Brockway, A. Fenner

    Hynd, John (Attercliffe)

    Roberts, Goronwy (Caernarvon)

    Broughton, Or. A. D. D.

    Irvine, A. J. (Edge Hill)

    Robertson, John (Paisley)

    Brown, Rt. Hon. George (Belper)

    Irving, Sydney (Dartford)

    Robinson, Kenneth (St. Pancras, N.)

    Brown, Thomas (Ince)

    Jay, Rt. Hon. Douglas

    Rodgers, W. T. (Stockton)

    Butler, Herbert (Hackney, C.)

    Jeger, George

    Ross, William

    Callaghan, James

    Jenkins, Roy (Stechford)

    Royle, Charles (Salford, West)

    Castle, Mrs. Barbara

    Johnson, Carol (Lewisham, S.)

    Shinwell, Rt. Hon. E.

    Chapman, Donald

    Jones, Dan (Burnley)

    Short, Edward

    Cliffe, Michael

    Jones, Jack (Rotherham)

    Silverman, Sydney (Nelson)

    Collick, Percy

    Jones, J. Idwal (Wrexham)

    Skeffington, Arthur

    Craddock, George (Bradford, S.)

    Jones, T. W. (Merioneth)

    Slater, Joseph (Sedgefield)

    Cronin, John

    Kelley, Richard

    Smith, Ellis (Stoke, S.)

    Crosland, Anthony

    Key, Rt. Hon. C. W.

    Sorensen, R. W.

    Cullen, Mrs. Alice

    King, Dr. Horace

    Soskice, Rt. Hon. Sir Frank

    Darling, George

    Lee, Frederick (Newton)

    Spriggs, Leslie

    Davies, G. Elfed (Rhondda, E.)

    Lee, Miss Jennie (Cannock)

    Steele, Thomas

    Davies, Harold (Leek)

    Lever, L. M. (Ardwick)

    Stones, William

    Davies, Ifor (Gower)

    Lewis, Arthur (West Ham, N.)

    Strachey, Rt. Hon. John

    Davies, S. O. (Merthyr)

    Loughlin, Charles

    Strauss, Rt. Hn. G. R. (Vauxhall)

    Diamond, John

    Lubbock, Eric

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

    Dodds, Norman

    Mabon, Dr. J. Dickson

    Swain, Thomas

    Donnelly, Desmond

    McCann, John

    Swingler, Stephen

    Ede, Rt. Hon. C.

    MacDermot, Niall

    Taylor, Bernard (Mansfield)

    Edwards, Rt. Hon. Ness (Caerphilly)

    Mclnnes, James

    Thomas, Iorwerth (Rhondda, W.)

    Edwards, Robert (Bilston)

    McKay, John (Wallsend)

    Thompson, Dr. Alan (Dunfermline)

    Edwards, Walter (Stepney)

    Mackie, John (Enfield, East)

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

    Evans, Albert

    McLeavy, Frank

    Thorpe, Jeremy

    Finch, Harold

    MacMillan, Malcolm (Western Isles)

    Wade, Donald

    Fitch, Alan

    Mapp, Charles

    Wainwright, Edwin

    Fletcher, Eric

    Mason, Roy

    Warbey, William

    Foot, Michael (Ebbw Vale)

    Mayhew, Christopher

    Watkins, Tudor

    Forman, J. C.

    Millan, Bruce

    Weitzman, David

    Fraser, Thomas (Hamilton)

    Milne, Edward

    Wells, William (Walsall, N.)

    Galpern, Sir Myer

    Mitchison, G. R.

    White, Mrs. Eirene

    George, Lady MeganLloyd(Crmrthn)

    Monslow, Walter

    Whitlock, William

    Gourlay, Harry

    Moody, A. S.

    Wilkins, W. A.

    Greenwood, Anthony

    Morris, John

    Willey, Frederick

    Grey, Charles

    Moyle, Arthur

    Williams, D. J. (Neath)

    Griffiths, David (Rother Valley)

    Mulley, Frederick

    Williams, LI. (Abertillery)

    Griffiths, Rt. Hn. James (Llanelly)

    Neal, Harold

    Williams, W. R. (Openshaw)

    Griffiths, W. (Exchange)

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

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

    Grimond, Rt. Hon. J.

    Oliver, G. H.

    Wilson, Rt. Hon. Harold (Huyton)

    Gunter, Ray

    Oram, A. E.

    Winterbottom, R. E.

    Hale, Leslie (Oldham, W.)

    Oswald, Thomas

    Woodburn, Rt. Hon. A.

    Hall. Rt. Hn. Glenvll (Coins Valley)

    Owen, Will

    Woof, Robert

    Hayman, F. H.

    Paget, R. T.

    Wyatt, Woodrow

    Healey, Denis

    Panned, Charles (Leeds, W.)

    Yates, Victor (Ladywood)

    Henderson,Rt.Hn.Arthur(RwlyRegis)

    Pargiter, G. A.

    Zilliacus, K.

    Herbison, Miss Margaret

    Parker, John

    Hewitson, Capt. M.

    Parkin, B. T.

    TELLERS FOR THE NOES:

    Hill, J. (Midlothian)

    Pavitt, Laurence

    Mr. Lawson and Mr. Redhead.

    Holman, Percy

    Pearson, Arthur (Pontypridd)

    Mr. du Cann: I beg to move, in page 11, line 4, at the end to insert:
    "and
    (d) there shall be allowed as a credit in assessing the income tax and profits tax with which a person is to be charged a sum equal to the amount of any tax payable in respect of the gains under the law of a territory outside the United Kingdom."
    This matter can be very shortly explained. Indeed, the purpose of tabling the Amendment is largely to obtain elucidation and clarification. Although gains made on the disposition of chargeable assets abroad are taxable under the provisions of the Bill, the Bill
    282
    none the less does not appear to contain any provision to give relief for foreign taxes levied in respect of those gains.
    It will be appreciated that as a nation we are encouraged to invest abroad. Indeed, there are good reasons for doing so, particularly in the underdeveloped countries and especially those in the British Empire. It will also be appreciated that foreign taxation systems are very much changing things. Although from some points of view this may appear to be a theoretical point, it must

    283
    be right that the Bill should provide for future contingencies.
    If one accepts the view that it would be equitable to allow relief in respect of this other taxation in other countries, should it be levied at any time, I hope that my hon. Friend the Economic Secretary will be able to make it clear to those of us who at the moment do not understand the position, first, whether the Bill does so, and, secondly, if it does not, whether he will be prepared to consider the matter with a view, if the Amendment is not acceptable in its present form, to introducing another which would cope with the position.
    The Economic Secretary to the Treasury (Mr. Anthony Barber): My hon. Friend has explained clearly the purpose of the Amendment, and I hope that, quite briefly, I shall be able to convince him that it is unnecessary. I am grateful to him for giving me the opportunity of making the position clear, because I realise that this is a point of considerable importance.
    The general position is that if a United Kingdom resident is charged overseas tax on a short-term gain made overseas, under the existing law relief would be due either under the provisions of an agreement with the other country, or, where there was no agreement, or the agreement did not cover the particular case, it would be given unilaterally.
    As my hon. Friend knows, there are a number of countries with which we have agreements which contain express provisions to the effect that a resident of one of the countries is, in general, to be exempt from tax in the other country on gains from the sale or exchange of capital assets. These provisions do not, in general, apply where a resident of one country carries on a trade or business in the other through a permanent establishment. Moreover, there are many agreements which contain no provisions dealing expressly with capital gains, but both these types of case would normally fall under the general provisions in agreements under which a taxpayer resident in the United Kingdom can claim credit for tax paid in the other country on income arising from sources in that country.
    284
    Now I come to what I can describe as the ultimate safeguard. If, for any reason, relief was not due under an agreement, it would be due under the provisions for unilateral relief contained in Section 348 of the Income Tax Act, 1952, and in the Seventeenth Schedule to that Act. These provide that credit for tax paid in an overseas country on income arising in that country shall be allowed as credit against United Kingdom Tax or Profits Tax chargeable in respect of that income.
    It is true that subsection (4) of Section 348 limits this provision to
    "taxes which are charged on income or profits and correspond to income tax or the profits tax in the United Kingdom".
    but, as the United Kingdom will be imposing taxes on short-term gains as part of its Income Tax and Profits Tax, any tax imposed by an overseas country on these gains would fall within this definition.
    Consequently, as my hon. Friend will see, in all circumstances relief would be provided either under the relevant provisions of an agreement, or unilaterally, so there would be no question of double taxation. With that explanation, I hope that my hon. Friend will withdraw the Amendment.
    Mr. du Cann: In view of the extremely clear and helpful explanation which my hon. Friend has been good enough to give, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    6.15 p.m.
    Mr. Mitchison: I beg to move, in page 11, line 8, to leave out "any previous year" and to insert:
    "any of the three immediately preceding years".
    I am correcting a slip in the drafting of the Amendment on the Notice Paper, which reads
    "either of the three immediately preceding years".
    In view of what has been said about conundrums I desire to take no chances.
    The question here is over what period, or for what period, one is allowed to carry forward losses which have been incurred against gains. Assuming that a person disposes of an asset at a loss in the year one, is he allowed to carry

    285
    that on indefinitely, or is there to be some limit to the time for which he may carry it forward? We suggest that year four is a convenient limit for this purpose.
    There is no long argument to be produced about this point. It applies, of course, to the Government's proposals. We have finished with our proposals. The Government's proposals are intended to be a way of dealing with what they regard as the equivalent of income for these purposes, that is, short-term speculative gains. If we are dealing with such gains, it does not seem right that a person should be able to set off against them losses which were incurred a number of years ago when, whatever their character when they were first incurred, they have no longer any connection with the kind of subject matter with which the Bill seeks to deal.
    It seems wrong that a person should be able to set off in, say, 1980, losses which he may incur in the current year. It is really the incongruity of the thing which calls for some limit, and the character of the gains which the Government are trying to catch. If that is the character of the gains there ought to be something similar in the losses which can be set off against them.
    I have another feeling. I do not want to follow the example of the Evening Standard, and add to the number of methods by which people can illegally avoid the tax without too much fear of detection, but it is obvious that if we allow losses to be carried forward for a long time we will open the door to a rather simple system of fraud. One will only have to find a man who has incurred losses a long time ago and put through what one hopes will be a good transaction in his name. If it proves to be a good transaction and one makes a gain, it will be set off against his losses.
    I think that the habit, in taxation matters, of allowing people to accumulate losses—though I know it exists in certain respects already—is for that reason and others, one which ought not to be extended. There has been a practice of companies acquiring a value not because they were carrying on any trade, not because they had any assets, but because they had a nice collection of losses against which future gains
    286
    could be set off. Though there will be limits set on this, and rightly so, I do not think that this is a practice that we ought to encourage.
    Mr. Geoffrey Stevens: The hon. and learned Gentleman's argument is very interesting, but he is probably aware that one of the largest industrial concerns in the country, flourishing and providing good employment and good exports, incurred losses for the first twenty years of its existence.
    Mr. Mitchison: I dare say it did, but I cannot see what that has to do with what I am talking about. I am saying that I do not like the idea of individuals or companies walking about labelled, "I have a fine collection of losses".
    The same thing goes for bits of property. We have all seen in the newspapers that such-and-such a piece of property has some nice tax losses attached to it against which any future profit can be set off. This sort of thing ought not to be extended. I am not talking about the question of limiting it further. I am simply saying that I do not think it ought to be extended.
    For those two reasons, which I now summarise, I ask the Committee to accept the Amendment. The reasons are, first, that the object of the Government's measure is to tax short-term speculative gains, and it seams inconsistent to allow people to set off against them what I might call "ancient losses" which have long lost the speculative character they may have had in the past. I am talking about the Government's measure, not about the Amendment which was rejected.
    My second reason is that it is a bad principle to set up classes of people who are valuable for having lost money in the past and are a possible instrument to fraud if transactions can be put through in their names.
    Mr. Barber: As the hon. and learned Member for Kettering (Mr. Mitchison) explained, the purpose of this Amendment is to restrict the carry-forward of losses under Case VII. As the Bill is at present drafted, a taxpayer who has a Case VII loss in a year can carry it forward indefinitely to set against short-term gains in any later year. Under the

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    Amendment the carry-forward would be restricted to a period of three years following the year of the loss.
    The provisions in the Bill regarding Case VII losses correspond to the existing loss provisions in the Income Tax Acts. A loss incurred in a trade carried on by a taxpayer can be carried forward indefinitely to be set off against his profits from the trade in question in a later year. Prior to 1952 there was a six-year limit for the carrying forward of trading losses, but following the recommendations of the Millard Tucker Committee on the Taxation of Trading Profits the limit was removed in the Finance Act of 1952.
    If the hon. and learned Member considers that the analogy of trading losses is not a particularly good one, I should add that if a loss is incurred by the taxpayer in a transaction such that any profit would be assessable under Case VI of Schedule D, the loss can be set off against the profits arising from any transaction in respect of which he is assessable under Case VI in the year of loss or in any subsequent year without limit. Here again, there used to be a six-year limit.
    The hon. and learned Member thought that there was some incongruity in the position laid down in the Bill, but there is certainly nothing new in the principle which is applied in the Bill. On the contrary, the provision is in line with the principle which is already applied, not only to Case I, but also to Case VI. The hon. and learned Member talked about consistency. I should have thought, since the whole scheme of the Bill is to treat short-term gains as income for all purposes, it is only consistent to apply in the Case VII sphere the rules which apply in other connections about the carry-forward of losses for set-off against future profits.
    The fact that Case VII liability is determined by reference to a time limit, which was a point made by the hon. and learned Member, is no justification for making a special distinction because the essential principle, surely, is to stamp a transaction as of an income-producing nature if it is carried out within the time limit. This principle is surely equally applicable in relation to losses. Once a Case VII loss has arisen from
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    the acquisition and disposal of an asset, there should be no special time limit on the carry-forward of such a loss against gains which are subject to tax under Case VII.
    The hon. and learned Member said that there was no long argument to be made over this. I think that I can sum up my reply briefly by saying that in my view the proposed Amendment is illogical, inconsistent and also unfair. For these reasons, I hope that the Committee will reject it.
    Mr. Mitchison: That comprehensive answer omitted half the argument, as comprehensive answers usually do. The hon. Gentleman said nothing whatever about the second point which I made, but I made it quite clear that there were two points.
    Dealing with what he has said, it is not the terms of the Statute which I am considering so much as what the Government say their object is. If the object is to deal with speculative short-term gains, the long conservation of losses which may be appropriate in trading matters, or even under Case VI, seems somewhat inappropriate. I like to concede anything I can to the hon. Gentleman and I think that he has strict logic on his side when he says that once a speculative loss always a speculative loss, that was the way it arose and that is all that matters. He did not answer my second point. I feel uneasy about it. I do not think it right to leave these rather obvious loopholes, although there are so many loopholes in the Government's proposals that one more or less may not matter much.
    For these somewhat cynical reasons I shall ask leave, with a reservation, to withdraw—
    Mr. Diamond: No.
    Mr. Mitchison: I beg pardon. I shall not ask leave to withdraw the Amendment, but await with interest the comments which my hon. Friend the Member for Gloucester (Mr. Diamond) has to make if he catches your eye, Sir Robert.
    Mr. Diamond: I am most grateful to you, Sir Robert, that I have succeeded in catching your eye before my hon. and learned Friend the Member for Kettering (Mr. Mitchison) completed his sentence.

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    I hope that he will not think me discourteous when I say that I think he was considerably over-generous in acknowledging the logic of the Government, for there was little logic there. The whole basis of the small answer which the Economic Secretary devoted to the main argument of my hon. and learned Friend—the very short part of his answer which was relevant to the question at all—was, once a speculative loss, always a speculative loss, but this depends on the loss having been made willy-nilly.
    When we take the parallel of an ordinary trading profit we find that the person enters on a series of trading transactions. For the sake of convenience the line is drawn at the end of the year and it is determined whether he has made losses or profits. It is a continuing trade, in which he is endeavouring the whole time to make profits. Because he is endeavouring to make profits, taxability arises. During the course of making profits he may, as the hon. Member for Portsmouth, Langstone (Mr. Stevens) said, make losses for twenty years in the course of reaching those profits. He is allowed to set off those losses because dividing the trading by one year intervals is highly artificial. The endeavour is to take the whole life of the business and see what profit or loss it has made over the whole life.
    If, during the early years, it had made a loss and that loss had been taken into account in the whole of the assessment, the profits in the life of the business would have been over-assessed. This is not a question of an investor endeavouring to make profits over a whole period, but deliberately making a loss for this purpose by deliberately selling part of his investments which have gone down in a period short of six months and keeping those investments which have gone up for a period of six months or more. If we took the whole thing together and valued everything there would be some justification, but that is not being done.
    It is being said to the taxpayer, "You have perfect freedom to make yourself liable to relief from tax in respect of your losing investments and to make yourself free from tax on the profits of your winning investments. That being
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    the case will you, Mr. Taxpayer, decide which investments it is now convenient to sell, it being just on six months from the time at which you bought them?" No investor has one stock, one share, or one debenture. He holds a series of stocks, shares and debentures, generally spreading over a variety of companies, some of which have gone up and some down. He will take the greatest possible care to sell those on which there are losses before the six months is up. Why is it right, in these circumstances, that this should be compared with the wholly different approach of a trading business, or even with Case VI, where it is the intention to make a profit over the whole period and the reason for the setting off of losses is merely that we would be taxing doubly if profits were made over the entirety of taxation of certain profits?
    6.30 p.m.
    I say to my hon. and learned Friend that I think, as is consistent with his character, he is being over-generous and over-courteous to the Government in accepting, up to a point, their argument. I would say that there has been no justification for what has been said by the Economic Secretary. The first part of his reply was wholly irrelevant to this issue, comparing, as he did, the setting off of losses against profits of ordinary businesses. There is no comparison there.
    What we are saying is that we have to take into account that the investor has a complete option to decide not whether he has made a profit or a loss on the whole of his investments, but whether he has made a profit or a loss on certain of his investments and by realising those investments bringing them within taxability or freedom from tax at a given point of time. By realising his losing investments he can get freedom from tax on them for all time. He sells two days later, one day before and one day after the six months' period. On his winning investment he escapes completely.
    In this way he will be building up an enormous store of losses just because there is an opportunity given to him of handling his investment as he thinks fit. This will lead to enormous tax avoidance. This is not a method of collecting tax, but of collecting losses

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    and building them up. They will be particularly juicy losses—losses for sale. We shall have calls in the London streets, "Who will buy my losses?" Anyone who has nice fat Case VII profits on which to pay tax will lean out of the window at teatime on Sundays and hear the bell. Crumpets? No, lovely big losses under Case VII. That is what it will be.
    I hope that the Economic Secretary will turn his mind to seeing what the real comparison is and whether there is any justification for giving freedom to the investor to determine his losses and exclude his profits for the purposes of Case VII.
    Mr. Houghton: I will give the Economic Secretary a new slant on this before he replies. Let us consider the more unsophisticated speculator who decides to have a flutter. He may decide to have a flutter and lose money. Then his wife grumbles at him, and he decides to give it up and buy a new car instead. He will have a Case VII loss. He may not indulge in speculative activities for years afterwards, but he will still have this loss on his mind.
    In due course, he will probably ask for a certificate, similar to the post-war credits certificate. He will keep this by him. It will be a very pretty document and every now and then he will take it out to look at it. Then his wife will say, "When will you got your money back?" He will say, "Until I go into the speculator's business again I shall never get it back." She will say, "That is unfair. They ought to allow you to set off those losses against your salary."
    I warn the Economic Secretary that this inevitable carrying forward of long held losses against income will be tiresome to him. It would be much better to cut it short and to get it over.
    Mr. Glenvil Hall: May I add, in case it is thought that the cases that have been put forward are rather speculative and even fanciful, that some record will have to be taken of these losses if they go on year after year. If they go on and people pile up credits in this way they should have some acknowledgment from the Treasury that their right to set off a loss exists. It seems to me that the Government will be pressed to issue
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    some sort of certificate to individuals in this position so that when, in ten or fifteen years' time, they try to get credit on a loss of ten or fifteen years before the Treasury will not be able to say, "We know nothing about it. Where is your proof?"
    Mr. Mitchison: Would not a medal be the best way of doing it?
    Mr. Glenvil Hall: A medal would be one way, but how one can inscribe on a medal what the transaction was, I do not know. There will be pressure for something of this kind to be issued and, therefore, what my hon. Friend the Member for Sowerby (Mr. Houghton) said was not all that fanciful. There is something in it.
    Mr. Barber: The principal point of the hon. Member for Sowerby (Mr. Houghton) was that the Government would in due course have pressure brought to bear to extend the loss relief so that a loss could be set off against other income. I do not think that I need go further than point out to him that this is not in the Bill and that there is no intention of doing this.
    As to the argument of the hon. Member for Gloucester (Mr. Diamond), I can only say that the logical consequence of it is that there should be no loss relief at all.
    Mr. Diamond: No.
    Mr. Barber: That was certainly the consequence of his argument. This being so, he is obviously at variance with the hon. Member for Sowerby. The consequence is the arguments I adduced in relation to the hon. and learned Member's Amendment applying with redoubled force to the arguments of the hon. Member for Gloucester.
    Mr. Mitchison: The Economic Secretary still has not answered the point about the inadvisability of equipping people with losses, with or without a medal, a certificate or other sign of their having them. I should have thought that the Treasury ought to be very careful about doing that. I suggest that it is inadvisable to extend the habit of carrying forward losses in this way. In this case it is certainly the open door to practices which, in the language of the Evening Standard, are undoubtedly

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    illegal but difficult to detect. That is a very good reason for being careful about it. I wish that the Economic Secretary would tell us why he disregards all that.
    Mr. Barber: We shall not have to consider in any provisions in a Finance Bill those who engage in what the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) quite frankly called fraud. There are obvious occasions in any new provisions for fraudulent practices. This is not mere avoidance which the hon. and learned Gentleman is talking about. It is fraud—a criminal offence. I should not have thought that, even taking into account the possibility of fraud, for that reason alone we should not do what otherwise, certainly prima facie is fair and equitable, which is to allow these people who are taxed under Case VII also to have an opportunity of setting off their losses against their profits.
    Mr. Mitchison: I do not think that the hon. Gentleman appreciated the strength of the arguments adduced in favour of the Amendment. I think, on the other hand, that what he has said deserves more careful consideration than perhaps at first sight it appeared to deserve. For these reasons I should like to reserve the possibility of reverting to the matter, but for the present I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Stevens: I beg to move, in page 11, line 48, at the end to insert:
    (b) in the case of any chargeable accounting period, whether or not it is a period for which the accounts of the trade or business are made up, the gains to be included shall be those accruing during the period, and the losses to be allowed shall be determined accordingly and subsection (3) of section twenty of the Finance Act, 1937, shall not apply in relation to those gains or losses.
    The reason for the Amendment is another example of the complexities and difficulties which arise from our two-tier structure of taxation of the profits of limited companies and should be a further encouragement to my right hon. and learned Friend the Chancellor to press on with the inquiries he is making into the possibility of simplifying the whole of our tax structure.
    In the ordinary way, the basis for assessment of the profits of limited com-
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    panies for Profits Tax purposes is the same as that for Income Tax purposes, namely, the twelve-month period of account of the company. Subsection (7) deals with the Profits Tax charging of these short-term gains. While the basis of assessment for Profits Tax purposes is normally the same for Income Tax purposes, it is not always so. The Profits Tax basis will change, for example, if the accounts of the company concerned are made up for irregular periods.
    That can happen in a number of different circumstances. It may be a new business. It may be an ending business. It may be that the board has decided to change the date up to which the accounts are made. For these and other reasons, the period of account of the company may be a period other than twelve months. In these circumstances, the Commissioners of Inland Revenue have power under Section 20 (2, a) of the Finance Act, 1937, to determine what the chargeable accounting period shall be. Obviously, in these circumstances the chargeable accounting period will not be the same as the period of account of the company.
    As I read the subsection, there is a conflict, because the effect of the first part of the subsection is that regard is to be had to the amount of the gains less losses accruing in the period for which the account is made up, but paragraph (b) clearly states that regard shall be had to the actual gains and losses accruing during the chargeable accounting period. There is thus a clear inconsistency between, on the one hand, the accounting period and, on the other, the chargeable accounting period. The object of my Amendment is to remove that inconsistency.
    Mr. Barber: My hon. Friend is quite right and I advise the Committee to accept the Amendment.
    Amendment agreed to.
    Mr. Stevens: I beg to move, in page 12, line 6, to leave out from "shall" to "be" in line 16 and to insert:
    "be the same as if no notice were in force under that section, but—
    (i) where gains accrue in a chargeable accounting period of the subsidiary in excess of the losses allowable to the subsidiary under this Chapter against those gains, then in computing the profits arising in the corresponding chargeable accounting period of

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    the principal company from its trade or business the excess shall, for the purpose of deducting losses allowable to the principal company under this chapter and accruing in that period and for the purposes of subparagraph (ii) below".
    I hope that this Amendment will be as successful and be greeted with the same brevity as was accorded to my last Amendment, which was dealt with in one of the best speeches I have heard from the Treasury Bench for a very long time.
    This Amendment deals with a different point. It deals with oases where there has been a group assessment. For Profits Tax purposes a group of companies can elect to have group assessment under Section 22 of the Finance Act, 1937. A main feature of that for Profits Tax purposes is that losses of one company can be set off against the profits of another. There are three ways in which those losses within the group may occur. A subsidiary can have a loss which is deductible from the profits of a parent; a parent can have a loss which is deductible from the profits of a subsidiary; or one subsidiary may incur a loss which is deductible from the profits of another subsidiary. Paragraphs (a) and (b) of subsection (7) deal with the first two contingencies but not with the third, the setting off of the losses of one subsidiary against the profits of another.
    The effect of my Amendment would also be that a small inconsistency in lines 6 to 8 on page 12 would be removed. The effect of the provision as it is at present written is that where a group assessment is in force the gains accruing to a subsidiary company will be included in the profits of both the subsidiary and the parent.
    I hope that I have made my argument clear and that this Amendment will be greeted with the success and brevity accorded to my previous Amendment.
    Mr. Barber: Yes.
    6.45 p.m.
    Mr. Mitchison: No. We should like a little more explanation than that. The Economic Secretary's speeches are becoming so short that he will not be able to Shorten them any further. Though there is much to be said against his longer speeches, there is also some-
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    thing to be said against his shorter speeches. We would like to know from him in detail why this and the preceding matters were omitted by the Government. What has caused the Treasury to commit so many errors of draftsmanship in one subsection?
    Mr. Barber: The honest answer is an equally brief one. We made an error in both cases. Now, my hon. Friend having sought to put it right in this way, we agree with him. I thought that it would be for the convenience of the Committee if I made the point as briefly as I did.
    Mr. Mitchison: Let him not do it again.
    Mr. Diamond: Notwithstanding the brevity with which the Economic Secretary has dealt with the Amendment, may we be assured that he has had an opportunity of looking at the drafting? We are all familiar with Amendments being introduced by back benchers which are acceptable in principle because a back bencher sees the point in question and seeks to put it right. Such Amendments are acceptable in principle, but, without the assistance which is available only to the Government Front Bench, it is often difficult to get the drafting precisely right.
    I recognise that the hon. Member for Portsmouth, Langstone (Mr. Stevens), who is a very distinguished member of an acceptable profession, has to consider the drafting of Income Tax Acts, Companies Acts and many other Acts in great detail. He is, therefore, very familiar with draftsmanship as a whole. Nevertheless, it would be very reassuring to know that the Economic Secretary had an opportunity to look at the drafting and that not only is the principle of the Amendment acceptable to him, but the drafting has been carefully considered and is so right as to every single word, comma and every other mark in it that the Economic Secretary found it possible to accept it in one word.
    Mr. Stevens: Although I very readily accept political jealousy between the hon. Member for Gloucester (Mr. Diamond) and myself, I very strongly resent this professional jealousy. The fact that he has never earned ten out of ten for one of his sums is no reason why I should not earn ten out of ten.
    Mr. Glenvil Hall: I have no objection whatsoever to the Economic Secretary being brief in his replies, provided that what he says tells the Committee why he has rejected or accepted an Amendment. Particularly in view of what he said in reply to the query raised by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), if the Treasury has slipped up and made a mistake it should apologise to the Committee. The Economic Secretary seemed to think that it was rather funny. At any rate, he took the matter very lightly, giving the impression that this was something the Treasury had had called to its attention and that it accepted straight away the Amendment tabled by the hon. Member for Portsmouth, Langstone (Mr. Stevens).
    If the hon. Member for Langstone had not noticed this, what would have happened? Would there have been a gap in this legislation to which we should have had to return next year? It is obvious that if the Treasury has made a mistake it should not be allowed to ride off in the way that the hon. Gentleman seems to think it can. The least we are entitled to is an apology from the Dispatch Box by the Economic Secretary.
    Amendment agreed to.
    Mr. William Clark: I beg to move, in page 12, line 34, at the end to add:
    (8) For the purpose of this section any profit not exceeding one hundred pounds in any year of assessment shall be ignored.
    The main reason for the tabling of this Amendment is that I believe that small savers should have every possible encouragement, and my fear is that the operation of the speculative gains tax, as at present envisaged, will act against them. The Chief Secretary to the Treasury said this afternoon that savings were necessary for our prosperity, and I would not want anything to stop small savers from carrying on with their saving.
    What, for example, is the position in regard to unit trusts. Unit trusts are now used quite extensively for short-term savings over three months, six months, nine months, or even longer periods. If a man saves 10s. a week in a unit trust and continues to do so for two years, under the Bill as it stands,
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    any capital appreciation on his unit shares in the first eighteen months will be exempt. In the last six months, however, he may be buying unit trust shares at different values—at 7s. 2d., 7s. 3d., 7s. 4.d., and so on. At the end of the two years, who is to calculate the exact amount of capital appreciation he has enjoyed?
    I am sure that, as the Committee knows, this tax is really intended to catch the large man. I do not think for a moment that it was ever envisaged that it should catch the small man as well. I know, too, that in the Bill as it stands, the tax on capital appreciation is meant to be an extension of the definition of income according to the Income Tax laws, but is that so? Under Case VII, the income or loss is not allowed to be set off against any other income. That takes it out of normal income; consequently, it should be dealt with separately and differently for the small saver.
    Again, we try, through the National Savings movement—and I think that the Treasury could do a little more to assist there—to help the small saver, in that the first £15 of interest on money in the Trustee Savings banks or the Post Office is free of Income Tax. If that is right for the small saver in that case, surely it is right to do the same for him in regard to this tax. I hope that my hon. Friend the Financial Secretary will give thought to this, because I rather fancy that, apart from the disincentive it will otherwise be to small savers, if the ordinary man has to work out when and what he bought at 7s. 2d. and sold at 7s. 3d. the whole thing becomes administratively impossible. Nobody would expect the Inland Revenue to do that work. The administrative difficulties would be enormous but, more important, the operation of the tax under the Bill as it stands would be a disincentive to the small saver.
    Mr. Geoffrey Hirst: I want to support the Amendment, particularly from the administrative point of view. As the Committee knows, I have an absolute horror of increasing in any way Government expenditure on that bureaucracy which I have fought since I became a Member of the House, though not very successfully. Without this

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    Amendment, a great deal of nonsense could go on, with lots of people fussing about over £12 or £15, which does nothing but cost more money.
    As my hon. Friend has pointed out, this tax is aimed much more at the person who more or less makes an offside trade in speculative gains. We should not get embroiled in the administrative details resulting from chasing a few small people, who may not even be conscious that they have made a gain. I hope that we shall show some sense of proportion in this matter.
    Mr. F. M. Bennett: As my hon. Friend the Financial Secretary may recall, I made this point a feature of my speech in the Budget debate. The effect on the small saver and the costs of administration have been dealt with, but there are one or two additional matters. The wording of the Amendment may, perhaps, have to be modified. It is always very difficult for back benchers to get the wording right, and, speaking for myself, I should be very happy were the Financial Secretary to express himself as being generally in sympathy with the object of the Amendment. Or perhaps we could employ my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) to do that work for us—or even the hon. Member for Gloucester (Mr. Diamond), if he wants to catch up with my hon. Friend—
    Mr. Houghton: If the hon. Gentleman will permit me to ask it, are not the drafting resources which are available to the hon. Member for Portsmouth, Langstone (Mr. Stevens) available also to him?
    Mr. Bennett: I cannot answer for that, because it did not occur to me until I realised that there was a professional feeling between my hon. Friend and the hon. Member for Gloucester.
    As I was saying, the wording might have to be altered. For instance, at might be understood that we were thinking in terms of £100 profit on any one transaction in any one year. There is no such intention. It is £100 for the year, otherwise a "smart boy" could have a whole series of small transactions and so avoid the tax. I hope that my hon. Friend the Financial Secretary will not waste any time on that point.
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    As to administrative convenience, it is a fairly good rule—
    Mr. Diamond: Before the hon. Gentleman turns to administration, and while he is still on drafting, and the distinction which rests on one side of the Chamber, where draftsmanship is available, and the other side, where draftsmanship is not available, to members of the same profession, could he tell me whether the words any profit" mean any profit after deducting the losses or before deducting the losses?
    Mr. Bennett: I think that we have dealt long enough with the professional rivalry between the two sides of the Chamber. I am not in the same profession as either hon. Gentleman, so perhaps we can turn to the substance of the Amendment.
    I was referring to the de minimis argument, and I think that more could be said on that than has been said by either of my hon. Friends. As the Bill stands, the Inland Revenue would not only have to spend a lot of time investigating small and, perhaps, isolated gains, but would also have to spend time checking up small losses. The result might be a very great administrative burden to deal with ludicrous annual losses of, perhaps, a few shillings. The administrative cost would be quite disproportionate to what was involved.
    Apart from the small saver, I do not mind supporting the small gambler. There are large numbers of people who like small gambles on the greyhound racing, or horses, or football pools. When I made this point in the Budget debate I was told, in effect, that those people had already been taxed, because a tax is levied at source on stakes on these pursuits. That is not a valid point in this case because, except in regard to gilt-edged, Stamp Duty has been paid, so that there is also a tax at source. There is, therefore, a very fair case for allowing a man to have a small gamble without all the paraphernalia of a speculative gains tax being involved.
    Quite apart from gambling, I hope that the Financial Secretary will realise that if the position remains as it is in the Bill, anyone who, most estimably, does not go in for gambling, but who buys gilt-edged fixed-interest stock

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    within six months of the redemption date, will bear the full burden of the speculative gains tax, when all he has done has been to obey the Financial Secretary's urging to buy fixed-interest Government stocks.
    At the moment any stock that is within six months of redemption will disappear from the market, otherwise the saver will be involved in the full burden of paying a speculative gains tax for what is not a speculative gain, for he is buying Government stocks with a view to gaining known appreciation on them on redemption; I hope that, in this instance, my right hon. and learned Friend will take this into account.
    7.0 p.m.
    Mr. Mitchison: I hope that hon. Gentlemen opposite will not object to my saying that the Tory Party provides me with continual amusement. Yesterday hon. Members opposite were engaged in opposing and voting against a proposal that small incomes should be exempted from taxation. They have today developed a sudden solicitude for the small saver—even the small gambler—which was entirely omitted when they voted yesterday. One always welcomes conversion as long as one can be certain that it is thoroughly sincere and extends to all aspects of the matter under discussion.
    Mr. F. M. Bennett: Since the hon. and learned Gentleman's remarks appear to be directed at me, may I point out that in other respects the small saver has received from this Government over a period of many years one concession after another? I was pointing out that when a new tax is introduced some concessions should be made.
    Mr. Mitchison: I was referring to the amusement which the Tory Party continually provides me and I find that observation rather funny. I wonder why it does not strike the hon. Member for Torquay (Mr. F. M. Bennett) in the same way? Yesterday Tory Members were voting against the exemption from taxation of small incomes and today they are justifying the Amendment by saying how anxious they are to protect the small saver and gambler. If they cannot see the inconsistency or irrelevancy of the remarks that have just
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    been made I am afraid that I cannot help them to do so.
    This is not merely a matter of drafting. There is a real difficulty about what is proposed and as the matter stands we are supposed to be dealing with gains. I take it that the word "profit" in the Amendment is intended to mean a single gain, although that is far from clear. Might I put this example to hon. Gentlemen opposite? Supposing one puts through a transaction in a considerable number of small parcels. One might find oneself exempted.
    Mr. W. Clark: The hon. and learned Member for Kettering (Mr. Mitchison) cannot have been listening to the speech of my hon. Friend the Member for Torquay (Mr. F. M. Bennett) in which he pointed out that we agreed that the wording of the Amendment was not of great interest to us but that we were concerned with the principle behind it. My hon. Friend pointed out that we did not want it to be so worded that a man with ninety-nine profits worth £99 each could get through. It is the principle that matters.
    Mr. Mitchison: I have listened to everything that has been said on the Amendment but I must consider the actual words of it or it will become extraordinarily difficult to discover what it is aiming at. I am pointing out that there is an inherent difficulty about the Amendment and I wish to develop my argument. If hon. Gentlemen opposite will study paragraph 15 (1) of the Ninth Schedule they will find that where one gets a number of transactions carried out in order to effect a single bargain one must regard each transaction as a separate one attracting a separate gain or loss. I am trying to point out that if one puts through something with the intention that apparently lies behind the Amendment, one is simply inviting people who are putting through quite a large transaction to do so in a series of small bargains. According to what I understand is meant by the remarks that have been made, and certainly by the wording of the Amendment, the result would be that none of them would attract tax.
    Another objection I have is that I do not think that there is any reason for drawing a line at this particular point

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    in this particular case. The amount involved on £100 at the standard rate is just under £40 at the present rate of tax. This is not a negligible amount and I fail to see why this form of income—because that is what it is to be treated as under the Bill—should attract this kind of exemption.
    As I say, I have in mind what hon. Gentlemen opposite did the other day when, on the total exemption of small incomes, they objected. Thus I fail to see why they have selected this case for exemption and I become doubtful about the real intention behind the Amendment. I have tried to do the best I can to extract it from the words of the Amendment but, despite that, I am told that whatever the Amendment means it does not mean what it says. This is an upsetting beginning. I do not know what hon. Gentlemen opposite think they are after and I really do not know if they know the answer themselves.
    The Financial Secretary to the Treasury (Sir Edward Boyle): After some years I derive a good deal of enjoyment and entertainment from Finance Bills, but I do not think that I should entertain the Committee if I attempted to respond to the invitation of the hon. and learned Member for Kettering (Mr. Mitchison) to have yesterday's debate all over again.
    My hon. Friend the Member for Nottingham, South (Mr. W. Clark), whose speech I listened to in the Budget debate, and my hon. Friend the Member for Torquay (Mr. F. M. Bennett) both gave notice to the Government of the points they intended to raise on this subject in Committee. I am not quite sure that the Amendment really performs the function that the hon. Member for Nottingham, South has in mind. This is not just a matter of drafting because I imagine that my hon. Friend's object is not really to exempt gains not exceeding £100 on individual transactions because this could lead to the exemption of fairly substantial total gains. I imagine that my hon. Friend has most in mind the idea of exempting total gains not exceeding £100 in one year.
    I can assure my hon. Friend that my right hon. and learned Friend the Chan-
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    cellor of the Exchequer has considered this proposition most seriously. There is, however, a difficulty about it; that my hon. Friend's proposal would be inconsistent with the whole scheme of the legislation we are considering in Clauses 9 to 15. The House and the Committee may or may not approve this legislation but there cannot be any doubt about what the Chancellor has in mind. My right hon. and learned Friend is, after all, widening the concept of income. He is proposing to treat short-term gains as income. To provide for the exclusion of relatively small amounts from the charge would be inconsistent with the purpose of these Clauses.
    The question of the rate of Income Tax to be charged on short-term gains will, of course, depend on the taxpayer's total income, just as it does in relation to any other item of income. This is a point which should be remembered. It is not very likely that the great majority of small savers who buy a small amount, perhaps of some gilt-edged security, will make a profit of £100.
    Mr. Callaghan: They will be jolly lucky.
    Sir E. Boyle: The Government's actions last year and this year have had a considerably improved effect on the gilt-edged market. I was saying that the great majority of small savers will not, in fact, be paying tax on these gains at a high rate. One should remember that if the taxpayer is liable to Surtax, small short-term gains should be brought in just as would a dividend from a small holding of shares. Taking into account the way my right hon. and learned Friend has introduced his Budget, I cannot see that there is any compelling reason to give better treatment to small savers than to others making short-term gains, any more than there is reason to think that the fact that a person's gains do not exceed £100 a year under Case VII will necessarily mean that he is a small saver, because I do not believe that that will always be true either.
    My hon. Friend raised the question of the unit trusts. Here again, if they derive gains within Case VII, there does not seem any convincing reason to exempt them when other persons whose main activities are not speculative will

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    have to pay tax on their short-term gains. Speaking for myself I would rather keep value judgment out of this. We do not want to think too much in terms of the idea that the person who makes large speculative gains is necessarily anti-social and should be caught and someone who just makes a small gain is a small saver and therefore ought to be encouraged by the tax system. What my right hon. and learned Friend says is that we should widen the concepts of income. In this Clause we are widening the concepts of income for everybody. We are not saying for a moment that there is something wrong about speculative gains, whoever makes them. We are saying that in our view they ought to come within the tax net.
    My hon. Friend raised the point of the concession made in 1956. He drew attention perfectly fairly, to the fact that we had in 1956 an exemption from Income Tax given on the first £15 of interest received by an individual on deposits in the Post Office Savings Bank or the ordinary department of a trustee savings bank. I was Economic Secretary at that time and I remember the circumstances of that Budget and Finance Bill very well. Surely the aim of that concession was that it was not simply given in order to encourage the small savers as such but was given in the context of a savings Budget, with a large Budget surplus at a time when we had in this country an excess of capital investment over savings. It was done not just to encourage saving but to encourage small savers to lend direct to the Government at the long-established interest rate of 2½ per cent. paid by the institutions in question. It was an encouragement to small savers to make a voluntary addition to the Budget surplus through lending to the Government in that way. I hope that I am not to be considered offensive if I say that the purpose of that concession has not been always understood. In so far as my hon. Friend has misunderstood it, he is in good company because in the distinguished book on saving by my right hon. Friend the Minister of Health I do not think that he quite got that point either.
    Mr. Jay: The hon. Gentleman surely is not suggesting that subscriptions to the
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    Post Office appear as above-the-line revenue in the Budget.
    Sir E. Boyle: I said that this concession was made in order to encourage a kind of voluntary addition to the Budget, in other words to lend money to the Government at the ordinary 2½ per cent. rate. The right hon. Gentleman can look up the debate at the time when these things were considered.
    On the question of administration, I can absolutely promise my hon. Friend the Member for Shipley (Mr. Hirst) that when this Clause passes on to the Statute Book the Revenue will have something better to do with its available manpower, who are none too many, than to regard as a first priority chasing up small investors about these small sums. I can promise my hon. Friend that there will be no question of the Revenue behaving unnecessarily—
    7.15 p.m.
    Mr. W. Clark: How would the Revenue know whether it was a small loss or a small profit?
    Sir E. Boyle: It is for the Revenue and not for me to say what its activities will be. We are bringing in here a considerable new aspect of our tax law. I thought that my hon. Friend the Member for Shipley rather exaggerated the extent to which the Revenue would be likely to be spending valuable manpower on pursuing what prima facie appear to be small amounts.
    Mr. F. M. Bennett: The Financial Secretary said that the Revenue would exercise certain discretion where deals are extremely small, but the Revenue will not have discretion where the losses are small. The individual loss must be pursued at the wish of the taxpayer if we do not draw a line, as we suggest, for gains and losses.
    Sir E. Boyle: I think that I was misunderstood. I was not saying that there is specific discretion. I was saying that the Revenue would administer the matter in the sensible way that it administers the overwhelming majority of tax cases. I cannot see that it would be sensible from the administrative point of view to say that we must take out of the charge a series of small transactions, because it would equally take out a series of substantial transactions involving large

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    losses on the one hand and large gains on the other, leaving £100 net. We have to realise that the £100 might be the result of a very complicated case. The Amendment is not consistent with the general scheme of legislation. While I have listened with respect to my hon. Friends, I do not consider that the precedent from the 1956 Act is as powerful as they suggest.
    I came back finally to the point that the Committee may or may not like my right hon. Friend's scheme but since he has decided to widen the tax basis in this way I do not think that there is a compelling case for having the kind of exemption which my hon. Friend has in mind under the Amendment, namely of total gains in one year not exceeding £100. It is for these reasons that I cannot advise the Committee to accept the Amendment.
    Amendment negatived.
    Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Jay: Our discussions so far have established two things. The first is that this is not a capital gains tax. The second is that it will not raise any revenue. It is useful to have that clear at this point of the discussion. What the Government have really done is not to introduce a capital gains tax, but to redefine what type of gains are to be classed as being liable for Income Tax, Surtax and Profits Tax. The Government have done that by choosing this rather queer criterion of a time limit as the test for the Inland Revenue. It does not seem to me, for two reasons, that the Government have made out their case for setting up a limit to the period during which this tax operates.
    First, there does not seem to me any valid moral distinction to be drawn between gains made within six months on securities or within three years on land and gains made over a longer period. It is remarkable that the Financial Secretary, in his last speech, said, "Let us get away from moral judgments; let us not make value judgments", when the whole construction of the tax is based by the Government on a moral judgment between gains made in six months and gains made over a longer period. Because, in our view, that moral judgment —and it certainly is a moral judgment
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    —is not valid, we do not consider that the time limit is justified.
    Secondly, it is unjustifiable for the obvious practical reason that it makes the tax so easy to evade. No argument so far has in the least impaired the contention we have made from the beginning that the six months' time limit for the purpose of share transactions makes the tax fantastically easy to evade. Therefore, the Government have not made out the case for the limit, Which is, of course, the main cause of the extremely small amount of revenue, if any, Which the tax will yield.
    In our view—I believe that hon. Members opposite really agree—it is as justifiable to tax capital gains over any period as to tax income. The other day, the Chancellor said that all taxes are odious. He will agree, I think, that some are more odious than others, or, to put it the other way, some are less odious. If one had to choose between taxing income and taxing capital gains. I should have thought that a capital gains tax would be, at least, the less odious of the two.
    We are informed that Mr. Clore, who has been mentioned in our debates, has made a personal fortune of about £50 million since the end of the war, mainly, presumably, by capital transactions in land and securities. Without entering into any moral questions about how this was done, or whether it was in the public interest at this time anyway, I do not think that anyone can seriously argue that, if a person can make gains of that order, or of even a smaller order, which are, of course, receipts in the form of money, whether they be called income, gains or anything else, which he can spend and which add to his purchasing power, those gains ought to be exempt from taxation.
    We have been very moderate on this side of the Committee. We have not attempted to argue that, with no time limit at all for defining taxability, the whole weight of Income Tax and Surtax should fall upon capital gains. We have proposed a tapering provision which allows to some extent for the Government's argument, in which there is, I think, some validity, that very long-term or fairly long-term capital gains probably have rather more element of investment in them.
    The Deputy-Chairman (Sir Robert Grimston): I am sorry to interrupt the right hon. Gentleman, but we must not go over again all the arguments which have been adduced on the series of Amendments discussed yesterday and earlier today.
    Mr. Jay: I was not seeking to do that, Sir Robert. I was merely looking at the tax and saying what some of us on this side feel about it and about the future of the tax as it now comes before us.
    A question has been raised about whether it is excusable to omit pool winnings from the tax. It seems to me that, for a tax of this kind, a pool winning is a quite different type of receipt from a capital gain or capital appreciation. To have capital appreciation, one must have some capital; one must have an asset which appreciates. The whole tax is based on the assumption that there is a capital asset which is worth something at one time and something else at another time, the gain consisting in the difference between the two.
    A pool winning is not of this kind at all. It is more in the nature of a prize. There is no capital asset which appreciates. Although I think that the pools should be subject to taxation, as they are by a different form of tax, I do not consider that pool winnings are a valid object for the purpose of this tax. If it were to be argued—I do not know whether anybody would argue it—that the capital asset involved is the stake put down at the beginning of the operation, I suppose that the conclusion would be that, where there was a stake and no winning, a loss was made and this would have to be set off against any possible gain. That is such an obvious absurdity that it shows the absurdity of treating pool winnings in that way.
    The Government admit that we shall get very little revenue from the tax, but I do not accept the argument that one could not expect any reasonable yield of revenue from the sort of tax we were proposing or from a real capital gains tax. It has been suggested that the revenue in the United States from the capital gains tax is irregular. So it is. Nevertheless, though not enormous, it is
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    substantial and the average over the years is very well worth having.
    We must remember also, in considering the yield, that the estimates of both the majority and of the minority of the Royal Commission which discussed the matter in such an illuminating manner were made before 1954, long before the great Stock Exchange boom which began really in 1958 and before the great boom in land values which was started by the Rent Act introduced by the present Chief Secretary of the Treasury. Those estimates were made long before the great rise in capital values which have since accrued in both Stock Exchange securities and land.
    If one goes back to 1957 and takes Stock Exchange securities alone, one finds that there has been a capital appreciation of about £10,000 million over periods of not more than two or three years. Going back that distance of time from now, one finds an enormous rise of about £8,000 million or £10,000 million. If one studies the national income figures—here, I have had some instruction by correspondence from the Financial Secretary—I think that it is possible to argue that the increase which is accruing annually in the value of assets of companies, without any new money being put up, that is to say, the rise in the capital values of shares held by equity shareholders generally, is proceeding at the rate of about £1,000 million a year.
    I fully admit that this, of course, is unrealised gains. So far as I know, no one is aware of what the figure of realised gains on these transaction is today, but I think that all these other figures indicate that it is probably very considerable, much larger than the minority or the majority of the Royal Commission allowed for, and that, therefore, potentially, if we had a real tax, there is a quite substantial source of revenue available to us here.
    The Chief Secretary to the Treasury advanced what I thought was a quite extraordinary argument against any more serious more form of tax. He said that, over any substantial period of years, or even a moderate period of years, part of the rise in the money value of the capital assets might be due to the fall in the value of money and, therefore, he seemed to suggest, it ought not to

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    be taxed. This argument applies to any estate values for Estate Duty In estate values for death duties nowadays, no doubt, a good deal of the money value is due to the decline in the purchasing power of the £ during the last twenty, thirty Or forty years, but nobody suggests that, for that reason, some portion of the estate should not be subject to Estate Duty.
    The same argument could be applied to Income Tax at present. We have heard today that the cost of living has risen by 6·4 points during the last twelve months, a very remarkable rise in the year of the Government's pay pause, faster than in any year for a very long time. Some people have had small rises in money incomes during the past twelve months. Most of them, if they have been anywhere near the Government's 2½ per cent., have been much less than the 5 per cent. or 6 per cent. rise in the cost of living. Surely the Chief Secretary will not argue that, because some of those rises in salaries or wages have been to offset the rise in the cost of living, they should be exempted from Income Tax. If he does not argue that, he must accept that there is no weight or substance in his argument on those grounds against a real capital gains tax.
    I do not believe that the tax will be temporary. It will be temporary in this farm, but I do not believe that we shall go back to a system in which we make no attempt to tax capital gains at all. It is interesting that the Chancellor did not even introduce it as a temporary tax. We are often told how Income Tax was introduced as a temporary measure and became permanent, and how the Purchase Tax was introduced as a temporary measure and became permanent. Here we have a tax which was not even introduced as being temporary. This is fairly good evidence, I think, that, far from disappearing, the tax will grow.
    My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) spoke about taxing the tree as well as taxing the fruit, and said that there was a good case for taxing the tree. I think that there is a good case in this instance, when looking at capital assets, for the tree is growing, and we are thoroughly justified in taxing it. I believe, also, that this tax will Brow as time goes on. We
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    on this side of the Committee shall seek to make it a more substantial, a more valuable and a more equitable type of tax, but, as it has been introduced by the present Chancellor and the party opposite, it is little more at present than a hollow framework—designed, I suppose, to delude people into thinking that it is a real tax—from which very little revenue is to be expected, and which will have to be converted in the future into something much more substantial and much more effective.
    7.30 p.m.
    Mr. Humphrey Atkins: I shall not attempt to go over the arguments that we have had during the last few hours. I rise only to seek clarification from the Government on one point concerning the application and the calculation of this tax, because I do not think it is at all clear in the Bill.
    I refer to the position of trust funds, and perhaps I could illustrate what I mean by referring to a simple form of trust with which many members of the Committee must be familiar—the one in which a trust fund is set up and the income is paid to one person during his or her life, the capital sum in due course being paid to another. If the trustees carry out some transaction which renders the fund liable to this new capital gains tax, what I do not understand is how this tax is calculated. I feel sure that the Committee will agree that it is manifestly unfair that the tax should be calculated by reference to the income of the life tenant of the trust, because the life tenant has no direct interest in the capital.
    My right hon. Friend the Chief Secretary to the Treasury referred to the tax as being a tax on money that may be spent as income. The life tenant cannot spend the money as income, because he or she has no title to it. It might appear that the obvious answer would be to calculate the tax by reference to the income of the remainder man, but, again, the same remark applies. If it is a tax on money which may be spent as income, the remainder man does not get it, at any rate, not straight away. Therefore, I do not think it would be entirely fair to calculate it by reference to his income.
    If there is more than one remainder man, and there are perhaps two

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    ultimate beneficiaries of the trust, how then does one calculate the tax? The Committee can imagine the situation in which there are two ultimate beneficiaries, one a child with no income and the other a grown-up, married to a rich husband or wife and paying a very high rate of Surtax. Is the tax to be calculated by some process of averaging, or how?
    Mr. Diamond: On a point of order. There is an Amendment on the Notice Paper to Clause 15, page 22, line 6, at the end to insert:
    (3) Where gains accruing to trustees of a settlement are assessed and charged on them under Case VII, the tax chargeable shall be treated by the trustees as a proper expense to be set against the capital of the trust estate notwithstanding any contrary direction in the instrument creating the trust.
    That deals with matters closely associated with those to which the hon. Gentleman is now referring. I only want to know whether, as I understand that that Amendment is likely to be called by the Chair, there will be any restriction of the discussion that may take place on that particular Amendment.
    Mr. Atkins: Further to that point of order. I have seen the Amendment in the name of the hon. Member for Gloucester (Mr. Diamond) and I have studied it. It seems to me, though I am open to correction, not to cover the points I am making. What I am addressing myself to at the moment is what kind of tax should be paid in the first place.
    The Temporary Chairman (Mr. G. Thomas): The hon. Gentleman may be quite sure that this discussion will in no way affect his Amendment. The hon. Member for Merton and Morden (Mr. Atkins) is quite in order in raising this point at this stage.
    Mr. Atkins: Thank you, Mr. Thomas. I will not weary the Committee with endless examples of how complicated it would be to determine this tax. In many trusts, there are beneficiaries with no established right to a share of the trust, because they may die or others may be born before the shares can be finally determined. It is extremely difficult to know how this tax can be assessed. In so far as it is meant to be a tax on profits which can be spent as income, it
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    is clear that no one can spend it as income, and I hope that my hon. Friend the Economic Secretary will say that, at least, it attracts no tax, but I doubt if that will be the case. It may be said that, by and large, trustees do not engage in speculations of this nature. I agree, but we can all see that this situation may arise and that it is extremely desirable that trustees should know exactly where they stand.
    Mr. Anthony Crosland: I am grateful to you, Mr. Thomas, for calling me now, because I should like to take up one or two points which have been raised on the other side of the Committee during the debate on this Clause.
    There has been a good deal of discussion about football pools, but it seems to me that nobody has pointed out the basic distinction between football pools and a capital gains tax, apart from the one mentioned by my right hon. Friend the Member for Battersea, North (Mr. Jay). If losses or costs are allowed to be set off against any gains, there cannot be any gains made from football pools. The pools promoters expect to make a profit every year. If the costs of betting—the same is true of horse racing or any other form of betting —are set off against the gains, there can be no net gains from football pools, taking the population as a whole, even if net losses are offset against these gross gains.
    The most striking feature of the debate has been the speech of the Chief Secretary. It should be said that the general level of that speech was a disgrace by Parliamentary standards. The right hon. Gentleman trotted out some of the most trivial and inaccurate arguments, many of which have been answered before. I think that he might have made some more elaborate attempt to deal with the points raised in detail. For example, on the point he made about inflationary gains. I should not have thought that, in 1962, that would have been raised from the Government Front Bench as part of a serious speech.
    The right hon. Gentleman said that any comprehensive capital gains tax such as we favour would have a very damaging effect on incentives to invest, but he did not make it at all clear in what respect this damaging effect would

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    operate. If there is to be a bad effect in this way, it would be far worse under this tax than under the kind of tax we are proposing. The marginal results of this tax will be much higher than under a real comprehensive capital gains tax which we on this side have always favoured, and any effect which there is likely to be will be much worse under this tax than under the alternative.
    So far as yields are concerned, the Chief Secretary was extremely disingenuous. He referred vaguely, though without quoting it, to the Report of the Royal Commission on the Taxation of Profits and Income. He did not refer to the quite different conclusions of the minority Report, or to the fact that the figures in the Inland Revenue appendix to the majority Report were based on assumptions that were out of date even by the time that the majority Report was printed.
    I want to take up the right hon. Gentleman's point that a comprehensive capital gains tax would yield very little revenue, even if we assume that, unlike the last few years, profits are going up only at the same rate as income, and that dividends are going up at the same rate as profits. In other words, we are making a more pessimistic assumption than the last five years warranted. If profits and dividends are going up at the rate which the Chancellor set as a gross target, namely, 4 per cent. per year of the gross national product, the yield of any capital gains tax on a comprehensive scale will be very considerable. It seems to me that this argument is completely unanswerable.
    There has been discussion about the effect on the Stock Exchange. I wish that the hon. Member for Taunton (Mr. du Cann) were here, because he was quite right in saying that the market has not been very strong since Budget day, due primarily to this Clause of the Bill, but partly to the fear of a dock strike and to the fear of a Labour Government, I am happy to say, and partly to the weakness of Wall Street.
    There was another point on which the hon. Member for Taunton was inaccurate. He trotted out, after the event, the fear which was widely put forward before the Budget that it would have a very serious effect on the number of
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    markings per day, on the volume of Stock Exchange transactions. There is no clear evidence that it has had this effect. There have been one or two days of particularly heavy marking since. This certainly appears from a consideration of what has happened on the Stock Exchange during the past month. It is impossible to say, therefore, that this fear has been realised in practice.
    The main points have been gone over several times in this matter, and one comes back to the main case against the Clause and in favour of our alternative proposal. We take the view, like the minority Report of the Royal Commission, that one cannot distinguish between income in the normal sense of the term and capital gains. The only intelligent way of ascertaining income is to consider what one spends during a week or, perhaps, six months. Capital gains increase one's spending power in the same way as income. In logic, that is an irresistible case for taxing capital gains as well as conventional income.
    The possession of capital confers on the lucky capital owner an advantage which cannot be measured in terms of income or capital gains. It can only be measured in terms of freedom, in terms of security, or in terms of the Crichel Down type of case in which one stands up against bureaucracy and public or private authorities. There is enormous room for manœuvre and general easement of life which cannot be measured by the income profit, nor, I would say, even by the capital gains profit.
    On these two grounds, it is not worth the Government bothering about a so-called capital gains tax from which the yield will be zero, and there is an irresistible case for a proper comprehensive tax of the kind which we propose.
    Mr. Graham Page: It has frequently been said in discussing Amendments to the Clause and during this debate that we are redefining the gains which were previously taxable and which the Chancellor of the Exchequer wishes to bring into charge. I, for one, cannot justify the tax freedom which that sort of gain has had in the past, and it is right, in present circumstances, to bring it into charge for tax, so long as one can do that without causing damage to the

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    sort of activities which one would wish the capitalist, if I may so call him, to undertake. We have in this Clause chosen a form of tax which will cause the least damage, first, to the use of capital for development and, secondly, to savings.
    What disappoints me about the form of tax which appears in the Clause is this. We have not excluded disposal which is made for immediate reinvestment. This will hit, in particular, the normal, prudent trustee. Only a few months ago we passed an Act dealing with the duties of a trustee, and we imposed a number of greater duties on trustees than they had before. One of them was that they should look, from time to time, at the investments which they hold in trust and, if necessary, should change those investments.
    It should be put on record that this Clause will put trustees in a very difficult position when they see that, in accordance with prudence in dealing with their investments, they ought to sell an investment at a gain and to reinvest in something else. They will have to consider whether it is right for them to increase the capital at the expense of the income beneficiary paying this tax. As I understand it, the tax will fall on the income beneficiary.
    7.45 p.m.
    I wish that we could have relieved trustees of these further problems that will be imposed on them and on the individual of paying this tax when disposing of savings merely to plough them back again into savings. We have not done that and, therefore, the individual and, in particular, trustees will be put in this difficult position of having to pay tax when they are merely changing their investments. In the case of trustees, it is not the same person doing the transaction who has to pay the tax. He has to think of two classes of person—his capital beneficiary and his income beneficiary—and I fear that he will be in great difficulty.
    Mr. Jay: The trustee already pays Stamp Duty when he buys equity shares and, of course, he pays Income Tax on the dividends from them. Is there any-think more wrong in this tax being payable also?
    Mr. Page: Yes, because, when he pays Stamp Duty, that is a capital expenditure and he is charging it against only one individual, the capital beneficiary. Now he will have to consider whether he is right in increasing the capital at the expense of the income beneficiary paying the tax.
    Mr. Diamond: Apart from the issue whether the duty falls on one class of person or another, on the beneficiary or on the remainder man, will the hon. Gentleman say whether it enters into the trustee's mind, when he decides to sell for the purpose of re-investing, that one argument for selling is that the stock he is proposing to sell stands at a high price and, therefore, one of his duties is to look after the various interests as well as he can and to sell because the stock is high since he will make a profit? If the trustee sells with a view to making a profit for those in whom he stands in trust, what is the argument against the tax being payable?
    Mr. Page: My point was that he will have to consider this when he carries out the duties he has been directed to carry out under a recent Statute, namely, to examine his investments from time to time. When he does that and decides that it is right to sell, take the gain and re-invest, he has to decide on which individual the liability should fall.
    That is a development of the main argument which I wished to advance, that I wish we could have included in the Clause an exclusion of disposal which is purely for the purpose of ploughing back any savings. We have not done that, and, to that extent, I regret the presence of the Clause in this form in the Bill. I should have liked to encourage the man with savings to look at them every now and then, to sell if sale is warranted, and to increase his capital and invest it in savings. I cannot see anything wicked or immoral in that. If a person has capital, he should not leave his talents in the ground, so to speak, so that they do not prosper. This Clause will be a discouragement to the ordinary saver who is looking after his Investments.
    Dr. Alan Thompson: We on this side certainly welcome the Clause as far as it goes, but, as we have amply said, it does not

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    go anywhere near far enough. The only satisfaction that we get from it is that at last the door has been opened and the Government have accepted the principle that a tax on capital is no longer unthinkable. The old arguments about it being confiscatory and the argument of my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) about the difference between the tree and the fruit, and that it is permissible to tax the one but not the other, have perished for ever. I liked my hon. Friend's analogy. I shall have to work out the implications of stripping a tree of its inflationary branches and pruning it for further production. However, my hon. Friend's analogy was a lively one and should find its way into economic text books in future.
    We are a little doubtful about whether the Clause as it stands can meet the many and complex objectives which any new tax in 1962 has to meet. We know that it will be a complicated tax. Any capital gains tax must be fraught with complications. As the Greeks used to say, however, it is not the easy things, but the difficult things, which are beautiful. I am sure that this quotation will appeal to the scholarly and sensitive classical minds of the Treasury. Nevertheless, a capital gains tax can be tailored to meet important objectives. In this respect, the Clause fails.
    The first and obvious objective is equality. It may be late in the evening, although I hope not, to quote Adam Smith; but as he comes from Fife, perhaps I may be permitted a quotation from his well-known canon on equality of sacrifice:
    "the subjects of every State ought to contribute to the support of government as nearly as possible in proportion to the revenue which they respectively enjoy under the protection of the State."
    Can anybody say that this miserable Clause comes anywhere near to fulfilling that objective?
    Emboldened by the attention given to that quotation, I should like to give another, from Adam Smith's canon on economy in raising tax. When I look at the elaborate paraphernalia of the Clause, the rules governing it, the elaborate details covering artificial transactions, and so on, when, by holding the investment a day longer, it is
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    possible to avoid the whole lot, I am reminded again of Adam Smith on economy of taxation, that
    "Every tax ought to be so contrived as both to take out and keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the State."
    The paraphernalia of administration in this case and the miserableness of the revenue stand in sharp contrast.
    Our charge is that the Clause makes little contribution—one might almost say no contribution—to equity. The old idea of equality of sacrifice as a kind of philosophical principle has given way to the idea of equality of sacrifice as a psychological necessity. Everybody in the community must be convinced that they are all bearing equal burdens. What our ancestors regarded as natural law, we think of as psychological. Even as a psychological gambit, however, the Clause fails. It will have no impact on trade unions or anybody else about equality of sacrifice. It leaves wide openings for avoidance. It will be expensive and cumbersome proportionately to the amount of tax collected. From that point of view, the Clause is a bad one.
    Another objective of taxation which, with our much more sophisticated ideas on public finance nowadays, we must consider is taxes for counter-cyclical purposes, using our tax system to offset booms, depressions and movements in the economy. This is an important point to which thought should have been given in preparing the Clause.
    It is true that as a counter-cyclical move, a capital gains tax is rather long term. It does not have the immediate effect of, say, indirect taxes on consumption, which can be put into effect immediately by means of regulators which we have discussed at other times. The delays in collection blur its impact in this respect as a counter-cyclical weapon. Nevertheless, it is, or could be, useful if more thought had been given in the Clause to using a capital gains tax in a counter-cyclical way. Properly designed, it could have been a useful offset to long-term inflationary tendencies.
    To develop the principle of using the Clause for what might be called compensatory finance, I think that both sides of the Committee are agreed—now that knowledge of Keynesian economics is

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    the prerogative of both sides although not always properly followed through—that automatic fiscal adjustments are, perhaps, the best way of dealing with cyclical movements. These automatic fiscal adjustments can be brought out by a sensible taxation policy.
    To make the obvious point, during a period of inflation and rising money incomes, the yield of taxes increases even though tax schedules remain constant. It is an automatic stabiliser in this respect. On the expenditure side, unemployment and social benefits tend to expand in a depression, but they contract in periods of rising income and employment. Therefore, these automatic correctives of a proper flexible taxation system have significant economic as well as political advantages over other kinds of controls.
    We do not rule other kinds of controls out of the question, but other kinds of discretionary controls which, nobody denies, are more administratively cumbersome lend themselves to difficulties and delay. We try the discretionary controls when our automatic fiscal working has broken down. In the Clause, however, capital gains has not been brought in to play its part in what might be called the compensatory finance of dealing with trade movements.
    To quote from the Review of Economic Studies, of February, 1962, to which I direct the attention of Ministers, Mr. P. H. Pearce, a Canadian economist now working with O.E.C.D., states that
    "The inclusion of capital gains in taxable income would prevent a most volatile part of total income from escaping tax and hence would increase the responsiveness of tax yields to income changes."
    Thereby, he goes on to argue, it would act as a counter-inflationary means in times of rising prices and vice versa in times of falling prices.
    What we might say, therefore, is that if we had had a proper capital gains tax, had the Clause gone far enough, we could have broadened the base of our system and we could have built it into an automatic compensatory system of finance. This is what anybody who wants to tidy up our ridiculously obsolete tax system is always anxious to do. It can also be argued that the less discriminatory the capital gains tax, the less the likelihood that it twists capital sup-
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    plies into the wrong channels. The more comprehensive it is, the fairer it is.
    I sometimes find myself in agreement with what is said on the benches opposite about Purchase Tax. The analogy is the same. Two extreme variations in Purchase Tax distort and misallocate resources. A flat, wider tax is better. For the same reason, by bringing in everybody a wide capital gains tax would discriminate against no particular form of enterprise. The more comprehensive the capital gains tax, the less one can argue from the viewpoint of the individual that he is being victimised or the less one can argue from the point of view of the country as a whole that resources are being in some way misallocated. For these reasons, we believe that the capital gains tax as proposed in the Clause is inadequate.
    A capital gains tax, too, is a good incentive to avoid inflation, quite apart from its compensatory factors. The most effective means of damping down the rate of capital gains is to control inflation. The question of capital gains assumes a completely different magnitude in, say, a period of stable prices, on the one hand, or a period of prices rising, say, at 5 per cent., on the other.
    Perhaps I may be allowed to sum up with a quotation from the late Lord Dalton, who said that public finance was one of those subjects which lie on the borderline between economics and politics. He said that studies in public finance raise the conflict between the analytical and the practical man and that excess of abstraction in this sphere is unreal and an excess of conventional rule of thumb is especially half-witted.
    8.0 p.m.
    What we have to do in the whole of public finance is to satisfy the ordinary person's sense of justice. This is the plain man's rule of economics. It is very real, and has been conceded on the benches opposite. Certain kinds of money have been escaping taxation, whereas others have been paying tax. We must satisfy the plain man's sense of justice and, at the same time, fit the tax into what nowadays is a complex and difficult system of raising and spending money.
    On the lines that I have suggested, it is open to argument whether one uses

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    the money raised from the capital gains tax for special purposes, for compensatory fiscal purposes in times of inflation, for Income Tax relief, for the Health Service, or whether, as the late Lord Dalton once suggested in his original proposals for a capital levy, one uses it to write off the heavy compensation debt of the nationalised industries and so gives the public boards a freedom and flexibility of manoeuvre with regard to prices and other policies which they do not at the moment enjoy, and also raise morale in the public sector.
    Whatever we use the fruits of the tax for, the Opposition would argue that Clause 9, as it stands, is a rather miserable, pettifogging effort conceived without enthusiasm and, we suspect, intended from the outset to fail—to fail from the point of view of its objective of equality, and to fail from the point of view of bringing it into harness to serve any real purpose, which any tax should, in solving the problems of our economy.
    Mr. Barber: The Committee will remember that when the Bill was debated on Second Reading my right hon. and learned Friend the Attorney-General, in winding up, dealt at some length with the position of the varying types of insurance companies. He concluded by assuring the House:
    "that between now and the Committee stage we shall give very careful consideration to everything said on this topic."—[OFFICIAL REPORT, 3rd May, 1962; Vol. 658, c. 1345.]
    Therefore, I hope that the Committee will bear with me if for a brief moment before I try to deal with some of the points which have been raised in the debate on the Question, "That the Clause, as amended, stand part of the Bill", I touch on the question of mutual insurance companies.
    For the reasons which were given by my right hon. and learned Friend on Second Reading, we do not propose any change in the position of mutual non-life companies from that which results under the present provisions of the Bill. If such companies, which are not now charged to Income Tax on their profits, should make short-term gains, they will be liable on them. But as regards mutual life companies, we have reached the conclusion that the case for a relieving provision is well founded. These
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    companies are not charged to tax on their profits as such, but in general they pay tax on the same basis as non-mutual life companies; namely, on their investment income, subject to due allowance for management expenses. This gives a bigger liability than if they were charged on profits.
    We are clear that it would be wrong to subject the mutual life companies to a charge under Case VII which would not fall on ordinary life companies, and my right hon. and learned Friend the Chancellor of the Exchequer intends to introduce an Amendment on Report to exclude mutual life companies from the change to tax under Case VII.
    We have had a long debate—
    Mr. Jay: Is the hon. Gentleman not going to explain to us the reasons for this decision? I gather that he is now saying that the mutual non-life companies are to be subjected to the tax. How about the non-mutual non-life companies? Are they subjected to the tax now? Is the hon. Gentleman making any distinction there? Can he explain exactly why he has drawn the distinction in this way?
    Mr. Barber: I will go over the whole ground again if the right hon. Member for Battersea, North (Mr. Jay) wants me to. I will try to explain it briefly, but I hope he will bear in mind that on Second Reading my right hon. and learned Friend went very carefully and in full detail into the distinctions between the two types of companies. However, I will go into it in detail if he would like me to. Briefly, in the case of life insurance companies both ordinary companies, in general, and mutual life companies pay tax on their investment income only and not on Case I. In fact, in law the ordinary life insurance company is liable to tax under Case I. Because of this, the ordinary company —that is, the non-mutual company—will not be liable to tax under Case VII. The right hon. Gentleman will remember that companies which are liable already under Case I come outside the scope of this charge.
    This means that the ordinary Company—this is the ordinary life insurance company—of the non-mutual type will normally pay tax on its investment income only. The mutual life company will also pay tax on its investment income only, but, as the Bill is at present

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    drawn, it will in addition pay tax under Case VII because it is not liable under Case I. This would obviously be inequitable, I think, if one compares the position of the ordinary company with the mutual company—I am concerned solely with life insurance companies—because it would in effect impose an additional burden on the mutual life companies. Therefore, we thought it right to take the action we have suggested.
    Mr. Jay: Does it mean that ordinary companies and mutual companies will now be in exactly the same position; that is to say, that the life companies in every case will be exempt whereas non-life companies will not?
    Mr. Barber: It is true that the life companies will be in the same position. I have put the matter very briefly. It is difficult to explain briefly, but I hope that my right hon. and learned Friend the Attorney-General will agree that I have put it correctly. I emphasise that it is lot easy to explain in a few moments.
    We have had a series of debates on the Clause, first, on the Amendment, and then a final debate on the Question, "That the Clause, as amended, stand part of the Bill", and these debates have gone on for a considerable time. The right hon. Member for Battersea, North, who spoke first for the Opposition in this last debate, made two main points. First of all, he said that, in his view, there was no particular validity in the periods of six months and three years selected by my right hon. and learned Friend. Surely the point that he made there raises once again the basic distinction between the view of the Chancellor and the right hon. Member for Battersea, North? We have been over this ground not only in the four-day debate that we had on the Budget and also on the Second Reading of the Bill but again this afternoon in connection with the Opposition Amendment to which my right hon. Friend the Chief Secretary replied.
    I hope that the Committee will acquit me of any discourtesy if I do not go over the same ground again. My right hon. and learned Friend has already explained why he is not in favour of the kind of scheme which is advocated by
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    the Labour Party, and the Chief Secretary repeated many of the arguments again this afternoon. I thought that the hon. Member for Grimsby (Mr. Crosland) was a little unkind. After all, my right hon. Friend the Chief Secretary was replying to many points which had been put previously in our debate.
    Briefly, I think one can draw this distinction. The Opposition's scheme is directed to taxing the appreciation on genuine investment—it is a point of view, and it is the one which the Opposition hold—whereas my right hon. and learned Frend's scheme is directed more to the taxing of the fruits of speculation.
    The right hon. Member for Battersea, North went on to say that the whole basis of my right hon. and learned Friend's proposals involves a moral judgment. Here again, I do not wish to weary the Committee by going over the whole ground again. This is the same point as the right hon. Gentleman made in the debate on the Budget. Perhaps I might just remind the right hon. Gentleman that, in columns 1535 and 1536 of HANSARD of 12th April, I dealt with this point at some length. I again, with respect, draw his attention to what I said.
    My hon. Friend the Member for Crosby (Mr. Graham Page) referred to the position of trustees. As a solicitor he has had much more experience than I of the practical workings of these matters, but from the discussions I have had about this Bill I doubt very much whether the difficulties of trustees will be as serious as he suggests. In any event, I am sure he will agree that it would be out of the question to exempt trusts from any form of tax on capital gains. This being so, even if the difficulties which he foresees were as serious as he suggests, I cannot see how, as a practical matter, we could, in the context of a tax of this kind, do anything to meet his point.
    The hon. Member for Dunfermline Burghs (Dr. A. Thompson) criticised what he called the "elaborate provisions and paraphernalia" of the Bill. I must confess that I have a great deal of sympathy with that point of view, and if it had been possible to produce a simpler and shorter Bill, that would have been done. But, of course, we are extending the scope of Income Tax into an entirely

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    new field, and in these circumstances it is inevitable that the legislation should be rather complex, not only to prevent doubt by trying to cover all these various points but by trying to cover the great variety of differing circumstances where the new tax is intended to operate.
    I hope that the Committee will forgive me if I do not deal with the point about automatic fiscal adjustments to deal with cyclical movements. That went a little wider than I had anticipated.
    Mr. Houghton: Has the Chancellor made any rough estimate as to whether the cost of the administration of the tax will be greater than the yield?
    Mr. Barber: I am not sure whether that is a trick question or not, but the hon. Gentleman will recall that repeatedly during the Budget debate and also, I think on Second Reading, Government spokesmen said that it is not possible in the case of a new tax of this kind to give any estimate of the yield. This being so, it is impassible to compare the yield with the cost of administration.
    Mr. Houghton: So this is a speculation in itself.
    Mr. Barber: I come finally to the point raised by my hon. Friend the Member for Merton and Morden (Mr. Atkins). He asked about the case of a trust where the income is paid to one person during his or her life but the capital fund is ultimately distributed to another person. He said that trustees might find that funds under their control attracted the new tax under Case VII, and he asked what the position was.
    As he knows, for tax purposes, the gain will obviously be treated as income. Whether or not it will be treated on a par with income for the purposes of the trust will depend on the terms of the trust instrument. By virtue of Clause 11 (6), trustees of a settlement are to be treated for Case VII purposes as a single and continuing body of persons. The consequence of this and of the general law in this matter is that in the normal case—by which I mean a case where the special anti-avoidance provisions do not operate—in respect of a gain chargeable under Case VII, there will be no liability to Surtax, and Income
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    Tax will be charged at the standard rate.
    I have tried to cover as briefly as possible the various points raised, and I hope that the Committee will now come to a conclusion.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 10.—(CHARGEABLE ASSETS.)
    8.15 p.m.
    Sir John Barlow: I beg to move, in page 12, line 41, at end to insert:
    Provided that no property of any description shall be chargeable assets if it is used or to be used in its trade by a body of persons carrying on a trade which consists of the working of mineral deposits of a wasting nature outside the United Kingdom.
    The Temporary Chairman: I suggest that we should also discuss at the same time the proposed Amendment to Clause 13 in the name of the hon. Gentleman, in page 18, line 45, at end insert:
    Provided that this subsection shall not apply to the shares held by a United Kingdom public company in a company the trade of which consists of the working of mineral deposits of a wasting nature outside the United Kingdom.
    Sir J. Barlow: That would be convenient, Mr. Thomas.
    Clause 10 deals with chargeable assets. It seems to me that the Chancellor, quite rightly, has cast his net very widely, but presumably he will recognise the justice and logic of the suggestion that he has cast it a little too widely.
    The Clause as drafted strikes at the assets of an overseas mining company merely because they have to do with land. There are two main reasons why this type of asset should not be included. The first is that many of these companies are overseas mining companies within the definition of overseas trade corporation, and a very Gilbertian situation arises inasmuch as such companies established on an O.T.C. basis will be wholly exempt on trading income but will attract taxation on any disposals of capital assets consisting of interests in land.
    It seems quite wrong and inconsistent to tax a company on its capital gains

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    while exempting it on its trading income. I hope that my right hon. and learned Friend will consider that.
    Secondly, the case may arise where a mining company, managed in this country but operating overseas, may want to change its capital. It may want to sell parts of its assets or, in the course of normal development and trade, it may wish to do various things with its shares. In some cases, it might easily happen that, if it tries to develop in the normal way, within three years it might attract this tax, and I do not think for a moment that that was in the mind of my right hon. and learned Friend. I hope that he will at least look into this even if he cannot agree completely to the Amendment as drafted.
    My second Amendment is to Clause 13, which strikes at profits made on sales of shares in land-owning companies, particularly those which are tightly controlled. It is unfortunate that the Clause strikes at other people who are outside its mischief. It is very wide indeed. An overseas mining company which uses land only for extracting minerals can fall within the definition of a land-owning company if 20 per cent. of its assets are held as interest in land. I do not think that the Chancellor meant to include companies such as that. Presumably, it is not intended that the sale by a non-dealing United Kingdom company of shares in an overseas mining company should be caught by the speculative gains tax without time limit.
    I hope that the Attorney-General will look at this matter. It is a simple point in that it deals with the same kind of assets which I mentioned on the other Amendment and which I do not think the Chancellor meant to bring within his orbit. I hope that the Attorney-General will consider my words and change the Clause if he agrees with me.
    The Attorney-General (Sir Reginald Manningham-Buller): I have listened with care to what my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) has said in support of these two Amendments, but we are not convinced that it would be right to concede the proposed exemption.
    My hon. Friend made it clear that the first of his Amendments operated only in respect of land and interests
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    in land, although the Amendment in terms refers to property of any description. In fact, quite apart from this Amendment, buildings occupied and used for the purposes of a mining trade with ancillary land are exempt under subsection (4), and plant and machinery are either tangible movable property and exempt unless they come within Clause 10 (1, c) or exempt as permanent or semi-permanent structures under Clause 10 (4, a), so the Amendment in fact would appear to affect only the position of interests in mining land.
    We are not satisfied that any case is made out for exempting such interest from being chargeable assets. If a company sells freehold or leasehold interests, if it owns large interests in land and sells those interests or part of them within three years of acquisition at a profit, there seems to be no logical reason why that profit should be excluded from the Case VII charge any more than a similar profit on the sale or leasing of any other kind of land wherever it may be situate. I am sorry to disappoint my hon. Friend by saying that, but when one examines the structure of this tax, it is difficult if not impossible to make out a logical case for this exemption.
    I now turn to the second Amendment in which my hon. Friend is seeking exemption in relation to shares held by a United Kingdom public company not being a company the trade of which consists of the working of mineral deposits of a wasting nature outside the United Kingdom. I do not want to say too much at this stage about the content of Clause 13, but to deal with this point I must remind the Committee that the sale of shares dealt with in Clause 13 is to meet the case where instead of disposing of the land within three years, shares in the company are sold instead. If a mining company or any other company sells the land within three years, it would be liable to tax. The sole effect of that Clause is to avoid the escaping of that liability by the sale of shares instead.
    If the United Kingdom public company controls a company which owns ordinary land abroad to such an extent that it is technically a land-owning company, it would be liable on any gain arising from the sale of share in that

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    company, however long the shares had been held, but the charge will not exceed the due proportion of any gain which would have arisen to the land-owning company if, at the time the shares were sold, it had sold at market value any land which it then owned for not more than three years.
    I am sorry to disagree with my hon. Friend, but I cannot see any ground for enabling a company of the sort dealt with in his Amendment to be exempt from liability on selling shares instead of selling the land itself, and I must therefore ask the Committee to reject the Amendment.
    Sir J. Barlow: In view of the Attorney-General's explanation, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Diamond: I beg to move, in page 13, line 33, to leave out subsection (4).
    The Temporary Chairman: It may also be convenient to discuss with this Amendment the Amendments in page 14, line 7, to leave out "or (4)", and in page 14, line 13, to leave out "or (4)".
    Mr. Diamond: The second and third Amendments are consequential and I need not comment on them.
    Clause 10 deals with chargeable assets and describes them to begin with as being all forms of property. But when we reach subsection (4), which we seek to omit, there is excepted from all forms of property one well-known kind of property, namely, a building or part of a building occupied and used for the purpose of a trade, profession or vocation. That is the generality of the situation.
    I quite understand that there are exceptions. There are the exceptions described in subsection (6), about which we all agree. There is the exception described in this very subsection referring to dealing companies. I need not go into that exception, because we are all agreed about it. What we are not agreed about is the justification of the argument which is incorporated in subsection (4), namely, that a trade which uses a building should not pay tax on the capital profit emerging from the sale of that building if it sells it within the period and in the
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    circumstances in which any other person selling land in this way would pay tax.
    The whole purpose of this short-term capital gains tax as put forward by the Government is that if property is disposed of by any person within a short period, that is, six months with a certain kind of property and three years with others, and if it is in the mind of that person to make a profit, tax shall be payable.
    8.30 p.m.
    What does a trade, profession or vocation do? What motivates the trader who is carrying on his trade? The simple answer is his desire to make a profit. That is what it is all about. He desires to make a profit in the normal way by carrying on his trade. Normally, he does not deal in property, but if, incidentally, he has a property to dispose of, he will try to make a profit when disposing of it. If a business wants to move, or has to move, the considerations which will affect the time of moving will be the market value of the property, whether it is likely to go up or to go down, what development there is to be in the neighbourhood, and so on—all the normal considerations would apply to anybody else who was seeking to make a profit by dealing in property alone.
    This does not refer to a property dealer, but to a business which incidentally has property. What motivates the trader is the desire to make a profit, and where the whole of the capital gains tax is based on the principle that if someone makes a capital profit of this kind he pays tax on it, I do not see why the property to which I have referred should be excluded.
    I hope that I have not misunderstood the position. The case can be made simply and shortly, and I trust that I have made it, but I am bound to go on to the question of plant, and here I may have misunderstood the position because it is nothing, like as simple as the other case. If I understand it aright, fixed plant comes under the heading of property and is not excluded by the reference to tangible moveable property. Fixed plant would be property which would be subject to the capital gains tax. If I am wrong, I am sure that the Attorney-General will stop me immediately, because there is no point in

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    developing an argument which is based on a misreading of the Clause.
    There is a fine distinction between what is fixed plant which would be property subject to this charge, and tangible movable property which would not be subject to this charge. So far as I am aware, the benches on which we are sitting may be one of two things. If they rest on the Chamber floor they are tangible movable property, but if they are firmly fixed to the concrete floor of the Chamber they are fixed property, and would be transferred only on the transfer of the House of Commons itself. That illustrates the fine distinction between the two types of property, and is an argument against differentiation because of the complications that will arise.
    Suppose, however, that we have to accept this complication and this fine line of division, and that we have to accept, also, that if these benches were in a building used for trading purposes they would be tangible movable property in certain cases and would be excluded, but if they were a part of the building itself they would be excluded because of this subsection. I do not follow that. If they were part of the property they would, presumably, be excluded under the terms of subsection (4), but if they were not part of the premises they would not be so excluded, so we would get into the extremely difficult situation that plant fixed to the property would, as ordinary property, pay this tax, but if included in the definition of building or part of a building would not.
    I therefore say that we are in an extremely difficult position, and more particularly I say that we can remove these complications and restore sanity to the logic of the argument by saying that any property on which there is a capital profit, the capital profit having been obtained by a person who is carrying on a business with a view to making profit, never mind whether it is land or not, should pay capital gains tax in the ordinary way. That is why I believe that this subsection should be removed.
    Mr. Millan: I wish to support the case put by my hon. Friend the Member for Gloucester (Mr. Diamond). There was a certain amount of discussion
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    earlier today about the increasingly artificial distinction drawn between income and capital. There may be a good deal of room for argument about taxation legislation, but a distinction like this is extremely artificial from the point of view of taxable capacity.
    A business operates to make money. If it makes a profit in this way that profit ought to be taxable. There is a considerable case for making that profit taxable under Case I under the ordinary profits of a trade or vocation. For other Income Tax purposes we have to draw these distinctions and have these categories of capital assets. It is perhaps going rather farther than this Amendment to make the kind of suggestion I have made, that in so far as profit is made by a taxable asset it should be taxable, but probably in every circumstance that ought to be done.
    This Amendment does not go nearly as far as that. It limits the taxable nature of the receipt to cases where the building has been disposed of within three years from purchase. If a building is purchased for some perfectly legitimate purpose of the business, even in the full expectation that the building will be maintained for the purpose of the business and remain a capital asset, and some particular circumstance arises during the period of three years from which the purchase is made and the building has to be sold, it seems that there is a strong case in this restricted category for any profits on the transaction to be taxable.
    The circumstances which can be used as an argument for making this a nontaxable receipt do not apply. Whatever may have been the intention of the purchaser in the first place, even if it were to keep the building permanently as part of the taxable assets of the business, that has not happened. For some presumably good reason the building has been disposed of. Therefore, one can say that the original intention has been frustrated. In those circumstances the argument that it then becomes simply a capital receipt and a nontaxable receipt seems to fall completely to the ground. This is a very good case where the distinction between capital and income which the Government wish

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    to lay down in other cases ought to be obliterated and this Amendment should be accepted.
    I do not want to go into detail about plant, but I agree with my hon. Friend that the situation seems extremely complicated. I imagine that what the Government are trying to do, although I cannot see them doing it by this Clause, is to make fixed plant in exactly the same position as the building itself. Subsection (4) does not mention fixed plant. Perhaps the Attorney-General can explain if it is covered in the definition of a building. One would have thought that the Government would have covered fixed plant by subsection (4). If it is included that can only be by implication. That seems unsatisfactory, but perhaps we ought to wait to hear what the Attorney-General says.
    The same considerations and circumstances ought to apply to movable plant as they would if the Amendment were accepted. If for any reason movable plant is sold within three years—whatever may have been the original intention—and profit is made, the profit ought to be taxable. There would be very few profits from the sale of plant within three years after purchase because normally plant deterorates quite rapidly, even if it is not used at all. In principle the same sort of consideration ought to apply. Perhaps it is not so important, but I hope that we shall hear something from the Attorney-General about it.
    What seems to be true, according to subsection (2, c), is that if movable capital assets are disposed of without their having been employed in the business, any profit on them is chargeable. One finds a certain amount of difficulty in envisaging many circumstances in which this would happen. One sees no reason why the Government should put in this provision and also include subsection (4). I should have thought that there was a basic contradiction in principle between the proviso in subsection (2, c) and the whole of subsection (4). I hope that, first, the Attorney-General will make clear what the Government's intentions are and whether this Clause carries out those intentions faithfully, and, secondly, that he will say something about the principle in subsection (4). Whatever we
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    may think about the distinction between capital and income in other contexts, the principle in subsection (4) is quite wrong and the subsection ought to be eliminated.
    The Attorney-General: The hon. Member for Gloucester (Mr. Diamond) put his points, if I may say so, extremely clearly, and I hope that I have appreciated them fully. If it were the case that we were setting out to tax all capital gains, it would, indeed, be anomalous to make the exemption provided by subsection (4). The approach of the party opposite is that this should be a tax on all capital gains. On this Amendment, in the present situation, I think that one must proceed on the basis that this is not a capital gains tax of that kind, but a tax on speculative short-term gains. I put this point of view on that basis to the hon. Gentleman.
    First, it is inherently improbable that buildings with ancillary land, for instance, a factory yard, used and occupied for the purpose of a trade carried on by the person who has disposed of them, would have been acquired by him as a speculation. The probability is that they were acquired because he intended to carry on the business. Quite apart from that consideration, there are considerable practical difficulties to which the hon. Gentleman, in the latter part of his speech, drew attention.
    If this exemption is not made and if the business is sold as a going concern and a lump sum is paid for the purchase, then the vendor, if this exemption were not there, might be liable in respect of different items in the totality of the business on quite arbitrary lines, and it would be necessary to apportion the purchase price between the different items.
    For instance, if one of the buildings that he was selling in the totality was a building bought within the period of three years it would be liable to tax on so much of the total profit attributable to that building. Then one would have to bear in mind that buildings which had been acquired before the three years would also be exempt from tax. Then there would be the case that for other assets, if there was no exemption for them, the period would be six months.

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    Having considered the practical difficulties and in the light of the inherent improbability that a business would be bought for a speculation by a person who had occupied and used it for the purposes of trade, we have come to the conclusion that in the circumstances it is right in the context of this tax to make this exemption.
    8.45 p.m.
    We realised that if we stopped just with this exemption it left a possibility that some unscrupulous persons would use it for the purpose of tax evasion. The purpose of subsection (6) is to stop that happening. I need not, on this Amendment, refer to that in detail. The Committee will see that if it is challenged a person would have to establish that the acquisition of the property was made for the purpose stated in subsection (4)
    "and not wholly or partly for the purpose of realising a gain from the disposal of it".
    We have blocked that escape route, I hope satisfactorily.
    It comes down to the question whether a speculative gains tax should be applied to the sale of a business which has been carried on by the vendor and which he himself occupies and uses for the purposes of the trade, profession or vocation. For the reasons I have given, we think that that would be wrong in the light of the practical difficulties and the inherent improbability that such an acquisition would have been made for the purpose of a speculation.
    The hon. Member for Glasgow, Craigton (Mr. Millan) raised a point about plant. I think that if it is fixed plant it comes within subsection (4, a) as a
    "permanent or semi-permanent structure".
    Tangible movable property is excluded already. But I will certainly consider whether it is necessary to make special provision to deal with the point raised by the hon. Member about fixed plant.
    Mr. Diamond: Can the Attorney-General tell me simply what the position is with regard to fixed plant? Is a profit made from the sale of fixed plant by a person carrying on the business subject to a capital gains tax?
    The Attorney-General: The intention is that if the business is sold as a whole by a person who occupies the building
    338
    or part of the building for the purposes of a trade, profession or vocation carried on by him, he should be exempt. But I will certainly look into the point.
    Mr. Houghton: I usually find the learned Attorney-General very persuasive in argument. I once agreed with him when he stood alone. I am always very impressed with the arguments he adduces, but I must say that on this difficult question I was not convinced by what he said just now. It seems to me that one of the objects of the Government in drafting this new tax was to exclude as far as possible any consideration of motive. The test applied has been the length of time between the acquisition and disposal of the asset. That was an understandable purpose; to avoid a lot of argument between the taxpayer and the Inland Revenue as to why the taxpayer did what he did: was it with a view to making a profit, or was there some other purpose in mind?
    What the Attorney-General said a moment ago about the problem of apportioning the value of a particular asset on the value of a business as a going concern would certainly be the case if there was any challenge by the Inland Revenue of the motive that prompted the person to buy the business and then to dispose of it.
    It is conceivable that a person with an eye to making a capital gain would buy a corner shop as a going concern, not being very interested in the business of the shop but being very interested in the property. After running the business for a short time, he would be able to dispose of it as a going concern to someone who might also have in mind the making of a capital gain on the disposal of the property later on.
    If that were believed to be in the mind of the person who acquired the property, the Inland Revenue could challenge him, and could ask for an apportionment to be made to the value of the property, as distinct from the value of the stock in trade and any goodwill there might be. In certain circumstances, that difficulty would have to be dealt with.
    A small business, or a professional man—a solicitor, or anyone buying a property for his own occupation for a while—would be more likely to have a capital gain in mind than would a larger business, where there would be

    339
    the site, or the cost of moving, and other considerations in the running of the business—the erection of plant, or, in some cases, a particular address. In those cases, it is unlikely that a transaction with a view to capital gain would take place yet, in such circumstances, capital gains can be substantial.
    We clearly understand that we are dealing only with a gain that would be excluded from the assessment on the profits of the business, but we feel that to have a capital gain made in those circumstances, which is charged neither as profits of the business nor as a capital gain, leaves a considerable amount of capital gain outside the scope of this tax. The learned Attorney-General says, "Of course, this is really a speculative gains tax, and we must not try to turn it into anything else", but we think that it is much better to include this within the scope of the tax and so get rid of the tiresome problem of motive, which would otherwise arise.
    There are other reservations in subsection (6) regarding the acquisition of a site with a view to the erection of a building or a structure, and its disposal, so some safeguards have had to be introduced. We are talking, of course, of a capital gain realised within the stipulated period. No tax will arise on any capital gain in a business which stays put for three years, and, where there was a strong possibility of a business being moved and a capital gain being swept up as a process outside that period, there would be a strong temptation to do that, as that capital gain would be tax free.
    In these circumstances, I cannot see why the exemption in subsection (4) should remain. We shall require a much more convincing argument than we have so far heard from the Attorney-General before we shall allow the matter to pass.
    Mr. Millan: It is obvious from the remarks of the Attorney-General on the question of fixed plant that the Government have not thoroughly thought out this provision. The words
    "any permanent or semi-permanent structure in the nature of a building"
    are not sufficiently wide to include fixed plant. Such plant in the sense of machinery is normally defined as plant that is bolted or screwed to the floor,
    340
    and I appreciate that machinery bolted to the floor is not as permanent a structure as something in the nature of a building.
    The Attorney-General was unable to say sufficient about movable plant. This shows that the Government have not given sufficient consideration to this question either. My hon. Friend the Member for Sowerby (Mr. Houghton) put this question of purpose lucidly because we are really importing into subsection (6) a substantial question of motive in a way that is not applied anywhere else.
    The whole point of having a time limit —of six months for securities and three years for land—is that, starting from the basic assumption of the Government, it does not involve one in considering people's motives. This disposal within a certain time is taken to settle the matter, and it is unfortunate that in subsection (6) we should have imported the question of motive. As I say, this does not appear elsewhere. The Attorney-General mentioned exclusively the technical difficulties that would arise on the sale of the business as a whole. Is he aware that we are not discussing that but are talking about the sale of a particular building? I should have thought that the number of cases in which a particular building is sold within three years of it being purchased will be very much higher than the number of cases in which there will be the sale of a complete business which happens to include a building or buildings purchased in the three years before the date of the sale.
    It is not sufficient to answer the point by talking, as the Attorney-General did, exclusively about the sale of a business. I can best illustrate this by putting two concrete examples to the Attorney-General and perhaps he will be able to tell us what provision the Bill makes for them. Supposing a company which has a chain of garages throughout the country decides to buy a site for the construction of a garage. Supposing that one of two things happens—that it is subsequently decided, within the period of three years of purchase, not to proceed with the construction of the garage for some perfectly legitimate reason, even though the land was purchased in the first place for the purpose of its construction.

    341
    If the company can prove under the Bill that there was a legitimate motive, what will happen if the company makes a profit on the sale of the site, as can happen with the soaring prices of property? Will that property be taxable under the subsection? This is a case in which a company has not used the site for the purposes of its business, though it happened to buy the site in the first place legitimately for those purposes.
    In the second case, suppose that it constructed a garage or was a company which purchased a showroom and sold it within the three years without having used it for the purposes of the business or having used it only far a brief period. Would it be taxable in those circumstances? There seems to be no reason why it should not be taxable, but perhaps the Attorney-General could answer these specific points and not talk in general terms of the sale of the business as a whole. I should have thought that these were the kinds of cases which often happen in ordinary commercial transactions. What would happen under subsection (4) to those two cases?
    9.0 p.m.
    Mr. Diamond: I hope that we shall not allow the Amendment to pass without making the strongest possible representations, and I hope that this is a matter on which we shall express our views in very clear terms in the Division Lobbies. The Attorney-General was very courteous. He said that he understood my point. If I may return the courtesy, I understand his point of view perfectly. He has an extremely weak argument and is doing his best to defend it. He produced two arguments which he was not even entitled to use.
    First, the right hon. and learned Gentleman used the argument of the complexity of apportioning the purchased price. If he was talking about the apportioning as between the premises and other assets in the business, he knows that that apportionment has to take place already, because one cannot deal with the matter otherwise and one has to deal with Stamp Duty in any
    case. If he was talking about apportioning the price of the building alone, as between different parts of the building bought at different times, partly within and partly without the three-year period, there is no difference between that and the problem which arises in any case when there is a capital gain on land when one part has been bought within and the other outside the period and the whole lot has been sold in one lump sum. There is nothing at all in that argument, therefore, except the usual dust which is thrown in the jury's eyes from time to time.
    I return to the first point that the Attorney-General made, on the question of speculation. I may be wrong, but I have not seen the word speculation" used once in the Bill. I have seen all sorts of descriptions, but not the actual word. Speculation relates to motive, and the whole Bill is designed to remove the question of motive. The Bill says that if a person buys stocks and disposes of them within six months we are not concerned with his motive. He will be deemed to have made a profit and will pay the tax. If he sells after six months we are not concerned with his motive and he is deemed to have realised a surplus on an investment on which he does not pay tax.
    The Bill is designed to obviate going into the question of motives. To say that the inherent probability is that wherever this sort of sale arises it was not done with a view to making a profit, but was only incidental to carrying on the business, is an argument which the Attorney-General cannot use. In short, a distinction has been drawn. There is no justification whatsoever for the distinction and on the philosophy of the Bill, never mind the philosophy of the Labour Party point of view, this exemption should not stand. I therefore appeal to my right hon. and hon. Friends to press the Amendment to the full.
    Question put, That the words proposed to be left out, to "shall" in line 38, stand part of the Clause:—
    The Committee divided: Ayes 226, Noes 178.

    Division No. 197.]

    AYES

    [9.5 p.m.

    Aitken, W. T.

    Barber, Anthony

    Bell, Ronald

    Ashton, Sir Hubert

    Barlow, Sir John

    Berkeley, Humphry

    Atkins, Humphrey

    Barter, John

    Bridgood, John C.

    Balniel, Lord

    Batsford, Brian

    Biffen, John

    Bingham, R. M.

    Harrison, Col. Sir Harwood (Eye)

    Pearson, Frank (Clitheroe)

    Birch, Rt. Hon. Nigel

    Harvey, Sir Arthur Vere (Macclesf'd)

    Peel, John

    Bishop, F. P.

    Harvie, Anderson, Miss

    Percival, Ian

    Black, Sir Cyril

    Hastings, Stephen

    Peyton, John

    Bossom, Clive

    Heald, Rt. Hon. Sir Lionel

    Pickthorn, Sir Kenneth

    Box, Donald

    Henderson, John (Cathcart)

    Pike, Miss Mervyn

    Boyd-Carpenter, Rt. Hon. John

    Hill, Mrs. Eveline (Wythenshawe)

    Pilkington, Sir Richard

    Boyle, Sir Edward

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

    Pitt, Miss Edith

    Bromley-Davenport,Lt.-Col.SirWalter

    Hirst, Geoffrey

    Pott, Percivall

    Brooke, Rt. Hon. Henry

    Hobson, Sir John

    Prior-Palmer, Brig. Sir Otho

    Brooman-White, R.

    Holland, Philip

    Proudfoot, Wilfred

    Brown, Alan (Tottenham)

    Hollingworth, John

    Pym, Francis

    Browne, Percy (Torrington)

    Hopkins, Alan

    Quennell, Miss J. M.

    Bryan, Paul

    Hornby, R. P.

    Ramsden, James

    Buck, Antony

    Hornsby-Smith, Rt. Hon. Dame P.

    Rawlinson, Peter

    Billiard, Denys

    Howard, John (Southampton, Test)

    Redmayne, Rt. Hon. Martin

    Bullus, Wing Commander Eric

    Hughes Hallett, Vice-Admiral John

    Rees, Hugh

    Burden, F. A.

    Hughes-Young, Michael

    Rees-Davies, W. R.

    Campbell, Gordon (Moray & Nairn)

    Hulbert, Sir Norman

    Renton, David

    Cary, Sir Robert

    Hutchison, Michael Clark

    Ridley, Hon. Nicholas

    Channon, H, P. G.

    Iremonger, T. L.

    Ridsdale, Julian

    Chataway, Christopher

    Irvine, Bryant Godman (Rye)

    Roberts, Sir Peter (Heeley)

    Chichester-Clark, R.

    James, David

    Robinson, Rt. Hn. Sir R. (B'pool, S.)

    Clark, William (Nottingham, S.)

    Jenkins, Robert (Dulwich)

    Roots, William

    Clarke, Brig. Terence (Portsmth, W.)

    Johnson, Dr. Donald (Carlisle)

    Ropner, Col. Sir Leonard

    Collard, Richard

    Johnson, Eric (Blackley)

    Russell, Ronald

    Cooper, A. E.

    Johnson Smith, Geoffrey

    Scott-Hopkins, James

    Cordeaux, Lt.-Col. J. K.

    Jones, Rt. Hn. Aubrey (Hall Green)

    Sharpies, Richard

    Corfield, F. V.

    Kerans, Cdr. J. S.

    Shepherd, William

    Costain, A. P.

    Kerr, Sir Hamilton

    Skeet, T. H. H.

    Coulson, Michael

    Kimball, Marcus

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

    Courtney, Cdr. Anthony

    Kirk, Peter

    Smithers, Peter

    Craddock, Sir Beresford

    Kitson, Timothy

    Smyth, Brig, Sir John (Norwood)

    Crowder, F. P.

    Lancaster, Col. C. C.

    Speir, Rupert

    Cunningham, Knox

    Legge-Bourke, Sir Harry

    Stanley, Hon. Richard

    Curran, Charles

    Lewis, Kenneth (Rutland)

    Stevens, Geoffrey

    Currie, G. B. H.

    Lilley, F. J. P.

    Steward, Harold (Stockport, S.)

    Dalkeith, Earl of

    Lindsay, Sir Martin

    Stodart, J. A.

    Dance, James

    Litchfleld, Capt. John

    Stoddart-Scott, Col. Sir Malcolm

    d'Avigdor-Goldsmid, Sir Henry

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

    Studholme, Sir Henry

    Deedes, W. F.

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Talbot, John E.

    Donaldson, Cmdr. C. E. M.

    Longden, Gilbert

    Tapsell, Peter

    Doughty, Charles

    Loveys, Walter H.

    Taylor, Edwin (Bolton, E.)

    Drayson, G. B.

    Lucas-Tooth, Sir Hugh

    Taylor, Frank (M'ch'st'r, Moss Side)

    Duncan, Sir James

    MacArthur, Ian

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

    Eden, John

    Maclean,SirFitzroy(Bute&N.Ayrs.)

    Teeling, Sir William

    Elliot, Capt. Walter (Carshalton)

    McLean, Neil (Inverness)

    Temple, John M.

    Elliott,R.W.(Nwcastle-upon-Tyne,N.)

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

    Thatcher, Mrs. Margaret

    Emmet, Hon. Mrs. Evelyn

    Macmillan, Maurice (Halifax)

    Thompson, Kenneth (Walton)

    Errington, Sir Eric

    Macpherson, Niall (Dumfries)

    Thornton-Kemsley, Sir Colin

    Farey-jones, F, W.

    Maginnis, John E.

    Tiley, Arthur (Bradford, W.)

    Farr, John

    Manningham-Buller, Rt. Hn. Sir R.

    Touche, Rt. Hon. Sir Gordon

    Fell, Anthony

    Markham, Major Sir Frank

    Turner, Colin

    Fisher, Nigel

    Marten, Neil

    van Straubenzee, W. R.

    Fletcher-Cooke, Charles

    Mathew, Robert (Honiton)

    Vaughan-Morgan, Rt. Hon. Sir John

    Fraser, Hn. Hugh (Stafford & Stone)

    Matthews, Gordon (Meriden)

    Vickers, Miss Joan

    Fraser, Ian (Plymouth, Sutton)

    Mawby, Ray

    Vosper, Rt. Hon. Dennis

    Freeth, Denzil

    Maxwell-Hyslop, R. J.

    Wakefield, Sir Waved

    Gammans, Lady

    Mills, Stratton

    Walder, David

    Gardner, Edward

    Miscampbell, Norman

    Walker-Smith, Rt. Hon. Sir Derek

    Gibson-Watt, David

    More, Jasper (Ludlow)

    Ward, Dame Irene

    Gilmour, Sir John

    Morrison, John

    Webster, David

    Goodhart, Philip

    Nabarro, Gerald

    Wells, John (Maidstone)

    Goodhew, Victor

    Neave, Airey

    Williams, Dudley (Exeter)

    Gower, Raymond

    Nicholson, Sir Godfrey

    Wills, Sir Gerald (Bridgewater)

    Grant, Rt. Hon. William

    Noble, Mlchael

    Wilson, Geoffrey (Truro)

    Grant-Ferris, Wg. Cdr. R.

    Nugent, Rt. Hon. Sir Richard

    Wise, A. R.

    Green, Alan

    Oakshott, Sir Hendrie

    Wolrige-Cordon, Patrick

    Gresham-Cooke, R.

    Osborne, Sir Cyril (Louth)

    Woollam, John

    Grosvenor, Lt.-Col. R. G.

    Page, Graham (Crosby)

    Worsley, Marcus

    Gurden, Harold

    Pannell, Norman (Kirkdale)

    Hamilton, Michael (Wellingborough)

    Partridge, E.

    TELLERS FOR THE AYES:

    Mr. Finlay and Mr. McLaren.

    NOES

    Ainsley, William

    Bennett, J. (Glasgow, Bridgeton)

    Broughton, Dr. A. D. D.

    Allaun, Frank (Salford, E.)

    Blackburn, F.

    Brown, Rt. Hon. George (Belper)

    Awbery, Stan

    Blyton, William

    Brown, Thomas (Ince)

    Bacon, Miss Allce

    Boardman, H.

    Butler, Mrs. Joyce (Wood Green)

    Balrd, John

    Bottomley, Rt. Hon. A. G.

    Callaghan, James

    Baxter, William (Stirlingshire, W.)

    Bowden, Rt. Hn. H. W. (Lelcs.S.W.)

    Chapman, Donald

    Beaney, Alan

    Bowen, Roderlc (Cardigan)

    Cliffe, Michael

    Bellenger, Rt. Hon. F. J.

    Braddock, Mm. E. M.

    Collick, Percy

    Bence, Cyril

    Brockway, A. Fenner

    Corbet, Mrs. Freda

    Craddock, George (Bradford, S.)

    Jay, Rt. Hon. Douglas

    Price, J. T. (Westhoughton)

    Cronin, John

    Jeger, George

    Probert, Arthur

    Crosland, Anthony

    Jenkins, Roy (Stechford)

    Pursey, Cmdr. Harry

    Cullen, Mrs. Alice

    Johnson, Carol (Lewisham, S.)

    Randall, Harry

    Davies, G. Elfed (Rhondda, E.)

    Jones, Dan (Burnley)

    Rankin, John

    Davies, Harold (Leek)

    Jones, Elwyn (West Ham, S.)

    Redhead, E. C.

    Davies, Ifor (Gower)

    Jones, Jack (Rotherham)

    Rhodes, H.

    Davies, S. O. (Merthyr)

    Jones, J. Idwal (Wrexham)

    Roberts, Albert (Normanton)

    Diamond, John

    Jones, T. W. (Merioneth)

    Roberts, Goronwy (Caernarvon)

    Dodds, Norman

    Kelley, Richard

    Robertson, John (Paisley)

    Donnelly, Desmond

    Key, Rt. Hon. C. W.

    Rodgers, W. T. (Stockton)

    Driberg, Tom

    King, Dr. Horace

    Ross, William

    Ede, Rt. Hon. C.

    Lawson, George

    Short, Edward

    Edwards, Rt. Hon. Ness (Caerphilly)

    Ledger, Ron

    Silverman, Sydney (Nelson)

    Edwards, Robert (Bilston)

    Lee, Frederick (Newton)

    Skeffington, Arthur

    Edwards, Walter (Stepney)

    Lee, Miss Jennie (Cannock)

    Slater, Joseph (Sedgefield)

    Evans, Albert

    Lever, L. M. (Ardwick)

    Smith, Ellis (Stoke, S.)

    Finch, Harold

    Lewis, Arthur (West Ham, N.)

    Sorensen, R. W.

    Fletcher, Eric

    Loughlin, Charles

    Spriggs, Leslie

    Foot, Dingle (Ipswich)

    Lubbock, Eric

    Steele, Thomas

    Foot, Michael (Ebbw Vale)

    Mabon, Dr. J. Dickson

    Stones, William

    Forman, J. C.

    MacColl, James

    Strachey, Rt. Hon. John

    Fraser, Thomas (Hamilton)

    MacDermot, Niall

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

    Galpern, Sir Myer

    Mclnnes, James

    Swain, Thomas

    George, LadyMeganLloyd(Crmrthn)

    McKay, John (Wallsend)

    Swingler, Stephen

    Ginsburg, David

    McLeavy, Frank

    Taverne, D.

    Gourlay, Harry

    MacMillan, Malcolm (Western Isles)

    Taylor, Bernard (Mansfield)

    Greenwood, Anthony

    Mallalleu, E. L. (Brigg)

    Thomas, Iorwerth (Rhondda, W.)

    Grey, Charles

    Mapp, Charles

    Thompson, Dr. Alan (Dunfermilne)

    Griffiths, David (Rother Valley)

    Mason, Roy

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

    Griffiths, Rt. Hon. James (Llanelly)

    Mayhew, Christopher

    Wade, Donald

    Griffiths, W. (Exchange)

    Millan, Bruce

    Wainwright, Edwin

    Grimond, Rt. Hon. J.

    Milne, Edward

    Warbey, William

    Gunter, Ray

    Mitchison, G. R.

    Watkins, Tudor

    Hale, Leslie (Oldham, W.)

    Morris, John

    Weitzman, David

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Moyle, Arthur

    White, Mrs. Eirene

    Hart, Mrs. Judith

    Mulley, Frederick

    Whitlock, William

    Hayman, F H.

    Neal, Harold

    Wilkins, W. A.

    Henderson, Rt. Hn.Arthur(Rwly Regis)

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

    Williams, D. J. (Neath)

    Herbison, Miss Margaret

    Oliver, G. H.

    Williams, LI. (Abertillery)

    Holman, Percy

    Oram, A. E.

    Williams, W. R. (Openshaw)

    Holt, Arthur

    Oswald, Thomas

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

    Hooson, H. E.

    Owen, Will

    Wilson, Rt. Hon. Harold (Huyton)

    Houghton, Douglas

    Padley, W. E.

    Winterbottom, R. E.

    Howell, Charles A. (Perry Barr)

    Paget, R. T.

    Woodburn, Rt. Hon. A.

    Howell, Denis (Small Heath)

    Panned, Charles (Leeds, W.)

    Woof, Robert

    Hoy, James H.

    Parkin, B. T.

    Yates, Victor (Ladywood)

    Hughes, Cledwyn (Anglesey)

    Pearson, Arthur (Pontypridd)

    Zilliacus, K.

    Hughes, Emrys (S. Ayrshire)

    Pentland, Norman

    Hunter, A. E.

    Plummer, Sir Leslie

    TELLERS FOR THE NOES:

    Hynd, H. (Accrington)

    Popple well, Ernest

    Mr. G. H. R. Rogers and

    Prentice, R. E.

    Mr. McCann.

    9.15 p.m.
    Mr. F. V. Corfield: I beg to move, in page 13, line 38, after "interest)" to insert:
    "or land used for the purposes of husbandry only, together' with the farmhouse, farm cottages and farm buildings used in connection with that land".
    I can explain the abject of this Amendment very shortly. It is designed to ensure that farmland managed as a genuine agricultural enterprise is not included as a chargeable asset under this Clause.
    As I read the Clause—it may well be that I have read it incorrectly—farmland would be excluded only if it were ancillary to some farm buildings. This seems to me an odd way of expressing this sort of situation, because normally the buildings are ancillary to the farmland. There are cases in which genuine farming enterprises can be carried out on land on
    346
    which there are no buildings. It can happen in many cases that a forced sale takes place within the three-year period, particularly when a farming enterprise is carried on as a partnership, and something happens, and the partnership is dissolved.
    I hope that, even if my right hon. Friend the Chief Secretary cannot accept the Amendment, he will assure us that it is the Government's intention to exclude genuine farmland from the operation of this Clause and that if it is not excluded at the moment he will move an Amendment to exclude it at a later date.
    Mr. Ronald Bell: I associate myself with what my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) has said. I should like to go even further,

    347
    because it seems to me that not only farmland but all land and all kinds of real property should come within the ambit of an Amendment like this. It is difficult to understand why there should be this rather penal provision when the land has not been sold by the owner but has been compulsorily taken from him.
    Mr. Brooke: I will confine myself to the case which has been put forward so cogently and pleasantly concisely by my hon. Friend the Member for Gloucestershire, South (Mr. Corfield).
    The Government considered very carefully what should be the appropriate treatment of farms and farmland in this Bill. As my hon. Friend has properly observed, the Bill is so drafted that buildings occupied and used by the owner for the purpose of farming are exempt under subsection (4) from any charge under Case VII, and the farmhouse, if it has been occupied by the farmer as his sole or main residence, is exempt from the charge under subsection (3). To that extent, the Amendment is superfluous.
    It would be impossible to give a general exemption to farmland, as I think he appreciates. If there were such an exemption, anyone who owned agricultural land could sell pieces of it from time to time within the three-year period for development at a substantial profit and would escape the charge to tax entirely. If my hon. Friend's suggestion were accepted, the speculators would, in my judgment, step in and would decide that there was an attractive possibility of buying up farms, farming them for a very short time themselves, and then selling part of the land for development. I am sure that that is not what my hon. Friend wishes. His concern is that the farmer shall be able to carry on his business in the proper way.
    My hon. Friend raised the question of partnership. It is not the normal case, but it might sometimes occur. If the partnership is being broken up and the land is remaining in agricultural use, I think it most unlikely that there would be any severe charge to tax because the land would not be liable for tax had it been owned for more than three years. Movements in agricultural prices are not
    348
    so swift that vast capital gains arise within three years on the sale of agricultural land for continued agricultural use. If, on the other hand, when a partnership is being broken up part of the farmland is sold for development purposes, there seems no reason why a charge for tax should not arise.
    The Government have considered the matter carefully. The question of compulsory purchase, to which my hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) referred, will arise on a subsequent Amendment and I say no more about it now. My hon. Friend the Member for Gloucestershire, South will, however, appreciate that it would not be fair to anybody to give a general exemption for farmland from the Bill as he suggests.
    I hope that what I have said about the farm buildings and the farmhouse will satisfy my hon. Friend that a substantial part of the purpose of his Amendment is already satisfactorily dealt with in the Bill.
    Mr. Corfield: I agree with a great deal of what my right hon. Friend has said, but would it not be possible to consider the problem of a partnership where one partner wishes to go on with partnership? It is possible to carry out substantial improvements to land by means of drainage and fencing, for example, even within three years. It seems to be wholly contrary to the intention of the Clause, which I support in principle, to include that type of improvement as chargeable for this purpose. If my right hon. Friend can either assure me that the point is already covered or consent to look into it, I will ask leave to withdraw the Amendment.
    Mr. Brooke: I assure my hon. Friend that, as I understand the matter, if the value of the land has been enhanced by expenditure upon it for drainage or other purposes, that would be taken into account in the calculation and there would not be a charge under Case VII for the increase in the value of the land which had been brought about by expenditure on the part of the owner in improving the land. I hope that, with this assurance, my hon. Friend will feel able to withdraw the Amendment.
    Mr. Corfield: On the basis of what my right hon. Friend has said, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Question proposed, That the Clause stand part of the Bill.
    Mr. Ronald Bell: Perhaps it will be appropriate for me at this stage to make my few comments. I take it, Sir Robert, that you are not calling the further Amendment in the name of my hon. Friend the Member for Gloucestershire, South (Mr. Corfield), also in page 13, line 38, after "interest)" to insert:
    "and any land used for the purposes of husbandry only, farm house, farm building or farm cottages which are compulsorily acquired by any authority"
    The Deputy-Chairman The Deputy-Chairman indicated assent.
    Mr. Charles Loughlin: On a point of order. May we know just where we are? I understood you, Sir Robert, to put the Question, "That the Clause stand part of the Bill." Are we now discussing the possibility of dealing with an Amendment?
    The Deputy-Chairman: No. The Question which I have put to the Committee is, "That the Clause stand part of the Bill." The hon. Member for Buckinghamshire, South (Mr. Ronald Bell) was, I think, seeking to raise on that Motion a point raised in an Amendment which can be discussed later.
    Mr. Ronald Bell: I am obliged, Sir Robert.
    Mr. Geoffrey Johnson Smith: I should be glad if my right hon. and learned Friend the Attorney-General could clear up two points in connection with Clause 10 (3). That provision exempts from a speculative gains tax the owner-occupied dwelling-house and also land which surrounds it up to an area of one acre. If we read further, we discover that a larger area may be so exempt having regard to the size and character of the dwelling-house. We note that the Commissioners are the people who will determine whether the larger area should be taken into account. I suppose that one of the things they must decide in coming to their judgment is whether or
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    not the larger area is required for the reasonable enjoyment of the residence.
    I am sure there is a simple answer to my first point. It relates to the Commissioners taking into account the land which surrounds an owner-occupied residence. Suppose someone wishes to sell the property and has on the land a stable block, a service cottage or other outbuildings. It is possible to find small residences surrounded by perhaps five acres. Are those buildings also exempt from the effects of the tax, or are they regarded as a chargeable asset?
    Secondly, is not the Clause giving rather wide powers to the Commissioners? I imagine that it is an issue of fact and the citizen has no recourse elsewhere as there is no right of appeal. If there were some legal dispute, the citizen could have recourse to the law. I am no lawyer, as must be apparent from that comment. However, there are many other people who are not lawyers, and I imagine that they might be worried about these powers.
    The Commissioners are being asked to make a very subjective evaluation. They are being asked to say that an owner of a property who wants to sell it within the course of three years, or may have to sell it for personal reasons, shall pay tax if they decide that certain outbuildings are not an integral part of the property, or are not things which are required for the reasonable enjoyment of the property. I visualise the case in which a widow may wish to sell as a whole property left to her, with the buildings on it, and may be forced to pay a sizeable tax.
    I should have thought that this was giving a wide power to the Commissioners when they are having to make a very subjective evaluation of what is and what is not to be included as a chargeable asset in properties of this nature.
    The Attorney-General: My hon. Friend the Member for Holborn. St. Pancras, South (Mr. G. Johnson Smith) has raised two points, one relating to the Commissioners. The appropriate body here will either be the local General Commissioners, who will know the locality well and be able to determine such a problem when brought before them without any great difficulty,

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    one would have thought, or in particular cases the Special Commissioners. I do not think that they, with their knowledge of the area, will have any difficulty in discharging the task, should it be put before them.
    The reason why it is necessary to make what is initially an arbitrary limit to the area of garden or grounds used for the enjoyment of the residents is that one of the frequent methods of securing large speculative gains now is to buy a property with extensive grounds and, while retaining the property, to sell part of the grounds for development. But, of course, where the house naturally would have a larger area than that specified in the Clause—larger than one acre —regard can be had to that by the Commissioners. I do not think that, in substance, any difficulty would arise with regard to that.
    9.30 p.m.
    My hon. Friend's second point with regard to other buildings apart from the dwelling. Insofar as these other buildings are distinct and separate buildings, they will not form part of the dwelling-house and will not be exempt from the charge. That is to say, cottages which are separate dwelling-houses will not be exempt, but buildings which really form part of the dwelling-house will be exempt.
    Mr. Jasper More: Will my right hon. and learned Friend make clear what are the special cases in which recourse could be had to the Special Comissioners?
    The Attorney-General: If anyone wishes to claim, in a sale of a house and grounds, that the area which should be regarded as reasonable for enjoyment of the house or grounds or garden exceeds one acre, he can go to the Commissioners and ask them to agree that it is a reasonable area.
    Mr. More: My question related to the Special Commissioners.
    The Attorney-General: They can deal with the matter, if he wants to go to them, just as well as the General Commissioners. They are two alternative bodies.
    Mr. Houghton: I would advise any appellant to stick to the local Commissioners in a dispute of this kind.
    None of us really likes this kind of Clause, which gives power to a body of Commissioners to determine a purely arbitrary matter of this sort, but it would have been wrong to have stuck to a limit of one acre, or any other acreage, in relation to the different types of houses that it may be necessary to deal with. It would be quite wrong, for instance, to regard one acre as the appropriate grounds to, say, Chatsworth House. A good many acres might go with that house.
    The essential point is that, whatever the amount of land that goes with the house and is therefore exempt under this Clause, it should be regarded as inseparable from the reasonable enjoyment of the house. I am not so concerned about this, although I looked at it very carefully. But I am very anxious, in this and in other respects, to reduce the area of dispute between the taxpayers and the Inland Revenue. That is very desirable. Even though it may mean rougher justice and fixing arbitrary conditions, at least people know better where they stand than if there is some doubt that may have to be resolved on appeal.
    I regret that subsection (4) is still in this Clause. It is a blemish. One of the disadvantages in ringing the changes on the Treasury Bench is that we do not have the same person making speeches on different Amendments or on different subsections of the same Clause. I thought that the Chief Secretary was much more robust in dealing with the reasoned Amendment on agricultural land than the Attorney-General was when dealing with subsection (4). I would have liked to have heard him dealing with the Amendment and the Chief Secretary dealing with subsection (4). But this very astute way in which they employ guile upon the Committee is rather disconcerting.
    This Clause deals with the chargeable assets under the Bill. Whether they go as far as they should is a matter for judgment perhaps as time goes on. There are other sources of substantial speculative gains which are outside the

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    Clause. For example, works of art now appear to come very much into the range of speculative transactions. Although for the time being we think that the scope of the Clause is about as wide as it can be, I do not think that it will necessarily remain so for all time.
    The Opposition must defend the Attorney-General on his last speech while opposing him on his earlier speech, and be fairly convinced by the Chief Secretary's reply on agricultural land. I notice that he had to reply to two speeches which were extremely brief and, on this side of the Committee, almost inaudible.
    Mr. Glenvil Hall: May I revert to the issue about the Commissioners? Do I understand from the Attorney-General that an individual making an appeal can, at his own option, appeal either to the Special Commissioners or to the General Commissioners?
    The Attorney-General: Yes.
    Mr. G. Johnson Smith: I do not want to be a bore about subsection (3), nor to detain the Committee for too long, but I was a little unhappy with my right hon. and learned Friend's reply when he said that outbuildings, stable blocks and buildings of that nature, would be a chargeable asset if a sale took place within the three-year period.
    There are two obvious circumstances in which a sale might be forced upon an individual. One is the death of a husband or wife when the survivor finds that the property is too large or too expensive for occupation and, therefore, wants to sell. Bearing in mind all the other problems which arise in a case like that, it seems monstrous to ask a person to pay tax on outbuildings when the residence and land surrounding it are being sold as a whole, in one lot.
    fThe other circumstance is when someone who has bought a property of that nature—and there are many such examples in the Home Counties of which I have personal knowledge—within the period of three years is asked by his employer to move to another part of the country. Is that person to pay speculative gains tax on outbuildings when he is selling the property as a
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    whole? That is why I was very unhappy with my right hon. and learned Friend's reply.
    The Attorney-General: I am sorry that my hon. Friend was unhappy about my reply. I should have thought that it was a very improbable case that there would be such a profit on the sale of outbuildings acquired within the last three years as to raise any real liability to any tax. One has to draw the line and the line is drawn with dwelling houses and gardens and grounds on one side and cottages, which may be convenient for housing staff in employment in the dwelling-house, on the other and outside the scope of the subsection.
    Mr. Hirst: I am not at all satisfied. I cannot understand why these buildings should not be within the scope of the Clause. The argument of my hon. Friend the Member for Holborn and St. Pancras, South (Mr. G. Johnson Smith) is substantial. Outbuildings, in this context, are a part of the estate. The Attorney-General has not treated the Committee with the respect due to it. There must be some logic in this situation. To argue that, in theory, the outbuildings will not increase in value in the next three years is so much poppycock. We do not sit here at night to listen to arguments like that and it is scandalous that such remarks should be made.
    On what grounds of logic is the Attorney-General asking the Committee seriously to say that outbuildings, which, of course, are part of the hereditament, should no longer he so and that after the short time of three years their value is not likely to increase? The whole thing makes me absolutely sick.
    The Attorney-General: I hope that my hon. Friend the Member fat. Shipley (Mr. Hirst) has dined sufficiently well.
    The answer which I gave to my hon. Friend the Member for Holborn and St. Pancras, South (Mr. G. Johnson Smith) is that if these buildings come under the heading of a dwelling, then they are exempt. But my hon. Friend was treating them as distinct and separate dwellings, and cottages was one of

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    his examples. Such dwelling would be outside the scope of subsection (3).
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 11.—(GENERAL OPERATION OF CHARGE.)
    Sir Henry d'Avigdor - Goldsmid: I beg to move, in page 14, line 23, at the end to insert:
    Provided that disposal of an asset shall not include its disposition or destruction through act of God, force majeure, compulsory purchase and other causes outside the control of the tax payer; and provided further that it shall include the non-exercise of an option or other right to acquire or dispose of chargeable assets.
    The Deputy-Chairman: With that Amendment can be discussed the Amendment to Clause 10, page 13, line 38, after "interest)" insert:
    "and any land used for the purposes of husbandry only, farm house, farm building or farm cottages which are compulsorily acquired by any authority"
    and that in Schedule 9, page 51, line 14, at the end insert:
    Provided that where money is paid under such a contract conferring an option and the option is not exercised, such money and any commission that is unconditionally payable in accordance with the contract shall be treated as losses allowable for the purposes of Case VII.
    Sir H. d'Avigdor-Goldsmid: I make no apology for having read the Amendment in full. My right hon. and hon. Friends and I attach considerable importance to it. We think that where a taxpayer disposes of property against his will and by force majeure he should not thereby incur a charge for tax. I make no apology either for the element of tautology in the drafting of this Amendment. I was most anxious to see whether it would attract any attention from the other side of the Committee, and I am glad to see that one representative of the Liberal Party is present and that the Opposition Front Bench is as usual well filled.
    There is here an interest not exclusive to this side of the Committee, because hon. Members on both sides are aware that compulsory purchase by local
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    authorities for housing purposes affects many people of humble means, and not only people of one political affiliation. I think, therefore, that we might have had better support from the other side of the Committee on this important point relating to the rights of the subject.
    The obvious point that arises here is compulsory purchase by local authorities for the purpose of clearance. This is something with which we are all familiar and I need not labour it. There are other elements about which I shall say more. There is the compulsory purchase of shares under Section 209 of the Companies Act, 1948. This is a rather more sophisticated matter, and arises when a buyer has obtained 90 per cent. or more of the capital of a company and can require the holders of the remaining 10 per cent. of the shares to sell to him on the same terms as he acquired the other 90 per cent. Here again there are unwilling sellers being forced by force majeure to dispose of assets in circumstances which, as the Clause is drawn, would attract tax.
    There is also the case of the person who is unlucky enough to have his house destroyed by fire. It is possible that, having over-insured, he might as a result of that accident come into possession of a larger sum of money than he originally paid for the house. These are things which occur, and I am sure my right hon. and hon. Friends will have no difficulty in expressing their view that these things should be outside the basis of taxation.
    The second leg of the Amendment is slightly different. It refers specifically to options. I know that options are dealt with later in this Measure, but I bring them in here because I think it would be useful if the Government declared their intention in regard to options because there may be consequential changes to be faced later if their attitude is other than entirely negative.
    9.45 p.m.
    In the case of an option on a transfer of shares, if the option is exercised and the shares purchased and subsequently resold the price of the option is counted as an expense of the transaction. That seems perfectly clear logic and quite unexceptional. There are other cases which

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    are not quite so clear. Suppose the option is not exercised. Had it been exercised it would have been allowed as an expense. Surely it remains as an expense although it is not exercised. Contrary to the views expressed by hon. Members opposite during the last few days, shares do go down as well as up. In fact I would wager that more options are bought and not exercised than those which are exercised. That is not something subject to proof.
    The Government should give us a clear reply about whether they have considered allowing an option as an expense whether it is exercised or not exercised. It should be allowed as a loss in connection with the assessment. Another rather more complicated case arises concerning options which companies sometimes give to their employees. There is a judgment of 1961 which renders those options liable to tax under Schedule E if the option has a value at the time it is granted, if, in other words, it is an option to purchase shares a: market price. An employee granted an option of this sort who has paid tax on it and finds later that it is not worth while exercising it because the value of the share has gone down, instead of going up as had been hoped, is then in a position of having been assessed for tax on an option which he has not been able to exercise. Surely there is a good case in equity for him to claim a rebate of taxation in respect of tax he has paid on an option which he did not exercise.
    I raise these points in language which I hope will be intelligible to both sides of the Committee, not that I think there is the tiniest chance of the Parliamentary draftsmen being able to accept them but because they form a useful peg on which to rest an argument which goes very deep. It concerns the rights of the people of this country, not rich men, but every owner of property, however humble, which is liable under this Clause for taxation in respect of matters in which he himself has been subject to force majeure.
    Mr. Ronald Bell: What I say three times is true. On this occasion, I think that I must have struck the right moment
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    for making the observations I sought to make earlier.
    I wish to support everything said by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), especially about compulsory purchase. I am less entitled to speak of the intricacies of options than he is. The wrong which will be done if the owner of land has to pay tax under this new arrangement because the property has been compulsorily purchased is, I think, quite obvious to everyone.
    A man who possibly did not need to sell the property and make a capital profit at all, whose intention was to remain the owner of it—in the case of a Harm perhaps to go on farming it—because a Department of State or local authority, against his will, takes the property from him, is made to pay at the full rate of Income Tax or Surtax on the notional profit which has been made. I think that this was clearly not within the original intention of the Government in putting forward the Bill, but it may be a consequence which they find it a little difficult to avoid.
    I suppose that it may be said that sometimes there are voluntary transactions in the shadow of compulsory purchase orders and that it may be a little difficult to distinguish between the voluntary sale which has been made by negotiation with a Department of State or the local authority and the case where negotiations have broken down and the transaction takes place under the compulsory powers. I can see that there is a practical difficulty there. It might mean that in nearly all cases property would be bought compulsorily within three years of its purchase and there would not be a negotiated settlement.
    I do not think that is a very serious consideration, or that it matters very much, since the price now paid on a compulsory purchase is the fair market price, which should not differ substantially from the price that would be paid by voluntary negotiation between the acquiring authority and the seller. If the making of the exception proposed by my hon. Friend in his Amendment were to mean that invariably we had the compulsory purchase procedure adopted in the not very numerous cases where

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    property was taken within three years of being acquired, I would not think that that was any major inconvenience.
    The present charge is conceived, certainly in the method of its computation, as being levied upon something which is "an adventure in the nature of trade". I take those words from Clause 12 of the Bill. It cannot be said that a man whose property is taken from him by a Department of State against his will is engaging in an adventure by way of trade. If that is a fair argument, then something in the nature of my hon. Friend's Amendment should be accepted by the Government. Otherwise, to take one example, a man who has bought a farm and wants to be a farmer, and has it taken from him compulsorily by a Department of State or a local authority, perhaps in time of inflation, may find that there is a paper profit. He has to pay at the full rate of tax on that paper profit and then has to buy a farm with assets which have been depleted by perhaps 30 per cent.
    That is a real and substantial injustice. It is no good the hon. and learned Member for Kettering (Mr. Mitchison) shaking his head. I do not know whether he means it is not an injustice, or that it would not happen.
    Mr. Mitchison: As the hon. Member asks me, I would say that I doubt whether he would be disposing of his property.
    Mr. Bell: What the hon. and learned Gentleman is saying is that the acquisition by compulsory purchase would not fall within the ambit of the tax. If what the hon. and learned Gentleman says is borne out by my hon. Friend, and the Solicitor-General says that it is not necessary because such transactions would not be caught by the tax, I am sure that my hon. Friend would be delighted not to proceed with his Amendment, but I have no such confidence. My own reading of the Bill, which I advance in all humility, is that such transactions will be caught as the Bill is at present drafted.
    Mr. Glenvil Hall: I think that I have followed the hon. Gentleman's argument correctly. As I understand it, in his illus-
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    tration the individual would purchase the farm to live there. If that is so, the Clause would not bite.
    Mr. Bell: The right hon. Gentleman is mistaken. The exemption for dwelling-houses does not extend to unlimited land appurtenant to them. Indeed, it extends only to a limited cartilage of one acre. I am not at all sure that it would extend to one acre of farmland. It is for land to be enjoyed with the house, land in the nature of a garden. It is certain that an ordinary farm of about 90 acres would not come within the exemption in favour of a dwelling-house. I think that is beyond doubt. [HON. MEMBERS: "No."] Naturally, I stand to be corrected, but I do not think that I am wrong. If a person who bought a farm with the intention of farming it had it taken from him within three years, and if general farm prices had risen by 20 or 30 per cent, in that district in that period, he would have to treat it as a profit and pay full Income Tax and possibly Surtax on it. He would then have to buy a farm with the depleted assets which he had left.
    That is the position under the Bill as drafted. It is plainly unjust. I can see that certain practical difficulties would be encountered in any attempt to solve the problem, but I say that they are not insuperable and that the effort should be made in common justice to people who find themselves in such difficulties.
    Mr. H. Rhodes: The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said that he hoped that the Amendment would attract the attention of the Opposition. It has attracted the attention of one Member of the Opposition—me. In the past I have taken a good deal of notice of the hon. Member's speeches and agreed with many of them, but I cannot agree with him now. When I saw the words "compulsory purchase" in the Amendment my mind went back to an occasion before Christmas when the Bank of England sold a property. The property was the St. Luke's property, which used to be the old Mint. The Bank sold this property some weeks before Christmas to Oddenino's Investment Company for £900,000. The property was resold at the beginning of this year for £1,500,000.

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    I raised this matter in the House. The Minister who I expect will reply to the Amendment, the Economic Secretary, said this:
    "I am informed by my right Friend the Minister of Agriculture that it was not until some months after the Bank had contracted to sell the site that he was advised that it might be suitable for the Covent Garden Market Authority."—[OFFICIAL REPORT, 25th January, 1962; Vol. 652, c. 396.]
    It would be outside the limits of order if I attributed any blame to the Minister of Agriculture or to the Bank of England for their ineptitude in not being aware of legislation which was before the House of Commons. It is not my purpose to do that tonight. I want rather to direct the attention of the Committee to the item compulsory purchase "in the Amendment.
    It so happened that the L.C.C. bought the property from Oddenino's Investment Trust. As this property was required for the new Covent Garden Scheme, the L.C.C. had compulsory powers, but it did not exercise them. Despite the fact that the price for the building at the beginning of the year had been £1½ million, showing a clear profit of £600,000 in a few weeks, the L.C.C. did not press for acquisition by compulsory purchase. Why was that? The reason was that it got a better price without.
    If it had not so been able to get a better price the L.C.C. would be shown in a very bad light indeed, and it could be accused of ineptitude, but in such circumstances, were this Amendment accepted, that Trust would have held back for a better price, so that the L.C.C. in exercising its powers of compulsory purchase would have paid a higher price. Although I do not expect the Economic Secretary to refer to ineptitude on the part of anybody involved in that transaction, I hope that my argument is strong enough to induce him to reject the Amendment.
    10.0 p.m.
    Mr. Barber: This Amendment concerns a number of important and difficult issues. They are important because they raise a point of principle —Ithis has, I think, been recognised on both sides of the Committee—and they
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    are difficult because, if we were to adopt even in part the suggestions made, we should have to give most careful consideration to the consequences of doing so.
    The proviso that my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) wishes to insert falls, as he indicated, broadly into two parts—the part concerned with what one might call involuntary disposal, and the part concerned with options that are not exercised. I should like to adopt his approach to the matter and deal with it in those two separate compartments; in other words, to deal first with involuntary disposal.
    I want, at the outset, to clear away one point. I would remind the Committee of the terms of the first leg of the proviso which my hon. Friend wishes to insert:
    "Provided that disposal of an asset shall not include its disposition or destruction through act of God, force majeure, compulsory purchase and other causes outside the control of the tax payer …"
    To some extent, the terms of the proviso are unnecessary because, under the Bill as drafted, the destruction of an asset, which is specifically referred to in the Amendment, does not involve its disposal. To take the case where a property is purchased, and where the three-year period applies, and the property is destroyed by fire within that period, that destruction will not, in itself, give rise to a charge under Case VII. Furthermore, if one assumes, as did my hon. Friend in the case he gave, that the property was insured and that the insurance money exceeded the cost of the acquisition of the property, the mere fact that the property was destroyed by fire and that the insurance moneys received were greater than the cost of acquiring the property, would not, in itself, give rise to a charge under Case VII. I ask, therefore, what is left of the effective operation of the first leg of my hon. Friend's Amendment? The answer is, I think, the very important category of involuntary disposals which are at present within the scope of Case VII and which this proviso would take outside.

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    This raises a point of both principle and practicability. The point of principle is this. My right hon. and learned Friend has explained why he is not in favour of a conventional capital gains tax and why this part of the Bill is concerned in the main with transactions of a speculative character. I say "in the main" because it simply is not practicable in trying to identify what transactions are of a speculative character to rely on the test of motive. He has, therefore, followed the practice of a good many European countries and has incorporated a time test.
    As I understand it, the point behind the first leg of the Amendment is that the motive is clear and that the transactions are not of a speculative character because they are involuntary. This point merits our most careful consideration. I am a little surprised that on a matter concerning compulsory purchase there is no representative of the Liberal Party here. However, there are two types of compulsory acquisition which immediately come to mind. The first is the compulsory acquisition of shares under Section 209 of the Companies Act, 1948, and, of course, the compulsory acquisition of land. Different considerations apply to each.
    Regarding the former, the compulsory acquisition of shares, I would remind the Committee that Section 209 of the 1948 Act enabled a company which had acquired 90 per cent. of the shares held by another company, with the agreement of the majority of its old shareholders, to compel a dissenting minority to do the same as the assenting majority had agreed to do. I am sure that the Committee will agree, in the context of the proposals in the Amendment, that there would be no ground for exempting a person who at the time of buying the shares knew that the other company was proposing to take them over. He would, after all, have bought the shares in the knowledge of what was to take place. The fact is that in these cases where there is compulsory acquisition within six months of the purchase of the shares, the odds are strongly in favour of the person concerned having had some knowledge.
    It follows that in the vast majority of cases—perhaps not in every one—persons who are compelled to dispose of
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    their shares under this Section will be those who bought the shares in the anticipation of that event and have done so for whatever profit it would give them. There is another important aspect to be considered, and I am sure that my hon. Friends will see the force in it. To exempt those who dispose of their shares could have awkward effects on arrangements for company amalgamations, for those who agreed to dispose of them in connection with the amalgamation would be liable to be taxed while those who refused to agree would not be subject to tax on any profit they made. I do not see how one could exempt them all. The charge in such cases is likely to be of very limited application because of the way in which paragraph 12 of the 9th Schedule operates.
    I now turn to the compulsory acquisition of land. My right hon. and learned Friend had already given a great deal of consideration to this point before the Bill was published and I must remind the Committee of some of the very real difficulties which are involved in providing exemption in these cases. I want to be fair and to present the other side, too.
    The first and most obvious difficulty is that which was mentioned by my hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell). If, for example, a local authority wished to acquire a piece of land and agreed to a mutually satisfactory purchase price, as frequently happens, and the land was conveyed within the three-year period, tax would be due, but if the vendor's next de-or neighbour declined to sell his land, required for the same project, and the machinery of compulsory purchase was brought into operation, he would avoid tax. The result would be that where there were compulsory powers of acquisition in the background nobody would enter into a voluntary sale, if it was within the relevant period, and everybody would insist upon his land being compulsorily acquired.
    It follows that if we did what our hon. Friend suggests we would have to provide exemption not only where land is compulsorily acquired but also where land is disposed of voluntarily but where there are compulsory powers of acquisition in the background. The Committee

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    will immediately see that this goes beyond the terms of the Amendment and —I put it no higher—it would not be easy to translate it into legislative form. But we are looking at this aspect already.
    Mr. Ronald Bell: Is there any difficulty in going through the form of compulsory purchase and having an agreed price? This is not unusual. There is often consent to compulsory purchase and then agreement about the price and one merely goes through the drill. There is no disadvantage. I should have thought that that would be a solution to this difficulty.
    Mr. Barber: I was trying to point out that if we travelled along the lines of the Amendment and did not go further it would surely mean that it would pay a person not to enter into a voluntary sale and to insist that he was compulsorily acquired. This seems to me to be a relevant consideration. If we were able to meet my hon. Friends on this very important point, we would all like to do so in such a way that, by virtue of our fiscal legislation, we would not force people to insist upon compulsory acquisition when they would otherwise not do so. That was the only point I was trying to make.
    I am sure that my hon. Friends will not under-estimate these difficulties, but I want to be frank and to say that I see the force of the argument of my hon. Friend the Member for Buckinghamshire, South that in a bona fide case where a person buys land as an investment and, quite out of the blue and against his wishes, it is compulsorily acquired, such a case is not in the nature of speculation. This is a very appealing argument. I am trying to present the case perfectly fairly.
    There is another point in favour of my hon. Friends which I do not think has been raised. It is that if the law remains as it stands in the Bill there would seem to be an incentive for a person who is approached by the local authority to hold out and employ delaying tactics for a sufficiently long term to take the trans action outside the three-year period. This is an aspect which has been mentioned from the benches opposite and which we have to consider very carefully.
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    I hope that the Committee will agree that I have tried to present fairly both the difficulties and the arguments in favour of an amendment. I cannot make any promise, but I can give the firm assurance to the Committee that in the light of what has been said this evening we will look at the matter again between now and Report and see whether anything can be done to exclude from the charge the bona fide case of the disposal of the land where there are compulsory purchase powers.
    10.15 p.m.
    I am sorry to be so long, but the Amendment covers two rather different points. I turn now to the other aspect of the matter, the effect of providing loss relief in respect of the non-exercise of an option. The charge imposed by the Bill is limited to gains on the acquisition and disposal of assets within the prescribed time limit. Similarly, the losses which can be set against such gains are losses arising on the acquisition and disposal of assets within the time limit. If money is paid for an option to acquire an asset and the option is exercised, then the money paid for the option will be brought into account in arriving at the purchaser's cost if he is chargeable by reference to an acquisition and disposal within the time limit, and, of course, the same will apply to the seller's receipt on disposing of the asset if he is chargeable.
    If the option is simply allowed to lapse, the man who has given money for the option gets no relief for it, and—this is important, in view of the way the Amendment is worded—the man who has received the option money is not charged in respect of it. There has been no acquisition and no disposal of the asset and, so far as the option itself is concerned, the person who acquired the option has not disposed of it but has allowed it to lapse.
    As I understand it, the Amendment is designed to make the non-exercise of an option to acquire or dispose of chargeable assets a disposal for the purposes of the legislation, so that the person who had acquired an option and did not exercise it would have a loss, allowable under Case VII, equal to the cost of the option. But the Amendment does not impose a charge on the person who receives money for granting such an

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    option. Logically, I should have thought, that, if there were relief for the person who pays for an option and does not exercise it, the person who receives the money for the option should be charged on it. I am sorry that this is rather complicated, but I must explain the matter in detail.
    Even, however, if this further step were taken, it would be difficult to secure a result consistent with a scheme for taxing short-term gains on the acquisition and disposal of assets. It would be unreasonable to charge the man who received money for an unexercised option under which he might be required to sell an asset he had held for many years. From this point of view, the granting of such an option might be a convenient way of proceeding to sell his assets, and it would not, therefore, be right to charge the option money as being a short-term receipt on its own.
    Since this means that only some option money should be chargeable as receipts, it would be inconsistent to allow relief for all option money laid out on unexercised options because, equally, some options might have been taken with a view to acquiring a long-term investment and then abandoned. Clearly, there is no means of distinguishing between money paid for unexercised options which ought to be allowed and those which ought not to be allowed.
    I am sure that the Committee will see the force of this argument. I assure my hon. Friend that we have looked at the matter with very great care. To return to the first leg of the Amendment, which deals, broadly, with involuntary disposals such as disposals by compulsory acquisition, I hope that, in view of the assurance I have given, my hon. Friend will not press the Amendment.
    Mr. Mitchison: I have not much to add to what the Economic Secretary has just said. If the words "disposed of" and "disposition" are to be used all through the Bill as they are, it ought to be made perfectly clear whether what is referred to is a voluntary act or the mere alienation of property including alienation under compulsion. There is no definition of "dispose of" which I can find, and most of the Bill is consistent with either use of the expression.
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    Next, as to the point about compulsory purchase, this is to be looked at again and, no doubt, we shall hear more of it in one shape or another at a later stage. I much appreciate the hon. Gentleman's point that we do not want to set a premium on people who drive local authorities to compulsory purchase instead of arriving at a reasonable bargain, or on those who delay so long in coming to terms that the ordinary public functions of the local authority are impeded. I think that we must bear that in mind.
    I find very great difficulty in seeing what is meant by the acquisition and disposal of an option, as such, and that is really what we are talking about. I agree with the hon. Gentleman that there is no logical distinction between those who pay money for an option and those who receive it. If it is to be brought into account on one side of the ledger, then, also, it should be brought into account on the other side. When I find that hon. Members opposite seek to bring it in only as a loss, I look not to their logic, but to their politics.
    Sir H. d'Avigdor-Goldsmid: I think that my hon. Friend the Economic Secretary has dealt very fairly with the Amendment, and, on the compulsory acquisition side, I thought that the points he made were good. I think that we take particular comfort from the fact that he will look at the matter again in connection with compulsory acquisition of farm land—the point mentioned by my hon. Friend the Member for Gloucestershire, South (Mr. Corfield).
    There is, however, one point with which he did not deal at all, and that concerns an option not bought for a cash payment, where option money is paid, but where an employee has received from his employers the grant of an option, and has been taxed on it, under a decision which, I am told, is that in the case of Abbott v. Philbin, in 1961. This is a very real point, because it is not remotely covered by what he said on options generally, when speaking of options being bought and sold. This is the option given on which the taxpayer has paid the tax on its value and subsequently has not exercised it because it did not prove to be of value. That seems to me to be a point deserving of

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    attention, but which he did not mention, and if my hon. Friend will give me an assurance that he will look at it I shall be pleased to withdraw the Amendment.
    Mr. Barber: I am sorry that I did not refer to that point, but I did not give any consideration at all to the point before I heard my hon. Friend, because I did not think that it was covered in the second part of the Amendment. I will certainly look at it; indeed, I would
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    be most grateful if the Committee would allow me to look at it further with my right hon. and learned Friend the Attorney-General before giving the Committee an answer.
    Sir H. d'Avigdor-Goldsmid: In view of that reply, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Sir H. d'Avigdor-Goldsmid: I beg to move, in page 16, line 36, at the end to add:
    "save that a person disposing of land by letting it for a term of twenty-one years or more shall not be chargeable under Case VII in respect of any income arising from the letting which is otherwise taxed."
    This is an Amendment concerning a rather difficult technicality. I should like to draw the attention of the Committee to subsection (11) on page 16 of the Bill, which begins by saying:
    "Except as provided by section twelve of this Act, a person disposing of land by letting it for a term of less than twenty-one years shall not be chargeable under Case VII."
    I do not need to bother the Committee with the rest of that Clause. The fact is that this is not a taxing Clause in itself in respect of land let on leases for twenty-one years or more, but, at the same time, there is a supposition from this exemption that land let on leases of twenty-one years or more will be considered as disposed of, for the purposes of Case VII, and if the disposal through the granting of a lease comes within three years of the acquisition of the land, tax will be levied. We are not told how the tax will be levied, but presumably the Revenue will capitalise the lease granted. I am glad to see my right hon. and learned Friend the Attorney-General shaking his head, because I have had to proceed by guesswork for the sad reason that no information has been afforded us on this Measure except this clue that transactions of less than twenty-one years would not be caught. I am dealing with transactions of twenty-one years or more, and, if the intention of my right hon. and learned Friend in shaking his head is to convey the impression that leases of twenty-one years or more granted within three years are not caught, I need say no more.
    The Attorney-General: My hon. Friend talked about the capitalised value of the lease. That is not brought in, and I will explain why in due course.
    Sir H. d'Avigdor-Goldsmid: I should be wasting the time of the Committee if I made a long speech which my right
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    hon. and learned Friend proposes to rebut. I would rather listen to his explanation.
    The Attorney-General: I appreciate that what my hon. Friend the Member for Walsall, South (Sir H. d'AvigdorGoldsmid) is concerned about is whether, in computing the gains of tax under this provision, one capitalises the rents due under a lease for twenty-one years or more. I can tell him emphatically that that cannot happen under the Clause as it stands. There will be no question of bringing the capitalised value of the rent received under a lease into a Case VII computation.
    Clause 12 (1) lays down that, where there is a chargeable disposal, the gain is to be computed as it would be far Case I of Schedule D in the case of
    "an adventure in the nature of trade",
    and so the principles applicable to traders in land will apply for Case VII. When a trader grants a lease, for however long a period, the capitalised value of the rent payable under the lease cannot be brought into his accounts as a trading receipt. All that can be brought in is any premium payable for the lease. I need not go into the reasons for that at present.
    It follows from what I have said that if any person comes within the scope of Case VII on disposing of land by way of lease, he will, like the trader in land, be liable only if and to the extent that he receives a premium for the lease. The position is different in relation to the case in which ownership of land is transferred in consideration of a permanent rent charge secured on the land. That has to be capitalised in the case of a trader, and so it would be here. But that is a very different point from the point raised by the Amendment.
    I hope that I have satisfied my hon. Friend that his fears are not justified and that the position is as he wishes it to be.
    10.30 p.m.
    Mr. Graham Page: I do not know whether the fears of my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) have been soothed, but I am afraid that mine have not. I am not clear about what my right hon. and learned Friend the Attorney-General means.

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    There can be many different forms of lease in the taking of a large premium at a small rent or a large rent at a small premium. It may be 21 years, 50 years, 99 years, or more. He says that the only item to be taken into account on the disposal is the premium, but against what is that compared? If, for example, a man buys a freehold property and buys it for £50,000 and he then decides to dispose of a 21-year lease, he takes a premium of £20,000 and lets at a small rent. On the £20,000 compared with the £50,000 which he paid for the freehold there Gs no gain. How, then, does one value the property which is left to him and take that into account if it is the value of his reversion, and add that to the premium which he took, and leave out the capitalised value of the rent?
    I cannot see how this will work in order to judge between the acquisition price and the disposal price, because there are two different aspects being dealt with. He has acquired freehold and he disposes of the leasehold. How does one compare one with the other, if one takes into account the value of what he paid for the freehold and against that any premium—and it is entirely for him to decide what premium he takes—he takes on letting? It would not seem to be chargeable against this. I do not know whether it is intended or not.
    The Attorney-General: My hon. Friend has raised a different point from that raised by my hon. Friend the Member for Walsall, South. There is, as I am sure my hon. Friend will be aware, on reflection, a generally accepted procedure which has been recognised by the courts for arriving at the trader's profit in the case which he put. The cost of the land, that is, the price paid for it, plus allowable expenditure on it, is apportioned to the premium and the freehold reversion according to a formula. For Case VII the cost of the land will similarly be apportioned, and the taxpayer's chargeable gain or loss will be the difference between the premium and the cost apportioned thereto. That is, the cost of the land multiplied by the premium for the lease divided by the market value of the freehold reversion, plus premium for lease.
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    I hope that is now clear to my hon. Friend. It is a generally accepted procedure laid down by the courts.
    Mr. Graham Page: That was crystal clear, but the point my right hon. and learned Friend has not dealt with is this. In the case of the trader who is charged, this charge of tax goes on for ever while the man is trading and therefore he is taxed on the rent which he is collecting in the ordinary way on his income, but in this case where it is a kind of tax which is being introduced we are considering only the gains during the three-year period, as I understand it. Therefore, it is obviously going to be a wise and very good way of escaping it to let at a high rent and never take a premium, because where is the gain out of it?
    The Attorney-General: My hon. Friend now raises another point. I was dealing with the question on how to find the profit where the lease is let at a premium. I said that it is by application of the multiple formula which he so readily understood. It is true that we are not dealing here with rents. Rents will not come into Case VII for the reasons I have given. Rental may or may not bear tax. What will come into the Case in the kind of instance my hon. Friend quoted will be premium for the lease and premium for the lease only.
    Mr. Mitchison: I trust that after the Attorney-General's exposition, no one on the other side of the Committee will say that any Schedules at the end of the Bill are in any way obscure. Secondly, we all know the Irishman's definition of a net: a number of holes with string round them. I seem to see some holes about.
    Sir H. d'Avigdor-Goldsmid: I do not think that it is any coincidence that the Government have chosen my right hon. and learned Friend the Attorney-General to reply on the Clause and that he has the support of his hon. and learned Friend the Solicitor-General. Clearly, this is a matter of considerable complication. Despite the considerable help which I have had from my hon. Friend the Member for Crosby (Mr. Graham Page), if my right hon. and learned Friend had said categorically that the Clause catches only the premium, I

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    would have felt satisfied with his reply. He qualified that, however.
    That being so, I can give only a qualified answer by saying that in so far as the Clause catches the premium, I am perfectly satisfied for the Amendment to be withdrawn. In so far as I am not qualified to evaluate the further considerations explained by my right hon. and learned Friend, in seeking leave to withdraw the Amendment I must say that I shall have to take professional advice and see whether, on Report, we must come back to the second part of what my right hon. and learned Friend has said. Subject to that, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Clause ordered to stand part of the Bill.

    Clause 12.—(COMPUTATION OF GAINS.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. Ronald Bell: On this Clause, it would be appropriate to ask for an indication of the Government's view about whether gains of this character should count as earned or unearned income. I put down an Amendment to the Clause which has not been selected, possibly because it is starred, which suggests that such gains should be treated as earned income. As I interpret the Bill—I hope, correctly—they will be treated as unearned income and there would be no earned income allowance in respect thereof.
    That seems to me to be a harsh step. Gains of this character have hitherto escaped taxation altogether, usually because they were infrequent in the case of the individual taxpayer and were able to be treated as casual profits. If he engaged in the operation sufficiently often, he became a trader or a person carrying on that operation by way of trade and so fell to be taxed in respect of its profits. The income was, however, earned income and the appropriate allowances were given. If a person did it once or at long intervals, no tax was payable and it was a casual profit.
    What the Bill does is to catch the casual profit and subject it to tax, but illogically to subject it to a higher rate
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    of tax than would be incurred if the person carried out the operation repeatedly. This is difficult to understand.
    In his Budget statement, my right hon. and learned Friend the Chancellor of the Exchequer said:
    "Certain types of quick gains secured by those not engaging in such operations as a business are under the present law treated as capital receipts. Although ordinary people find it difficult to distinguish them from income…"
    He said a little later:
    "Those who make a business of such transactions are taxed already as traders. Those to whom the new arrangements will apply are those of whom it cannot be established that they are carrying on a business. In my view, however, it is wrong that such people should escape taxation on such activities."— [OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 979.]
    In Clause 12, which establishes the way in which the gains are to be computed, it says that
    "the gain accruing to a person … shall be computed for purposes of Case VII in the like manner as it would fall to be computed for purposes of Case I of Schedule D if the acquisition and disposal … had been an adventure in the nature of trade."
    In other words, what we are doing is to say that the occasional profit which in the past has escaped taxation altogether shall in future be assimilated to those gains of a like character which have resulted from adventures in the nature of trade. Therefore, it seems to me that the logic of the argument—an argument which I do not in itself in any way resist—is that these should be treated as though they were trading profits as they would be if more frequently resulting and that, therefore, unearned income allowance should be given in respect of them.
    I expect that there will be "technical difficulties"—there always are in Finance Bills—and, unlike my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), I am not sufficiently skilled in these recondite matters to be able even to understand the nature of the technical difficulties, let alone suggest a solution of them. But it seems to me to be on the face of it inequitable that something which was formerly thought to be immune to the tax and which it is now thought ought to be assimilated to the trading profit of the person who engages in that kind

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    of operation as a livelihood based upon capital gains, should nevertheless be differentiated in this disadvantageous way from the more frequent exercise of the same activity.
    For these reasons, my view is that it should be regarded as earned income, and I hope that the Attorney-General will give some hope that this possibility will be examined.
    Mr. Houghton: I entirely disagree with the hon. Member for Buckinghamshire, South (Mr. Ronald Bell). I must admit that I have been very surprised to read in various quarters an expectation that earned income relief would be applied to this tax. I always regarded earned income relief as quite inapplicable to a tax of this kind, and I was glad that the Government, in putting forward their proposals, were of the same opinion.
    The hon. Gentleman has referred to subsection (1) with its cross-reference to Case I of Schedule D. It is true, of course, that the Clause refers to assessment under Case VII in like manner with Case I of Schedule D, but that, I have assumed, is merely to avoid a lot of tedious repetition. It does not mean that to be assessed in like manner with Case I carries with it the expectation that earned income relief will also be applied in a like manner. I think that is the obvious explanation of this cross-reference to Case I of Schedule D. It is an easy reference to the basis of assessment.
    I have been wondering what would happen if a taxpayer said, "In order to get the benefit of earned income relief, I wish to be assessed under Case I of Schedule D." What would happen if the Inland Revenue said, "This profit is assessable under Case VII", and he replied, "No. I insist that it shall be assessed under Case I"? What would the Inland Revenue do? The taxpayer would certainly then get the benefit of earned income relief. But of course the time limit which might or might not be available to him would be removed—he would he assessable by the year. He might, however, employ the cessation provisions at a suitable point in time. I do not know.
    It is an engaging question as to whether a taxpayer could insist on being assessed under a different case of Schedule D. He could presumably say, "This is not a speculative gain; I am
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    engaged in trade, and this in the nature of an adventure. Do not argue with me; I tell you what I am doing and I insist on being assessed accordingly." Perhaps the Attorney-General can tell us what would happen in that extraordinary situation.
    On the general issue, I suggest that if a person does desire to have the benefit of earned income relief, then the tax assessment must come within the framework of the rest of the taxing code relating to earned income—that is to say, it must be in the nature of a trade and be assessable accordingly. Although it is very late for the right hon. and learned Gentleman to apply his mind to these hypothetical situations, he acquitted himself very well just now and probably he has the answer to this one.
    10.45 p.m.
    The Attorney-General: That complimentary observation—unusual from the hon. Member for Sowerby (Mr. Houghton)—has done a good deal to allay the suspicion I feel when I find myself in agreement with anything he says. On this occasion, his last remark has done a good deal to remove suspicion.
    We gave careful consideration to this problem long before this Bill was introduced, and I am sure my hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) will agree with the general principle that a gain or a loss on a particular transaction is to be computed as it would be under Case I of Schedule D in the case of an adventure in the nature of trade.
    I got his argument based on the reference to a trade adventure. That is merely put in as a method for computing the gain, and it does not state that the gain comes from trading. Of course, up to the present there have been many people who have been seeking to make it appear that they are not trading and so avoid liability for tax. One effect of the Bill may be to reverse the trend, but one does not know. No doubt those concerned with these matters will give careful consideration to that issue.
    As far as the Inland Revenue is concerned, there is a question of fact—whether the person concerned is carrying on a trade, profession or vocation. The Revenue will have to be satisfied

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    about that by evidence before acceding to a claim from someone who up to now has been claiming not to be carrying on a trade yet has suddenly become a trader after the passage of this Bill.
    To seek a title to earned income relief on gain falling under Case VII would be going too far. One starts from the hypothesis that there is no trade carried on, and liability under Case VII will be of a much more casual nature than when trade is carried on. Often, the work will be no more than knowing that a piece of land can be bought cheap and sold at a profit, or speaking to a broker on the telephone, or getting a bank to sell the results of allocation. To treat such gains within the ambit of earned income, as though they were like the salaries of a miner or a Minister or the income from a genuine business, would be unfair and might lead to ridicule.
    I am glad my hon. Friend raised this point, for others have raised it outside this Committee, and it is right that it should be discussed even at this late hour. I hope that now he will not find it necessary to press his objection.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 13.—(DISPOSALS OF LAND EFFECTED INDIRECTLY.)
    Mr. Graham Page: I beg to move, in page 18, line 44, to leave out "and notwithstanding that" and to insert "unless."
    This Amendment is to the last line of page 18 and is intended to exclude a legatee from being charged under the Clause. May first, refer to Clause 11 (8) in which the legatee is excluded from the tax which we have been discussing? It says:
    "A person acquiring assets as a legatee shall not be chargeable under Case VII in respect of any acquisition and disposal by reference to that acquisition except as provided by section thirteen of this Act.…"
    It is that exception with which my Amendment deals.
    I can see no real case for penalising the legatee under Clause 13 when he escapes under earlier Clauses. Let me give an example of how a legatee may
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    be subject to these penal provisions. A person has held shares in a landowning company for many years. He dies and bequeaths those shares to the legatee now mentioned in the Clause. The company acquires some property and the company disposes of the property within the three-year period. Although he did not acquire his shares necessarily within the three years, and his testator might have acquired them many years before, the legatee is caught for tax on those shares on the gain which is made by reason of the company having carried out a chargeable transaction during those three years; but he may dispose of those shares purely for Estate Duty purposes. He may find himself left with a legacy on which he has to pay Estate Duty and on which he has to pay a tax under the Clause.
    That seems most unfair. If he is taking those shares in an estate which is paying 75 per cent. Estate Duty and he is also paying a short-term gains tax, he may be paying more than 100 per cent. in respect of a legacy which he might not then think worth receiving. I would have thought that it was right to relieve the legatee of liability under Clause 13 as he is relieved of liability under earlier Clauses.
    Sir E. Boyle: We now proceed to Clause 13 which, as the Committee will realise, is designed to prevent persons from taking tax-free what is in substance a profit on land, by acquiring the land through the medium of a company and disposing of shares in that company, outside the six-month period which applies to shares generally. The Amendment of my hon. Friend the Member for Crosby (Mr. Graham Page) would exclude from the scope of the Clause shares acquired as a legatee.
    Generally speaking, assets, including shares, acquired as a legatee, are put outside the scope of Case VII by the operation of Clause 11 (8), but Clause 13 is quite deliberately intended to cover disposals of shares acquired as a legatee and also shares acquired before 10th April, this year. That is because if a company is being put to use in connection with land transactions of the type at which this Clause is aimed, the fact that one or more shareholders had inherited shares in that company is not sufficient reason for excluding disposals of such shares from Clause 13.

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    However, my hon. Friend has drawn attention to what I call a marginal case at which we shall look. I thought, as my hon. Friend put it, that in certain respects he was putting rather a marginal case, but I am mindful of the words of the distinguished Cambridge writer, Lowes Dickinson, that marginal cases may suggest a fundamental fallacy, and while I do not think that there is a fundamental fallacy in the Clause as drafted, there is a point at which maybe we ought to look again.
    As I understand my hon. Friend's point, it is that a person can acquire a substantial interest quite inadvertently when his shareholding is increased by a legacy, and that the Clause is unfair on a man who inherits shares in a landowning company which he does not want to keep, and who could find himself taxed by reference to land acquired by the company before the shares came into his possession.
    I cannot advise the Committee to accept the Amendment, and I think that it would be wrong to take inherited shares out of Clause 13, but I am certainly prepared, an behalf of my right hon. and learned Friend, to say that between now and the next stage of the Bill we shall consider whether, in computing the charge on inherited shares that were sold, there should be an exclusion of land acquired by the company before the legatee acquired those shares.
    I think that that is a point which it would be reasonable for us to look at before the next stage of the Bill. Having said that, I must say to my hon. Friend that the Chancellor could not consider an Amendment which simply excluded shares acquired as legatee from the scope of this Clause.
    Mr. Graham Page: I am grateful to my hon. Friend for small concessions, and I am glad that he recognises that there is something in the example I gave. I cannot say that I am satisfied, because I still cannot see why legatees should be brought in at all.
    If they are excluded from the earlier Clause, I should have thought that the proper thing to do would be to exclude them from this Clause. There is no possibility of evasion of tax by somebody being left shares in a will. I cannot see how there can be evasion of tax in those cases. However, I hope that
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    when my hon. Friend looks at the particular marginal example that I gave he will be convinced that my argument is correct, and, therefore, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    The Chairman: In calling the next Amendment, in page 19, line 8, after "land", insert "at market value", in the name of the Chancellor of the Exchequer, I had not intended to call the Amendment to the Amendment in the name of the hon. and learned Member for Kettering (Mr. Mitchison), because it may be discussed in the debate on the Chancellor's Amendment.
    Sir E. Boyle: I beg to move, in page 19, line 8, after "land" to insert" at market value".
    Taking a simple example of its operation Clause 13, as the Committee realises, imposes a charge in certain circumstances on a person who disposes of shares in a closely controlled landowning company where the disposal takes place outside the ordinary six months' period, however long he may have held the shares.
    The chargeable gain under Clause 13 —and I am trying to put it in non-technical language—is, in effect, the lesser of two things, the lesser of either the actual gain on the disposal of the shares, or the appropriate part of the chargeable gains the company would have made if it had, at the time of the sale of the shares, disposed of its land.
    Mr. Callaghan: Is that non-technical?
    Sir E. Boyle: The hon. Gentleman knows the difficulties that we have on these occasions. At any rate, it is less technical than certain words which could have been used.
    The Bill omits to say that the company's gain is to be computed as if the disposal of the land had been for the market value of the land. It may seem that in the context of the Bill the provisions of Clause 13 could only be interpreted as referring to disposal at market value and nothing else. None the less, it is the view of my right hon. and learned Friend that it would be as well to insert these words "at market value" to make the position

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    clear. As the Committee appreciates, this is, practically speaking, a drafting Amendment.
    11.0 p.m.
    Mr. Mitchison: I regard this as rather more than a drafting Amendment. I am very glad to see the Chief Secretary to the Treasury in his place, because some little time ago the right hon. Gentleman, as the Minister of Housing and Local Government, was responsible for introducing a Town and Country Planning Bill. What that Town and Country Planning Bill was concerned with was the market value of land in connection with compulsory acquisition. The point that was made, and made repeatedly—and there were many weary days in Committee—by the right hon. Gentleman was that one could not possibly arrive at a market value for land without making certain fundamental assumptions about planning permission.
    This went on for some time and the point of the whole exercise was that there was no such general phrase as a "market value for land" and that it was insufficient to say that local authorities should be obliged pay for land at its market value. On the contrary, several pages of the Statute and a large number of Sections were required to explain how one arrived at market value.
    Finally, we arrived at market value, and here we have market value without any such reference at all put into the Bill by what is called merely a drafting Amendment. What does it mean? If it is as obvious as all that what is market value, why did the Government some time ago trouble the House at some length with an enormous Measure showing how market value was arrived at?
    Is the market value in the Town and Country Planning Act the same as the market value in this case and, if it is, why is all this necessary if market value means something easily comprehended? We ought to be told what particular meaning market value has in conjunction with this subsection. I have always felt, and still feel, that the whole of the arrangements that were put into the Town and Country Planning Bill were really intended to obscure the possibility that market value has a quite ordinary and simple meaning.
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    An hon. Member opposite introduced a Private Member's Bill providing that compensation should be at market value. The Government said, "We cannot have anything like that. That does not take us any further. We do not know what market value is in that connection. You must say what you mean." There we were, with pages and pages and sections and sections, and yet when it suits them the Government stick in
    "disposing of its land at market value "
    as though it were an obvious trifle so clear to everyone that the Economic Secretary can call it nothing more than a drafting Amendment.
    I ask the Government to be a little more consistent. If it is all as clear as that—it naturally means that it is something palpably obvious to everyone, and that is what appears to be suggested—what was the former Act about? Are we to have the assumptions about planning permission when we have to consider something rather different—the provisions of this Clause? Really the two things may appear at first sight to be in different fields, but the point is exactly the same.
    I am tempted to the conclusion, if this is really something that is perfectly clear, that the whole object of the Town and Country Planning Act was to make local authorities pay rather more than the obvious market value of the land.
    Sir E. Boyle: I do not think that we can now debate the 1961 Act all over again, but I am assured by those who are more learned in these things than I am that "market value" means the price of land on the market.
    Mr. Mitchison: I wonder whether the Financial Secretary has discussed this matter with the Chief Secretary to the Treasury, who was the responsible Minister at the time who changed with great forethought over many years the apparently simple proposition that the hon. Gentleman is now putting forward?
    Amendment agreed to.
    Sir E. Boyle: I beg to move, in page 20, line 17, to leave out "share capital of" and to insert "shares in".
    This is quite definitely a drafting Amendment. Clause 13 as drafted applies in relation to companies limited by guarantee as well as to companies

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    limited by shares. The reference to share capital in subsection (7) is not, I am told, at all apt in the case of a company limited by guarantee. The Amendment accordingly substitutes the reference to shares, an expression which by virtue of the extended meaning given to it in subsection (8) will suitably cover the point.
    Amendment agreed to.
    Mr. Peter Walker: I beg to move, in page 20, line 28, at the end to add:
    (9) Nothing in this section shall be held to apply to a company being a public company whose shares are officially quoted on a stock exchange in the United Kingdom and twenty-five per cent. of which are held by the public.
    The purpose of this Clause, which is to capture companies which own land and duly make a capital profit by selling the land by means of shares, is something with which I am perfectly in agreement, but I feel that as at present drafted the Clause will create a serious and difficult problem for public companies. I believe that I am right in saying that at present under the Clause there could be a public company with a London Stock Exchange quotation, perhaps a long-established company, with one shareholder who happens to have more than 5 per cent. of the shares and a group of five shareholders who between them have control of the company. The shareholder with 5 per cent. of the shares could discover, when selling some of the shares, that the Revenue could say that during the past three years the company had acquired or developed a property and a portion of the share price he obtained on his shares was, therefore, taxable under this Clause.
    That is an impossible position for such shareholders to be in in public companies. There is no way in which they could discover at the time of selling of some shares whether any particular land had been sold in the last few weeks or months. I should like to know how the Revenue can make a computation as to the proportion of the share price in relation to a particular capital gain in the last three years. Is it to ask the company to make an appreciation of that part of its portfolio?
    When the Income Tax Act. 1952, was passed provision was made about Surtax on the undistributed income under Sec-
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    tion 256 (1 and 5) and public companies were excluded from this provision. I presume that the reason they were excluded was that such companies with a Stock Exchange quotation of more than 25 per cent. of shares owned by the public would be forced to act in a responsible fashion. If the Revenue found that such a company was not acting in a responsible fashion some provision would have to be made. I can well understand that if a person acquired a shell company, and made a gain, if this Amendment were accepted, there should be a tax.
    There is, however, the fact that first, he would have to acquire a shell company, which would cost a considerable sum of money. Secondly, he would have to sell 25 per cent. of the shares to the public, and, thirdly, he would have to get a Stock Exchange quotation. I should have thought that one could stop such a device for avoiding tax by arranging that such provisions would not be given to such a shell company for this purpose. If that is not accepted, surely it is reasonable to say that a public company is not to be charged under this Clause unless control passes or a substantial volume of the shares are sold during any one period. It would be a bureaucratic impossibility if the position were created in which, if a substantial shareholder sold a small proportion of his shares—say, £1,000 or £500 worth—the Revenue had to go through the process of calculating exactly what proportion of the £1,000 or £500 worth of shares was connected with a development or a property acquired during the last three years.
    Mr. Dudley Williams: It is even worse that that. If somebody owned 5·1 per cent. and sold 0·2 per cent. of his shareholding, would he be taxed on the 0·2 per cent. which he sold, but not be taxed if he subsequently sold the 4·9 per cent.?
    Mr. Walker: I have difficulty in reading the general complications of the Clause, but I should imagine that he could sell the 0·2 per cent. and he taxed and sell the 4·9 per cent. and not be taxed. Then there is the question of related shareholders. A person may have 5 per cent. with a brother, a mother, a sister, a son or a daughter. It must often happen that two or more

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    members of a family hold shares in a company without knowing the holdings of the other person. In any case, how does one know who has a 5 per cent. holding in a public company? People use nominees. It will be very difficult for the Revenue to discover on each share transaction in a property company whether a person has 5 per cent. of the shares. The Revenue will have to trace through all the names of the nominees.
    I ask the Government to give careful consideration to the Amendment. Some provision should be made to stop the bureaucratic nonsense which will arise if the Clause goes through unamended. It must be remembered that the majority of public companies act in a perfectly reasonable way and develop their properties or acquire properties in the normal course of their business and are taxed in the normal way.
    Mr. Dudley Williams: I support the plea made by my hon. Friend the Member for Worcester (Mr. Walker). It is very difficult to understand how the Clause will be implemented. I am rather surprised that it was not made clear in the White Paper on the Taxation of Short-term Gains, which says that a company is a closely-controlled company within the meaning of subsections (2) and (3), that public companies were to come within the ambit of this control and that it was not to be restricted to private companies.
    Everyone in the Committee agrees that this manoeuvre by which people make tax-free profits should be stopped. The profit made by a man who puts up a building, puts it into a company and then sells the shares to the company should be treated as a trading profit. Those of us who have examined the Clause feel strongly that there should not be included within it any reference to public companies, companies which are quoted on the London Stock Exchange or any of the provincial Stock Exchanges.
    If this is not done, very serious anomalies will arise. I have written a letter to my hon. Friend the Economic Secretary pointing out some of the difficulties which will arise. I have sent a copy of the letter to my right hon. and
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    learned Friend the Attorney-General to explain the nightmare I had when considering the Clause. I do not propose to read the letter in full. It refers to a gentleman called Fred who was married to a lady called Gwen. They had two sons. On 1st May, 1962, Fred settled 20 per cent. of his property company on his (wife, retaining 30 per cent. for himself. The remaining 50 per cent. of the shares in the property company were owned by private investors, who had purchased them through the London Stock Exchange.
    In the spring of 1963, Fred went on a mission to France. There he met a charming lady called Fifi, who became enamoured of him. When he returned, his wife took a poor view of his adventure, and decided to divorce him. She was extremely wealthy in her own right, and decided not to take advantage of the shares settled on her by Fred, but to hand them over to her two sons. This she did. Those two young men did not approve of Fred's affair with Fifi, and decided to stand for Parliament in order to amend the law of matrimony. Having so decided, they sold the shares in their father's company in order to secure the money necessary to achieve their object. Having done that, they got into very serious difficulty, indeed—
    11.15 p.m.
    Mr. Diamond: Will the hon. Gentleman tell us how much it was necessary to sell them for in order to buy a seat in the way he suggests?
    Mr. Williams: That will become more apparent when I say for which party the two gentlemen stood. The father, I might say, was a Conservative, so the hon. Member must be nervous about which party the two sons stood for.
    As I say, they sold the shares to get the money necessary to stand for Parliament, but then found that because they owned more than 5 per cent. of the shares in their father's company, and were related to him—that was the sinister point—the sale attracted the tax. Of course, if their mother had not been so honourable and had retained her shares until the marriage was dissolved, she could have sold them without any trouble at all, because in the Ninth Schedule to the Finance Act, with which we are now dealing, there

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    is no reference to a woman being connected with a man if she has been divorced from him; she is only connected with him if related to him by blood, or married to him. Because she had behaved in what I should have thought was a scrupulous manner and had disposed of her shares to her two natural sons, those sons were penalised. Had she hung on to the shares until the divorce was completed, she could have sold them free of tax.
    But worse was to follow. The sons sold the shares, but the summer of 1963 was very dry and the father did a very great deal of development. As the date of the General Election drew near, of course, with all its uncertainties— although a considerable number of people felt that almost any Government would be better than one that had produced ideas of this nature—the shares fell by half, but the Revenue held that the development that had taken place in the summer of 1963 repesented half of the value of the shares before the fall, so the sons were left with nothing. There was a sequel to this rather sad story because, as a result of subsequent Surtax and Income Tax demands, the sons went bankrupt. The moral is that if one wants social injustice, one does not necessarily have to vote for the Labour Party. Subsequently to those events, there was a dramatic change in Government. The Liberal Government changed the law, with the result that Fifi, who was by now, of course, a rather charming widow, became a million-airess.
    I do not think that my right hon. and learned Friend the Attorney-General would like to see such events take place, and I suggest, with great respect, that although we think that we are all in agreement over this manoeuvre to deal with the man who makes use of a private company to make a tax-free profit, there is a very considerable case for saying that the same manoeuvre, the same restriction, should not be applied to public companies.
    Let us now try to see what would happen if someone tried to get round the law to make a tax-free profit by means of a public company. First, one would have to obtain a public company. One would have to obtain 75 per cent. control of one and leave 25 per cent. of
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    the shares in the hands of other shareholders otherwise one would be liable to get one's Stock Exchange quotation stopped.
    Naturally, one would have to pay something for the public company in question. Let us say it costs £25,000. One then decides to put up a large building costing, say, £400,000. Being a shrewd developer, when the building is finally erected it is worth £500,000.
    Mr. Walker: Has my hon. Friend realised that, having changed the nature of the company, the Stock Exchange would have withdrawn the quotation?
    Mr. Williams: I was hoping to get round that. [Laughter.] I was hoping that the secretary or chairmen of the Stock Exchange, in a more explosive moment, would allow the person in question to continue with the quotation of the company. In fact, of course, he would not and it would be suspended. However, assuming that it is kept, one now has a company which originally cost £25,000 to which has been added a building which cost £400,000 to build.
    Let us say that it takes eighteen months to construct a building of this nature and that, after eighteen months, one discovers that it can be sold for £½ million—giving a profit of £100,000. Naturally, having paid £25,000 for the shares, the most profit one can get is £75,000. Since one must also allow for 25 per cent. of the shares being in other people's hands, one cannot make more than £50,000.
    Mr, Diamond: Might I point out that in the hon. Member's example, for which he has given a number of figures, while his arithmetic might be correct, his assumptions may be miles out?
    Mr. Williams: I do not think that they are very far out. To get hold of a public company would not cost much less than the figure I gave. [HON. MEMBERS: "More] If hon. Members think that it would cost more, let us add another £10,000 to the figure and say that it would cost that much more to acquire it. My example still applies. The profit figures I gave apply equally —apart from legal expenses one would incur plus, of course, nursing costs to get over the breakdown or ulcer which all this has caused.

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    Assuming that £35,000 of the £100,000 is lost because one wants to avoid keeping this building for another eighteen months. If one keeps it for a further eighteen months one's profit, instead of being £65,000 will be £100,000. To sum up, I do not think that any shrewd property man would be willing to go through this difficult manœuvre to give away £35,000 which he could certainly have made tax-free had he hung on to it for eighteen months.
    Therefore, I feel that there is no case for the maintenance of this restriction on the activities of public companies. It can only lead to extreme difficulties in the value of shares and the proportion one must pay to dispose of them. I hope that my hon. Friend the Financial Secretary will say that he is at least prepared to give further consideration to this matter before the Report stage.
    Sir E. Boyle: I always find the company of my hon. Friend the Member for Exeter (Mr. Dudley Williams) enjoyable and educative. However, I must say that what I said about marginal cases, in reply to an earlier Amendment, could be applied to the story he told. I was rather reminded of an occasion when my father took me to dinner at the Café Royal when I was 15. It was a dark night and as we got out of the taxi he turned to me and, I suspect, forgetting for the moment to whom he was speaking, said, "Pot luck, Edward, on a night like this."
    As for the letter mentioned by the hon. Member for Exeter, of which I have a copy, he describes in the third paragraph how, to achieve their aim, the sons needed some cash and disposed of their father's shares. I can tell my hon. Friend that if the sons had sold their father's shares they would have escaped Case VII, but the Attorney-General has some doubt about whether they would have escaped gaol, which is another matter.
    The Amendment which was so ably moved by my hon. Friend the Member for Worcester (Mr. Walker) has a serious point and I would like to give a careful reply to it. Clause 13 imposes a charge, in certain circumstances, on sales of shares, however long held, in, first, a closely controlled land-owning company, that is, a land-owning company under
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    the control of not more than five persons; secondly, a closely controlled company which controls a land-owning company; and, thirdly, a company which has a substantial interest—that is, 5 per cent. of the shares—in a landowning company if the seller of the shares, alone or with his associates, controls the company whose shares are being sold. The purpose of the Amendment is to take out of the scope of the Clause a public company if its shares are officially quoted on a Stock Exchange in the United Kingdom and 25 per cent. of the shares are held by the public.
    The first point is that I do not believe that there is such a close analogy with the company Surtax provisions as my hon. Friend the Member for Worcester suggested, because the two cases are quite different. The exemption from the Surtax avoidance provisions was given on the basis that if members of the public held 25 per cent. of the equity the company would pay reasonable dividends, so that it would be unnecessary to apply the Surtax anti-avoidance measures to it.
    The same argument does not apply to Clause 13, which is aimed at the disposal of land indirectly through the medium of companies. Operators in the property world—and I do not use the expression in any pejorative sense—could realise a profit in respect of land acquired by a company by selling the company's shares if the company is one in which the public has an interest, as well as if it is one in which the public has not.
    The taking of a profit on land, or part of a profit on land, through the sale of a company's shares may well be by way of arrangements for selling off shares in a private company to the public. Further sales of shares by the operators could be effected after the first sale to the public, and such further sales would escape the charge if there was an exemption for companies in which the public is substantially interested.
    We must try to look at it realistically. The Amendment would apparently let out not only the individual who sells shares in the company, with a 25 per cent. public share holding, but also such a company which itself sells shares in a closely controlled company. I am not

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    certain whether this result is in the minds of my hon. Friends, but one has to bear it in mind and there are difficulties about going as far in this matter as my hon. Friends want to go.
    As to the Clause in its present form being as my hon. Friend the Member for Worcester has described it, "bureaucratic nonsense", and on the question of how it will work, I would ask my hon. Friend to pay attention to subsection (5). I will not read out the subsection or even a translation of it, because I do not think that the Committee would take kindly to it at this late hour, but it is designed to deal with the point which my hon. Friend was making. It is an extremely good piece of drafting, but I do not think that it would be to the taste of the Committee to have it read now.
    This is an important issue and we will look, between now and Report, at Clause 13. We shall look at it from the point of view of profit from the administrative point of view, and from the general policy angle of whether it has too wide an ambit. The Government fully realise the anxieties felt and will look at it again. But at first sight it seems to me to go too far to suggest that we must take out of the Clause shares of a company being shares officially quoted on the Stock Exchanges of the United Kingdom and where 25 per cent. of the shares are held by the public. I do not believe that one could make an Amendment as wide as that without wrecking a Clause which is necessary to the Government's whole scheme.
    11.30 p.m.
    Sir Cyril Black: I do not want to detain the Committee for more than a few moments at this comparatively late hour, particularly in view of the speech which my hon. Friend the Financial Secretary has just made to the Committee, but I think that it should be made clear that many of us, I think, on this side of the Committee hold the view that, as drafted, the purposes of the Clause are perfectly reasonable but the operation of the Clause in a number of particulars, as I could show if I were to take time to do so, is practically impossible
    In view of what my hon. Friend has said I do not intend to make the speech
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    which I certainly would have made if he had given an uncompromising reply to the, points already made by my hon. Friends the Members for Worcester (Mr. Walker) and Exeter (Mr. Dudley Williams), but I take it from what has been said that my hon. Friend is willing to consider, and to consider carefully and even sympathetically, any cases of injustice and practical difficulty which can be brought to his notice and which, in the view of many of us, would inevitably arise under the Clause as it stands at the moment.
    I understand from what my hon. Friend has said that it is his intention to look at the matter seriously in the light of what has been said tonight and other representations which may be made to him, and if that is so, as I understand it to be, I do not intend, at any rate on this occasion, to burden the Committee with the speech which I would otherwise have made.
    Mr. Diamond: In just two minutes, because the hour is somewhat late, I appeal to the Government, when giving this matter consideration, to consider even further the point which was well made by the Financial Secretary, namely, referring to the fundamental fallacy in the argument which the hon. Member for Worcester (Mr. Walker) put forward. The hon. Member for Worcester, who is very well informed on all these matters, said to begin with that, in principle, he was in favour of what the Clause intends to do, but, in particular, he wanted to exclude certain companies, and, although he did not say so specifically, obviously he had in mind the exact parallel of the Surtax provisions.
    In the Surtax provisions there is a complete antithesis between the company on the one hand and the shareholders on the other hand. There is the company wanting to hang on to its profits and not distribute them for they would be taxable; there are the shareholders, namely, 25 per cent. of them, desiring to receive dividend. There is a complete antithesis between the one and the other. On this proposal which we are now considering there would be no antagonism between the board and a section of the shareholders: they would be sharing tax-free profits. In those circumstances, the parallel is absent.
    Mr. Walker: I am grateful to the Financial Secretary for his promise to reconsider this matter, and for his reference to subsection (5), which is obviously regarded as a treasured piece of drafting. It is a good piece of drafting which three hon. and learned Gentlemen on this side of the Committee have interpreted for me. However, in view of the assurance which has been given, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Clause, as amended, ordered to stand part of the Bill.
    Mr. H. Brooke: On behalf of my right hon. and learned Friend the Chancellor, I should like to express appreciation to both sides of the Committee for the very fair progress we have made today. In my judgment, we have reached a point from which we ought to be able to conclude our discussion on the remaining Clauses and Schedules of the Bill tomorrow and yet at a reasonable time of night, and we shall be able to start clear away on the new Clauses next week. If that is generally acceptable to the Committee, I beg to move,
    That the Chairman do report Progress and ask leave to sit again.
    Mr. Callaghan: I am glad the Chief Secretary thinks that we have made good progress today. I agree with him. Of course, I could not say now whether we shall be able to finish the Clauses tomorrow, because so much depends upon the right hon. Gentleman's hon. Friends, who have a number of Amendments on the Notice Paper. Therefore, a great deal of the pace will depend upon them. Speaking for myself, I hope that the Committee will accept the right hon. Gentleman's Motion.
    This evening, I was fascinated as I listened to the intricacies of the capital gains tax. The quality of the Treasury Bench reading has improved. The diction is good, the expression is most marked and the Treasury Ministers sometimes read as though they are actually making a speech. I enjoyed listening. I felt that I understood at least one word in five. I ask the Financial Secretary to go a little more slowly now and again, however, so that those of us with slower comprehension can at least try to pretend that we are taking past in the debate when he is speaking.
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    We have had a number of changes in bowling today. At the end of each over, it has been interesting to watch who would speak next. The Attorney-General bowls straight up-and-down stuff. There is nothing very guileful about it, but he goes on steadily. The Financial Secretary moves the ball both ways. We are never sure which way it will come, but he is capable of making it move in the air and he does it very well. The Solicitor-General has stood at long stop all day and has not been called. There he has been, holding the coats with his briefs in his hand, but has not had a chance of coming on to bowl.
    The Chief Secretary opened the bowling, but he had so many runs knocked off him that he bas not appeared at the wicket again. The Economic Secretary, a good change bowler, bowled a couple of overs, but he did not look much like getting a wicket and he retired to square leg and has not reappeared. We have not seen the captain all day. So disgusted was he with the operation that he has not been near the field of play.
    I do not think that this team is likely to get many wickets this evening. The Government bowling has been of such an ordinary character recently that it is clear that we should give them a rest in the pavilion. Therefore, if my hon. Friends agree, I am ready to accept the Motion and I hope that tomorrow we will make good progress.
    I hope, however, that we do not part too much on terms of acerbity. I have been interested to see a large number of hon. Members opposite present tonight to discuss the capital gains tax. I wish that they had been here yesterday to help me in connection with a simple proposition to relieve of taxation those who are lowest paid. Had they heard the case that was put, I believe that we would have heard a great deal more pressure upon the Treasury. I hope that they are not only interested in the capital gains tax, but will join us later on the new Clauses and help us in our efforts for some of the other people who are affected and not merely property companies in the City of London.
    Question put and agreed to.
    Committee report Progress; to sit again Tomorrow.

    ADEN (INDUSTRIAL RELATIONS)
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peel.]
    11.39 p.m.
    Mr. Robert Edwards: I am grateful for the opportunity in this Adjournment debate to deal with a small Crown Colony—Aden—on the southern tip of the Arabian Peninsula. It is one of the smallest of the territories under the control of the Colonial Office, its population is only 150,000 and it is a long way from this country, but there are problems affecting the industrial workers of the Colony which should be discussed in this House.
    It is not my intention at this late hour to deal with the large political issues involved in the Middle East. All I want to say is that if we consider Aden to be an important part of our strategic defence of the Middle East, it is clear to me that if that defence is to be real we must have the good will of the people in the Colony. At the moment we are losing that good will. We are turning thousands of industrial workers sour. We are creating anti-British propaganda that is sweeping the Middle East because in the sheikdoms from the Trucial Coast to the hinterlands of Aden we still consider we can apply the old, outmoded colonial policy that died years before the end of the war.
    Aden has not to be considered as we consider Muscat and Oman or some of the little sheikdoms up the Trucial Coast. Here is a very large concentration of industrial workers, and there is a state of tremendous industrial unrest among them. They are strongly organised in trade unions. These are not Communist unions. They are trade unions affiliated to the International Confederation of Free Trade Unions, to which the British Trades Union Congress is affiliated. Yet these trade unionists are denied the right to withhold their labour to defend their own day-to-day interests.
    The Legislative Council of Aden, under the pressure of the Colonial Office, has maintained an industrial
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    relations ordinance which makes striking illegal. If there is one principle which separates us from totalitarian 'countries, it is that we believe that working men and women should, if their negotiations reach deadlock, have the right to withhold their labour. When industrial workers are denied the right to withhold their labour in the interests of their living standards, they are denied elementary freedom. That means that they are living under a dictatorship, and democracy becomes a farce.
    Over the last few months I have asked many Questions about the situation in Aden. On 27th February I asked the Secretary of State for the Colonies
    "if he will make a statement on the state of unrest in the Aden Colony which has led to the threat of a general strike."
    The reply I received was:
    "I am advised by the Governor that there is no such unrest or threat of a general strike."
    The same day I asked the same Minister why the general secretary of the Technical and General Workers' Union in Aden had been arrested. The reply was that he was arrested for
    "inciting a strike in contravention of the Industrial Relations Ordinance."
    The same day I asked why the president of the Aden Refinery Workers' Union had been arrested. The reply was that he was arrested for
    "Inciting a strike in contravention of the Industrial Relations Ordinance."—[OFFICIAL REPORT, 27th February, 1962; Vol. 654, c. 124–5.]
    On that very same day we were informed in this House that, according to the Governor, there was no such unrest and no threat of a general strike. If there is no unrest, why are two leading officials of two major unions arrested and imprisoned, charged with inciting the workers to strike?
    Two leaders of the Aden trade union movement are serving terms of imprisonment of twenty-three months and another is serving ten months. Hundreds have been fined. Thousands, even in such a small Colony as this, have been dismissed for union activities. How is it possible to create harmony? How is it possible to maintain any kind of a strategic defence in the Middle East from an area where the whole population is being turned hostile to the

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    Legislative Council and to the British Government?
    I am not making frivolous charges. The I.C.F.T.U. discussed this matter and sent a deputation to Aden. It consisted of two members of the Executive Council, and they met the Governor. They were so appalled by the situation that they protested to the I.L.O. The nature of their protest was that the ordinance relating to industrial relations was a violation of the I.L.O. Charter as it related to free collective bargaining and the right of workers to join unions of their choice. They protested that the journal of the Aden T.U.C. had been suspended, so that the workers had no voice. They protested that hundreds of workers at that time had been dismissed only because they were trade unionists.
    They asked the British Government to intervene in Aden so that the ban on the union paper would be lifted and the ordinance modified so that democratic trade unionism could function again. They asked that the trade unionists who had lost their jobs in the public service should be reinstated, and that the Government should also invite the private employers to reinstate workers dismissed only because they were trade unionists.
    Of this very small Colony of 150,000 people, 4,000 are Europeans. There is great concentration of industrial workers in the ports, because this was a great coaling port, occupied by the British in 1830 during the period when we needed to keep our trade with India free. A very large number of workers are still engaged in the ports. There is a large British refinery employing 2,500 workers. There are a rubber processing industry, a plastic industry, and by-product industries. There is a very large industrial population, reckoned as a percentage of the total.
    When a large number of industrial workers occupy the same kind of employment, it is a natural development that they should get together and form trade unions to defend their position and advance their living standards. This has happened everywhere in the world. No repressive measures or ordinances can prevent the development of trade unions, and this ordinance in this British Colony has been imposed to deny the right of
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    industrial workers through their unions to withdraw their labour when their claim for a decent wage advance has been denied.
    There was a token strike in the refinery after twenty-three months of negotiations which were abortive. Is there anything wrong with that? Is it a crime for workers, frustrated after so many months of negotiation, to withdraw their labour? The right to withdraw labour is a right which was won after generations of struggle by the industrial workers of this country. I said in a supplementary question in the House the other day that Cairo Radio was calling these men the Tolpuddle Martyrs of Arabia, and all over the Middle East these men are becoming martyrs.
    Who knows better than we do that all history, ancient and modern, has proved that When men become martyrs, they become leaders, that ideals cannot be destroyed by suppressive measures, that the status of a leader is not lowered by putting him in gaol? This stupid method of destroying a movement has been tried all over the world and all over the old British Empire and has failed. Do we not learn any lessons from the past?
    Only last year there was a delegation from the Trades Union Congress of Aden to the British Trades Union Congress. Those two bodies held a joint meeting with the International Confederation of Free Trade Unions in London and that joint meeting asked the British Government to have another look at the situation in Aden to see what could be done to wipe out this ordinance and lift the ban on the trade union journal, but nothing has been done.
    The situation is becoming more dangerous every day. In 1957, 2,060 days were lost through industrial disputes. In 1958, the figure was 7,000 days and in 1960 there were 87 separate industrial disputes in this little Colony. Even now, although it is a criminal offence to come out on strike, there have been token strikes and on 11th May, this very month, there was a general strike in Aden.
    The Government ought to reconsider this situation to see what can be done to have a new beginning and to create a new atmosphere in Aden so that the trade unions can operate effectively and

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    peacefully and democratically. This can be done only by bringing all the elements involved together in a conference and by promising to wipe out this ordinance which cannot be justified in any democratic Parliament, and by lifting the ban on the trade union journal, a ban which cannot be excused in a free society which claims that its freedom is based on the right of the workers to join a trade union of their choice and to withdraw their labour if negotiations fail, the right of a free Press and the right of free assembly. Those rights are denied the industrial workers of Aden and unless those elementary democratic rights are won back, there will be trouble in this little Colony, trouble which all decent people want to avoid.
    I hope that the Under-Secretary will give us some assurance that the Government will look at this situation again so that the whole affair can be reviewed with a view to easing the tension which can be reduced only if trade unionists are given their due rights.
    11.55 p.m.
    The Under-Secretary of State for the Colonies (Mr. Hugh Fraser): The hon. Member for Bilston (Mr. R. Edwards) has been very vigilant on these matters. I welcome the vigilance of the House on this matter of trade union relationships in Aden, but I must say that some of the statements made by the hon. Gentleman are wide of the mark. He talked about many being imprisoned, about hundreds being fined, and about thousands being dismissed. There are wild exaggerations. During the period to which the hon. Gentleman referred, 16 persons were fined for taking part in the recent building strike, the secretary of one union was sentenced to two years' imprisonment—but mainly on a charge of sedition, for attempting to bring down the Government—13 others were committed to prison, and five others were bound over. Also, 30 members of the Forces Union are being summoned as a result of the last 48-hour strike which the hon. Gentleman referred to as a general strike, which again is untrue.
    I disagree with the hon. Gentleman when he says that labour relations have deteriorated. On the contrary, labour relations over the period that we have
    402
    been discussing since the introduction of this ordinance have greatly improved. In October, 1961, there was a building strike; in December, 1961, two short strikes at the B.P. refinery and in April and May, 1962, there were two short strikes by the Forces Union, to which I have already referred. The International Labour Organisation carried out an investigation to see whether the ordinance to which I shall refer in the main body of my speech was in order with Convention 98, that is, with the right to organise collective bargaining, and came to the conclusion that it was, and that it was not incompatible with this Convention. Therefore, what the hon. Gentleman said about the I.L.O. being opposed to the ordinance is not true.
    I should like to discuss with the House the reason for imposing this ordinance in Aden. The main object of it is to see whether we can work out a harmonious relationship between both sides of industry in Aden. This may seem an odd way of going about it, to control and insist on arbitration, but by the end of 1959—and trade unions only started in a big way in Aden in the middle 1950s—in spite of visits from trade unionists in this country, which we welcomed, the situation had got to such a pitch that voluntary bargaining and co-operation between the two sides was not, functioning at all. Indeed, in 1957 and 1958 there had been 37 strikes; in 1959 and the first half of 1960 there were 118 strikes; and of the 84 strikes in 1959, 68 took place before any dispute was reported to the Labour Department at all.
    As the hon. Member said, there are political undertones in this matter and, of course, industrial relationships are bedevilled to some extent by local politics. We thought that in view of the serious worsening of industrial relations and the threat to the general progress of the Colony an attempt should be made to put these matters in order. In consequence, in 1960 a special adviser on industrial relations, Mr. Fallows, a former British trade union official with forty-two years' experience in the movement, went out to investigate.
    After spending three months in the Colony trying to obtain, without much success, the co-operation of union

    403
    leaders, Mr. Fallows submitted a report from which I would like to quote his main conclusion. He said:
    "Freedom to combine as well as to enjoy immunity from legal process for otherwise tortious acts, has placed in the hands of the trade unions of Aden a power of such magnitude that the community can be held almost to ransom and at the same time be used as an instrument to coerce and undermine Government. However charitably one may be inclined to regard this young trade union movement it is impossible to avoid the conclusion that this freedom to combine and their immunity at law seems to be regarded by them as a licence to strike on the slightest pretext and if order is to be brought to the industrial relations in the Colony all concerned must conform to good industrial practice and live and work within the framework of normal negotiating processes."
    The key passage of Mr. Fallows' report was as follows:
    "I am convinced that steps must be taken to prevent by suitable restrictive legislation the present easy access by the trade unions to the strike weapon."
    This is why this ordinance of 1960 was drawn up.
    Mr. G. M. Thomson: Is there not a difference between announcing that there may be some sort of restriction and going ahead with an outright ban making all strikes illegal? Would it not be good to have a cooling-off period?
    Mr. Fraser: It is an exaggeration for the hon. Gentleman to say that all strikes are illegal. This is not true. What was aimed at was to bring in this enactment, based on this experienced trade unionist's advice, and to set up an independent tribunal—the Industrial Court—to which labour disputes not settled voluntarily must be brought for compulsory arbitration, and it imposed certain restrictions on the right to strike and to lock out.
    The legislation emphatically does not ban all strikes. This is an important point. First, strikes are not illegal in industries Where wages councils are created; secondly, they are not illegal where the Crown as employer is not prepared to accept arbitration in disputes; thirdly, they are not illegal if in the opinion of the Industrial Court an employer tries to take advantage of the men's inability to strike and does not negotiate in good faith; and, lastly, and most important, they are not illegal
    404
    where a collective agreement has been concluded, providing satisfactory arrangements for the settlement of disputes between the parties, and has been registered with the Industrial Court.
    It is perfectly true to say that as a result of this legislation there has been a notable increase in the number of agreements which have been made by the employers and by the unions. But although a considerable number—I think ten—of the major unions have concluded such agreements they are not prepared for political reasons to bring them before the Industrial Court and register them. If they would do this they would, of course, make their Whole situation infinitely easier. It is my appeal tonight that they should do this and so enormously ease the burden of their own problems by registering the agreements which in many cases they have reached.
    I think that this provision is an entirely constructive one. Any trade union can throw off the restriction and gain complete freedom of industrial action simply by concluding an agreement with provisions for the settlement of a dispute, which many have done, and submitting it to the Industrial Court and obtaining a certificate. Although the procedure for obtaining a certificate is simple and straightforward, a union cannot be deprived of a certificate once it is obtained unless its conduct can be shown to be of such a nature that it should be withdrawn. That can be done only by a full-scale board of inquiry. This means that the gateway to complete trade union freedom is an easy one to go through, but once gained complete trade union freedom cannot easily be again restricted.
    It is completely open to the trade unions in Aden if they wish to register agreements with the Industrial Court. In one respect trade unionists in Aden might be said to be even more safeguarded than in this country. This is one of the peculiarities of the situation, for the fact is that certain aspects of trade union law there are even stronger in the protection of the individual than here. When I heard the hon. Member saying that people had been dismissed for trade union action, I thought that that was totally untrue, for there is a

    405
    special provision in the law there that a man cannot be dismissed if he is merely asking people to join a trade union. If he were dismissed from employment for that it would be an illegal act under this ordinance.
    Although there are difficulties, I believe that this legislation has been helpful in Aden. It has certainly reduced the number of strikes. It has led to the conclusion of quite a number of agreements and we hope that in the not too distant future we shall be able to look at the whole matter again in the light of what is happening. It must, however, be in the light of a reasonable attitude by the leaders of the trade union movement in Aden. They must not rely on using the strike weapon and the trade union movement—which, as an industrial movement, is fully protected—as a political movement in an attempt to overturn an elected Government.
    There are immense complications in the Aden situation, complications in that more than half those employed come from outside Aden and are not citizens. There have to be special provisions to
    406
    make sure that there is industrial order and if there is co-operation there can be complete freedom. It may be that the time is approaching when confidence between the employer and employed will grow to the point where normal industrial processes can be fully accepted by both sides and the special restrictions of the 1960 ordinance may no longer be necessary.
    We must allow this decision to be left to those in charge of the situation in Aden. The position is open to those who wish to conduct their union affairs in an orderly fashion. Since the ordinance there has been a great advance in claims accepted. I have seen a complaint by the chamber of commerce that some of the awards have been far too high—
    The Question having been proposed after Ten o'clock on Tuesday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
    Adjourned at nine minutes past Twelve o'clock.

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Preamble
The House met at two of the clock, The LORD MERTHYR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwell

LORD INCHYRA
Sir Frederick Robert Hoyer Millar, G.C.M.G., C.V.O., having been created Baron Inchyra, of Saint Madoes in the County of Perth—Was (in the usual manner) introduced.
LORD SAINSBURY
Alan John Sainsbury, Esquire, having been created Baron Sainsbury, of Drury Lane in the Borough of Holborn, for life—Was (in the usual manner) introduced.

FINANCING OF INTERNATIONAL SPORT
2.25 p.m.
BARONESS BURTON OF COVENTRY: 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, in view of the urgency of the matter, they have reached a decision concerning the giving of some financial help, on a reciprocal basis, towards the cost of sending teams oversea this summer to compete in amateur international sporting events.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (EARL JELLICOE): My Lords, Her Majesty's Government's decision concerning increased expenditure on sport and physical recreation, which was announced by my right honourable and learned friend the Chancellor of the Exchequer in another place on May 8, concerned only additional resources put at the disposal of my right honourable
894
friends the Minister of Education and the Secretary of State for Scotland, and local authorities, for expenditure for which they are responsible. As my right honourable and learned friend said in reply to supplementary questions in another place, other matters concerning sport are under consideration. It would be a new and controversial step in this country to link national sporting prestige with direct State financial aid, and I cannot promise a decision on this point in advance of the other matters which have to be considered in this connection.
BARONESS BURTON OF COVENTRY: My Lords, while suggesting that it would not be at all controversial to help, where requested, on a reciprocal basis, but rather an encouragement to voluntary contributors and workers alike, might I ask the Minister whether we may take it from his reply that Her Majesty's Government regard the question of a Sports Development Council as one of urgency and the question of travelling expenses as a priority for that Council?
EARL JELLICOE: My Lords, I can certainly agree with the noble Baroness that it is highly desirable that a decision should be taken at any early date regarding the establishment or not of a Sports Development Council or some alternative, and the whole question is under review. I am afraid I cannot, at this stage, say what particular priority that Council or any alternative body, if established, would give to any particular project.
BARONESS BURTON OF COVENTRY: My Lords, while pursuing that faint grain of hope just a little further, may I ask the Minister whether he is aware that my Question referred to sporting events this summer; and whether he also knows that many international sporting events will be taking place oversea in the next few months? Should Her Majesty's Government not reach a decision early enough for help to be given in these matters, if sporting bodies who are adversely affected by financial shortage were to appeal to the Treasury, would the Treasury consider them in advance of the establishment of a Sports Development Council?
EARL JELLICOE: My Lords, I am sure that, subject to the qualification which I have already given in answer to

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the noble Baroness's original Question, any representations about particular projects, either from sports bodies or from the noble Baroness herself, will receive very careful attention.

TALL BUILDINGS IN LONDON
2.29 p.m.
LORD BOSSOM: 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, recognising the deep concern so widely held, and seeing that such capital cities as Washington and Paris have found it entirely practical to limit the heights of buildings in certain sections of these cities, there is any reason why London cannot do the same and limit the heights of new buildings, to be erected in the proximity of the historic structures that mean so much to our nation.]
EARL JELLICOE: My Lords, my noble friend will doubtless recall that during our very full debate on high building in London on February 22, I explained why the Government considered that the most practical way of dealing with this most difficult problem was by examination of each proposal on its individual merits and demerits against the background of stated criteria. I also referred at some length to the difficulties that any form of height zoning might give rise to.
The criteria by which proposals are judged in Central London have been under detailed reconsideration by the London County Council in the light of their experience up to date, and of the public discussion of this problem in recent months. They are now in consultation with the Royal Fine Art Commission on a draft restatement of these principles, and I understand that the Council hope, in that restatement, to be able to give more positive guidance on the main questions to be considered, including that mentioned by my noble friend. I hope, therefore, that my noble friend will agree that further discussion of this question should wait until the new statement is available. This should be some time during the summer.
LORD BOSSOM: My Lords, while thanking my noble friend for that Answer, I believe that if he looks into it on a rather wider basis he will find that it is being done with perfect ease in two other very important capitals. Could he also explain what there is to be gained by the British people in allowing our historic and beautiful buildings—which are admired by people from all over the world, who come here especially for the purpose of seeing them—to be belittled and dwarfed by these buildings which are being put up, by which only a few people gain and which do not help the country or the cities at all?
EARL JELLICOE: My Lords, to answer first my noble friend's second supplementary question, the existing policy is to ensure that historic buildings, and indeed historic views, are not prejudiced. I should be the first to agree that the existing policy may not be working aright. That is not necessarily a case for abandoning the policy, but it may very well be a case for re-examining it carefully, which is precisely what the London County Council are at present doing. In answer to my noble friend's first supplementary question, I would agree that they may order things better in Paris, or indeed in Washington, than we do here, but I would suggest that each country and each capital has to find the answer to its own particular needs, and the solution which might be right for the cities of Haussmann and L'Enfant might not be right for the cities of Wren and Bossom.
LORD BOSSOM: My Lords, I thank my noble friend for that more or less accurate advice. Will he endeavour to ensure that no more tall buildings are put up in important positions overlooking, or in close proximity to, important buildings until this matter has been brought up and a decision reached about it?
EARL JELLICOE: My Lords, I would suggest to my noble friend that it would be better to await the restatement of principles which the London County Council are at present working on before prejudging any particular building; but I will, of course, bring to the attention of my right honourable friend the observation which my noble friend has just made.
LORD MOLSON: My Lords, will the Parliamentary Secretary give an

897
assurance that, before Her Majesty's Government come to an unalterable decision about this subject, they will take into account informed opinion as to how these amenities can be preserved? We are most anxious not to be faced with a fait accompli, a statement that Her Majesty's Government have accepted the views of the London County Council on this matter.
EARL JELLICOE: My Lords, I fully recognise the great interest of my noble friend in this matter. I do not think I can give him a categorical answer to the question he has just posed; but I can assure him that I understand that the restatement of principles which the L.C.C. are working on will be published and that there will therefore be full opportunity for public opinion to express its views on the matter, either inside or outside Parliament.
LORD MOLSON: Before Her Majesty's Government have taken a definite line?
EARL JELLICOE: My Lords, I am certain that Her Majesty's Government will wish to bear closely in mind the expression of public opinion on this question.

LONDON COUNTY COUNCIL (IMPROVEMENTS) BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
SOUTH ESSEX WATERWORKS BILL
Read 2a, and committed to an Unopposed Bill Committee.

BRITISH TRANSPORT COMMISSION BILL
2.35 p.m.
THE CHAIRMAN OF COMMITTEES (LORD MERTHYR): My Lords, I beg to move that this Bill be read a second time.
Moved, That the Bill be now read 2a.—(Lord Merthyr.)
VISCOUNT ST. DAVIDS: My Lords, I did not expect to speak on this particular Bill to-day. I noticed it on the Order Paper only this morning; I had
898
expected it to turn up at a later date. However, since it is here, it will have to be dealt with. I had intended, when this Bill came up, to move an Instruction to the Committee upstairs on the matter of certain waterways. However, since this Bill is now in fact so close up on the larger Bill, there does not seem to be a good reason for moving an Instruction. Instead, it would seem to be much better to deal with the matters purely on a Second Reading speech.
LORD MERTHYR: My Lords, I wonder whether the noble Viscount would forgive me for interrupting him. The position is that if the noble Viscount wants to make a Second Reading speech on this Bill, it would be customary, to say the least, for me then to move the Adjournment of this debate in order that we can all have proper notice, and the Bill can be put down at a time and on a date when it is convenient for everybody to discuss it. Unfortunately, the position is that we have the Second Reading at this time of day if there is not likely to be any Second Reading debate, as I quite thought would be the case to-day, because the noble Viscount was not able to give me notice that he was going to say anything at all this afternoon. To be quite frank with the House, I am a little worried that I may be accused of taking up time which should be devoted to Public Business to-day, rather than to Private Business. It is entirely for your Lordships to say, but may I just say again, before I sit down, that if the noble Viscount wishes to discuss this Bill, as of course he is perfectly entitled to do at the proper time, then I shall be constrained to move, and to ask your Lordships to carry, a Motion, that this debate be adjourned until a more suitable occasion? I do not know what the noble Viscount wishes to do.
VISCOUNT ST. DAVIDS: My Lords, I thank the noble Lord very much; I am sorry to have troubled the House with this matter. I certainly want to make at least a Second Reading speech. As a matter of fact, on noticing this Bill on the Order Paper I did give notice earlier in the day both to the Ministry of Transport and to my own Whips' Office. I am sorry if it did not reach the noble Lord.
LORD MERTHYR: My Lords, if the noble Viscount would allow me to move a Motion before he concludes his speech to-day, I would therefore beg to move now that this debate be adjourned.
Moved, That the debate be now adjourned—(Lord Merthyr.)
On question, Motion agreed to, and debate adjourned accordingly.

FERTILISERS (UNITED KINGDOM) SCHEME, 1962
2.40 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): My Lords, I beg to move that the Draft Fertilisers (United Kingdom) Scheme, 1962, a copy of which was laid before Parliament on May 3, be approved.
The purpose of this Scheme is to extend the fertiliser subsidy for a further year, from July 1 next to June 30, 1963. In accordance with this year's Annual Review determination, the rates of subsidy—which are set out in the schedules to the Scheme—have been reduced so as to effect a total subsidy reduction, based on current levels of consumption, of £2½ million. In general, the new rates will be about 8 per cent. below those currently being paid. The precise apportionment of the £2½ million cut between the different fertilisers eligible for subsidy has been agreed with the Farmers' Unions.
Apart from these changes in the rates, the only other change between this Scheme and the 1961 Scheme is that provision has been made for the rate of subsidy on sulphate of ammonia to be reduced proportionately in cases where the nitrogen content is less than the normal 21 per cent.
This is the fourth successive year in which it has fallen to me to move the approval of the Annual Fertiliser Subsidy Scheme. On each occasion I have been able to report an increase in total fertiliser usage over the previous year; and this year is no exception. For the twelve months ending June 30 this year, an increase of nearly 6 per cent. over the figure for the twelve months before that is forecast.
900
For many years consumption has been on a rising trend. Since the present subsidy arrangements were introduced, as far back as 1952, the usage of nitrogen has doubled, the usage of phosphate has increased by nearly 30 per cent., whilst the usage of potash has also doubled. While the Ministry's Advisory Service has some of the credit for this welcome state of affairs, as well as the salesmanship and advisory work of the fertiliser manufacturers and the merchants, there is no doubt in my mind that the biggest single factor behind the increase in usage has been the subsidy. Surely the figures of increased usage are the best justification it can have.
The reason why this increase in fertiliser usage is so much to be welcomed is the contribution which the right level of fertiliser application can make towards reducing unit costs of production. The experts will say, of course, that, taking the country as a whole, we are still not using enough fertiliser—particularly on grassland—and there is no doubt that there is scope for further improvement. But it remains true that the increased and better use of fertilisers has been a major factor in increasing agricultural efficiency. If one cavils at the cost—and subsidy payments totalled £33 million for the financial year, 1961–62—it is perhaps worth reflecting what the cost of agricultural support would be if unit costs had not been reduced in the way this subsidy scheme has made possible.
My Lords, since I first moved this Order in 1959 there have been significant developments in the fertiliser-manufacturing industry. Costs have tended to come down, and in fact there have been price reductions every year since 1959. This year already the two major manufacturers have announced lower prices. The new prices include delivery to the farm, and not just to the nearest railway station, as previously. The cuts in price amount to more than the subsidy cuts which will be made under this Order. Therefore the argument cannot be supported that it is only the manufacturers who benefit from this subsidy. The object of the subsidy is to help farmers by reducing the cost of one of their main raw materials. Of course the manufacturers benefit by the expansion of their market that this subsidy makes possible,

901
but do noble Lords wish to criticise that? It seems to me a perfectly reasonable state of affairs.
At each of the last three Annual Reviews, a cut has been made in the fertiliser subsidy. On each occasion, manufacturers have cut their prices, farmers have not had to pay more, and usage has continued to rise. It seems to me that this bears out the soundness of the policy the Government have followed. Payments under this subsidy for the year ended March 31 last amounted to £33 million, which is a considerable sum of money. But I believe that this sum is fully justified by the 65 per cent. increase in usage which this subsidy has stimulated since its introduction, and I hope therefore that your Lordships will approve this Scheme. I beg to move.
Moved, That the Fertilisers (United Kingdom) Scheme, 1962, be approved.—(Earl Walde grave.)
2.45 p.m.
LORD STONHAM: My Lords, we are most grateful to the noble Earl for his careful explanation of this Fertiliser Scheme, which, as he said, has been in operation since 1952, although I think that he will agree that the original principle of a fertiliser subsidy was introduced by my noble friend Lord Williams of Barnburgh, when he was Minister of Agriculture. The noble Earl was at some pains to justify the subsidy, but so far as we on this side of the House are concerned there is no need to justify it, because we are wholly in favour of the principle of encouraging the use of fertilisers by means of a subsidy to farmers. There is no question that over the years it has played a great part in increasing food production, and, I believe, in decreasing the cost of production.
As the noble Earl, said, however, £33 million is a large sum for the taxpayer to find, though few, if any, of us would boggle at the price, if we could be quite certain that it all goes towards the reduction of farm costs. In fact, the noble Earl mentioned that there were some who were not quite sure on that point, and I must number myself among them. Certainly in recent times doubts have risen about whether that is the case. The noble Earl has pointed out that there have been several successive reductions in farm subsidies for fertilisers, and every
902
year these have been met by corresponding reductions in the prices charged by the manufacturers of fertilisers. If we were to follow that line of thought, of course, it would be logical to conclude that the thing to do would be to wipe out the subsidy altogether, for the manufacturers would then reduce their prices, we should save a lot of money and the farmers would pay less for their fertilisers. But I really cannot accept the noble Earl's premises.
The trouble is that the Order specifies the amount of Treasury subsidy per ton of fertiliser but does not specify the price per ton which the farmer should pay for it. The large manufacturers are not monopolists, but they are in a position virtually to monopolise the market and decide prices, and there is no Governmental control over fertiliser prices at all. It is reasonable to speculate what the price of fertilisers would be if there was no subsidy; or, to put it another way, how much of the subsidy we are now being asked to approve represents real benefit to the farmer and how much of it represents extra profit to the manufacturer.
On March 15 last, the noble Earl, replying to a Question of mine on this subject, admitted that whilst I.C.I., one of the largest suppliers, were charging English farmers £20 7s. 6d. per ton for sulphate of ammonia, they were selling this same material to Eire at £12 10s. a ton. The difference of £7 17s. 6d. a ton bears a remarkably close relation to the subsidy of £8 1s. per ton which we are asked to approve in this Order. Therefore, one is entitled to ask who really gets the subsidy—the farmer or the fertiliser manufacturer? I submit that it is no answer at ail to say that the export prices of many things are lower than the home prices. These are the goods that do not enjoy a large subsidy. If the manufacturer decides that low-priced exports are worth while because they make a contribution to factory overheads, that is his business. It is our business, before we part with (this Order, to ask the noble Earl to tell us what the fertilisers cost to produce, and how much profit sulphate of ammonia shows at £20 7s. 6d. a ton.
Some two or three years ago, the Monopolies Commission expressed themselves as satisfied. But they did not tell us what the fertiliser costs, and I hope

903
that we shall be told now. As the noble Earl has said, I.C.I. have just announced a reduction in next season's prices which they estimate, so far as they are concerned, at equal to some £1 million. I think the noble Earl indicated that the other manufacturers will fall into line. They have also, apparently, made the same remarkable economies in manufacturing costs, despite the increased cost of labour and so on. They are going to fall into line, so that the reductions in selling prices will cover the £2½ million cut in subsidy. I submit that we are kept far too much in the dark about this. The Government should give us the essential facts on which we could base a fair judgment.
There is one other point that I wish to put to the noble Earl on which I should like some information. This Order covers Northern Ireland. Farmers there receive £8 1s. per ton subsidy on sulphate of ammonia in exactly the same way as everyone else. But there is nothing at all to stop them buying this I.C.I. material from Eire at, say, £13 a ton, which includes an agency commission on top of the £12 a ton which is being paid in Eire for it now. The fertiliser would then cost them, after deduction of the £8 subsidy, only £5 a ton net. That is scarcely an injustice to Ireland, but it is a considerable injustice to the English taxpayer. The noble Earl cannot deny that this can, and probably will, happen. Maybe it has already happened because the Order does not lay down how much the farmer shall pay, or from whom he shall buy. We established that fact by question and answer the last time I raised it. I do not wish to deny farmers in Northern Ireland or anywhere else any support to which they are entitled, but it seems to me that a good deal of this subsidy money may well be finding its way into the wrong pockets.
I read in the newspapers to-day that Fisons' profits may be reduced by something like £1 million, but last year they made a net profit about £3½ million, which is a fairly sizeable sum. I ask the noble Earl, therefore, to answer these questions and, above all, to tell us what the fertilisers cost to produce. I submit, with all respect, that if the noble Earl says he does not know, and that
904
his Department do not know, then on the face of it they should find out before they ask us to approve the subsidy.
LORD WISE: My Lords, before the Minister replies, there is another point which I would put to him in passing. I apologise for not giving him notice of this point, which has nothing whatever to do with the matter raised by my noble friend. It is a question of the definition of "agricultural association". The noble Earl will not have with him the Bill to which I refer, but a few days ago we dealt with the Agricultural and Forestry Associations Bill in which there is a definition of "agricultural association". There is also a definition under this Order and the two definitions are different. The definition under the Agricultural and Forestry Associations Bill is more embracing than the definition in this Bill, and I am wondering whether, for the sake of clarity, at some future date the two definitions might be brought into line. As I have said, I cannot expect the noble Earl to give me an answer now, because the point arose only last night when I was looking at the Order and comparing it with the Bill which we had before us two or three days ago.
2.56 p.m.
EARL WALDEGRAVE: My Lords, I am glad that your Lordships welcome this Order, and that the noble Lord, Lord Stonham, was wholly in favour of a Government subsidy on fertilisers. He seemed a little doubtful as to why I felt it right to justify the subsidy fairly fully to your Lordships, but the reason must surely be that any Department which is spending £30 million of the taxpayers' money has to show why it is being spent, and why the Department considers it to be a good object on which to spend it. That is what I was trying to do.
Last year, if I remember correctly, I had an exchange with the noble Lord, Lord Walston, about the illogicality, as he put it, of saying that if you reduce the subsidy to nothing at all then you will get the fertiliser cheaper and cheaper; this argument can be reduced to absurdity. I remember that he said that the usage of potash had gone up, that potash was not subsidised and that, therefore, I could not possibly argue that the subsidy on fertilisers was increasing

905
usage. The potash question, which has not been raised to-day, is an easy one, because potash is used in nearly all the compound fertilisers. Its usage goes up because we are subsidising the others. We really cannot follow this illogicality that the price of fertilisers is forced down for the farmer.
The truth is that it is fortunate that there have been such developments in the fertiliser industry. There have been new entrants. The big petrol firms are now making nitrogen. There is no doubt greater competition in efficiency and the manufacturers are able to make this economy. Although we have reduced the subsidy, the farmer is able to buy his fertiliser at the same or a lower price because the industry is becoming so well organised and because there is such strong competition in the industry. I have no objection to the fact that the manufacturers can reduce their prices.
I do not want—and I do not think it would be proper—to go into the accounts of individual firms. But many of your Lordships have seen in the newspapers or on the tape that the board of Fisons have issued a statement that they are going to reduce the cost of their fertilisers, although they have made a considerably lower profit this year than in the year before. This is a matter of business. They think that they must retain their market and they anticipate economies in production and distribution; therefore, they are lowering the price to the farmer.
The noble Lord, Lord Stonham, said that we can speculate about the profits of the fertiliser manufacturers. We do not have to speculate about their profits. They publish their accounts and they are there for all to see. But when the noble Lord comes to the question of the actual cost of manufacture of a unit of nitrogen, it is a very different matter. The noble Lord has clearly been refreshing his memory by reading the report of the Monopolies Commission. There was much discussion about this at the time. The discussions with I.C.I. and Fisons about assurances regarding their profit levels, arising from the report of the Monopolies Commission, have been going on since this Report came out. They are not yet concluded. When they are, as I understand it, Parliament will be told what the results of these discussions
906
have been. I really do not want to do anything now which might prejudice a satisfactory outcome to the difficult and delicate discussions which are conducted chiefly by the Board of Trade, although my Department is of course fully associated with them.
The noble Lord, Lord Stonham, also asked whether in the Irish Republic you could buy cheap fertiliser which is sold there as surplus from one of the big manufacturers—the Irish Republic has no manufacturing industry of its own at the moment, but I believe that it is going to have one shortly—at a price of about £13 a ton, export it across the border into Northern Ireland, draw a subsidy on it and thus have it for next to nothing. I really doubt whether that is a very practical business. The noble Lord, Lord Stonham, and I might go and see what we can do about it. But I rather suspect that when we went across the border from Northern Ireland into the Irish Republic to buy this fertiliser at £13 a ton, we should find that the cost quoted was the cost at port-side. By the time we had transferred the fertiliser to Northern Ireland we should find Chat we had paid very much more for it than the first cost of landing this material at the quay.
Secondly, I think it is material that if a firm in this country—Jet us take I.C.I., because that is the suggestion here—is sailing its fertiliser at a low price to Eire and is also selling it at a higher price in Northern Ireland, there may well be some perfectly legitimate arrangements between merchants. The noble Lord and I might find, when we went to do our business, that it was a rather difficult matter.
LORD STONHAM: My Lords, may I interrupt the noble Earl? There is no dispute on the question of fact. He himself has confirmed the fact that the price from I.C.I. to Eire is £12 10s. per ton c.i.f. The only additional cost to Northern Ireland are landing charges, which are small, and railway freight charges. That is the first point. The second point, which he has confirmed, is that I.C.I. sell in Northern Ireland at £20 7s. 6d., so there is nothing whatever to stop a third party from exporting from Eire to Northern Ireland at a very much lower price; and that fertiliser

907
exported from Eire to Northern Ireland will qualify for subsidy at £8 1s. per ton.
EARL WALDEGRAVE: My Lords, I do not think this is a particularly profitable argument. If all the fertiliser is going from I.C.I., and if this deal were done by Messrs. Stonham and Walde-grave, I.C.I. would be likely to put their price up in the Irish Republic.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, what we really want to know is whether the last facts mentioned by the noble Lord, Lord Stonham, are the truth? Is there any evidence that any such trade has gone on from Eire into Northern Ireland? Is there any Customs duty in Northern Ireland against this being done?
EARL WALDEGRAVE: My Lords, there is a Customs duty on sulphate of ammonia entering the United Kingdom of £4 per ton, which has been reduced to £3 4s. per ton, as announced by my right honourable friend the President of the Board of Trade on May 18. But I am not sure if this applies here. I am not denying this possibility, but I think that it is very unlikely to happen in practice. There are many ways of killing a cat other than drowning it.
The point that was made by the noble Lord, Lord Wise, was one of a technical nature, of which he had not given me notice. He asked about the definition of "association" in this scheme and in the Bill of the noble Earl, Lord Buckinghamshire, which was moved a day or two ago. I would ask him, if he would be good enough, to allow me to answer his question When I have studied the two definitions. May I write to him instead of replying across the Table?
LORD WISE: I should be very pleased to go into it with the Minister.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am much obliged for the trouble that the noble Earl has taken to reply to the discussion, but I must say that it leaves us a little undecided on this side of the House. There seems to be a special desire not to make things difficult for the manufacturers of fertilisers in these matters.
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Certainly there have been very great profits made in the post-war years as a whole on these mutters, and I Chink we are entitled to rather more details than we have yet obtained. What is the real objection to stating the facts? The noble Earl said, of course, that these companies publish their accounts. What are the accounts which they publish? The profit and loss account and the balance sheet. Detailed information on how prices are arrived at, what they are, and what goods are sold at is not available for the general public, although the goods are so heavily subsidised. I think this wants looking at a little more closely. I do not want to embarrass the noble Earl to-day, but we shall have to take the matter up again in the House.
If the noble Earl's Government are going to take us into the Common Market, for example, we may not then have any real final control of what aids to agriculture may be in our own country. We do not really know and we ought to be given all the information so that we can examine all the facts quite fairly.
EARL WALDEGRAVE: My Lords, if I may say so, I am not withholding any facts. The Monopolies Commission when they reported on the fertiliser industry said that the profits being made were reasonable. Discussions have been going on between my right honourable friend the President of the Board of Trade and those who are running these companies. The discussions are still continuing both as to accountancy principles and as to what the unit rate profits are. As I said, we are not withholding any facts at all. When these discussions are completed Parliament will be told what has come out of them.
LORD WILLIAMS OF BARNBURGH: My Lords, before we pass on to the next Business, is it not correct to say that these annual interventions, such as the one to-day from my noble friend Lord Stonham, have been very effective in warning the fertiliser producers that they cannot go on for all time exploiting the subsidy provided by the Government? I think the fact, as the noble Earl has stated, that there has been a reduction in the price in four successive years clearly indicates that fertiliser producers have not done too badly out of

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the business. But there is nothing that the noble Earl could do to prevent them if they wanted to to exploit the situation badly.
I could not argue whether that has been the case or whether they have been modest in their demands and the prices they fix, tout what we do know is that the Ministry of Agriculture should keep their eye on the target where the Government are paying a large subsidy for certain services to agriculture. The only other thing I would say to the noble Earl is that if one production grant is reduced or abolished then what happens to the money which is apparently, but not really, saved? For example, assuming we abolish this £33 million subsidy on fertilisers to-morrow, where would the money go?
EARL WALDEGRAVE: My Lords, I really should not speak again, but with regard to what the noble Lord, Lord Williams of Barntourgh, said, would he really like to go on record as saying that firms of this repute are exploiting? With what he said later I entirely agree. They may have done pretty well, and so may have the farmers and others. But to say that they are "exploiting" is a rather different thing. I just wonder if the noble Lord would wish to go on record as saying that.
LORD WILLIAMS OF BARNBURGH: Would the noble Earl provide me with an appropriate word?
EARL WALDEGRAVE: Yes—doing pretty well.
On Question, Motion agreed to.

NATIONAL ASSISTANCE ACT, 1948 (AMENDMENT) BILL
House in Committee (according to Order).
House resumed:
Bill reported Without amendment; Report received.

POLICE FEDERATIONS BILL
House in Committee (according to Order).
House resumed:
Bill reported without amendment; Report received.

TRANSPORT BILL
3.11 p.m.
Order of the Day for the House to be again in Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Mills.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MERTHYR in the Chair.]
Clause 1:
The four Boards
1.—
(3) The British Railways Board shall consist of a chairman, a vice chairman, or two vice chairmen, and not more than sixteen nor less than ten other members; the chairmen and other members of the Board shall be appointed from among persons who appear to the Minister to have had wide experience of, and to have shown capacity in, transport, industrial, commercial or financial matters, administration, applied science, or the organisation of workers, and the Minister in appointing them shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of particular regions and areas served by the Board.
(4) The London Transport Board shall consist of a chairman, a vice chairman and not more than nine nor less than four other members; the chairmen and other members of the Board shall be appointed from among persons who appear to the Minister to have had wide experience of, and to have shown capacity in, urban transport, industrial, commercial or financial matters, administration, applied science, or the organisation of workers.
(5) The British Transport Docks Board shall consist of a chairman, a vice chairman and not more than nine nor less than four other members; the chairmen and other members of the Board shall be appointed from among persons who appear to the Minister to have had wide experience of, and to have shown capacity in, transport, industrial, commercial or financial matters, administration, applied science, or the organisation of workers, and the Minister in appointing them shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of particular regions and areas served by the Board.
(6) The Inland Waterways Authority shall consist of a chairman, a vice chairman and not more than nine nor less than four other members; the chairmen and other members of the Authority shall be appointed from among persons who appear to the Minister to have had wide experience of, and to have shown capacity in, the operation, management or administration of inland navigations or related

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matters or who appear to him to have special knowledge relating to some important aspect of the Authority's work or to have had wide experience of, and to have shown capacity in, transport, industrial, commercial or financial matters, administration, applied science or the organisation of workers, and the Minister in appointing them shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of particular regions and areas served by the Authority.
LORD SHEPHERD LORD SHEPHERD moved at the end of subsection (3) to insert:
"Provided also that not less than three of the members of the Authority shall be persons who appear to the Minister to have had a wide experience of and shown capacity in the operation management or administration of Road Transport."
The noble Lord said: I beg to move this Amendment on behalf of my noble friend, Lord Lindgren, who I regret is unable to be here this afternoon. This Amendment is of the same character as that which we were discussing at the end of the Committee stage yesterday afternoon. I thought we had an interesting debate on Amendment No. 8 and I believe there was a general view that it would be of advantage to the Board that a fair number of 'the persons on the Board should have practical railway experience. It may seem rather strange that on a clause setting up a Railways Board we should be moving an Amendment to the effect that some of that Board should have road transport experience, but if any of your Lordships were to look at the accounts and reports of the British Transport Commission, he would see that road transport plays a very considerable part in railway operation—there is the collection and delivery of merchandise from the railhead. In fact, the cost of these operations is in the region of £22 million a year. It is also interesting to note the size of the fleet. The Commission has a fleet of nearly 35,000 vehicles, and with the railways it has in operation 49,000 different containers. We therefore have a road fleet comparable in size to that of British Road Services and its sister companies, and also the passenger side. Therefore, in view of the size I would say that the inclusion on the Railways Board of persons with a knowledge of road transport is essential.
When one looks at Clause 4, and the powers that the Railways Board have
912
for the carriage of goods and passengers by road, it becomes very important that we should have on the Board directors with an intimate knowledge of road transport. I should not be pressing this Amendment quite so strongly if we were to have a co-ordinating Board above the Boards that are being created in Clause 1. If we had had a co-ordinating Board to co-ordinate the duties of British Road Services and transport with the rail authorities, perhaps that would 'have met the case. But it is quite clear that the Government do not propose to give us that. Therefore I think that, when we are creating this new Railways Board, with its responsibilities for a certain amount of road haulage, road delivery, and the movement of passengers, we should have on the Board persons with an intimate knowledge of road transport. I beg to move.
Amendment moved—
Page 2, line 25, at end insert the said proviso.—(Lord Shepherd.)
THE MINISTER WITHOUT PORTFOLIO (LORD MILLS): When I spoke yesterday on Amendment No. 8 I indicated that I was also referring to this Amendment, as did the noble Lord, Lord Lindgren. Indeed, the objections that I found to Amendment No. 8 apply equally to this Amendment. Clause 1 (3) does refer, inter alia, to "transport" and not to "railway transport", leaving it to the Minister's discretion what members with experience of rail or road transport he appoints to the Board. As I said yesterday, it would be a departure from the general provisions governing appointments to the nationalised Boards to require a fixed number to be appointed with definite qualifications. In my view, the Minister must be left free to make such appointment as appear to him to be right, after consultation with those who are qualified to advise him.
Of course, every phase of the management of the railways and the associated enterprises cannot be covered by the Board membership. The Board must rely in many cases on qualified officials to advise them on how to carry out their duties. I quite see the point made by the noble Lord. I think the question of road transport is important: my objection is merely that we should not

913
be too rigid about this and must leave discretion to the Minister.
LORD SHEPHERD: In the circumstances of the noble Lord's reply, I beg to withdraw my Amendment.
Amendment, by leave, withdrawn.
3.20 p.m.
LORD STONHAM LORD STONHAM moved to add to subsection (3):
"Provided also that the members of the Board shall include a member from each of the regional Railway Boards mentioned in section two of this Act."
The noble Lord said: On behalf of my noble friend Lord Lindgren, whose absence has been already explained, I beg to move Amendment No. 10 on the Marshalled List. Clause 1 (3) envisages a Railways Board comprising a minimum of 12 and a maximum of 19 members. If the Minister follows the directions which are given in this subsection, they must include persons of sufficient calibre with wide experience in transport, industry, commerce or finance, applied science or the organisation of works. We were told yesterday that this almost certainly included people with experience in agriculture and with experience of rural problems. That is eight categories of people. In addition to those eight categories, the Minister, in appointing his Railways Board, must consider appointing members who have intimate knowledge of the special requirements and circumstances of the regions and areas served by the Board. That is already laid down in the clause as we now have it.
I would concede at once that this last category of members, those with particular regional knowledge, need not necessarily be additional to the eight categories I have already mentioned, because naturally some members with regional knowledge may also possess one or other of the attributes specified in the subsection. I submit, however, that there is no better method, no more economical or sure method, of making certain of getting regional experience on the Railways Board than by the acceptance of this Amendment, which would write into the Act the requirement that at least one member of each of the six Regional Boards should be a member of the Railways Board.
The noble Lord, Lord Chesham, yesterday expressed some sympathy with an Amendment which I moved, which required the Minister of Transport, before appointing the Board, to consult the Secretary of State for Scotland and the Minister for Welsh Affairs. The noble Lord appears to be in some doubt. I have only suggested that he expressed some sympathy with the Amendment. He will recall that he agreed to look at it a little further.
THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD CHESHAM): It was my noble friend Lord Dundee.
LORD STONHAM: I beg your Lordships' pardon. I thought it was the noble Lord, Lord Chesham. If this Amendment were accepted, quite obviously it would go some way to meeting the point that I put in that Amendment yesterday, because it would put a Scottish representative on the Board. Equally, the member for the Western Regional Railway Board would have special knowledge not only of the problems of Wales but of the not altogether dissimilar problems of Cornwall, Devon and areas of that kind; the Eastern Board representative would have specialist knowledge of the agricultural problems of East Anglia, and, indeed, might well be helpful on agricultural problems generally. In every case, in fact, the regional representative would have a specialist and vital contribution to make to the formulation of national railways policy, and to its efficient implementation.
Yesterday, in replying to an Amendment moved by my noble friend, the noble Lord, Lord Mills, said [OFFICIAL REPORT, Vol. 240 (No. 81); col. 864]:
"I agree with the sentiments … expressed, but I think that the Amendment introduces a rigidity which we cannot accept … "
Such is the charm of the noble Lord that when I heard that statement and noted it down, it did not make, as it were, a harsh impact on me—it sounded a reasonable statement to make. But reflecting on it overnight, I cannot now see much difference between those words and saying "My mind is made up; do not confuse me with the facts." I hope that the noble Lord, if he comes to reply, will not attempt to deal with

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this Amendment in the same way, because it would prove that the rigidity lies with the Government and the flexibility in the Amendment. In fact, in my submission, acceptance of this Amendment will give the Minister much greater flexibility, and much greater room for manœuvre, in trying within a total of 12 or, if you like, 19 members to satisfy all the various constituents which, in effect, are already written into subsection (3) of this clause. I think it would also assist effective co-ordination of rail services, which noble Lords opposite have frequently assured us is one of the Government's main objectives.
It will be the duty of the Railways Board to delegate certain of its powers to the Regional Boards. This may be an advantage. There may be an advantage in having Regional Boards concentrating on local problems under conditions of local autonomy. But no one envisages that the Regional Boards will return to the position which the old private-enterprise railway companies were in. The Western Regional Board will not be a return to the old Great Western Railway or anything of that kind. The Bill is still designed to ensure that the railways will be run by the British Railways Board, carrying out a national railways policy. It is vital, therefore, that the regions should have a part in formulating policy, and that one member of each region should be in a position to interpret it to his Regional Board.
There are many national organisations which have immensely benefited from this kind of pyramid structure. The noble Lord, Lord Mills, smiles. But I have keenly in mind the position in the hospital service. I run a group of five hospitals. Five of the members of my group are chairmen of those hospitals. In fact, they carry down, and explain, policy in that way. In my submission, this is immensely valuable. The Amendment, of course, does not insist that the chairmen of each Regional Board should be the regional representative on the Railways Board. That might be the best solution, but we are content in the Amendment to say that each region must have a member with a seat on the Board. I cannot see that there is any reasonable objection to this Amendment. It seems
916
to me to have great advantages, and it would help to remove many serious and, in my view, well-founded misgivings. I therefore hope that the Government will accept it. I beg to move.
Amendment moved—
Page 2, line 25, at end insert the said proviso.—(Lord Stonham.)
3.30 p.m.
LORD MILLS: At any rate, I will try to vary my language this time. I understand the motive actuating the noble Lord in moving this Amendment. If I might refer your Lordships to the White Paper, Cmnd. 1248, it was proposed in paragraph 15 that there should be on the Railways Board
"A representative from each of the Regional Railway Boards."
On consideration, however, we have come to the conclusion that the balance of central and regional representation on the British Railways Board should not be fixed by Statute but should be determined in the light of future experience and needs. We ought, I suggest, to leave it to the new management to work out the best arrangement. The Boards should be able to consider at any time what regional representation is needed, in the light of the requirements at the centre and other experience and knowledge. The Minister has power to make these appointments and the upper and lower limits of the numbers of the Board have been fixed in order to allow for regional representation. I would also remind your Lordships that Clause 1 (3) says:
"… the Minister … shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of particular regions and areas served by the Board."
So, while I think there is much merit in the proposal, I would prefer that your Lordships should leave discretion with the Minister to make his appointments after consultation with the new management of the railways.
LORD SHEPHERD: Am I to understand from the noble Lord that it is the Minister's intention to appoint a small nucleus of the Board, and then for the Board to meet and decide what is to be their future size as a central Board and how they propose to appoint and operate the Regional Boards?
LORD MILLS: I do not think that is quite the situation. Your Lordships will remember that the Transport Commission have already appointed a Railway Committee which has regional representation. It would be with the chairman and members, of that Committee that the Minister would discuss this problem.
LORD SHEPHERD: So it is this Committee and the Minister who will decide, and not the Board that is being created?
LORD MILLS: No; it is the Minister who will decide.
On Question, Amendment negatived.
LORD STONHAM LORD STONHAM moved to add to subsection (3):
(" ( ) The Chairman and not less than nine members of the Railways Board shall be required to render whole time service to the Board or Regional Boards.")
The noble Lord said: The British Transport Commission has been described as the biggest undertaking in the country, if mot in the world. The Railways Board will be very much smaller than that, but it will still be a very big business which cannot, in our view, be administered by a number of part-timers. The First Schedule to the Bill makes it clear that members will be expected to render substantial service and be paid salaries or fees and allowances; they may qualify for pensions or compensation for loss of office. They will obviously, therefore, be expected to be much more than, say, the part-time members of Electricity Boards. We are anxious, however, that the Bill should be more explicit than that. Again and again when we raise Amendments of this kind the Minister when replying refers us to certain words in the clause, words which of course we have read again and again, to see whether we can screw some crumb of comfort out of them. Then we put down Amendments because the words do not seem likely to produce the kind of set-up that we want.
On this particular point we feel quite strongly that this should be, if not wholly, substantially a full-time Board. In fact we say in our Amendment that at least 10 members of the Board—just over 50 per cent. of the optimum number of 19—should work full time. This full-time service, we point out, could be given either to the Railways Board or
918
to one of the Regional Boards. It would not only ensure that a Board would be run mainly by men with continuous day-to-day experience, but would give active, working railwaymen a clear view of the top rungs of the ladder; and I am bound to say that both the White Paper and this Bill have done a very great deal to obscure those top rungs, particularly among some of the men who thought that they had them in sight.
During the course of our debates there has been some difference of opinion about the immediate practicability of insisting that the top posts should be filled by railwaymen. We on this side have thought that the men were there already; noble Lords opposite have not been nearly so confident. I do not think there is any difference of opinion about the necessity to fire railwaymen with the ambition to reach the top, and there can surely be no better way of doing this than by letting them see that they are serving a professional organisation; that the majority of the Board is composed of men who are working full-time on the job, and therefore that the way to the top is, and must be, open to men of ability. Again, I hope that this Amendment will commend itself to your Lordships as likely to add enthusiasm, incentive, knowledge and efficiency to the Railways Board and to the men who work on the railways.
Amendment moved—
Page 2, line 25, at end insert the said words.—(Lord Stonham.)
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (THE EARL OF DUNDEE): The only reason why I hope your Lordships will not press this Amendment is that I think it would introduce into the working of this part of the Bill a degree of statutory rigidity, which would certainly be unnecessary and possibly undesirably restrictive. Your Lordships have just negatived an Amendment which would have made it a statutory requirement that one member of each of the six Regional Boards should be a member of the Railways Board. There are only 16 members of the Board, apart from the chairman and two vice-chairmen. That would mean that if you had 6 compulsory members from the Regional Boards you would be left with only 10 others, apart from the chairman and vice-chairmen. If

919
this Amendment were now to be accepted, requiring that 9 of those members should be full-time, that would leave the Minister latitude to appoint only one member who was not a full-time member. I think that would really be an absurd degree of inflexibility. In point of fact, I would submit to your Lordships that it is better not to have any statutory requirements as to the proportion of whole-time members. Whatever number is chosen as the right one may change with circumstances, and we do not want to have new legislation too often.
I know that in the 1947 Act it was provided that there should be 4 whole-time members of the Transport Commission out of a total of 8, and that number of 4 has been continued until now. The proportion was altered in 1953, when the total number of members was raised to 14, but the minimum of 4 whole-timers was left. So the proportion of statutory whole-timers was greatly reduced, although in fact the number of whole-time Members has always been greatly in excess of 4.
I would submit to your Lordships that, in the interests of the smooth and efficient working of the Bill so far as concerns the personnel of the Commission and the freedom of the Minister to choose the best people, it is much better not to have a statutory limitation of this kind. I think it is a false apprehension to think that the Minister would ever want to appoint too few whole-time members. It is really to his interests, and to the interests of everybody, to have a large number of them. When this Amendment was moved in another place, it was withdrawn on the assurance given by the Parliamentary Secretary that the great bulk of members of this Board would be full-time. I am glad to repeat that assurance to your Lordships, and I think it is right that they should be. But I would ask your Lordships not to try to limit the exact numbers by Statute.
LORD STONHAM: I am grateful to the noble Earl for repeating the assurance given to us an another place, which assurance I personally have heard for the first time. I do not know what is the practice of other noble Lords, but if I move an Amendment I prefer not to read what
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has already been said, and to make my own case. It does seem to me, however, that the noble Earl, in replying to the arguments, brought in a completely false reasoning. He used the word "rigidity" again. It reminds me of that kind of reasoning used when a young man asks for a rise, and the employer, by taking the total number of days and then deducting the time the man is sleeping, away at weekends and so forth, proves that the young man does not work at all. The noble and gallant Viscount, Lord Montgomery of Alamein, introduced some similar argument recently, in proving that Regular soldiers had scarcely put in any actual time in service. The noble Earl has used exactly similar arguments. He first took the 19 members of the Board, and then reminded your Lordships that you had just rejected an Amendment which would have ensured that 6 members from the Regional Boards would be appointed. Your Lordships had rejected that, but he nevertheless deducted those 6 as if you had accepted the Amendment.
THE EARL OF DUNDEE: Surely, I said—if I did not, I ought to have said—that in spite of that Amendment being rejected, it was quite possible that the Minister would appoint one member from each of the Regional Boards. It may be very desirable that he should. I think it will be within the recollection of your Lordships that I did say that, and that was the basis of my argument. The fact that we do not think it is desirable to have a statutory, compulsory provision that there must be one member from each Regional Board does not mean that it is not possible or even likely that one member from each Regional Board would be appointed. If they were appointed, it would—and I think it is a perfectly reasonable argument—leave only 10 others and, if 9 of the others were statutory whole-timers, that would leave the Minister latitude to appoint only one. What I have suggested may very likely happen. It is not a hypothetical argument at all.
LORD STONHAM: I am grateful to the noble Earl, but if he says that it is extremely probable that there will be 6 members appointed from the Regional Boards it makes it all the more difficult to——
THE EARL OF DUNDEE: On a point of detail, I do not think I used the words "extremely probable". I think I said "quite probable".
LORD STONHAM: Certainly I shall study the actual words with interest to-morrow, but the noble Earl did create in my mind the impression that he thought it was very likely that these 6 members would be appointed. I find it all the more difficult to understand why the Government refused to accept the Amendment.
THE EARL OF DUNDEE: Why?
LORD STONHAM: The whole point of the noble Earl's argument was this: if we deducted these full-time members—and these were his actual words—there would only be one member of the Board left. But I should have thought it extremely likely that the 6 members from the Regional Boards would be full-time employees. It' I am right in thinking that—and I think it is very likely—you would immediately have a margin of 6 more. I tried to point out that these people from the Regional Boards—one from Wales, one from Scotland, one from East Anglia—would help the Minister to ensure that he got that regional representation which he is obliged to get. So you cannot keep on counting them, because you get back to the original reductio ad absurdum which I mentioned, of the young man who does not work at all. That was precisely the argument that the noble Earl used, and the only remarkable thing about it was that he coupled that argument with the insinuation that we were being too rigid.
We are very far from convinced that the case has been answered. All we are told is, "We do not really want your Amendment, but it is likely, or it is probable, that what you seek to achieve in the Amendment will be carried out in practice, anyway." In our view, it would be much more reassuring to the railwaymen, and also better evidence of the Government's intentions, if the Amendment were accepted.
On Question, Amendment negatived.
3.48 p.m.
LORD BURDEN LORD BURDEN moved, in subsection (4), after "Board" (where that word occurs a second time) to insert:
922

"(a) shall include persons who appear to the Minister to have had wide experience of, and to have shown capacity in, urban transport matters and the organisation of workers, and

(b) subject to paragraph (a) of this subsection,"

The noble Lord said: After the (uncompromising refusal of the noble Lord, Lord Mills, to accept a similar Amendment yesterday, I have very little hope that this Amendment will commend itself to Her Majesty's Government this afternoon. But I still feel that it is worth while to get on record, in regard to this specific proposal, what the Government have said about the trade union representation, and how they are carrying out their promise. I should like to read again—as the noble Lord, Lord Mills, did yesterday—paragraph 32 of the White Paper, which says:
"In making appointments to the various Boards the Minister will have regard to the special contribution which can be made by those with Trade Union experience. It is particularly important to use this experience in the management of these undertakings, where manpower plays so large a part."
We ask the Government 'to write their promise into the Bill, and we are met with various excuses—"We do not 'want rigidity", or, "We want flexibility". As my noble friend Lord Stonham has pointed out, we seem to be getting a new connotation of words in connection with this Bill: rigidity—a refusal to carry out that which was indicated as the policy to be carried out; flexibility—the means of evading the carrying out of a promise. The Government seem to be like Humpty Dumpty and say, "We will make words mean what we want them to mean".
Then we are told that young and vigorous trade unionists might not be forthcoming, and so on. These are all excuses. I would urge, as I urged yesterday, that the 500,000 men and women in the railway service, the ranks of which are filled with those who understand the aims and objects of their fellow workers, who understand their psychology, and who understand how they can best be made to give of their utmost to make this new machine work, should be given the opportunity of doing so in the centres of authority; and they should have that as a right rather than it should depend upon the good will (I

923
will not use another term) of the Minister or of the civil servants who may determine it. I beg to move.
Amendment moved—
Page 2, line 28, at end insert the said paragraph and words.—(Lord Burden.)
LORD MILLS: I am not surprised—I am never surprised at anything—but am a little sad that the noble Lord, Lord Burden, should spend time in again approaching a matter which we debated so fully yesterday. I am also a little disappointed that, having read Hansard, as he must have done, he did not see that the remarks I made about representation by the workers were fair. They were not against representation by the workers, and they were intended to be helpful in this matter. But the Amendment proposed by the noble Lord, Lord Burden, is precisely similar to Amendment No. 6, which he submitted yesterday. In submitting it he said [OFFICIAL REPORT, Vol. 240 (No. 81), col. 845]:
" … the points referred to in Amendment No. 6 are also dealt with in Amendments Nos. 12, 13, 14, 17 and 22".
When I came to reply, I added Amendments No. 89 and Nos. 219 to 222 which are to the first Schedule. I do not know whether the noble Lord intends to take us through all these Amendments. If he does, very well; but I can only repeat what I said yesterday: that it is not usual in these Bills to provide for distinct numbers in distinct categories. I must ask your Lordships to reject this Amendment.
On Question, Amendment negatived.
3.55 p.m.
LORD SHEPHERD LORD SHEPHERD moved to add to subsection (4):
"Provided that at least a majority of the members of the Board shall be persons who appear to the Minister to have had wide experience of, and to have shown capacity in, London Transport."
The noble Lord said: I hope the noble Lord will not complain about what he may think is rigidity in regard to Amendments of the character of that which I am now moving. It is, of course, a peg on which to hang a few remarks—remarks which I hope the noble Lord will take as an attempt to be helpful to the Government. This Amendment seeks
924
to make it a requirement of the Minister that, when he appoints the Board, he should ensure that the majority of the members shall have had experience in London Transport. The middle of the subsection refers merely to urban transport. I am quite sure the noble Lord, Lord Mills, will agree that there is a considerable difference between urban transport and London Transport.
The problem of moving commuters and general passengers in London has proved a formidable task, and I am quite sure the noble Lord will agree that the conditions under which our people move to-day are quite intolerable. Therefore, when this Bill is passed, Londoners will expect a Board to have been set up which will be able to make an impact upon the conditions which now prevail. I personally do not believe that a person with experience of merely urban transport is sufficient to meet the task. I and my noble friends would like to see a very strong London Board—a Board made up of men and of women, if they are available, who know intimately the difficulties, who know the resources that are available, and who will, within a reasonable time, make an impact upon present conditions. I beg to move.
Amendment moved—
Page 2, line 33, at end insert the said proviso.—(Lord Shepherd.)
LORD MILLS: This Amendment is, I think, linked to Amendments Nos. 19 and 26.
LORD STONHAM: If the noble Lord will allow me, certainly we do not regard it as linked with No. 19. It is a quite separate point that I shall put to the noble Lord in connection with Amendment No. 19.
LORD MILLS: Then I shall deal with Amendment No. 16 now, and we can deal with the others when we come to them. The purpose of the Amendment is clear. It is to ensure that a majority of the members of the London Transport Board are experienced in London Transport. This Amendment, too, would narrow the scope of the membership of the Board. The effect could be that, out of a membership of six, including the chairman and the vice-chairman, the majority—that is, four—would have to be persons experienced in London Transport. But I would ask noble Lords

925
what the position would be if the Board come to the conclusion, and if the Minister comes to the conclusion, that other interests should be represented. The proposal is one of those things that look all right on paper. But I do suggest it is far better to leave the position (if I may use the word again) flexible, so that the Minister may appoint the people whom he thinks right to run these boards, and not be tied down in this respect.
LORD SHEPHERD: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.0 p.m.
LORD SHEPHERD LORD SHEPHERD moved, in subsection (5) after "commercial" to insert "(in particular export requirements)". The noble Lord said: I move this Amendment merely to stress the importance to the docks that the Docks Board should have on it persons with some knowledge of export requirements—that is, the facilities within our docks for the loading and quick despatch of our cargoes. There are some times when I cannot help feeling that in our docks our imports seem to have a greater degree of priority than do exports. Certainly that can be said when one sees the long lines of heavy lorries waiting to off-load their cargoes in many of our ports. Therefore I would ask the noble Lord—he may not wish to accept my Amendment—whether he would bear in mind that, in the man who is described as having "commercial" knowledge, we should have a person who has a good knowledge of the requirements of our export trade, so that our docks can be developed to provide a better service for the exporter than is at present provided. I beg to move.
Amendment moved—
Page 2, line 39, after ("commercial") insert ("(in particular export requirements)").—(Lord Shepherd.)
LORD CHESHAM: Of course, I have no difficulty at all in agreeing with the noble Lord, Lord Shepherd, on the importance of exports and of getting them expeditiously through the docks. I certainly agree with him that the Docks Board should be constituted in such a way that the management wall be aware of the vital importance of the subject he mentioned. I tell him here and now,
926
and I hope he will feel happy about it, that the Minister will certainly make his appointments having very much in mind the consideration of exports; and the term "commercial", which I suppose would probably cover the point, will be interpreted as widely as possible in order to cover the very point the noble Lord has in mind, so that the people appointed are suitably qualified and experienced. I hope that assurance will be sufficient. I do not think it would be quite appropriate if I 'were to accept his Amendment, because the drafting of the Bill is in connection with the organisation of the docks. From the point of view of efficiency of running the docks, it is probably equally important that there should be people with knowledge of imports, and perhaps various other matters besides. Therefore, if the noble Lord does not mind, I do not wish to accept his wording. I think the position is well covered by the existing categories of people, and I can give him an assurance that that point will be very carefully looked at when the appointments are made.
LORD SHEPHERD: Would the noble Lord consider on Report stage, instead of using the word "commercial", the possibility of using the word "shippers"?
LORD CHESHAM: I do not want to seem obtuse about this point, but I would rather leave the wording as it is. I think it caters quite well for the circumstances. I do not want to repeat the argument I made yesterday: that there is always a case, once you start narrowing down categories, for other categories having a claim to be mentioned as well, and you end up in rather a muddle. I should prefer to leave the wording as it is.
LORD SHEPHERD: Then in the circumstances, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD STONHAM LORD STONHAM moved, in subsection (5), at end to insert—
"Provided that at least a majority of the members of the Board shall be persons who appear to the Minister to have had wide experience of, or to have shown capacity in, the operation management and administration of the Docks."
The noble Lord said: I beg to move Amendment No. 19. When the noble Lord, Lord Mills, was dealing with Amendment No. 16, he was of the opinion that that Amendment and the Amendment I now move were on the same point. He will remember that I rose to disagree with him, and he kindly agreed that we should discuss them separately. In my view, this Amendment seeks to repair a quite remarkable omission. Subsections (3), (4), (5) and (6) of Clause 1 all lay down, as it were, the criteria which shall guide the Minister in making his appointments to each of the four Boards. But I would point out this remarkable difference. In forming the British Railways Board, the Minister is required to appoint someone who knows something about transport. That is fair enough. The London Transport Board will include members with knowledge of urban transport. The British Waterways Board will have the advantage of the advice of members with wide experience of inland navigation. But in selecting the members of the Docks Board, the Minister is required to make sure that, whatever else the members know, they must be completely ignorant on the subject of docks. That is why I ventured to suggest to the noble Lord, Lord Mills, that this particular Amendment was on a slightly different point.
I should like to assure the noble Lord that I have read those four subsections over and over again, and I have searched in this particular one very hard to see whether I could find any reference to the word "docks", and there is none. But the Minister is required to appoint the members of the British Transport Docks Board, and I should have thought, therefore, that the first essential was that he should appoint, as our Amendment suggests, persons who appear to him
"to have had wide experience of, or to have shown capacity in, the operation, management and administration of the Docks."
With the recent dispute in mind—and this may be said particularly by those noble Lords who witnessed the extraordinary discussions on television—it may be argued that management of the docks is an applied science, and therefore the question is covered by the clause as it now stands. But that does
928
not satisfy me, and I do not think it will satisfy the dockers, who, whether they be of the Crichton or the Frank Cousins brand, are likely to be very down-to-earth and outspoken people and will look with keen interest at the constitution of this particular Board. They will be somewhat dismayed if they find that the Board is composed largely of persons whom they would regard as intellectuals. Most dockers regard an intellectual as an educated blockhead, a square moving in the best circles, and they are likely to be very blunt and outspoken in their criticisms. I submit that if ever an industry required down-to-earth, hard-won experience, it is the docks industry. That is why we seek, by this Amendment, to ensure that, not just one or two, but a majority of the members of the Docks Board shall be persons who have had wide experience and, indeed, have achieved some eminence in the operation, administration and management of the docks.
I hope that when the noble Lord comes to reply it will not be argued that the British Transport Docks Board will be concerned solely with getting loads to and from the docks, because it is the docks end which, to a large extent, is the governing factor. British Railways are pushing what I regard as a most hopeful special export service.
Subject to adequate notice and consignments of sufficient size, they are prepared to guarantee delivery to any docks from any part of the Kingdom within 24 hours. But that is the railway part of it. It will take quite a lot of organisation (in order to achieve this quite remarkable guarantee, and however good the railway end of that organisation may be, it is not going to be much good unless it is co-ordinated with the service at the docks. I am sure that the noble Lord has had personal experience, perhaps in his younger and less eminent days, of the frantic things that can happen to an export or import at the docks. Over the last few days I have experienced this and, believe me, it is a matter which requires considerable experience and a strong constitution to withstand.
The railway service has to be properly co-ordinated with the service at the docks and that calls for people with experience of the docks and anxious to

929
increase consignment by the railways. I cannot believe that this word is omitted accidentally from (this clause and I shall be interested to hear the explanation, but if there is not an explanation, then I submit that there is an overwhelming case for putting these words, or something like them, into the Bill. I know that it will be said that the Minister is not a fool and that he will put people with experience on the Board. If that is the reply, then I would say: why is it that in this particular subsection, the only one of four, the Minister is not required to include someone with specialist experience in the docks? I trust that the Minister will agree that this exclusion, even if it is deliberate, is totally unacceptable. I hope that the Government will accept the force of my argument. I beg to move.
Amendment moved—
Page 2, line 44, at end insert the said proviso.—(Lord Stonham.)
LORD MILLS: I cannot advise noble Lords to accept this Amendment, for the same reasons as I advanced in dealing with Amendment No. 16; but I readily admit the point put forward by the noble Lord, that there is no mention in subsection (5) of people experienced in dock management. I think the Bill needs amending in that respect. If the noble Lord will allow me to consider it, I will bring this forward again at a suitable opportunity. I am greatly obliged to the noble Lord.
LORD STONHAM: The indebtedness is entirely on my side. I am most grateful to the noble Lord for his consideration and kindness. I assume that he himself will table his own Amendment to cover the point and, with that assurance, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD CHESHAM: This Amendment is another dealing with the change of name of Inland Waterways. I beg to move.
Amendment moved—
Page 2, line 45, leave out ("Inland Waterways Authority") and insert ("British Waterways Board").—(Lord Chesham.)
On Question, Amendment agreed to.
LORD CHESHAM: The same applies again. I beg to move.
Amendment moved—
Page 3, line 2, leave out ("Authority") and insert ("Board").—(Lord Chesham.)
LORD STONHAM: Can I help the noble Lord? Has he explored every avenue to see whether there is any other way than that of repeating this 80 times in the course of the Committee stage?
LORD CHESHAM: I have examined this and I am sorry to say that there is none. We have to go on doing it. I will simply say from now on, "I beg to move", and leave it at that.
On Question, Amendment agreed to.
LORD CHESHAM: I beg to move.
Amendment moved—
Page 3, line 7, leave out ("Authority's") and insert ("Board's").—(Lord Chesham.)
On Question, Amendment agreed to.
4.18 p.m.
LORD SHEPHERD: On behalf of my noble friend Lord Walston, I beg to move this Amendment, although again it may be regarded as rigid. I am sure that your Lordships will agree that some of the canals which the British Waterways Board will be taking over play an important part in irrigation in some parts of the country. Therefore, I think it is imperative that we have on the Board a person with some knowledge of irrigation. I wonder whether the noble Lord can accept this point. I beg to move.
Amendment moved—
Page 3, line 9, after ("science") insert ("agriculture, irrigation').—(Lord Shepherd.)
LORD CHESHAM: I do not want to go over the arguments I went over yesterday on a similar Amendment. I should have thought the noble Lord's point, which as a point is a perfectly good one, is covered by the wording in the Bill where it says:
"… and the Minister in appointing them shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of particular regions and areas served by the Authority."
I would resist the noble Lord's point because I can think of a number of other specialists and users of water—for example, drainage boards—all of whom could well claim to be included. Although I think the noble Lord's point

931
is a fair one, I do not think that we should accept it as an Amendment to the Bill.
LORD WALSTON: In view of the assurance given to us yesterday by the noble Lord, I am satisfied with what the noble Lord has said, though I think that this is something which should be permanently in the minds of those responsible for the future of the waterways, in view of the increasing importance of irrigation in agriculture and the increasing strain which it places on our general water resources, together with the fact that there are a good many waterways which are hardly used at all for transport. It is for that reason that we felt it was necessary to make special mention of irrigation, not because it is the only or the most important aspect of the whole problem of waterways, but because it is one which in the past has been entirely neglected and is liable to be forgotten unless special mention is made of it. So long as we have the noble Lord's assurance that the needs of irrigation and the potentialities of waterways as a means of supplying water in certain areas will be remembered, we shall be satisfied, and I shall be happy to withdraw the Amendment.
LORD CHESHAM: As I said, I do not argue over what the noble Lord has said; my resistance is based on the rather narrower point of drafting of the Bill. I shall certainly be glad to give him an assurance that when my right honourable friend comes to make his appointments, I will see that he is fully appraised of what the noble Lord thinks. That is not to say that my right honourable friend does not already appreciate the importance of these matters; because I agree—and I know that my right honourable friend also agrees—that the future of the waterways is bound up with such matters as water supply, conservation, drainage, and so on. He will, I am sure, have these things very much in his mind when he is thinking about the Boards, and I will certainly add a little fuel to that particular fire.
LORD WALSTON: Not water.
LORD CHESHAM: Water to that particular pond.
Amendment, by leave, withdrawn.
LORD CHESHAM: I beg to move the next Amendment.
Amendment moved—
Page 3, line 13, leave out ("Authority") and insert ("Board").—(Lord Chesham.)
On Question, Amendment agreed to.
4.22 p.m.
THE EARL OF LUCAN THE EARL OF LUCAN moved to add to subsection (6):
"Provided that at least a majority of the members of the Authority shall be persons who appear to the Minister to have had wide experience of, and to have shown capacity in, the operation management and administration of Inland Navigation or related matters.'
The noble Earl said: At first sight it may be thought that this proviso we are proposing is unnecessary. So it would have been if the clause had not contained those two phrases in lines 5 and 7 with the word "or". The first sentence at the top of the page says that the chairmen and other members shall be appointed from people having shown capacity in the administration of inland navigation and related matters. That is all right, but there is an alternative to that. In fact, there are two alternative courses open to the Minister in choosing the people to serve on this Board. It seems to me that some may have no knowledge of inland navigation, but perhaps special knowledge of some other aspect of the Board's work. I have no complaints about that, because obviously inland navigation is only one of the functions which the waterway system is required to serve in the present day. In the same way, the words "administration, commercial knowledge and experience" are wide, but they will hardly serve the members of this Board to the exclusion of "knowledge of inland navigation or related matters."
Even more we doubt the value of this clause because of the last four lines, starting with line ten. According to the words here the Minister must have regard to the desirability of appointing members familiar with the special requirements of all the different regions served by the waterways. That seems to me the most extraordinary provision. If the Minister elects, as he may, to appoint a Board with only a chairman, vice-chairman and four members, he is required to have regard to the desirability of putting in somebody from the North-East, North-West, South-East

933
and South-West, with special knowledge of the needs of those individual areas. Your Lordships know that those areas all have very different problems. They serve different ports and estuaries, and the nature of the canal problem in each of those areas is widely different. So it could be that the Minister would appoint all four members of the Board to represent geographical areas, and have no regard to the general needs of navigation and other related functions.
I think there is a case—and my noble friends may mention it later—for a much less particular instruction to the Minister in the case of many of these Boards. There is something to be said for his merely being required to appoint the most suitable man for the job, and to leave all the rest to him. Because, as noble Lords opposite have told us many times, both yesterday and to-day, if you start a catalogue of these people whose special knowledge should be represented on the board, you will have to exercise judgment and put your requirements in order of priority, and not everybody will agree with the priority. However, we have adopted the course of putting in a proviso that at least a majority of the members shall be people
"who appear to the Minister to have had wide experience of … the operation management and administration of Inland Navigation or related matters."
In case of doubt, I would explain that, in our understanding, the words "related matters" mean all the other functions that we want the waterways to perform—water supply, drainage, recreation, angling amenities, and all the rest. We should prefer to see a simple instruction of that sort, but we are suggesting in the proviso only that there should be a majority with these qualifications. It would mean that, out of a Board of 6 consisting of chairman, vice-chairman and 4 others, 4 at least should have a general knowledge of the subject—navigation and related matters—leaving two or three others who can be appointed on account of their special knowledge of the geographical areas. We think that, as it stands, the clause is open to the objections I have made. I beg to move.
Amendment moved—
Page 3, line 13, at end insert the said proviso.—(The Earl of Lucan.)
LORD MILLS: I said a little earlier that I was never surprised. But I have come very near to it in listening to the noble Earl. I thought that subsection (6) as drawn was drawn very wide and gave a choice to the Minister which was desirable. I see nothing wrong in the clause as drafted. It lists a number of occupations from which the Minister should choose. It says that in appointing them he
"shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of particular regions. … "
Not all regions. While the noble Earl was talking I read and re-read this clause, and I could see nothing wrong in it; and I still cannot. As regards this particular Amendment, I cannot advise your Lordships to accept it, for the same reasons that I advanced in regard to Amendment No. 16, which I am sure you will not want me to repeat at length again. I think it is most undesirable that the Statutes should lay down the exact number and exact qualifications which the Minister should have regard to in appointing persons to these Boards. I am sorry that I cannot accept the Amendment.
THE EARL OF LUCAN: I am sorry, too, if I caused the Minister any surprise.
LORD MILLS: Almost.
THE EARL OF LUCAN: It seemed to me that the clause required the Minister to take a large number of things into consideration in appointing his Board, and it would seem to us better that these people should be selected for their suitability, while concentrating on the main job of inland navigation and related matters. However, we do not propose to press this Amendment, but I hope that perhaps later the position which will emerge will not be as bad as we think it will. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 1, as amended, shall stand part of the Bill?
LORD SHEPHERD: I am sure the noble Lord, Lord Mills, would indeed be surprised if we let this clause go by without some comment. In fact, I rise rather like a minister to face the devil,

935
looking for words to convince him of the Tightness of my case. As I said on the Second Reading, we have this Bill which is necessary because of the complete and utter failure of Government policy and of the Act of 1953. There is nothing in the Bill which deals with the basic causes of railway difficulties. It is, in many cases, an accountant's Bill, re-writing the books. Its object is in some way to reorganise the administrative set-up of the nationalised transport industry.
It is in many respects retrograde. When industry is moving forward to cooperation and co-ordination, the Government have decided yet again to fragment the nationalised transport industry. Under Clause 1 there will be four separate Boards, with road transport out on a limb under a Holding Company. The only apparent method of co-ordination will be through a Minister Who is already grossly overworked; a Minister who, because in at least 120 different parts of the Bill he will have power to interfere with the Boards, is indeed going to be a very busy man. I doubt whether he will find the time to have the jaunt which he had yesterday. I do not propose to speak further. We have no confidence in this Bill. As your Lordships know, we did not divide on the Second Reading. This is the main clause, and therefore I would ask my noble friends to register their disapproval of the Bill by dividing against this clause.
THE EARL OF LUCAN: I should like to add to what my noble friend has said a point which has struck me in reading and listening to the speeches from the Front Bench opposite. We have had a great deal of talk over the question of filling the places on the Boards, a great deal of talk over the need and desire of the Government that the transport industry and the railways in particular should breed their own leaders. I forget the exact words, but the intention was a most admirable one with which no one would quarrel: that those at the top should, to a large extent, be the men who have made the industry their career, their profession, and have worked their way up in it; men who have entered the industry in the hope of a career, have passed through the
936
various stages of promotion, qualified by experience in their own chosen sphere, and become qualified for the higher posts governing the industry, controlling the policy of the industry or that section of it that they have adopted.
But that comes strangely from a Government with the record of the Party of the noble Lords opposite. For ten years the transport industry in one form or another has been subject to perpetual interference, to radical change at the beginning of the ten-year period, continual interference since, and radical change again. How can anybody be expected to enter an industry of that sort or, if in it, to stay in it under those conditions? These proposals for filling the controlling bodies of the different sections of the industry show clearly that, whatever the Government may desire, their record and their actions tend to make that impossible and tend to deter the best young men and women from entering the industry and making it their career. That is just one of the reasons why we are profoundly dissatisfied with this first clause of the Bill.
LORD MILLS: I too will be brief. I have never been called the devil before to my face, but if it gave the noble Lord, Lord Shepherd, the opportunity of telling us he was saved, I accept it in the spirit in which it was said. The noble Lord's complaint is that there is nothing in this Bill to deal with the ills of the industry.
LORD SHEPHERD: I said the basic ills.
LORD MILLS: The basic ills of the industry. But the whole Bill is designed to deal with those basic ills. We are at last taking steps to get rid of some of the measures which were introduced by the Party opposite in the original Bill and which made efficient management a very difficult and costly thing. This Bill is designed to get rid of some of those burdens. It is designed to reorganise the industry and to give it a chance. I am sorry that the noble Lord is taking this attitude on the Question that Clause 1 stand part of the Bill.
On Question, Whether Clause 1, as amended, shall stand part of the Bill?
Their Lordships divided: Contents, 46; Not-Contents, 24.

CONTENTS

Alexander of Hillsborough, V.

Latham, L.

Silkin, L.

Amulree, L.

Longford, E.

Sinha, L.

Burton of Coventry, B.

Lucan, E. [Teller.]

Stonham, L. [Teller.]

Champion, L.

Methuen, L.

Summerskill, B.

Crook, L.

Rea, L.

Walston, L.

Geddes of Epsom, L.

St. Davids, V.

Williams, L.

Greenhill, L.

Sainsbury, L.

Williams of Barnburgh, L.

Henderson, L.

Shackleton, L.

Wise, L.

Kenswood, L.

Shepherd, L.

NOT-CONTENTS

Ailwyn, L.

Freyberg, L.

Mills, L.

Allerton, L.

Goschen, V.

Milverton, L.

Bathurst, E.

Grenfell, L.

Newall, L.

Blackford, L.

Hailsham, V. (L. President.)

Newton. L. [Teller.]

Bossom, L.

Hastings, L.

Northesk, E.

Boston, L.

Hawke, L.

Rathcavan, L.

Bridgeman, V.

Home, E.

Robins, L.

Chesham, L.

Howard of Glossop, L.

St. Aldwyn, E. [Teller.]

Coleraine, L.

Iddesleigh, E.

St. Oswald, L.

Conesford, L.

Jellicoe, E.

Saltoun, L.

Crathorne, L.

Kilmuir, V. (L. Chancellor)

Strathclyde, L.

Denham, L.

Lansdowne, M.

Stuart of Findhorn, V.

Dundee, E.

Long, V.

Swinton, E.

Ebbisham, L.

Luke, L.

Tenby, V.

Forster of Harraby, L.

Mancroft, L.

Teynham, L.

Fortescue, E.

Merrivale, L.

Tweedsmuir, L.

Fraser of Lonsdale, L.

Resolved in the negative, and Amendment disagreed to accordingly.

Resolved in the affirmative, and Clause 1, as amended, agreed to.
Clause 2:
The Regional Railway Boards
2.—
(4) Each Regional Railway Board shall, on behalf of the Railways Board, exercise such functions of the Railways Board as respects the part of the national railway system for the management of which that Regional Rail way Board is to be responsible as are for the time being delegated to them by the Railways Board; and the Railways Board shall, in determining what functions are to be so delegated by them, act on lines settled from time to time with the approval of the Minister.
4.49 p.m.
LORD SHEPHERD LORD SHEPHERD moved to leave out subsection (4). The noble Lord said: The purpose of moving this Amendment is to obtain some information from the Government about their intentions with regard to the powers to be given to the Regional Railway Boards. I rather anticipate that the noble Lord may say that this will be left until the Board has been constructed and is in operation. The noble Lord will, however, remember that on the Second Reading I expressed some concern that by the creation of these six new Regional Boards there might be an opportunity to break up the whole railway
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system into the sort of situation that prevailed before the war. The noble Lord replied that that was not 'the intention, and said it was the intention to keep the railways as one unit and that these six Regional Boards were being created for administrative purposes.
But when we hear so much talk about the commercial aspects, the need for the railways to be competitive, and when we have set up Boards and not executives—where Boards are obviously going to fight for their own particular responsibilities—and when one looks at Clause 43 (3), which gives the Board power to charge for their services and facilities, according to the conditions, I wonder whether there is not a possibility that the Regional Railway Boards may in fact be in competition with each other, quoting different everyday rates for the movement of merchandise, in circumstances where, as in the case of the old London and North Eastern and the London Midland and Scottish Railways, we may find those lines running side by side and supplying much the same type of area.
I wonder whether the noble Lord can give us an assurance, first of all, that it is not the intention completely to break up the railways; that there is no question that these

939
railways will be competing against each other, other than on terms of providing efficient services—that is, that there is no question of the railways quoting different rates against each other.
The other point I wish to inquire about concerns the last lines in subsection (4)—namely,
" … the Railways Board shall, in determining what functions are to be so delegated by them, act on lines settled from time to time with the approval of the Minister."
Are we to understand that the Minister is going to take what I might call an everyday interest in, and responsibility for, the operation of these regional railways? From these words it would appear that the Minister is going to have a closer interest in the railways than in the other Boards. On Second Reading my noble friend Lord Citrine complained, from his experience, and that of his friends who have been on nationalised Boards, of the continual interference by Ministers in the working of the Boards. I hope that the Minister can give us an assurance that the Boards which are being created, and the persons who are placed in positions of responsibility, will be left to do their job. I beg to move.
Amendment moved—
Page 3, line 39, leave out subsection (4).—(Lord Shepherd.)
LORD CHESHAM: I think I shall be able to give the noble Lord, although not in all respects, the assurances he seeks. I am going to elaborate somewhat on his various points, but I think I shall be able to satisfy him quite considerably in the process. On the whole, he wants to know what are the intentions of the Government in relation to the Regional Boards. I think it will help your Lordships to understand just what those intentions are if, before I come to his more specific queries, I point out that these Boards are being set up and are being considered in fact as, to use a slightly hackneyed phrase which is often repeated in another place, tools of management. They are there to help and support the Railways Board. Just as the Railways Board has a clearly defined task to perform in the set field which is laid down quite clearly in this Bill, they are to be enabled to concentrate on that main task by having these
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Regional Boards to which they can delegate matters of day-to-day management and operation, which are best dealt with "down the line" rather than centrally at the top. That is the idea of the Boards.
Therefore, the first assurance that I can give to the noble Lord is that there is no intention of breaking up the British Railways system by means of these Boards. I can give him that assurance without any hesitation at all. The Boards are intended to be there as, I repeat, tools of management, to help the main Board concentrate on its main task. The central Board, the British Railways Board, will remain. If there is any doubt about this, I should like to make quite clear that this Board will remain directly responsible for all matters of importance to the railways as a whole, on a national basis, including overall finance, investment and modernisation; the shape and size and balance of the railways, as circumstances may change in the future in a way which we do not know now; and such things as manpower, wage negotiations particularly, price policy, and commercial negotiations. The central Board will quite firmly remain in charge of those. The responsibility for them is quite firmly on the Board.
Perhaps I might add a fact or two, to further strengthen my assurance. The Regional Boards are not in themselves corporate bodies. As I understand it, the noble Lord's fear of what is to be found in Clause 43 (3) applied to the main Board in its charging policy. It is not to be a method of supporting the Regional Boards the one against the other. The idea is that the Regional Boards will be better able to cater for the day-to-day operations in their own area than the central Board at the top. That is the whole nub of the matter. I think it gives to the noble Lord the assurance he sought.
There is one further matter about which the noble Lord was worried—namely, the possibility of interference by the Minister. Of course that is not intended at all. The devolution of authority to the regions is a practical problem—I spoke about this on Second Reading—depending upon operational, technical and other practical considerations of which the Railways Board must be the judge. That, in fact, is provided for in Clause 2 (4). It is a matter for

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the Board, who will make any adjustments that may be needed from time to time. But on a broader level the Minister must be able to exert some influence on the scale and shape of delegation, if he considers this is necessary, if only to make sure that the central Board is left free to concentrate on the main tasks. That is the whole point of having the Regional Boards to which tasks can be delegated. For that matter, he will need to have some control to make quite sure that the assurance which I have already given to the noble Lord, about keeping certain matters within the ambit of the central Board, is carried out. That is the reason for his control, and not the fact that he intends to interfere with every day-today decision. I think these Boards are thoroughly justifiable. The conception has worked quite well under the British Transport Commission. They are useful tools of management, and have been proved so to be. I think that they are something that we need, and I hope that I have justified their existence to the noble Lord's satisfaction.
VISCOUNT ALEXANDER OF HILLSBOROUGH: While we are dealing with these Regional Boards, could we have further information than is given in the clause or Schedule as to what is likely to be their composition? We have the numbers. But will they require a full-time chairman? I daresay, if you are going to have a pretty wide range of duties, that some of the members will be part-time, but why should there not be a permanent chairman?
LORD CHESHAM: The composition of the Boards is dealt with in Part II of the First Schedule.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Yes, I have looked at that.
LORD CHESHAM: It clearly states that there will be a chairman, and it also sets out the composition of the Boards and the sources from which the other members will be drawn.
VISCOUNT ALEXANDER OF HILLS BOROUGH: But rot whether any are full-time.
LORD CHESHAM: No, it does not state that, that is perfectly true. On the general subject of the composition
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of the Boards it is thought that the representation would be reasonably wide in order to cater for the interests of the area or region which the Board is to serve. I think that there again it would hardly be a practical proposition to write into the Bill, as we have heard before this afternoon, that there should be a set and stated percentage of members who would be either full-time or part-time. I think here again it is a question of preserving a certain flexibility, because the type of person who one visualises might be on the Board in Lancashire, for example, would be someone with a knowledge of cotton, and in Yorkshire someone with a knowledge of wool, whose services perhaps could be obtained only part-time. Therefore I should not like the idea of writing into the Bill a definite ratio of part-time or full-time members.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I am grateful to the noble Lord for having explained this as he has done, but I might have saved him a good deal of trouble. At any rate, he has been most kind. These are quite extensive regions, there will be a good deal of staff management involved, and you will need to have central policy interpreted by a central Board. But it really requires more than that, in that the staff ought to have somebody of Board status who could always be there for consultation. I think that if you had a permanent chairman of the Board, this would go a long way towards meeting this requirement. I agree with all the other things the noble Lord said about the composition of the Regional Boards, but would he look at that point between now and the Report stage, to see whether some further statement could be made?
VISCOUNT BRIDGEMAN: Before my noble friend replies, may I say that I am beginning to wonder whether we are all keeping as clear a distinction as we should between the functions of Boards and the functions of management. As I listened to my noble friend explaining the work of the Regional Boards, it struck me that the great bulk of the work in the regions will be likely to turn out to be management work as opposed to Board work. I think noble Lords opposite might consider whether

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they have been clear throughout this debate as to the relative functions of management and Board.
LORD SHEPHERD: Personally, I have never had much doubt on this subject. When one is dealing with very large modern organisations, I do not think in actual fact that board responsibility is very far from management. That has been my experience. I think that the day of the company director arriving on Wednesday in time for lunch and departing on the 3.30, has gone. Where it does exist, it is to the disadvantage of the business. My friends and I have been trying to get provision that a fairly large percentage of permanent executives shall serve on the main Boards. I hope the Government will consider the voice of experience of my noble Leader, and bear in mind the point he made in regard not only to the Regional Boards but also the main Boards having permanent chairmen. I certainly fell into a trap when I looked at the composition of the Railways Board. I thought of Dr. Beeching at his salary of £24,000, and therefore I presumed he was full-time, and I assumed also that all the chairmen of these Boards would be full-time. In the Bill now before us, however, that is not the case. I hope the Government will consider the points that have been made from both sides of the House, in particular from my noble Leader, and I would ask them to consider some Amendment for the Report stage.
LORD CHESHAM: Needless to say, I am not, at this stage in the discussion, in a position to give an undertaking in that respect, but I willingly say that I will look at this point again and consider the matter, as the noble Lord says, in the light of his noble Leader's voice of experience. I think it would be unreasonable not to do so. I cannot say what the result of that consideration will be, but I assure noble Lords opposite that it will get it. I would point out, however, on the subject of full-time and part-time members—rather in mitigation of what my noble friend Lord Bridge-man said—that it is provided in the Bill that the general managers of regions shall be members of the Boards. So there, at any rate, is a basic element of the full-time membership of the Board.
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For the rest, I think I need say no more than that we will consider the points that have been made, although it must be without commitment at the present stage.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Clause 3:
Duty and powers of Railways Board
3.—(1) It shall be the duty of the Railways Board in the exercise of their powers under this Act to provide railway services in Great Britain and, in connection with the provision of railway services, to provide such other services and facilities as appear to the Board to be expedient, and to have due regard, as respects all those railway and other services and facilities, to efficiency, economy and safety of operation.
(3) Subject to this Act, the Railways Board shall have power—
(b) in the circumstances specified in the next following section, to carry goods and passengers by road,
(c) to operate the harbours owned or man aged by the Railways Board, and to provide port facilities at those harbours,
(d) to consign goods on behalf of other persons from any place in Great Britain, or from any place to which the Railways Board have themselves carried the goods in question to any other place, whether in Great Britain or elsewhere,
5.8 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH VISCOUNT ALEXANDER OF HILLSBOROUGH moved, in subsection (1), after the second "services" to insert:
", adequate for the needs of the public, agriculture, commerce and industry,"
The noble Viscount said: The particular subsection with which this Amendment deals is fairly specific and general, but we feel that a great opportunity has been missed here of stating specifically in what way the Boards should carry out their duties to the public. I think that what is disturbing to the public is that year after year the effects are being felt of the Government's policy in regard to the railways. The one consideration seems to be that they must make a profit and in the long run everything else must be sacrificed to that end. There is no longer an overall duty to render a public service according to the needs of the community.
This is the feeling that I find is canvassed in respect of almost every proposal to close a branch service, for

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example, or in relation to a proposal for retention of a part service, so that the needs of the local industry or of agriculture and the like can be adequately met. I was very impressed the other day to see a startling advertisement by the Commission, emphasising that the railway line is the shortest way to the factory and the field. Yet we frequently find it said, where a case is put up in defence of a service which is being rendered in a district, that it must be closed because it does not pay.
When we were dealing with the Pipelines Bill, we had to keep pointing out in our discussions that the Government ought to be laying down 'general principles and conditions to be followed by the Authority to be set up, which would have public service as one of the prime factors necessary for that organisation to be in existence. We are very unhappy about the matter on this side of the Committee, and that is why we have included the specific wording in the Amendment. I rather think that the noble Lord, Lord Mills—(who, apparently, is staying on while the other noble representative of the Government has, no doubt, gone to have some refreshment, which he has earned—will understand my case from his long trade experience.
I drive very regularly over a level-crossing that still exists in a place called Tiptree. I do not know whether, when you come to develop the general transport system by putting roads where branch railways have been, there will still be the same treatment as at present. At the -moment, there are seasonal services to the first station from the junction to Tiptree, for jam-making purposes, carrying away the jam when it is made, and at times there are fresh strawberries and things of that kind to be carried. That service is still being retained. How far are you going to keep all those things really in mind, with the rather limited powers which seem to me to be put into this paragraph that we are seeking to amend? I think that if we put these words in—and I hope that the noble Lord will be willing to do so—then the general public will have some confidence in the Statute, and feel that they may complain at any time if they think that these duties, which we want to make adequate for the needs of the public, agriculture, commerce and industry, are
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not being met. If they are not being met, then people can come to the Minister and say that they ought to be met. I hope very much that the noble Lord will give the Amendment favourable consideration.
Amendment moved—
Page 4, line 20, after ("services") insert (", adequate for the needs of the public, agriculture, commerce and industry,").—(Viscount Alexander of Hillsborough.)
LORD MILLS: I have listened very carefully to what the noble Viscount had to say, because this is an important matter. It is true that the Bill as drafted omits from the duty of the Board a reference to "the needs of the public, agriculture, commerce and industry". But it does lay upon the Board the duty
"to provide railway services in Great Britain and … such other services and facilities as appear to the Board to be expedient. …"
The omission of the words which the Amendment now seeks to introduce was, I suggest, entirely logical, in view of the growing seriousness of the financial position of the railways, who continued to provide services even when they were no longer justified and where alternative means existed.
I said yesterday on another Amendment that we must not assume that everything that did not pay would be wiped away and I will enlarge on that a little later when I come to the Report of the Select Committee on Nationalised Industries. I suggest that the omission of those words was consistent with the Government's intention to remove both the common carrier obligations and the control over charges other than in the London area, and with the need to take into consideration what the public were prepared to pay for the services that were provided. I think noble Lords accept the fact that there has to be some reorganisation of the services. The noble Lord, Lord Lindgren, with his large experience of the railways, referred to this fact yesterday when he spoke on Amendment No. 1. With your Lordships' permission, I should like to read to you what the Select Committee on Nationalised Industries had to say in their Report on British Railways. It will be found in paragraphs 415, 416 and 417.
"It seems to Your Committee that the best initial teat of what the public need is given by what they will pay for. If, thereafter, there

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are other considerations which make it desirable for members of the public to travel or freight to be carried on some routes at prices below the cost, it should be for the Government and not the Commission to decide."
In this clause we are telling the Railways Board what its duties are.
VISCOUNT ALEXANDER OF HILLSBOROUGH: "Make it pay ! ".
LORD MILLS: The Report goes on:
"In earlier days it was possible within a railway system to make large profits on some parts of the service, and to use those to subsidise the losses on other parts. But that was at a time of restricted competition; in the present circumstances, when competition is increasing (particularly from privately-owned cars and C-licence vehicles), large profits cannot be made on any part. For the Commission therefore to continue to provide some services that are bound to be run at a loss is to continue to drive the railway accounts into deficit. This makes it impossible for them to carry out their duty of balancing their revenue account, taking one year with another.
"It is easy to understand how public-spirited motives, and indeed earlier railway practice, have led the Commission to take this view of their duty. But Your Committee consider that this confusion in judging between what is economically right and what is socially desirable has played an important part in leading to the situation in which the Commission now find themselves."
I have troubled your Lordships with a rather long quotation, because it seems to me to be the nub of the situation. In the present declining traffic situation of the railways, and with the growth of competing forms of transport, I suggest it is illogical and meaningless to put an Obligation on the British Railways Board towards any particular class of "user. As this Report said, that is a matter for the Government and is not a duty to be laid upon the Board.
LORD STONHAM: I do not think that the noble Lord, Lord Mills, has really answered the case put forward by my noble Leader. He 'has told us that the omission of the words in our Amendment is consistent with the Government's intentions. I think that has been made quite clear throughout the whole of our debates during the Committee stage. It is obviously the Government's intention—indeed, their determination—that the main criterion shall be that the rail services, and indeed the other services with which we are dealing, shall be run at a
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profit, taking one year with another. The whole point of principle between the two sides of your Lordships' House is that the Government take that point of view, whereas we on this side say that we certainly want efficient, well-run transport services; we certainly want them to be developed in such a way that, where possible, they will pay their way; but that when we get to the point when we have the 'Ultimate of the services which do or which can be made to pay their way, they will still fall short of what we regard as the public need.
The noble Lord has told us before, and he has repeated the assurance to-day, that under this proposed new regime we must not conclude that all uneconomic services will be abolished. Then he goes on to say that it would not be right to continue these services where there is an alternative form of transport—that is, to continue uneconomic rail services where there is an alternative form of transport. If there were an adequate alternative form of transport, then I am sure that no one among my noble friends would disagree with that. Of course we do not want two forms of transport overlapping, each losing money.
In fact, the noble Lord may remember that on Second Reading I said that there would be nothing wrong in closing a second main line when there was already one main railway line doing the job adequately. That may be quite a good thing. In fact, a lot of this duplication has arisen out of the growth of the transport service under private enterprise. We have had competition, and now we find that those competitive forms cannot both continue to live. We have to decide whether only one should live. We would accept that, at least in principle: but at no time have the Government been able to give us an assurance that in those many other areas which my noble Leader referred to there will in fact be any public form of transport at all, and that as our great difficulty.
The noble Lord quoted the Select Committee as saying that the difficulty of deciding between the economically right and the socially desirable has led to the present difficult or impossible position on the railways. But that does not mean that we—or, indeed, the vast

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majority of people in this country—tare going to acquiesce in the total abandonment of all that is socially desirable unless it is also economically right, which is putting it the other way round. The noble Lord may say, "We have no intention of abandoning everything that is socially desirable in the field of trans-pout merely because it does not pay". He may tell us that, and I am quite sure he would believe it; but there is nothing in the Bill here which gives us any (as it were) statutory assurance on that point, and, it was precisely that point which my noble Leader was urging.
I would go so far with the noble Lord as to say that if all these words were written into the Bill, then it might well be the case that he could say, "We do not have a Bill at all. It would not do what we want". But surely he can find some way of giving us in the Bill that statutory assurance which we need: that provision will be made for those people who are living in sparsely-populated areas—not merely the classic ones of the Highlands of Scotland, the wilds of Wales or the remote parts of Cornwall, but other parts, even in the Home Counties, that we know quite well are too sparsely populated for us to visualise a local transport service, whether by road or by rail, which would be economically right.
No one in this House would suggest that those services are not socially desirable, and in many respects economically necessary; because if those services are taken from the countryside, or if they are pruned to the extent that they become grossly inadequate, then you are going still further to denude those areas, and it will become virtually impossible to carry on the industries, mainly agriculture, which are now carried on in those areas. For example, if we were thinking about re-populating the Highlands, we should have to think not only about transport services but also about housing and all kinds of other things. In the areas of which I am thinking we have the houses now, and, in the main, we have the services; but it will be a great tragedy if this further breaking up or drifting away of the transport services is continued.
While fully appreciating the noble Lord's difficulty about an Amendment
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of this kind, I think he ought to consider something which the country and the Government will have to face up to: that when the Railways Board is formed and starts performing it will in the fairly near future have to announce its plans as to the services which are going to be closed down. I do not think there is any question at all that when that announcement is made large parts of the country will find themselves without an adequate or reasonable transport service. They will perhaps find themselves without a transport service at all; and there will then be no power resting with the Government under this Bill to enable them to compel any of the constituent bodies set up by this Bill to provide those services, or to provide means for them to do so.
There will be only one solution, and that is one which the Government have not yet faced in public. They will have to say to the Boards, whether it be the Holding Company or the Railways Board, "We want these certain services to continue, and we will pay for them." At no time, so far as I am aware, has any Minister, and certainly no noble Lord during the passage of the Bill, said that. I feel, therefore, that we should have something more of a reply from the noble Lord than he has so far given us.
LORD MILLS: The noble Lord seems to know far more than I do about what is going to happen when the Railways Board starts to work. It might be the path of wisdom to wait and see what is going to happen, because otherwise we shall be guessing. The noble Lord is apt to paint a picture of a country denuded of railways. I would remind noble Lords that this Amendment refers to the Railways Board: it does not refer to the whole transport field.
I think we must remember that conditions are not static; they have changed very much in recent years. This Bill is designed to take that into account, and to lay down the kind of organisation which is necessary to-day. I think it would be wrong, for reasons I have explained, to lay upon the British Railways Board obligations which they may not be able to carry out, and which it may not be desirable for them to carry

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out. The situation has altered, and I think that in the circumstances of to-day these words are not right in this context.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I am obliged for the answer of the noble Lord, but he knows full well that this is very much a point
5.40 p.m.
LORD SHEPHERD LORD SHEPHERD moved, after subsection (2) to insert:
"( ) The Railways Board shall co-operate with other Boards and other Nationalised Transport Undertakings, for ensuring that railway services provided by the Board are properly co-ordinated with services provided by the other Boards and undertakings to provide efficient services to the user."
The noble Lord said: I beg to move this Amendment. The Committee will notice that there are instructions to the Railways Board and the London Transport Board that they should co-operate to provide an adequate and properly coordinated service. But it is to be noticed with regard to the Railways Board that there is no provision for co-ordination of their services with the other Boards, in particular with the Docks Board. I have tried in this Amendment to find words which would stress the need for
of principle with us. Therefore the only thing I can suggest is that we record our view in the Lobby.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided: Contents, 26; Nat-Contents, 49.
the Railways Board to co-operate with other Boards and other nationalised transport undertakings, to ensure that the railway services provided by the Board will afford an efficient service to the user. I am sure that the Committee are of the view that we should use our assets and facilities to the maximum advantage and I think that the only way we can do that is to lay down in the Bill these requirements. I hope that if the Minister cannot accept this Amendment, at least he will be able to accept the spirit of it.
Amendment moved—
Page 4, line 31, at end insert the said subsection.—(Lord Shepherd)
THE EARL OF DUNDEE: This Amendment perhaps can be related to Amendment No. 49. Of course, it could be discussed separately, but I think that the noble Lord has made it clear that the principle is the same. This Amendment relates to the Railways Board,

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and No. 49 to the Docks Board, and both of them follow the language of the immediately preceding subsection of Clause 3, which provides that
"The Railways Board shall co-operate with the London Board for the purpose of ensuring that the railway services provided by the Railways Board in the London Passenger Transport Area are properly co-ordinated with the services provided by the London Board …"
I think that that is a reasonable requirement. Clause 3, in providing that the Railways and London Boards shall coordinate their activities and services, is dealing with two Boards which have a complete monopoly in the areas over which they have authority. The Railways Board has a monopoly of railway transport and the London Board has a virtual monopoly of all passenger transport in London.
The noble Lord hopes that we can at least accept the spirit of his Amendment, which seeks to introduce co-ordination outside London between the Railways, Docks and Waterways Boards. Of course we wish that the policies of all these undertakings shall be co-ordinated, both with regard to investment and with regard to traffic policy. If I may glance ahead, to the beginning of Clause 55, on page 55, the noble Lord will see that subsection (1) says:
"There shall be established in accordance with this section a Nationalised Transport Advisory Council for the purpose of advising the Minister on such questions relating to the co-ordination, or any other aspect, of the nationalised transport undertakings as the Minister may refer to the Council."
I am advised that that would cover investment policy as well as traffic policy.
I think that in moving his Amendment the noble Lord was more particularly interested in traffic services, and if he will look at Clause 14 (1) (b), he will see there:
"… the Boards shall have power … to enter into agreements with the other Boards and with any subsidiary of any of the Boards or of the Holding Company, for the management, working, and use by one party to the agreement of works, land or other property belonging to the other party, and with respect to the rendering of services and the pooling of receipts or expenses,'"
I hope that the noble Lord will agree that these words do what he wishes to do by his Amendment. But they are associated with the previous paragraph,
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which refers to co-ordination, not with other Boards but with private haulage or dock services. Under paragraph (a) the Boards will have power:
"to enter into and carry out agreements with any person for the carrying on by that person, whether as agent for the Board or otherwise, of any of the activities which the Board may themselves carry on,"
Clause 3 (3) (f) also provides specially that the Railways Board shall have power:
"to enter into and carry out agreements—

(i) with carriers outside Great Britain for the through carriage of goods …

(ii) with any person engaged in coastal shipping for co-ordinating the activities of that person with those of the Board, and in particular for facilitating the through carriage of goods, … "

And this is repeated in respect of the London Board in Clause 10 (3) (g), using exactly the same language.
I hope the noble Lord will agree that these provisions, particularly in the two first paragraphs of Clause 14(1) fulfil the intention of his Amendment. From his speech, I think that they do exactly fulfil what he intended. I am sure that in putting down and arguing this Amendment he did not intend to imply that the Railways and Docks Boards should co-ordinate their activities in such a way as to divert and encourage traffic to and from British Transport Commission ports at the expense of the independent ports and independent road haulage. That is the reason why we have put these provisions in Clause 14, in juxtaposition to each other, so that it shall be quite clear that the intention is to give the Board powers to take the necessary measures of co-ordination both with private persons and with other Boards, as we think they ought to do.
If we were to insert a new paragraph in Clause 3, immediately after that, relating to the monopolistic Boards, it might give the impression to independent ports and transport operators that we were giving a kind of "loaded" duty to these Boards to co-operate with each other at the expense of the independent transport operators or private docks. That would create a great deal of hostility, and if by any chance it were incorporated in that sense, it would, in my submission, be contrary to the public interest. Therefore I hope your Lordships will agree that the provisions contained in Clause 14 and the

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other relevant clauses are adequate for the purposes which the noble Lord wishes to achieve.
LORD SHEPHERD: I must say that I listened with a great deal of sympathy and gratitude to the first part of the noble Earl's speech. But his concluding words frankly made my back stiffen a little. If I gathered them aright, the noble Earl felt that the railways would be in a monopoly position. They may be in a monopoly position in the sense that the railways are running railways, but in their fight to obtain merchandise to carry, obviously they are not in a monopoly position in transport. However, it is too late in the evening for us to discuss these points. I will look carefully at the earlier remarks of the noble Earl to see whether they meet the point of my Amendment, and if I am not satisfied I can come back on the Report stage. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD SHEPHERD: On behalf of my noble friend Lord Lindgren I beg to move this Amendment. I think I can also speak to Amendments Nos. 32 and 33. In Clause 4—that, is the clause giving the Railways Board power to run road services—we have a peculiar mixture of powers granted to the Board. In the first instance the railways have the power to provide transport services by road for the carriage of goods which have been, or are to be, carried by rail or water by the Railways Board. Can the noble Lord tell me why it is that passengers also cannot be carried? We then have in the same subsection the carriage of goods where the railway service has been temporarily interrupted. I have got slightly confused here and I am sorry I cannot proceed further.
Amendment moved—
Page 4, line 35, leave out from beginning to ("to") in line 36.—(Lord Shepherd.)
LORD CHESHAM: I wonder whether I can help the noble Lord here. I quite agree with him that these Amendments are rather linked together, and I have found in my consideration of them—because it is going to fall to my lot to answer him—that they are rather confused. If the noble Lord does not mind,
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I think it might be better if we took them one by one. That would at any rate keep my mind more clear, because it will be necessary, if we are speaking to them all, to go plodding through from one to the next and then to the third. If the noble Lord and the Committee are agreeable, we might do it in that way.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4:
Railways Board's road services
4.—(1) Subject to this section, the Railways Board shall have power—

(a) to provide transport services by road—

(i) for the carriage of goods which have been or are to be carried by rail or water by the Railways Board, and

(ii) for the carriage of goods where a railway service has been temporarily interrupted, and

(iii) for the carriage of passengers where a railway service has been tem porarily interrupted, or has been discontinued,

and to carry goods and passengers by those services;

(b) to exercise the powers conferred by the Railway Road Transport Acts of 1928 (which relate to the provision of road transport services).

5.55 p.m.
LORD TEYNHAM LORD TEYNHAM moved, in subsection (1) (a) (iii), to leave out "or has been discontinued". The noble Lord said: I am sure we all wish to ensure that where a railway service is discontinued, for example in a remote area, alternative transport is made available. Clause 4 would enable the railway to run a bus service themselves without any reference, as I see it, to an established bus service. I think it is true to say that no newcomer to bus operation can expect to run an unremunerative service more cheaply than an established bus service, and the railways would almost certainly, I think, waste public money. I suggest that the running of a permanent bus service should be left to the professional bus operators who really understand the business. In cases where the railways consider that it is essential for the substitute bus service to run, surely it would be better for them, both financially and otherwise, to induce the local bus company to run it upon terms of indemnity.
I would point out that under the 1928 Road and Rail Partnership Agreements, as I see it, the railways at present have the right to insist on this method, and have in fact exercised this right upon a number of occasions. I would remind your Lordships that during the Second Reading of the Bill Her Majesty's Government made it plain that one of the fundamental ideas behind the Bill was that the railways should be left free for their set task of running railways, and should not be hampered by having to run other forms of transport. This Amendment still permits the railways to ensure that a substitute passenger road service is provided in special cases by arrangement with the local bus service on an indemnity basis, which I should say would be far cheaper than running a bus service themselves. In fact, under the present agreement the railways have been allowed to insist on a bus service being provided by a local company on an indemnity basis where a working agreement exists. I beg to move.
Amendment moved—
Page 5, line 31, leave out ("or has been discontinued").—(Lord Teynham.)
VISCOUNT GOSCHEN: I should like to support my noble friend Lord Teynham. We heard yesterday, and we have heard again to-day, that it might not be only rural railway lines which ace discontinued. What would be the case if the railways were to provide bus services on their own for other main lines? My noble friend Lord Teynham has already said that we know it is the job of the railways to run their railways, and not to run the buses. This has been one of the difficulties, and I think we must make certain that, where lines are discontinued, the bus service is run by bus companies and, if necessary, with indemnity, as mentioned by my noble friend.
THE EARL OF LUCAN: I wonder Whether noble Lords opposite would explain what is meant by "on an indemnity basis" or words to that effect? As I see it, the object of this clause is not to conifer any benefit on the railways, but to ensure that they carry out their duty to the public. In other words, where they find it necessary to discontinue a service in a given area, for the benefit of the public in that given area road services should be
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substituted. It is all very well to invite a local bus company to undertake this job, but What is there to compel them to take it if they do not want to; or, by definition, in such cases as those where there is a small amount of traffic needing public transport and where a bus company is not likely to see any great profit in it?
Moreover, a bus company, even if they took on the service, would provide services only at the times and in the quantities that they thought they could carry out without losing money. It appears to me that the object in this Bill, which is a perfectly proper one, is to ensure that the public have public transport at their disposal, and for my part I should be very reluctant to consent to any such deletion as is proposed in this paragraph.
LORD HAWKE: I think we are all at one. We want to make certain that there is a substitute if the railway company is forced to withdraw its services. We want, in fact, what one might describe as a long-stop. The Bill provides as a long-stop the power of the railways to carry passengers as a direct operation of the railways. My noble friend is trying to delete that power from them in favour of other people because, being a practical bus-man himself, he knows that it is going to be far more expensive and uneconomic to operate a service to replace a disused railway line if the job is not done by the existing professional bus operators, whether State-owned or privately-owned.
As I see it, for passengers, if we want a long-stop we can have three different thoughts. First of all, we can put in the Bill as it stands that the railways can operate the service itself. If they did so it would mean setting up garages, depots and all sorts of things; and, as my noble friend has pointed out, the present General Manager of British Railways is very anxious that his people should concentrate on running railways and not buses. The second form of long-stop is where the railways have working agreements with bus companies—and they have them in many parts of the country—under which the bus company can be called upon to undertake a service provided the railway company indemnifies them for any loss they may

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incur. Thirdly, we could have the Holding Company's wholly-owned subsidiaries as a long-stop; and at an earlier stage in the Bill, yesterday, I suggested to Her Majesty's Government that it would be much more reassuring to the general public if, somewhere in the Bill, probably in Clause 29, it were written that the Minister has power to direct the Holding Company to instruct their wholly-owned subsidiaries to offer a service which is uneconomic but for the public good, with or without indemnity from the Minister or from the railway—I do not mind which.
In other words, there seem to be three different sorts of long-stop we can have. The first, the one written in the Bill, I believe to be entirely wrong. The second, the working agreement, is a partial and perhaps nearly complete solution, but it is not a complete solution because there must be parts of the country where these working agreements do not exist. I believe they should be buttressed and reinforced by the power to use the wholly-owned subsidiaries of the Holding Company.
That is all right about passengers, but when we come to goods, quite frankly I am a little puzzled by the Bill. I do not understand line 33 of page 5. Clause 4 says:
" … the Railways Board shall have power … where a railway service has been temporarily interrupted, or has been discontinued … to carry goods and passengers by those services."
I do not know what that means. Does it mean that they visualise providing a service like a Swiss bus, with passengers sitting in a coach in front and goods in a trailer behind?
There clearly must be a long-stop for goods as well, and I am not aware whether there are any working agreements between railways and private road haulage undertakings. Nor am I aware how far the railways could call upon the Holding Company's wholly-owned goods subsidiaries to operate a goods service where a railway was withdrawn; and it seems to me that for goods, too, that long-stop of the Holding Company's wholly-owned subsidiaries will be necessary. But I think the first thing to do is to pass my noble friend's Amendment.
LORD CHESHAM: It seems to me that my noble friend's fears of what is going to happen are rather based on the provisions of this Bill enabling the Railways Board to provide bus services on the same kind of scale as the discontinued railway service. I think it would be reasonable to say that, if that were so, if that were what we were visualising, perhaps my noble friend's case would be rather more soundly based. It is not the intention of the power in subsection (1) (a) (iii) of Clause 4 that the Railways Board should do just that: that they should substitute a corresponding pattern of their own operated bus services for railway services which, for one reason or another, have (been discontinued.
One of the reasons why subsection (2) of that clause makes the exercise of the Railways Board's powers which it will inherit under the Railway Road Transport Acts, 1928, subject to the Minister's consent is because (my noble friend was perfectly right) our idea is that the job of the Railways Board shall be to run the railways and not indulge as general bus operators at large. That was, as I say, one reason for requiring the Minister's consent, because that is not the direction in which their minds should be occupied or their capital resources employed.
In the circumstances, it is expected, in the great majority of cases, that the alternative bus services where there have been rail closures 'will be provided by other operators, either on their own initiative or as a result of an approach from the Railways Board, resulting either in a voluntary service or perhaps in a working agreement; and a working agreement could, of course, be either with the Holding Company or with a private operator. Whatever happens in this case a road service licence has to be obtained, even if the Railways Board provide the service under the powers that they have, and the Traffic Commissioners would, of course, have regard to the bus services already being operated on or near the routes for which application had been made and would pay regard to the claims of other operators who could reasonably provide a similar service. Therefore, the power in the subsection I mentioned, subsection (1) (a) (iii), is no more than a capacity

961
power intended to meet a situation where, for reason of cost or inability of other operators to provide alternative bus services at reasonable terms, the Railways Board might find it necessary or expedient to do so themselves.
It is true that under the Railway Road Transport Acts of 1928 there are sufficient powers for the Railways Board to run services of their own all over the place, subject, of course, only to licence. But as I have said they will not be able to exercise those powers without the consent of the Minister except in so far as they are able to do so by virtue of working agreements already made and in existence immediately before vesting date. Although those powers would be adequate, I would strongly advise your Lordships not to accept this Amendment and see this reserve power taken away from the railways, because, apart from weakening their position in any negotiations that they were called upon to do with bus operators to provide services, it is a reserve power that they very much need; and I think we should not be paying due attention to the opinions that have been expressed about the necessity to maintain bus services in the country if we did not let the Railways Board retain this power. Therefore I hope this Amendment will not be accepted and that that power may be retained.
LORD TEYNHAM: First I should like to deal with the point raised by the Minister about the bargaining power of the Railways Board, which they might not have if this Amendment were accepted. I would say that the argument there is entirely unrealistic. If the Railways Board say, "All right, we will run a bus service ourselves", I believe the established bus operator with an organisation in being would surely call their bluff every time. I am a little unhappy, too, about the fact that under Clause 4, subsection (1) (b), the railways are given specific powers to run bus services. I should think that would have great bearing with the Traffic Commissioners, and with those powers it would be difficult for the Traffic Commissioners to resist an application for a licence. I do not propose to press this Amendment this evening. We all want to see that a bus service or some kind of transport service is provided in the event of the closing down of a railway
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service, but I am not at all convinced that this is the best way of doing it.
6.14 p.m.
LORD CHESHAM: In view of what my noble Mend has said, I wonder whether your Lordships will allow me to add a few words. While I was thinking of something else, I omitted, I am sorry to say, to answer a point which was brought up by my noble friend Lord Hawke. Although the powers under the 1928 Acts would be adequate, and while I agree that the concept of working agreements With the bus companies is particularly suited to the provision of buses on behalf of the Railways Board, I still think it right that this express power which my noble friend criticised should appear in the Bill. The reason is that in Clause 54 there is a duty on the Railways Board to give the public advance notice of the discontinuance of railway passenger services; and further, in Clause 56 the Railways Board have a duty to publish proposals for such closures together with particulars of any alternative road passenger services that will be available and any proposals that the Board may have for providing or augmenting such services. Therefore, I think it must be made quite clear on the face of the Bill.
Perhaps I am arguing that it is a little more valuable from the point of View of presentation than it is of actual fact, but I think that if there are to be these duties on the Board they ought to be seen to have the responsibility put upon them to carry them out. An old friend of Lord Hawke asked why there was no provision to provide goods services, and the reason for that is quite simply that while there has been a good deal of criticism and unease about the situation of bus services an the country, there has been none Whatsoever about any dearth of road haulage services. I feel convinced that if there is a demand for goods to go by road instead of rail, the road haulage industry is fully capable of meeting it.
In saying that, I should like to add one more small point, and that is that the railways Will be able to operate their collection and delivery services under the existing terms over larger distances where a railhead has closed down. They Will still be able to collect and deliver in their own transport goods which will

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have to be carried over a greater distance to the new railhead. I still think that this is the way the thing in fact should be done. I am sorry if my noble friend does not, and I will certainly pay attention to what he has said. I am glad that he does not intend to press his Amendment.
LORD HAWKE: My noble friend has not answered a point. Perhaps I did not phrase my question in the way I should have done. Under sub-paragraph (ii), the Railways Board have power to provide road transport services
"for the carriage of goods where a railway service has been temporarily interrupted,"
and, under sub-paragraph (iii)
"for the carriage of passengers where a railway service has been temporarily interrupted, or has been discontinued,"
and then it goes on
"and to carry goods and passengers by those services".
I do not understand what that means. It is laid down that they can carry goods in temporary interruption and they can carry passengers both in temporary interruption and permanent discontinuance. But why add in line 33 "and to carry goods and passengers by those services"?
LORD CHESHAM: I will explain it to my noble friend in, I hope, a few short and well chosen words. The services referred to in the line about which my noble friend complains are those mentioned in the line where paragraph (a) begins: "to provide transport services by road". It then specifies three sets of circumstances in which they may provide services, but none of those provisions actually gives them the power to carry goods or passengers, only to provide the services. That is what that last line is doing—giving them that power.
LORD TEYNHAM: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD TEYNHAM LORD TEYNHAM moved, in subsection (1), to add to paragraph (b):
"in relation to the carriage of goods and in relation to the carriage of passengers, the powers conferred by any of the sections in those Acts of which the marginal note is ' Working Agreements, etc.'"
The noble Lord said: This Amendment is rather difficult to explain. I think it is true to say that Section 3 of the 1928 Act, which commences,
"The railways may provide, own, work and use road vehicles",
et cetera, is still in force, although the large majority of the provisions of the 1928 Act were repealed by Section 122 of the Road Traffic Act, 1930. If the powers contained in Section 3 of the 1928 Act, which I have already mentioned, are wider than the powers contained in Clause 4 of this Bill I suggest that they are unnecessary and undesirable. I would suggest that the only section for the retention of which a case can be made at all is Section 11—that giving the railways power to enter into working agreements. I would say that, even here, it would seem that there is much to be said for a new and up-to-date clause. However, as the Government appear to insist upon a reference to the 1928 Acts, I suggest that the only powers thereunder to be specifically passed to the Railways Board under this clause should be as in this Amendment, which has accordingly been designed to deal with working agreements. I beg to move.
Amendment moved—
Page 5, line 36, after ("services") insert the said words.—(Lord Teynham.)
LORD CHESHAM: It seems to me, in effect, that acceptance of this Amendment would have a rather similar result to that of the noble Lord's previous Amendment; it merely seeks to attack from a different angle, so to speak. I do not wish in any detail to go over the arguments I employed before, but I must resist the Amendment for the same kind of reason that I used in respect of the last Amendment. If we are to confine the Railways Board to providing bus services only by means of working agreements, if they ate not to have the power, in the last resort, to provide services themselves, I think we shall be doing a disservice.
It was with some slight trepidation that I made my remarks about the bargaining power of the railways when they come to negotiate with other bus operators. The noble Lord immediately said that if the railways tried that sort of tactic they would have their bluff called

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at once. I should not have thought that that was true if it was important, as I think the noble Lord has told us, that the bus operators want a degree of protection, through the withdrawal of this power from the railways. I should not have thought they would have wanted to call the railways' bluff, because it is perfectly clear that it would not be a bluff, and that the railways could provide such services. But I do not want to enter into a detailed argument about that with my noble friend. I do, however, stick to my point that I think the railways' position would be weakened. I also think it would rather disturb the existing working agreements which, in the past, were freely negotiated between the railway and bus companies, having regard to the fact that the railways themselves had the power to run services.
I think, too, that the Amendment is unnecessary, in 'that the present exercise of the powers of the 1928 Act to run buses is effected through working agreements, and that under Clause 4 (2) as drafted the railways would be able to exercise the other powers only with the express consent of the Minister. Therefore I do not think that we should accept my noble friend's Amendment, which would, incidentally, raise rather difficult drafting problems.
VISCOUNT GOSCHEN: Might I ask my noble friend this question: does what is in the Bill and what he has said mean that in this direction the Railways Board will have wider powers than exist at the moment?
LORD CHESHAM: No, it does not; I can say that quite firmly. It does no more than preserve the existing powers of the British Transport Commission, or it preserves the existing powers under the 1928 Acts which the Railways Board will inherit as an ultimate successor to the railway companies of the time. As I mentioned before, what is in the Bill—that they can run certain services—is merely to reimpose an obligation. It is a declaration as much as anything in connection with their duty to publish certain information in advance; and in point of fact they have nothing wider under the Bill than they have at present.
LORD TEYNHAM: I do not intend to press this Amendment. I beg leave to withdraw it.
Amendment, by leave, withdrawn.
6.26 p.m.
LORD STONHAM LORD STONHAM moved to leave out subsection (2). The noble Lord said: On behalf of my noble friend Lord Lindgren, I beg to move Amendment No. 36. The two Amendments which have just been withdrawn have, in effect, sought to limit, or at least to confine, the power of the Railways Board to furnish passenger services, and to some extent goods services, by road. I was extremely glad that the Government did not feel able to accept those Amendments, because, in our view, the powers of the new Railways Board are far too circumscribed as it is; indeed, they will considerably limit the Board's ability to carry out the objective placed before them, of paying their way, taking one year with another.
The Amendment that I am now moving has precisely the opposite effect to that of the two preceding Amendments, in that we seek to remove subsection (2), which in our view severely and unnecessarily limits the powers of the Railways Board to carry passengers or goods by road. The noble Lord, Lord Chesham, has just assured us that the Railways Board will inherit the existing powers under the 1928 Act. Although they will inherit those powers, they will exercise them only if the Minister says so. That may be regarded by some as a good provision, but I think it is a bad one; because in any case it must involve delay, and it must limit the powers of the new Railways Board to a greater extent than the British Transport Commission's railways services are at present limited. I do not think that can be argued at all. The subsection expressly says that
"The Railways Board shall not in exercise of the powers conferred by the said Acts of 1928 without the consent of the Minister—

(a) enter into any agreement … for the carnage of passengers by road, whether or not by way of varying an existing agreement, or

(b) except in pursuance of an agreement under the said Acts (whether entered into before or after the passing of this Act) provide any service for the carriage of

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passengers by road which was not being provided by the Commission immediately before the vesting date, or

(c) carry any goods by road for hire or reward."

Time and again during our discussions we have visualised the fact that some railway services will cease. I know that the noble Lord, Lord Mills, advises me to wait and see; but even the greatest optimists feel that the line closures will continue. We know that they have already started, and almost anyone could mention places which are threatened as a result of proposals in local areas—proposals which are causing considerable disturbance. If it is the case that a satisfactory alternative exists in those areas, and is likely to be provided, then there is some justification for this limitation. But whether that is so or not, there surely is no sound reason why the railway company should not have the chance of providing an alternative.
It was argued by Lord Mills earlier this afternoon, I think quite fairly, that it was not right to assume that, because railway services in a particular area were uneconomic, bus services replacing them must necessarily also be uneconomic. Why should the Railways Board therefore not have the opportunity of providing a bus service, as an alternative to a rail service, if no bus service exists in the area to replace it? That is a point to which I should like the noble Lord, Lord Chesham, to reply when he answers my points.
Subsection (2) (c) says that without the consent of the Minister the Railways Board shall not "carry any goods by road for hire or reward." That is to say, in exercising the powers under the 1928 Act in regard to the carriage of goods for hire or reward, the Minister must be able to say, "Yes" or "No". We all know that many village stations have been closed. There is no shunting going on in these villages any more; it is all done at the junction, and any goods that are sent out to these villages from the main junction are sent by road vehicles belonging to British Railways. Quite obviously, that is a sensible arrangement, which surely must continue; indeed, I should have thought that it would expand. The noble Lord seems to be rather puzzled about the point I am
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trying to make, but let me quote an example.
LORD CHESHAM: I was not absolutely clear to which service the noble Lord was referring.
LORD STONHAM: I was referring to subsection (2) (c). This is a part of the subsection which we propose to delete. Paragraph (c) prohibits the carriage of "any goods by road for hire or reward," in the Board's exercise of its powers under the 1928 Act, without the consent of the Minister. That is how the case stands at present; that is what we are proposing to delete.
LORD CHESHAM: I am sorry, but may I just get this clear? I wanted to know which services the noble Lord was complaining about—which services will not be able to be carried on any more.
LORD STONHAM: I am not suggesting they will not be able to be carried on any more, but that they will not be able to be carried on without the consent of the Minister. At the moment I am speaking about the carriage of goods by road for hire or reward. The kind of case I am now putting exists at the moment in the town of Taunton, which is a fairly substantial railway junction. Over the last ten years or so the goods services in quite a number of local stations within a radius of seven or eight miles have been discontinued; the goods train no longer serves them. Any goods destined for those areas are off-loaded at Taunton and then delivered by goods vehicles. In other words, it is all part of the railway service. The noble Lord may say "Well, that is going to continue."
LORD CHESHAM: Yes; that is right.
LORD STONHAM: I am sure we all agree that it is a very sound and sensible thing. My question is this. Assuming—and I think it is a fair assumption—that that kind of idea will be duplicated in many other centres where it does not yet exist, so that the railways will have to carry the goods comparatively short distances by road vehicles from the railhead, it obviously will be desirable that tlhey should be carried under the aegis of the Railways Board. Will that kind of road transport under the 1928 Act require the special consent of the Minister, or will the British Railways Board be

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able to carry it out without obtaining such consent? I should have thought that for the Board to have to obtain the Minister's consent for such a reorganisation, which is eminently sane, desirable and economical, would be quite absurd.
On the question, of road transport services which would be permissible under the 1928 Act, but which again, under the Bill as it stands, require the consent of the Minister for them to be performed, I think that here again the Railways Board should have discretion—power, as it were, without surveillance—to furnish road services in areas where the railway services are closing down and where there is no alternative form of transport. They are the two main questions that lie behind this Amendment, and I hope that the noble Lord will be able to give us an answer to them.
Amendment moved—
Page 5, line 37, leave out subsection (2).
LORD HAWKE: In bringing forward these Amendments to widen the powers of the Railways Board, I think that the Opposition leave out of account one or two factors. First of all, in regard to passengers, in a great many cases the railway will, in effect, be competing with other State industries, because the Holding Company will own the shares of the greater part of the buses in the country and will have a half share in most of the rest. So that to encourage the railways to set up their own organisation to compete with something which is nearly State-held, would be most uneconomic. This policy of diversification at any price, in order to try to get something to set off against a railway loss, is one that I should not have expected a sound businessman like Lord Stonham to put forward. This is the taxpayer's capital that is going to be employed. If the railways have to buy buses or extra vehicles, it is our money they are going to use, and I hope that the Minister will be there to see that it is used properly. For that reason, I hope that this Amendment will be rejected.
6.40 p.m.
LORD CHESHAM: The noble Lord, Lord Stonham, has raised some really interesting points here. I think we must revert straight away to the 1928 Acts. Those Acts, subject to certain considerations,
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roughly speaking empowered each of the main-line companies (later the British Transport Commission; now to become the Railways Board) to carry passengers and goods by road in any district to which access was afforded by its railway system. Then there are a certain number of prohibitions and so on. So that, in effect, they could either provide their own service, or enter into working agreements; and largely—almost entirely—they chose to enter into working agreements. Now those powers allow the railways to operate goods services.
The point of Clause 4 (2) (c), to which the noble Lord made reference—that they are not allowed to "carry any goods by road for hire or reward"—is to chip away, so to speak, that part of the 1928 Acts, because (I will come on to the reasons in a minute) it is not desirable that they should carry the goods. So far as passenger services are concerned, they can either, as I said, enter into working agreements with bus companies, or provide their own services. For the same reasons, we consider it much more preferable that they enter into working agreements, although they should still retain the power to provide their own services with the consent of the Minister, which we regard as an essential safeguard.
The reasons why goods are not to be carried, and passenger services are to be provided only with the Minister's consent, will, I regret to say, show what is probably a fairly deep political cleft between us. Noble Lords opposite have often explained that their ideal of running the system is by integration—that is the usual word—and therefore this is yet another Amendment in a string which has been designed to enable the Railways Board to go into business as operators of road services at large. They would be subject to a road service licence, but otherwise they could just go on when and where they wanted, without the Minister's consent. That is where we differ. The noble Lord and other noble Lords opposite think that that is the way to do it; we do not, and that is what the Bill is all about. We are trying to set up a Railways Board to run the railways, and not to act as general bus operators. I have said this before this afternoon, but I make no

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apology for making the point again: that they should not divert their attention and their capital resources into running buses, when their job is to run railways.
Leaving aside political considerations, I sometimes wonder whether noble Lords opposite truly do believe that the railway system, which is basically a nineteenth-century form of transport, can be brought up to date and modernised to serve the needs of the twentieth century. With the insistence, or persistence, I should say, with which they suggest that the railways should run almost everything else, as well as doing their own job, one would almost think that noble Lords opposite believed that, without road transport to lean on, the railways had hardly any hope of making a success of their system at all. Perhaps that is an unworthy view, but it is one that keeps coming into my mind when I hear noble Lords making their case.
Clauses 3 and 4 give the railways quite adequate powers for what they must do in the provision of services ancillary to or, in the last resort, in replacement of closed services. The noble Lord asked whether the delivery and collection services would go on, or whether they, too, would require the consent of the Minister. No, certainly not. The railway collection and delivery services—and I did mention the point earlier on—will continue as at present, and if there are not so many stations, and railheads are further apart, they will work and be able to work over wider distances. I hope, therefore, that the noble Lord will feel happier about that.
I have already made the point, on the previous Amendment, that the Railways Board should inherit the road transport powers from the 1928 Acts, in order to be able to provide a bus service where it is absolutely necessary. The noble Lord, Lord Stonham, complained slightly that I had not, as it were, when answering my noble friend Lord Goschen on an earlier question, revealed that the powers were cut down by being made subject to the Minister's consent. I think that is what the noble Lord said. Of course, I did not think it was necessary to do so, because I was asked if the powers were wider; and that was the question I answered. Of course, the powers are not
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wider, and they are narrower only in that the consent of the Minister has to be obtained. I still think that that is a perfectly reasonable thing to happen, because, as we see it, we are trying to build up this Railways Board to run the railways. We think that the bus and road haulage activities are better under the Holding Company, where they can operate most efficiently. It would defeat the objects of the reorganisation for which we have been striving, and which have been fairly widely approved, if we were to give the Railways Board an unfettered power to provide bus services. But I do maintain that a fettered power—if your Lordships like to call it that—one subject to the Minister's consent, is necessary for them to be able, in the last resort, to supply what may be essential for the public.
Finally, therefore, I say to the noble Lord who asked me the direct question, "Can they supply buses in areas where there are none?", that subject to obtaining the Minister's consent—which is as much an insurance as anything else—and subject to their obtaining a road service licence, of course they can.
LORD STONHAM: I am in this case sincerely grateful to the Minister for a most helpful reply. So far as the goods services or, as he more correctly described them, the delivery and collection services, are concerned, I think he has fully met my point, and, providing I did not misunderstand him, those particular services or their expansion as necessary will not require the especial consent of the Minister. I asked that, because in some areas it may well be—although I do not know—that they will have to go over a reasonable distance of ten or fifteen miles. I know that in some areas there is virtually no other collection and delivery service, and if the railways did not do it it would not be done at all. I think that was a satisfactory answer to that part of the Amendment.
On the other part with regard to passenger road services, I think there is something, at least, in what the noble Lord says, although I am sorry that I could not accept the strictures of the noble Lord, Lord Hawke, that our Amendment would allow the railways to compete with other State industries. I specifically said that we do not ask for

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a second service where one is already in existence, and I would not be such a bad business man, and I would not want the Government to be such bad business men, as to provide two services where there was already an efficient service in operation.
I must spend just a moment in answering the question which the noble Lord, Lord Chesham, posed to us when he said, "Do we really believe that the railway system can be brought up to date and can serve a 20th century purpose?" The answer is, "Yes, we do most sincerely believe that"—and I would say what I think the main function of the railways should be in the 20th century. It is, whether by the conveyance of passengers or of goods, to serve the country in those capacities over long distances, or over what are long distances in a small country like this, and that they should be fed by road passenger and road goods services. To a large extent, that is what I mean by "integration"; and I think it would be better both for the owners of goods and for passengers, and cheaper. I do not accept that the railways need road transport on which to lean if they are going to survive, but I think it is powerful common sense to try to arrange it so that both can play the part they are best fitted to play. It may not have helped anyone else, but this discussion has greatly helped me on these two points, and I thank the noble Lord for it. I would ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 agreed to.
Clause 6:
Railways Boards power to provide hotels
6. The Railways Board shall have power to provide hotels in places where those using the railway services provided by the Board may require them, for use both by those and other persons, and shall have power to manage hotels, but the Board shall not exercise their power of managing hotels without the consent of the Minister.
6.52 p.m.
LORD SHEPHERD: We now come to a rather remarkable clause in the Bill. When one considers the assets and the importance of the Railways Board, and also the importance and standing of the
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persons who we anticipate will be appointed to administer this Board—Dr. Beeching at £24,000 a year, and another gentleman at something in the region of £12,000—it seems, I would say, nearly an insult that the Minister should have felt it necessary to place in the Bill that, if the Railways Board felt that an hotel was necessary for the convenience of the passengers of such railway services, then they could provide that hotel but they could not manage it without coming to the Minister for permission. I should be grateful if the noble Lord would tell us why this provision was necessary. I should have thought, considering the duties, the responsibilities and the standing of the persons on whom the responsibility is based, that at least the Government could have said, "If you are to provide an hotel, then we can trust you to manage it efficiently". I beg to move.
Amendment moved—
Page 7, line 8, leave out from ("hotels") to end of line 10.—(Lord Shepherd.)
THE EARL OF DUNDEE: This is rather an intricate subject, and it is not made any simpler by the fact that in the White Paper it was proposed that all the Transport Commission's present hotels should be transferred to the Holding Company. But since then we have reconsidered the matter and we have decided that the most efficient and profitable plan would be that all these hotels should be managed, not by the Holding Company but by an hotel company which is to be set up, as soon as this Bill is passed, by the present Transport Commission, and then later on, when the vesting date comes, that it should become a subsidiary of the Railways Board—that is to say, the Railways Board will own all the shares and receive any profits, and also, of course, if they choose to let to the hotel company the hotels they build, they will receive the rents. But we think it is better that the management should be by a specialised hotel management, and that they should not be directly managed by the Railways Board.
All that is provided for under Clause 33, which describes the "set-up" of the proposed hotel company. It does not mention specifically, I think, the word "building", but as an hotel company, of course, the power to build will be contained in their memorandum of association. What we contemplate is that

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normally the provision of new hotels and the management of all hotels shall be under this hotel company and not directly under the Railways Board.
LORD SHEPHERD: They are under the Railways Board, are they not? They are ultimately responsible to the Railways Board?
THE EARL OF DUNDEE: Yes. The hotel company will be a subsidiary of the Railways Board. I think this is the only Amendment about hotels. There do not seem to have been set down any Amendments to Clause 33 at all; and since the last thing I want to do is to provoke or incite any of your Lordships to add to the 263 Amendments which are already on the Marshalled List, I shall immediately come to Clause 6, which provides for certain exceptions to this general policy. We admit that there may be exceptional circumstances which may make it desirable that the Railways Board and not the hotel company should build a new hotel. For instance, if at some time in the future a new hotel were required in connection with railway services, perhaps as part of the redevelopment of main-line termini in London, it might be desirable for the Railways Board to build it, not necessarily for the purpose of managing it but to enable it to be taken over, perhaps on lease, and run by the hotel company. Therefore, we give them this power specifically in Clause 6.
Then, with regard to management, although in general the intention of the Bill is that all the railway hotels are to be run by the hotel company, there might be unforeseen circumstances in which it would be convenient for some particular hotel to be directly managed by the Railways Board, and provision is therefore made in Clause 6 for such direct management. It is our whole intention that these things should be exceptional. We do not want to rule them out. But, of course, the only person who can clearly decide whether the situation is exceptional or not is the Minister. We do not think it is any reflection on the Railways Board, who are put there to manage railways and not to manage hotels, to say that the decision whether, in some exceptional circumstance, they ought to have some special power to manage or to provide
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some hotel, ought to rest with the Minister. That is the reason why these possible contingencies are provided for in Clause 6.
The noble Lord's Amendment would, of course, convert the exception into the rule. Clauses 6 and 33 would then give the Railways Board a general power, without the consent of the Minister, both to provide and to manage hotels, and they would therefore be really contradictory. The main purpose of the Bill is contained in Clause 33. We are including this Clause 6 because we wish to provide for these possible exceptions, which the noble Lord obviously agrees may sometimes arise. We want to make sure only that they do not become the rule. That is the reason for making the Minister's consent necessary.
LORD STONHAM: Personally, I do not think that this provision which has been explained by the noble Earl is going to make very much actual difference to the running of British Railways' hotels at all: nor do I think his acceptance of my noble friend's Amendment would have made much difference. The only hotel that is owned by the Transport Commission for which there is not an absolutely 100 per cent. railway case is Gleneagles. I think that was built in order to persuade people to use the railways and arrive at Gleneagles. Every other railway hotel is an absolute railway need, and if anybody does not believe that, I advise him to try to get a bedroom at the Midland Hotel in Manchester, or at the Adelphi Hotel in Liverpool, at any time when those cities are busy.
The point I should like to make on this Amendment is that really it is nonsense to have a private company under the direction of the Railways Board to run these hotels, because you are merely interposing another structure. The position from time immemorial has been that the hotels section of British Transport has been a separate section, and it has always been run by experts. When this new company is formed under British Transport it will be run by the same experts, by exactly the same people doing exactly the same jobs. Indeed, it is the nucleus of the present British Transport Hotels Services. They have their separate buying offices; they order their

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goods as British Transport Hotels Services. They are not waiting for a company to be formed; they are a completely separate unit now. Therefore, it will not make any difference really, except to add to the expense when they are formed into a company under the British Railways Services Board.
This particular clause and this particular arrangement has been thought up by someone who knows nothing whatever about the matter. The present hotels section is a development of the old Midland Railway hotels section, which was the best one of its kind when the vesting date in 1948 came along and they were all amalgamated. The nucleus is still there. Some of the same staff is still there. The arrangements are precisely the same, and when this change is made the only thing which will happen is that it will have the word "Limited" stamped at the end of the company style, and the other arrangements will go on.
But there is one exception, about which I should like to ask the noble Earl what is going to be done. At the present time, British Transport Hotels Services are also responsible for the dining cars. They do all the buying, and, in effect, therefore, the dining cars services are part of the hotels section in so far as the catering is concerned. If there is any doubt in the noble Earl's mind, I may say that certainly in so far as the buying is concerned they are part. Everything that is bought for the dining cars services is bought by the same section that buys for the hotels. What is going to be the position in the future? Are you going to set up another organisation, a separate buying organisation, for the dining cars? Is the organisation for the dining cars going to be separate from the hotels? Because if so, you are adding expense; you are adding another set of staff. If the answer to this question is "Yes", then judging from my experience, which goes back over some thirty-odd years, I would say that this was a very foolish step to take.
THE EARL OF DUNDEE: The answer to the noble Lord's specific question is that railway catering on the railways is being left to the Railways Board. He wanted information on a question of fact which I will gladly give him, but
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I hope he will not expect me at this time of night to pursue his arguments, the force of which I quite see, because I am not sure that they are vitally relevant to the Amendment.
LORD SHEPHERD: We will certainly look at this point again. My noble friend spoke of Gleneagles. I like Gleneagles. Personally, I regret that its competitor railway failed to provide a similar hotel on the East coast of Scotland, and I am sure the noble Earl, Lord Dundee, will agree with me there.
THE EARL OF DUNDEE: There is one at Turnberry.
LORD SHEPHERD: Well, I am still not happy. We have the position where the Board can build and possibly manage hotels, and the other hotels will be under an hotel company. If the Board is given the power to build hotels, even if it has the power to manage them, I cannot imagine it will in fact do so if we are going to pay the Board what we are proposing to pay them. This Board would be likely to say that they would manage two or three hotels, but the rest would be managed by the Hotels Board. However, we will look at this point again, and in the meantime I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
LORD MILLS: It might be convenient to the House if we adjourned the Committee at this stage. Therefore, I beg to move that the House do now resume.
Moved, That the House do now resume.—(Lord Mills.)
On Question, Motion agreed to, and House resumed accordingly.

ASSAY OFFICES BILL [H.L.]

  UNIVERSITY OF SUSSEX BILL [H.L.]
  Returned from the Commons, agreed to, with Amendments: the said Amendments considered, and agreed to.
  House adjourned at seven minutes past seven o'clock.