Sitting of 8 July 1965

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
MESSAGE FROM THE QUEEN

  INCOME TAX
  The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address as follows:—
  I have received your Address praying that the Double Taxation Relief (Taxes on Income) (Jamaica) Order 1965 be made in the form of the draft laid before your House.
  I will comply with your request.

PRIVATE BUSINESS
  BRIGHTON SKYDECK BILL [Lords] (By Order)
  Read a Second time and committed.

  COVENT GARDEN MARKET BILL
  The Chairman of Ways and Means (Dr. Horace King): I beg to move,
  That the Committee on the Covent Garden Market Bill have leave to proceed notwithstanding the absence of more than one of the Members.
  On 23rd June the Chairman of the Committee on the Covent Garden Market Bill reported to the House that the hon. Member for Kingston-upon-Hull, North (Mr. Solomons) was unable on account of illness to attend the Committee. Since that date the Committee has sat with its bare quorum of three Members, until yesterday, when the hon. Member for the Isle of Wight (Mr. Woodnutt) was also taken ill and unable to attend, which made it necessary under the Standing Orders for the Committee to adjourn for the day for lack of a quorum although all the parties were present.
  Now, the Committee has so far sat for 17 days, and it seems likely that another four days will conclude the business. Fourteen Petitions have been lodged against the Bill, and the hearing has been
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  attended by 11 counsel and one private Petitioner. The Chairman of the Committee, the hon. Member for Stalybridge and Hyde (Mr. Blackburn) and the parties concerned have expressed their support to the proposal contained in this Motion; indeed they are most anxious in view of the labour and expense that has already been involved that the Committee stage of this Bill should be brought to the speediest possible conclusion.
  I am happy to say that the hon. Member for the Isle of Wight has been able to attend the Committee this morning and I hope that it will not be necessary for the powers proposed by this Motion to be exercised, but I hope that the House will agree that in the circumstances they should be given.
  Question put and agreed to.

ORAL ANSWERS TO QUESTIONS
  HOME DEPARTMENT

    Government of Ireland Act, 1920
    Mr. Roseasked the Secretary of State for the Home Department whether he will initiate legislation to amend the Government of Ireland Act, 1920, so as to abolish university seats and the consequent plural voting and to reduce correspondingly the number of seats in the Northern Ireland Parliament.
    The Secretary of State for the Home Department (Sir Frank Soskice): No, Sir. Under Section 14 of the Government of Ireland Act, 1920, the Parliament of Northern Ireland has power to alter the law relating to constituencies for elections to the Northern Ireland House of Commons provided that the number of Members is not altered. I understand that the Government of Northern Ireland have a review of constituencies in hand.
    Mr. Rose: Is my right hon. and learned Friend aware that the Northern Ireland Minister of Home Affairs recently stated that there are great disparities in the electoral position, and would he not at least set up a commission of inquiry to look into the whole scandalous position of the electoral franchise and voting methods in Northern Ireland? In connection with the university seats, does not

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    my right hon. and learned Friend support the policy of the Northern Ireland Labour Party which is to redraw the electoral boundaries so as to redistribute the seats, and does he think that an enabling Act would be necessary?
    Sir F. Soskice: I have already said that the Government of Northern Ireland have a review of constituencies in hand. There is a well recognised constitutional convention that the Westminster Parliament does not legislate with regard to matters within the province of the Northern Ireland Parliament.
    Mr. Chichester-Clark: Does the right hon. and learned Gentleman realise that the official Labour Party in Ulster does not want a reduction in the number of seats? May I tell him how much his visit to Northern Ireland recently was appreciated for the courtesy and understanding he showed, and for his recognition of the Northern Ireland Government's good work? Would it not be a good idea if some of his less enlightened colleagues went to Northern Ireland? It does not cost very much, and instead of sniping they would be able to see what the position was for themselves.

    Abortion
    Mrs. Renée Shortasked the Secretary of State for the Home Department whether he has now completed his study of the representations made to him by the Abortion Law Reform Association; and if he will make a statement.
    Mr. William Hamiltonasked the Secretary of State for the Home Department what reply he has sent to the National Union of Townswomen's Guilds' letter to him concerning the problem of the law on abortion; and what progress has now been made in the preparation of legislation to amend the law on the subject.
    The Minister of State, Home Office (Miss Alice Bacon): The reply indicated that my right hon. and learned Friend had, as requested, taken note of the resolution passed by the National Council of this body. On the general question, I have at present nothing to add to the Answer which I gave on 25th March to a Question by my hon. Friend the Member for Fife, West (Mr. William Hamilton) when I said that we were
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    keeping the matter under review but that we could hold out no prospect of early Government legislation.
    Mrs. Short: Is my hon. Friend fully seized of the weight of public opinion behind proposals for the reform of this law? Is she aware that a recent poll carried out among doctors in London showed a majority of doctors in favour of reform on the lines suggested by this Association? Is she further aware that a National Opinion Poll, as recently as last March, showed that over 72 per cent. of the population was in favour of reform on the lines proposed by the Association? Will she, therefore, bear in mind that she will have the weight of public opinion behind her if, early in the next Session, she and her right hon. and learned Friend will agree to find time for this humanitarian reform?
    Miss Bacon: My right hon. and learned Friend and I are fully aware of all that my hon. Friend has said. As she knows, we met a deputation from the Abortion Law Reform Association. The Government are of the opinion that as there are divergent views on both sides of the House, this might be a good subject for a Private Member's Bill in the new Session, when the opinion of this House could be tested.
    Mr. Hamilton: Can my hon. Friend give any good reason why the Government should continue to prevaricate on this issue? Does she not appreciate that we on this side gave support to the Murder (Abolition of Death Penalty) Bill brought forward by the hon. Gentleman the Member for Nelson and Colne (Mr. Sydney Silverman), as a Private Member's Bill? Why cannot the same treatment be given to the Bill of my hon. Friend the Member for Wolverhampton, North-East (Mrs. Renée Short), since it commands the support of a much greater majority in the country than did that of my hon. Friend the Member for Nelson and Colne?
    Miss Bacon: It is obvious that nothing could be done in this Session, but if any of my hon. Friends, or any Member of this House, were to be lucky in the Ballot, then the Government would have to see what their attitude would be about doing the same as they did in the case

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    of the Bill of my hon. Friend the Member for Nelson and Colne.

    Sunday Observance
    Mr. Sharplesasked the Secretary of State for the Home Department when he now intends to introduce legislation to rationalise the law relating to Sunday observance.
    Sir F. Soskice: In the light of the debates in this House on 15th February and in another place on 17th March, the Government consider that Parliament should be given an opportunity to pronounce on the main recommendations of the Crathorne Committee; and in a matter which so closely affects the consciences of individual Members they believe this could best be arranged if a Bill were introduced in Private Members' time on which all decisions would be left to a free vote of the House. The Government would be very ready to offer facilities for the drafting of such a Bill, but no undertaking can be given to provide Government time.
    Account will be taken of the Committee's recommendations regarding Sunday trading in the proposals for legislation to amend the Shops Act, 1950, of which the Government intend to publish an outline within the next few weeks as a basis for further consultation.
    Mr. Sharples: Is the right hon. and learned Gentleman aware that that was a most unsatisfactory reply? A Bill of this magnitude should be undertaken by the Government, and the responsibility for legislation in a matter of such great importance to every single person in the country should not be shelved by the Government on to a private Member.
    Sir F. Soskice: I agree with the hon. Gentleman that it would be a Bill of considerable magnitude. That was one of the reasons why I said that unfortunately no undertaking could be given to provide Government time.
    Mr. Paget: Is my right hon. and learned Friend aware that the private Member's procedure is quite unsuitable for Bills of considerable magnitude? Social matters are a Government responsibility and it is no use shelving them in this way.
    Sir F. Soskice: I repeat what I have just said, that unfortunately it is impossible to find Government time, having regard to the priority of other legislation which the Government propose to introduce.
    Mr. Prior: Is not the right hon. and learned Gentleman aware of what the Prime Minister said in Glasgow 10 days ago—that he can get any Bill through this House at any time? What is the difficulty in the Government finding time for this Measure?
    Mr. Rankin: Could my right hon. and learned Friend tell us why the Opposition were not fully seized of the importance of this Bill during their period in office?
    Mr. Speaker: The Home Secretary has many responsibilities but that is not one of them.
    Mr. Iain Macleod: Does the Home Secretary realise the significance of the comment he made a moment ago when he said that, because of the size of this Bill, and, presumably, the importance of it, Government time could not be found for it? That is surely the best reason why Government time should be found. Will he stop passing on these Measures of great importance to private Members when they ought to be the responsibility of the Government?
    Sir F. Soskice: I do not for a moment wish to imply that it is not a Measure of great importance. Of course it is. It is, however, necessary for Government time to be available before one can bring it before the House in Government time. I am sorry, but it is just not possible to find Government time for it.

    Experiments on Monkeys
    Mr. Burdenasked the Secretary of State for the Home Department how many monkeys have been used in this country for stomach ulcer experiments resulting in their death or killing for autopsy after six months; what medical knowledge has been gained from these experiments during which great anxiety and physical suffering was caused to the animals used; and if he will refuse licences for the carrying out of these experiments in future.
    The Joint Under-Secretary of State for the Home Department (Mr. George Thomas): No authority has been given for experiments of this kind. If such authority were sought the application would be considered with full regard to the restrictions imposed by and under the Cruelty to Animals Act, 1876, and to the risks of pain to the animal.
    Mr. Burden: Is the hon. Gentleman aware that that was the reply I expected? Is he also aware that, while animal lovers appreciate the zeal with which anti-vivisectionists in this country press their case, the manner in which they sometimes collect evidence of excesses in vivisection carried out abroad, and present this as if it had happened in this country, is to be roundly deplored? In connection with this, will the hon. Gentleman consult his right hon. Friend, despite the manner in which time presses upon the Government from many points of view, and consider the possibility of debating the Littlewood Report early in the next Session of Parliament, if they are still there? Would he also consider the possibility of introducing legislation to bring forward and put into operation some of the recommendations of that Committee?
    Mr. Thomas: I would draw the hon. Gentleman's attention to the fact that on the last part of his supplementary question there is a question on the Order Paper to be answered later today, if it is reached, put down by my hon. Friend the Member for Wood Green (Mrs. Joyce Butler). On the first part, the hon. Gentleman has a high reputation, both in the House and outside, on all matters relating to the care of animals. I know that his strictures will be noted by those to whom they refer, and I support them.

    Polythene Bags (Danger to Children)
    Mr. Bostonasked the Secretary of State for the Home Department if he will introduce legislation to prohibit salesmen and other tradesmen and door-to-door callers from leaving polythene bags at dwellings in circumstances potentially dangerous to young children.
    Mr. Tuckasked the Secretary of State for the Home Department whether he will now introduce legislation to prohibit
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    the distribution through private letter boxes of plastic bags.
    Sir F. Soskice: I have for some time been keeping under close review the danger to children from polythene bags and following discussions between the Home Office and the Packaging Film Manufacturers' Association in 1962 the trade has arranged for many such bags to carry a printed warning of it. The Home Office has also asked the firm mainly concerned with the door-to-door use of old clothing to use bags of not less than 150 gauge, with holes down the side and centre.
    There are practical difficulties about legislation of the kind suggested in the Questions, but the possibility is receiving consideration.
    Mr. Boston: Will my right hon. and learned Friend bear in mind that there is very real and grave widespread concern about this and that his own efforts and the efforts of other Ministers in his Department are very warmly appreciated? Will he accept that the indiscriminate distribution of bags of this kind is a very great danger and that notices on them are not very effective where young children are concerned, especially when the bags sometimes contain things attractive to children, like toys? Will he keep the possibility of legislation very firmly in mind?
    Sir F. Soskice: Yes, Sir. I certainly have in mind the risk of the use of these bags. The difficulty about introducing legislation is this. Polythene bags are now an object of ordinary household use in their millions. Simply to prohibit their distribution to private houses would not make any significant impact in diminishing the risks which they involve. The difficulty about legislation is that we would have to try to do something to prohibit the use of polythene bags in general, and that is a scarcely practical proposal, having regard to their extraordinarily widespread use.
    Mr. Sharples: Will the Home Secretary look at this matter from the point of view of bags which are put through letter boxes? Will he see whether they can be banned entirely, particularly in view of the danger, not only to young children, but to mentally handicapped

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    children? Will he also have a look at the case which I brought to his notice in which the implication is that these bags are distributed on behalf of handicapped people? Will he see whether action can be brought in cases of this kind under the Trading Representations (Disabled Persons) Act, 1958?
    Sir F. Soskice: I will certainly bear all those things in mind. So far as I am aware, none of the casualties which have taken place is traceable to polythene bags put through letter boxes or distributed to houses. That is one of the difficulties. I assure the hon. Gentleman that I have the danger of polythene bags fully in mind and will certainly examine what he has suggested.

    Sexual Offenders
    Mr. Ensorasked the Secretary of State for the Home Department whether he will make inquiries into the possibility of using the operation of castration in cases of persistent sexual offenders who are a danger to the public, in view of the fact that this operation has shown good results in a number of European countries.
    Sir F. Soskice: I have no plans for action in this matter.
    Mr. Ensor: Would my right hon. and learned Friend agree to hear representations on this matter in the near future?
    Sir F. Soskice: I will be glad to listen to any representations which my hon. Friend may wish to make to me, but I can give him no undertaking in the matter.
    Sir G. Nicholson: Will the Home Secretary express his horror at an idea which is more in keeping with the traditions of Nazi Germany than this country?
    Sir F. Soskice: I do not think that I can usefully add to what I have said, namely, that I cannot give any undertaking about this matter, but that I will always listen to any representations which any hon. Member makes to me.
    Sir C. Osborne: In view of the fact that these revolting sexual offences have increased from 2,000 to over 20,000 in the last 20 years—violent, fierce, filthy attacks—will not something be done, even if this course is not accepted?
    Sir F. Soskice: I share the hon. Gentleman's abhorrence, as everybody in the House does, of sex offences. What I am trying to do, as I think the House knows, is to build up the strength of the police force and to put the police in a better position to combat the commission of criminal offences.

    Private Employment Agencies (Fees)
    Mr. Kenneth Lewisasked the Secretary of State for the Home Department whether he will introduce legislation to establish a fixed fee which private employment agencies may charge when placing employees in appointments, or to take such other action as may be necessary to prevent private employment agencies nominating wages in order to secure maximum reward for themselves.
    Mr. George Thomas: My right hon. and learned Friend is keeping in mind the possibility of legislation to ratify the International Labour Organisation Convention No. 96 on the regulation of fee-charging employment agencies, but he cannot undertake to give priority to it.
    Mr. Lewis: I thank the hon. Gentleman for that somewhat encouraging reply. Is he aware that the Government, in regard to their economic policy, should look at this matter very quickly because the present position is that these agencies nominate a fee related to a salary which they nominate from the beginning? Because they nominate a salary, much higher salaries than are justified are paid. This is a built-in incentive to inflation.
    Mr. Thomas: The hon. Gentleman can rely on the speed of the Government in the right direction, as at all times.
    Mr. Molloy: Will my hon. Friend bear in mind the practice which is growing up in some of these private employment agencies of keeping the address of a person whom they have placed in employment and then, when he has been there for a few weeks, writing to him and offering him alternative employment, encouraging him to leave the job which they found for him originally and trying to place another person in that job? This is a very clever little racket which is growing up and to which I should have

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    thought my hon. Friend would pay attention.
    Mr. Thomas: I will listen to my hon. Friend, whose accent I so admire.
    Mr. Sharples: This is the fourth time in 20 minutes that we have been told that desirable legislation cannot be introduced because of the pressure on Government time. Should not the hon. Gentleman consult the Leader of the House about this and get some of these sensible Measures introduced?
    Mr. Thomas: We have our priorities. Of course, I will speak to my right hon. Friend.

    Property (Theft or Damage)
    Mr. Cordleasked the Secretary of State for the Home Department whether he will make proposals to provide that conviction on a charge involving loss by theft or malicious damage to private or public property shall include restitution of such loss in addition to any penalties, pecuniary or otherwise, ordered by a court; and whether he will give power to the courts to require security for such restitution by impounding or charging the personal effects of the convicted person.
    Miss Bacon: The criminal courts already have power, under Section 4 of the Forfeiture Act, 1870, to order an offender to pay compensation up to £100 for loss suffered as a result of a felony, including theft, and there are certain other powers under which they may award compensation for malicious damage; such orders may be enforced by distress of the money and goods of the offender. The Criminal Law Revision Committee, in its recent Report on felonies and misdemeanours, has recommended that the power in the Forfeiture Act should be applied to any offence triable on indictment and should include compensation up to £400 for damage as well as loss.
    Mr. Cordle: While welcoming the hon. Lady's lengthy reply, may I draw her attention to the fact that there is a real need to look at this question? Is she aware that many people in this country would like to see thuggery dealt with by the introduction of corporal punishment? Will she agree that the present cult of
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    softness has brought about a lot of our problems?
    Miss Bacon: The Government are very concerned at the malicious damage, but I cannot agree with the hon. Gentleman's suggestion that corporal punishment would be in any way effective in dealing with it. Indeed, the past has shown that flogging and birching did not reduce crimes for which flogging and birching were used.

    Children Under Care (Emigration)
    Mr. Biggs-Davisonasked the Secretary of State for the Home Department what criteria are laid down for local authorities to use when judging whether the emigration of a child in their care would be in his or her best long-term interest.
    Sir F. Soskice: Local authorities act under Section 17 of the Children Act, 1948, which lays down no criteria. They must consider what is in the child's best interests in the circumstances of each case.
    Mr. Biggs-Davison: While accepting that they must consider what is in the child's best interests and also the paramountcy of parental and family rights and responsibilities, may I ask whether there are not very many children in care today at high public cost who would find a happier and healthier life in Commonwealth countries overseas? Will the Home Office try to persuade local authorities to study the advantages of the Fairbridge Farm Schools and other similar organisations of high reputation?
    Sir F. Soskice: I have every reason to think that local authorities are very fully aware of what the hon. Member indicated in his Question. Over the last few years about 60 children a year have emigrated under the provisions of the Section.
    Sir D. Renton: Is not the right hon. and learned Gentleman aware that the Fairbridge Farm Schools have enabled thousands of children in the past to start new lives in Australia or Canada, but that the number of children going to these schools has been so much reduced in recent years that there are now vacancies in the Fairbridge Schools in Australia?

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    Would he not give some advice to the local authorities which would enable the fullest advantage to be taken of the great opportunities which exist?
    Sir F. Soskice: I have no doubt that the question will have been read and will be read throughout the country. I have to give approval in each case under Section 17 of the Act, and I do not think that it would be appropriate in these cases for me to give advice.
    Mr. Mapp: Will my right hon. Friend bear in mind, in considering this matter, that economic considerations in respect of such children are quite unimportant in relation to the overall need for people to take over the duties of parents to them? Is he aware that many hon. Members on this side of the House would resent it if economic considerations had the effect of causing the emigration of these unfortunate children?
    Sir F. Soskice: Of course I will have that in mind, and I have been fully conscious of it.

    West Sussex Police Force (O. and M. Survey)
    Mr. Shepherdasked the Secretary of State for the Home Department if he will call for a report from the Chief Constable on the work study produced for the West Sussex Police Force and the extent to which it will improve the efficiency of the force; and if he will seek to extend this survey to other forces.
    Mr. George Thomas: The report of the survey of the West Sussex Constabulary carried out by the West Sussex County Council O. & M. team was made to the police authority, and it is for them and the chief constable to implement its recommendations. Her Majesty's Inspector of Constabulary will however keep in touch with what is done. In the search for greater efficiency which is going on in police forces all over the country, the value of O. & M. surveys is recognised. Arrangements were made last year for experimental teams of police officers to be trained in O. & M. work. These teams are now working in several police districts and have produced some useful reports.
    Mr. Shepherd: Does not the Minister think that this Answer demonstrates that
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    the powers which the Home Office have under the new Police Act are not sufficient to assure uniform application over the whole country of the best methods of running the police force?
    Mr. Thomas: No, Sir.

    Probation Service (After-Care Work)
    Mr. Shepherdasked the Secretary of State for the Home Department what funds are to be made available to the probation service in order that it may carry out its extended functions in respect of after-care; and whether he is satisfied that the funds being made available will be adequate to avoid any restriction of the effectiveness of the service.
    Miss Bacon: I assume that the hon. Member has in mind financial assistance for discharged offenders whose needs cannot be met by the National Assistance Board. My right hon. and learned Friend has recently indicated to probation committees his readiness to consider applications for increases in the annual maximum of expenditure authorised for this purpose.
    Mr. Shepherd: Is it not a fact that those from detention centres are now subject to after-care? Is she satisfied that the probation service has enough in the way of resources, in both physical and financial terms, to do the work which it is now called upon to undertake?
    Miss Bacon: Yes. The hon. Member knows that changes are taking place and have been taking place in the arrangements for after-care. We are very anxious indeed to see that sufficient funds are available for this important purpose. Some of the charitable funds which were to be spent by the Discharged Prisoners Aid Societies have been passed over to the Probation and After-Care Service.

    Mr. C. P. Q. Beck
    Mr. Gowerasked the Secretary of State for the Home Department what decision he has reached regarding the request of Mr. C. P. Q. Beck of 56 Heol-y-Gors, Whitchurch, Glamorgan, for a full inquiry into his case, as outlined in the correspondence which has been forwarded to his Department.
    Mr. George Thomas: As the hon. Member has been told, my right hon. and learned Friend can find no grounds to justify the institution of a formal inquiry into Mr. Beck's case, which has already been very fully considered in the light of the correspondence that he has forwarded.
    Mr. Gower: Has the Joint Under-Secretary of State noticed the two main complaints of Mr. Beck, namely, that although the Home Secretary refuses to intervene in this case, in fact the Home Office intervened in a similar case brought to its notice by the Society of Labour Lawyers some time ago; and, secondly, that although there was no reporter in the magistrates' court, a full report of the prosecution case appeared in the newspapers and the defence case, which was ultimately successful in the assize court, was not reported at all—an action which was condemned by the Press Council? Does he not think that there is some ground, in the light of all these circumstances, for some investigation?
    Mr. Thomas: The hon. Member knows that his constituent met my predecessor in office, that he was heard by the Minister then dealing with this matter that for three years the Home Office has been receiving correspondence upon the matter and that it has been thoroughly looked into.
    Mr. Gower: No.
    Mr. Thomas: The hon. Member ought to know, because he has sent me more letters than anyone else—and that is saying something. The hon. Member may be assured that we have looked into this case with the utmost care, as did the last Administration, and we have reached the same conclusion.
    Mr. Michael Foot: While I am sure that the Home Office has looked at the matter carefully, may I ask my hon. Friend to appreciate that what is required in this case is some form of independent investigation into the matter? Does he not accept the fact that those who have looked into the details outside the Home Office have reached a conclusion that some independent inquiry ought to be made? Will he, therefore, undertake to reconsider the matter with that in mind?
    Mr. Thomas: No, Sir. The inquiry which took place in the Home Office was an independent inquiry and not a biassed inquiry. It was an inquiry by people who have all the facts at their disposal, and I see no reason at all for asking for a special inquiry in this case.
    Mr. Iain Macleod: Does the Minister realise that to a great majority of people in the House, including myself, the details of this case are unknown, but that what creates anxiety is the point made by my hon. Friend the Member for Barry (Mr. Gower) in his supplementary question and reinforced by the hon. Member for Ebbw Vale (Mr. Michael Foot)? Unless the Minister is prepared to dispute these facts—and if he is, will he tell us so—does he not agree that there is a case here for an inquiry?
    Mr. Thomas: What has been said this afternoon is not new. All this has been looked into. I do not seek to dispute what the right hon. Gentleman said about publication in the Press, but I assure him that these facts were borne in mind during our investigation and during the investigation of his right hon. Friend the Member for Hampstead (Mr. Brooke), who reached the same conclusion as we have reached.

    Caravans (Illegal Parking)
    Mrs. Renée Shortasked the Secretary of State for the Home Department if he will take steps to increase the fines for the illegal parking of caravans on roadside verges and open spaces.
    Miss Bacon: Proposals will be made at a suitable opportunity for increases in certain maximum penalties bearing on this matter.
    Mrs. Short: May I thank my hon. Friend for that reply? I am glad that the Department is taking this matter up in this way. Will she urge her right hon. Friend the Minister of Housing and Local Government to find a solution to this problem and to urge local authorities to set up proper sites for these people?
    Miss Bacon: This matter involves several Ministries, not only the Ministry of Housing and Local Government but also the Minister of Transport, who has already said that he intends at a suitable opportunity to seek an increase in the penalties in the Highways Act.
    Mr. Longden: These several Ministries have been investigating this question for at least two years, since it was first raised by me. Is the hon. Lady aware that the immense time and trouble which is taken by the police to bring these people to book is quite useless, because they find it much cheaper to pay these fines than to pay rates and taxes?
    Miss Bacon: Yes. I realise that this is a very difficult problem and that, strictly speaking, it is not solely a problem for my right hon. Friend. The various Ministers concerned are determined to do something to try to make the position better.
    Mr. Jopling: When the hon. Lady is looking into this matter, will she look also into the question of gipsy fairs, which cause appalling chaos in some parts of the country, certainly in my constituency, when several dozen of these people descend on a district for periods up to a fortnight?
    Miss Bacon: Yes, this is another problem entirely, and principally one for the Ministry of Housing and Local Government and under the Public Health Act.

    Air-raid Shelters, Dinas-Powis
    Mr. Gowerasked the Secretary of State for the Home Department if he will now authorise the demolition of the two communal air-raid shelters at Elm-Grove Place, Dinas-Powis, Glamorgan, which were designed for use under the conditions of the last war; and if he will arrange for their early removal.
    Mr. George Thomas: As the hon. Member has been informed, there appear to be no grounds, under existing policy, to justify demolition in this particular case.
    Mr. Gower: Is it not somewhat absurd that air-raid shelters designed for use in the conditions of the last world war, in 1939, should be retained in circumstances which are deplored by all the local residents, when the shelters are most insanitary, when they are the sort of buildings which attract youngsters in the most undesirable circumstances—[HON. MEMBERS: "Oh."]—and, in view of the fact that they are quite unsuitable for any
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    future war, will the hon. Gentleman give instant instructions for the demolishing of these buildings?
    Mr. Thomas: I take the hon. Gentleman's word for what may happen at these shelters, but he ought to be aware, as I am aware—we both know these shelters—[HON. MEMBERS: "Oh."]—Mr. Speaker, I cannot understand the interruption. But the hon. Gentleman ought to know that these shelters have been closed up—
    Mr. Gower: Yes.
    Mr. Thomas: —and that the rural district council has already declined his suggestion that they should be closed down. The general question as to the use of air-raid shelters in a possible war is not raised by this Question.
    Mr. Gower: In view of the unsatisfactory reply, I should like to raise the matter at the earliest moment.

    Hostel Prisoners (Employment)
    Mr. Lubbockasked the Secretary of State for the Home Department how many hostel prisoners have continued in the same employment after release; and for what length of time.
    Miss Bacon: Precise figures are not available, but it is estimated that about one-third of hostel prisoners continue in the same employment after release, and that about one-third of these remain in it for at least six months.
    Mr. Lubbock: Is it not desirable to obtain more precise figures than these so that we can assess the success of the hostel scheme because, from the information which the hon. lady has given, is it not clear that this scheme has been valuable so far and should be extended?
    Miss Bacon: It is very difficult to get precise figures since if a prisoner is not under after-care it is difficult to know where he is at work, but I agree with the hon. Gentleman that these hostels are very important, and we are doing all we can to extend them. Three new hostels are expected to open within 12 months, and others are planned, and we hope to be able to extend them as quickly as possible.

    Campaign for Nuclear Disarmament
    Mr. Newensasked the Secretary of State for the Home Department why records are kept by the Metropolitan Police of persons active in the Campaign for Nuclear Disarmament; and what these records are.
    Sir F. Soskice: The Commissioner of Police informs me that no special records are kept by the Metropolitan Police of persons because of their activities in the Campaign for Nuclear Disarmament.
    Hon. Members: Why not?
    Mr. Newens: Is my right hon. and learned Friend aware of the fact that earlier this year he gave me an Oral Answer in which he stated that details were taken of people returning from a nuclear disarmament rally in Paris by a police officer? There is various evidence we get that records are kept. While we are very happy to be assured on this matter, would my right hon. and learned Friend review what he has said to make sure that it is absolutely true?
    Sir F. Soskice: I am quite satisfied that what I have been told is true, and I do not think there is any need to review it. With regard to the former Answer to which my hon. Friend refers, I think, if I may say so with the greatest respect to him, that I said that only routine, normal inquiries were made.
    Mr. Lagden: But would the Home Secretary consider, in the interests of security, immediately asking for such particulars to be kept?
    Hon. Members: Hear, hear.
    Sir F. Soskice: I am quite satisfied that the security service in this country discharges its task extremely efficiently.

    MINISTERS (ADVERTISEMENTS)
    Mr. Robert Cookeasked the Prime Minister what instructions he has given to senior Ministers of the Crown concerning the use of their names in advertisements.
    The Prime Minister (Mr. Harold Wilson): There are no specific instructions, but it is well understood that Ministers
    1806
    do not lend their names to advertisements, and certainly not on any commercial basis.
    Mr. Cooke: Can the Prime Minister assure the House that when it is said, as it is,
    "The Right Honourable Frank Cousins, M.P., slept here"
    it refers to the right hon. Gentleman in his trade union capacity and not in his capacity as a Minister of the Crown?
    The Prime Minister: I am sure that the hon. Gentleman does not want us to embark on a censorship of advertisements. The hon. Gentleman was kind enough to send me a copy of this advertisement. I am informed—I have not had a chance of checking it yet—that it is some four or five years since the occasion celebrated in the advertisement, and that it is only recently that this advertisement has started to appear.
    Sir Alec Douglas-Home: Is the right hon. Gentleman aware that the matter underlying the Question by my hon. Friend cannot be dismissed quite so lightly? Does he recall that on 2nd March I said to him across the Floor of the House that a conflict of interest was likely to arise if the right hon. Gentleman kept his job as general secretary of his union as well as his position in the Cabinet? Is it not clear that this position has now arrived, and may I ask the right hon. Gentleman if he will act?
    The Prime Minister: I think that the right hon. Gentleman's supplementary question belongs to Question No. Q2. The point at issue here is that my right hon. Friend, in his previous capacity, before he was a Minister, slept in an hotel—I hope that that is all right—and that four years later, as I understand it, the owners of the hotel put out an advertisement saying that he once slept there. I find it difficult to see how, with this time interval, there can be any question of a conflict of interest. If the right hon. Gentleman will put his question on Question No. Q2 I will try to deal with it.
    Sir Alec Douglas-Home: Will the Prime Minister, perhaps, have this advertisement put in the Cabinet Room, where it would seem to be appropriate also? But

    1807
    I will return, if I may, to the subject on Question No. Q2.
    The Prime Minister: About putting it up in the Cabinet Room, I have already told the right hon. Gentleman that when we went to No. 10 there were quite a number of Conservative posters, and that we do not plaster the place with political posters, anyway.

    MINISTER OF TECHNOLOGY
    Mr. Ian Gilmourasked the Prime Minister if he is still satisfied that no conflict of interest is involved in the joint holding of a Cabinet post and the office of General Secretary of the Transport and General Workers' Union, in view of the fact that the union is opposed to the incomes policy of Her Majesty's Government; and if he will make a statement.
    The Prime Minister: Yes, Sir, no conflict of interest arises. No statement, therefore, is necessary.
    Mr. Gilmour: But is not the most likely explanation of the Minister of Technology's conspicuous failure to lend his support to the First Secretary's incomes policy the retention of his trade union office, or does the Prime Minister consider that if the Minister of Technology had attended his union's conference this week the Government's economic policy, instead of being rejected by 800 votes to 16, would have been defeated by only 800 votes to 17?
    The Prime Minister: That sounds very laboured. The hon. Gentleman must realise that on all matters decided by the Government—I would hope this would be true of all previous Governments—there is full collective responsibility for all decisions. That members of a Government who have had active associations with outside organisations should therefore derive that kind of slur from the hon. Gentleman, that they must necessarily, in their Cabinet capacity, be taking instructions from outside organisations, would be totally wrong.
    Sir Alec Douglas-Home: This is a serious supplementary question which I want to put to the Prime Minister on
    1808
    this subject. He said that if he was satisfied that there was a conflict of interest in this case, he would act. How can he say that there is no conflict of interest when in their debates in the last two days members of the Transport and General Workers' Union came out contemptuously against the First Secretary's incomes policy and also against the Government's policy on Vietnam? Is it not quite clear that a conflict of public interest arises? Will the Prime Minister consider telling his right hon. Friend that he must choose which job he will hold?
    The Prime Minister: I am sorry to see that, despite having held the office of Prime Minister, the right hon. Gentleman does not know what the words mean. The phrase "no conflict of interests" means that in the discharge of his capacities as Minister, he is not in any way subject to any pressures, or any conflicts, upon him not to do the job of the Minister properly. The right hon. Gentleman himself was a member of the National Farmers' Union and during that period, except in election years, there was strong criticism of his Government by that union. I would not suggest that there was any conflict of interest. Like Ernest Bevin before him, my right hon. Friend has no executive responsibility within the union. He is on leave of absence and 100 per cent. of his time is on Government work.
    Mr. Emrys Hughes: Is the Prime Minister aware that there is an important difference in that, although the ex-Prime Minister was a member of the National Farmers' Union, nobody ever dreamed of making him the general secretary? [Interruption.]
    Mr. Speaker: Order. Our enthusiasm is preventing us from making enough progress with Questions.
    Mr. Godber: Will the right hon. Gentleman answer a simple question on this matter? Does the Minister of Technology support the Government line? If so, why does he not say so and, if not, why does he not resign?
    The Prime Minister: Yes, Sir. All Ministers support the Government's policy on all questions which have been decided. If the right hon. Gentleman is to take

    1809
    silence on any question as indicating dissent, I can give him a whole string of cases proving that the last Government were divided from beginning to end.
    Mr. Grimond: The Prime Minister has told us that the right hon. Gentleman in question has no executive duties; has he any duties in connection with the union? If so, people would feel that that was undesirable. However, if it is merely to establish his right to return to the office, that is no different from the numerous people who return from Government to the numerous directorships which they held before taking office. [Interruption.]
    Mr. Speaker: I much enjoy the noise, but it stops us from getting on and there must be less.
    The Prime Minister: I have certainly noticed that many right hon. Gentlemen return to their previous employment, not least the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), who has been in and out several times.
    Several Hon. Members rose—
    Mr. Speaker: We must get on.

    ECONOMIC SECRETARY TO THE TREASURY
    Mr. Boxasked the Prime Minister whether he will recreate the post of Economic Secretary.
    The Prime Minister: No, Sir.
    Mr. Box: Is the Prime Minister aware that if he had attended the Committee stage of the Finance Bill, he would have observed how disillusioned, dispirited and dejected members of the Treasury Front Bench had become? Is he further aware that if he contemplates giving us a further dose of the Kaldor cure in the autumn, he should not only re-establish this post, but devise a method of appointing Dr. Kaldor to it so that he could have some accountability to the House and the country for the Government's disastrous financial policy?
    The Prime Minister: I am not sure whether the hon. Gentleman is referring to the events of 36 hours ago. On those I would simply say that if the Opposition
    1810
    Whips, when they wake up—[Interruption.]
    Mr. Selwyn Lloyd: It was the Prime Minister who was asleep.
    Mr. Speaker: Order. The House is doing itself no good. Less noise and on we go.
    The Prime Minister: If the Opposition Whips want to play cops and robbers in the middle of the night, I do not want to spoil their fun, as long as they do not think that it has any constitutional or political significance. [HON. MEMBERS: "Oh."] As to the second half of the hon. Gentleman's question; if he is trying to make a rather slimy reference to the fact that among the Government's advisers is an individual, or two, of Hungarian origin, let me tell him that right hon. Gentlemen opposite were similarly advised and that we never thought of raising the matter.

    POLAND AND RUMANIA (OFFICIAL VISITORS)
    Mr. Jacksonasked the Prime Minister whether he will invite the Heads of Government of Poland and Rumania to visit London this year.
    The Prime Minister: The Rumanian Government have accepted an invitation in principle for a visit to this country by a senior member of their Government, though no dates have yet been fixed. The Polish Foreign Minister and a Polish Deputy Prime Minister visited this country last year and my right hon. Friend the Foreign Secretary is paying an official visit to Poland in September. No further official visits from either Poland or Rumania are at present under consideration.
    Mr. Jackson: Would not the Prime Minister agree that this announced visit indicates a very fine example of the Labour Government doing everything possible to break down the Iron Curtain?
    The Prime Minister: I think that it is a fairly continuing proposition that all Governments welcome visits from members of Governments in the East, even though there may still be a number of points of disagreement between us and them.

    IMMIGRATION
    Sir C. Osborneasked the Prime Minister if he will make a further statement on the Government's decisions on the Mountbatten Report on immigration; and if he will now introduce legislation to ban all immigration except for genuine students and professional people who will return to their native countries at the end of a limited stay.
    The Prime Minister: I would ask the hon. Member to await the statement which is to be made to the House in due course.
    Sir C. Osborne: In view of the undisputed fact—[Interruption.]—I do not put this question to the monkeys sitting right behind—
    Mr. English: On a point of order. Is it in order to call an hon. Member a monkey?
    Mr. Speaker: I have not the slightest idea to whom it was directed.
    Sir C. Osborne: When I am trying to ask a very serious question and noises like monkeys are made, I expect them to come from monkeys.
    Mr. Speaker: The hon. Gentleman wants to ask a question and he would get on better if he did so.
    Sir C. Osborne: As the vast majority of people in this country, irrespective of party, want to see a drastic reduction in the number of immigrants into this country, because of the tremendous—[HON. MEMBERS: "Question."]—because of the tremendous—[HON. MEMBERS: "Question."]—
    Mr. Speaker: Order. I will deal with it if it is not a question.
    Sir C. Osborne: I was prefacing my question—because of the tremendous social problems affecting the working-class people of this country—[HON. MEMBERS: "Oh."]—will he not—[Interruption.]
    Mr. Speaker: I must ask the House to behave itself. We cannot go on behaving in this fashion. Some responsibility rests on hon. Members. They must not call upon the Chair to be troubling them all the time.
    Sir C. Osborne: In view of the immense difficulty of this problem, will the Prime Minister promise the House that he will introduce some legislation, or some emergency regulations, before the Summer Recess?
    The Prime Minister: I agree with the hon. Gentleman to this extent, that this is an extremely important question. I also agree with his concluding words, that it is a very difficult one. It is, therefore, right that the Government should have adequate time not merely to decide, in the light of Lord Mountbatten's report, what the next correct steps should be, but also to have some chance of discussions with the Commonwealth countries. This is what is happening. I can promise the hon. Gentleman that he will have a statement very soon now, at the earliest possible moment that it can be made, having regard to the necessity to consult and discuss the matter with the Commonwealth countries. I very much hope that the statement will be made within a week or two, and certainly before the Recess. As to what it will contain, I am sure that the hon. Gentleman will be prepared to wait and see.
    Mr. Chapman: When my right hon. Friend makes the statement, will he make sure that he deals with the entry of aliens and of Irish people so that this does not look like a colour bar?
    The Prime Minister: As the Commonwealth Communiqué showed, Her Majesty's Government made it very clear to our Commonwealth colleagues that, whatever is necessary by way of immigration control, it will not be operated on colour or on racial lines.
    Mr. Sharples: Will the Prime Minister confirm that he will make his statement in time for there to be a debate on the subject before the Summer Recess?
    The Prime Minister: The question of a debate is a matter for my right hon. Friend the Leader of the House. I did not say that I would make the statement. If it is the wish of the House that I should, I shall do so, but it will be more convenient if it is made by one of my right hon. Friends, and it will be made in good time before the Recess.
    Mr. Michael Foot: Will my right hon. Friend give the House an assurance that

    1813
    this statement will take into full account the great contribution which immigrants to this country have made in the past, and which they can make in the future? Will he also give us an assurance that nothing will be done to sever relations between families and the people who have been accepted as citizens of this country? Will he ensure that no restrictions are imposed which will prevent them from bringing their families or children to this country? Would not my right hon. Friend agree that any restriction which involved that would be a great infringement of human rights?
    The Prime Minister: On the first part of my hon. Friend's supplementary question, I am sure that the whole House recognises the great contribution that has been made in this country by immigrants, not least in the hospitals. I am sure that hon. Members and their families know of cases where
    people's lives have been saved by coloured immigrants. I am sure that that is not in question on either side of the House.
    On the second point, I ask my hon. Friend to await the report. My right hon. and learned Friend the Home Secretary gave certain assurances on the points made by my hon. Friend, and he will find that they are honoured. In addition to the statement in the House, we hope to have available a fairly lengthy White Paper dealing with the evasion problem, the control of immigrants, and with the problem which all hon. Members have in mind, that of assimilating the immigrants who are here within the towns and cities in which they live.
    Mr. Sharples: In view of the assurance given by the Leader of the House in reply to a question from me, will the Prime Minister confirm that he himself will be making the statement?
    The Prime Minister: I think that this is a matter of convenience. Although one does not usually announce the composition of Cabinet Committees, it is well known that one or two of my right hon. Friends have been closely concerned with this problem. This is a matter of the convenience of the House. I have spent a good deal of time on this problem. If the House wants me to make a statement, I shall do so—I know how anxious hon.
    1814
    Members are to hear me make a statement—but I should have thought that it would have been more convenient if my right hon. and learned Friend, who has spent so much time on this, dealt with it himself. However, I am very much in the hands of the House in this matter.
    Mr. Thorpe: Arising out of the supplementary question asked by the hon. Member for Ebbw Vale (Mr. Michael Foot), may I ask the right hon. Gentleman whether he accepts that if the Government recognise that the problem is one of integration and that that is the angle to be tackled, and not one of restriction, and he resists the short-term political prejudices which are sweeping certain parts of the House, he will be warmly applauded for taking action which recognises the economic importance of these immigrants and the vital rôle of Britain in the centre of a multi-coloured Commonwealth?
    The Prime Minister: My advice to the hon. Gentleman is to await the statement and the White Paper. I have said that the White Paper and the statement will deal fully with the problems of assimilation and integration as well as with certain questions which have arisen about the effectiveness of the controls and evasion. The White Paper will, I hope, be comprehensive in its scope, and I ask the hon. Gentleman to await it.

VIETNAM (PARLIAMENTARY SECRETARY'S VISIT TO HANOI)
Mr. Maudling Mr. Maudling (by Private Notice) asked the Prime Minister if he will make a statement on the visit to Hanoi of the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance.
The Prime Minister (Mr. Harold Wilson): As the House will be aware, the reply from the North Vietnamese authorities to the proposal that the Commonwealth Mission should visit Hanoi did not appear, in our view, to amount to a flat refusal. We, and other members of the Mission have, therefore, been endeavouring, through all the channels open to us, to clarify the position and to make clear to the authorities at Hanoi the purpose for which the Mission was established.

1815
In the course of one of these discussions the possibility came up of my hon. Friend the Member for Leek (Mr. Harold Davies) visiting Hanoi, and after consultation with him I felt it right, in order not to lose any opportunity of advancing this vitally important matter, that he should go.
I hope that when he is there he will be able to remove certain doubts which appear to have arisen there as to the purpose of the Mission and thus advance the day when this very serious crisis in Vietnam can be brought for negotiation to the conference table.
Mr. Maudling: This is a strange situation, and one about which we must be clear. Is the hon. Gentleman in Hanoi as a representative of the Government, or is he not? I ask that because the North Vietnamese journalist who apparently provided the visa said that he does not represent the British Government. If the hon. Gentleman does represent the Government, why was not the House told? What is the extent of his instructions? Is he clear that he cannot depart in any way from the policy announced in this House by the Foreign Secretary, and was there discussion beforehand with the Commonwealth and with our American allies?
The Prime Minister: I hope that the right hon. Gentleman will not be pushed too far by the competitive spur under which he is labouring into getting to the point where he is not even prepared to welcome any initiative, however unusual it may be, to get those concerned round the conference table.
The right hon. Gentleman asked in what capacity my hon. Friend was in Hanoi. I must make this quite clear, though I should have thought that it did not need to be clarified. In this Government, at any rate, a member of the Government is always a member of it, and my hon. Friend is in Hanoi because he is a member of the Government. This should now be quite plain to the right hon. Gentleman.
It will be the purpose of my hon. Friend's visit—he has been there before and I think that he is highly respected—to make plain what is the purpose of the Commonwealth Mission, and to get a
1816
dialogue started, because the problem is that this tragedy in Vietnam arises from the fact that we have no diplomatic representation between East and West in these areas. Of course this is unusual. Of course one would have preferred to have been able to deal directly through diplomatic channels, but the plain fact is that one cannot do so, and we were not going to leave the matter there.
Mr. Maudling: The situation is far too serious for the sort of cheap crack that the right hon. Gentleman made. Will the Prime Minister be good enough to answer my other two questions, which are serious ones? First, has the hon. Gentleman the Member for Leek (Mr. Harold Davies) any authority to depart from the policy of Her Majesty's Government as announced to this House by the Foreign Secretary? Secondly, what discussions took place beforehand with the Commonwealth and with our American allies?
The Prime Minister: No member of the Government has any authority to depart from the position taken by Her Majesty's Government on the question of Vietnam. I should have thought that it was unnecessary to ask that question. But the right hon. Gentleman must recognise—I wish that he would show some awareness of the gravity of the problem in Vietnam—that the Commonwealth, acting collectively, has taken an initiative which depends upon acceptance of the Mission by the countries which are parties to the fighting in Vietnam. So far, we have not had acceptance. I never pretended that it would be easy. We must take every means of getting it.
Of course, we have kept our colleagues on the Mission informed about this particular action, and we have informed all other interested parties.
Mr. A. Henderson: I warmly welcome the Prime Minister's statement. Will he remind the House that there are precedents going back over the last 40 years for Ministers of the British Government undertaking missions similar to the one undertaken by my hon. Friend the Joint Parliamentary Secretary? I refer, in particular, to the Runciman mission which was sent by the Conservative Government before the last war.
Secondly, may we take it that, if the opportunity presents itself, my hon.

1817
Friend tie Joint Parliamentary Secretary will be willing to have talks with the political leaders of the Vietcong?
The Prime Minister: I do not accept that the Runciman precedent is relevant here, because—I think that I am right in this; the right hon. Gentleman can probably tell me—Lord Runciman, who went to Prague, was not, in fact, a member of the Government. My hon. Friend the Joint Parliamentary Secretary is a member of the Government.
The purpose of his visit—he is welcome in Hanoi; I think that he has already arrived there—is to have discussions. He knows fully and in every detail the position about both the Commonwealth Mission and the views of all of us on the dangerous situation in Vietnam. I am very happy to leave it in his hands now, and I hope that whatever he is able to do will in some way at least—I do not underrate the difficulties—help to advance the cause of peace there.
Sir Alec Douglas-Home: Will the Prime Minister answer quite clearly whether the United States Government were consulted? He will recognise the great dangers here of any tendency towards appeasement in this matter. Were the United States Government consulted before his hon. Friend left?
The Prime Minister: Should there be any question of my wanting lessons in appeasement, I know who to go to. [Interruption.]
Sir Ian Orr-Ewing: On a point of order, Mr. Speaker. In the Report of the Select Committee on Procedure, specific attention was drawn to the fact that, in replying to questions, Ministers have assumed the practice of making personal insults. Is not this undesirable from the point of view of the House of Commons and the dignity of the Prime Minister's office?
Mr. Speaker: I cannot exactly quote Erskine May off the cuff, but the proposition is that a Minister, in answering a question, should direct the answer to what is asked for in the question; and the rest of the sentence is something like, "but a certain amount of licence is allowed to Ministers".
1818
I do not think that it is possible to state the matter more precisely than it is stated in the relevant passage; but I urge that, if we confine ourselves strictly to the subject matter, we shall make better progress.
Mr. Manuel: On a point of order, Mr. Speaker. I distinctly heard, as did many of my hon. Friends, the right hon. Member for West Flint (Mr. Birch) say to my right hon. Friend the Prime Minister, "Swine".
Mr. Speaker: I have been in trouble about this before in trying to rule on something which I did not myself hear, and versions vary. I suggest that we get on.
The Prime Minister: If I may now reply to the question, Mr. Speaker—
Mr. William Hamilton: Further to that point of order, Mr. Speaker. I think a precedent was set by you yourself when, although you had not heard words alleged to have been said, you asked the hon. Member accused of uttering them whether he had, in fact, uttered them. Will you now ask the hon. Member whether or not he uttered the word and, if he did, will he be asked to withdraw it?
Mr. Speaker: I thought that the House probably did not want to bother. It was obvious that the Prime Minister was not bothering. As to the previous occasion, that was my warning. I had so many versions in the end of what was supposed to have been said that I did not know what it was. I do not wish to repeat that. If the House desires me to pursue the matter. I shall ask the hon. Member. [HON. MEMBERS: "Hear, hear."] Order. Will the hon. Member for Westmorland (Mr. Jopling) be good enough to tell me what was said?
Mr. Birch: I said quite a number of things, Mr. Speaker. I do not think that I actually used the word "swine".
Hon. Members: He did.
Mr. Speaker: Order. I was told that it was the hon. Member for Westmorland—
Hon. Members: West Flint—
Mr. Jopling rose—
Mr. Speaker: Order. I accept the proposition that what I heard had gone too far north. Will the right hon. Member for Flint, West (Mr. Birch) be good enough to tell me whether he accepts that he said something?
Mr. Birch rose—
Mr. Jopling: On a point of order, Mr. Speaker. I believe that I was referred to by the hon. Member opposite—
Hon. Members: No.
Mr. Speaker: Order. I do not think that the hon. Gentleman was. I think that I heard it wrong—something which began with the syllable "West". Let us get on. Will the right hon. Gentleman be good enough to tell me just this: did he or did he not say "swine" with reference to the Prime Minister?
Mr. Birch rose—
The Prime Minister: Further to the point of order, Mr. Speaker. The issue we are discussing, the situation in Vietnam, is far more important than anything that the right hon. Gentleman may have said. I am sure that it would help you, Mr. Speaker, and the whole House if we could begin to adopt rules under which it will be clear that insults from certain hon. Members are compliments.
Hon. Members: Oh.
Mr. Speaker: Order. I wish to take the House into my confidence. It does itself no good at all by spending time, on either side of the House, exchanging insults. It is not what we come here for. I entirely accept, and I am sure the House does, what the Prime Minister says, namely, that it is a very serious matter which we are discussing, and least of all is it desirable that it be interrupted by other matters.
The position is that, if I am challenged as to whether or not an unparliamentary expression has been uttered and pressed, I must inquire, find out, and rule about it. Rather than interrupt, I should like to be relieved of that duty. But at present I am asking the right hon. Member for Flint, West to be good enough to tell me, aye or no, whether he used the word.
Mr. Birch: I said a number of things, Mr. Speaker. I do not remember using the word "swine". If I did, I certainly withdraw it.
Mr. Speaker: Let us, with that assistance, proceed. I beg the House to be more reasonable.
The Prime Minister: The Leader of the Opposition asked whether the Government had consulted the United States about the mission of my hon. Friend. The position is that the United States and all other interested parties have been informed of my hon. Friend's mission. I am sure that the right hon. Gentleman—because I know that he does not want to give the impression that, for example, the United States would be against this mission—will agree that President Johnson has repeatedly stated his desire for negotiations.
I believe that the mission of my hon. Friend, which may or may not be productive, is designed to help to secure the desire of, I am sure, all parties before too long to get round the conference table. That is why we felt it right to inform the Americans of this mission and not—I am not sure whether this was what the hon. Gentleman was suggesting—to consult them in the sense of asking their permission.
Mr. Maudling: If so many people were informed, why was this House not informed? Why did we have to learn from the newspapers, and why will the people of Hanoi receive the Joint Parliamentary Secretary when they will not receive either the Prime Minister or the former Foreign Secretary?
The Prime Minister: The right hon. Gentleman had better go to Hanoi and find out the answer to that question. I do not know it. As to telling the House—I do not know why the right hon. Gentleman has taken this attitude—he surely does not suggest that when it is necessary to consult other Governments on particular courses of action, one tells the House of Commons before consulting one's partners, allies and those concerned. The Leader of the Opposition never did. He was always consulting other Governments, and rightly, and then made a statement to the House at the earliest possible opportunity.
In this affair, there were good reasons why no statement should be made until my hon. Friend got to Hanoi. I was very worried that it might leak out in some way. In the event it did, but my

1821
hon. Friend is already in Hanoi. So that the right hon. Gentleman can take relief from that.
Mr. Grimond: Was this an official invitation from the Administration in Hanoi? If so, did it specify the hon. Member who has gone, or was he suggested by Her Majesty's Government? As, as far as we know, the Parliamentary Secretary has no diplomatic connection with the country's foreign affairs, why was he selected?
Can the Prime Minister tell the House whether he not only informed, but consulted, the Commonwealth Peace Mission, which, we are assured, is still in being, and whether it approved of this mission?
The Prime Minister: I have already told the House that my colleagues who were appointed by the Commonwealth Conference to constitute the Peace Mission have been informed. There has been discussion. I said in my original Answer that more than one member of the Peace Mission was making, by agreement of all of us, such contacts as we could with Hanoi, and at least one of my other colleagues is engaged, by methods appropriate to the circumstances of his Government, in helping in this same way.
I am more concerned to see that this Mission is successful than to go too much at this moment into the history of how it all happened. I am more concerned to get results than to gratify the curiosity of the right hon. Gentleman opposite.
As the Leader of the Liberal Party will know, because there are no direct diplomatic relations between Britain and North Vietnam, we cannot use normal methods. There are in this country one or two North Vietnamese in a private capacity who have their own link with their Government. My hon. Friend was having discussions with them on the question of the Peace Mission in general and in the course of it it emerged that a visit by him would not be unwelcome. It was in these circumstances that, when it was reported to me, I felt it right that he should go.
That is what happened and I am glad that my hon. Friend is there, as, I hope, the whole House is, although there are one or two who do not seem to be very keen
1822
on the idea. My hon. Friend goes with the full knowledge of the position of Her Majesty's Government and the Peace Mission in respect of the methods needed to end the fighting in Vietnam.
Mr. David Griffiths: Everyone on this side of the House will rejoice in the wisdom of my right hon. Friend the Prime Minister. I am disturbed and alarmed at some of the excuses that right hon. and hon. Members opposite are rendering. [HON. MEMBERS: "Question."] Is my right hon. Friend aware that it was my good fortune to be chosen with my hon. Friend the Member for Leek (Mr. Harold Davies) on behalf of the first mission that went to the South-East Asian Continent? [Interruption.] May I say, for the benefit of those on the benches opposite who are making the noise and of some, possibly, who may be against my hon. Friend's visit and some who are more enlightened, that my hon. Friend was a very welcome guest? The Foreign Secretary at that time, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), will accept and appreciate the good will that was extended by my hon. Friend who was on that mission. I wish my hon. Friend well and I am perfectly satisfied that he has gone.
The Prime Minister: I was not aware of the particular mission to which my hon. Friend has referred. The whole House will recognise that it is because of the entirely unusual but dangerous circumstances that we have to use rather unusual and informal contacts in this matter and to pursue lines that would not be normal. I am, however, sure that the House will agree that it is better to use these contacts, however informal and unusual, than not to make the contact at all.
Sir R. Thompson: Is the Prime Minister aware it is because we are seized of the deadly earnestness and urgency of the situation that we doubt the propriety of sending this particular hon. Member? [HON. MEMBERS: "Oh."] Does the Prime Minister not realise that after the fiasco of the Gordon Walker mission we should not pile absurdity Secretary from the Ministry of Pensions upon insult by sending a Parliamentary and National Insurance?
The Prime Minister: That is one of the most extraordinary remarks I have heard, even from among hon. Members opposite. If he accepts, as we at any rate do, the vital urgency of this matter, for more reasons than simply the danger of escalation to world war, he will, I hope, agree that any step open to us to get talks opened up should be taken.
Of course, we were disappointed that the North Vietnamese authorities did not receive Mr. Gordon Walker when this was proposed. There was a lot of glee on the part of some hon. Members that he was not received. We were more concerned to get results. We do not mind these rebuffs. We are more concerned to get results than to bother about amour propre, prestige or any of those matters. The pernickety attitude of some right hon. Members opposite on this question is extremely surprising.
I do not say that my hon. Friend will succeed. I say that he has as fair a chance as anybody else of succeeding. I believe that he was the right man to go on that journey, and that is why he has gone.
Mr. Shinwell: Is my right hon. Friend aware that we on this side at least, and, I think, some hon. Members on the other side, are less concerned about the pettifogging criticism that we have heard this afternoon than we are about bringing this tragic affair to an end?
Is my right hon. Friend aware that it has been customary for many years for successive Governments, in particular Conservative Governments, frequently to take action without consulting the House, including during periods of recess, when important decisions were reached without the House being informed?
The Prime Minister: I would have intended to make a statement as soon as I could on the arrival of my hon. Friend there and not until then. He has, I understand, arrived. It is a fact that something occurred in the Press this morning, but only this morning. I would have been making a statement this afternoon, which would have been the first opportunity to do so.
Sir D. Renton: Is the Prime Minister aware that we have a Foreign Secretary who has already proved his worth? Will the right hon. Gentleman say what part
1824
the Foreign Secretary is being enabled to play in all this?
The Prime Minister: I am glad to get the tribute from the right hon. and learned Gentleman to my right hon. Friend the Foreign Secretary. My right hon. Friend and I have worked completely together on this matter since the proposition was first put to the Commonwealth Prime Ministers' Conference. My right hon. Friend has a heavy and important responsibility, not only as Foreign Secretary, but as co-chairman of the Geneva Conference. What all of us are trying to do is to get into a position where he and his opposite number, Mr. Gromyko, can then take over and call the Geneva Conference. This is the whole purpose of the operation.
It just happens that because, in the talks with Mr. Gromyko, no progress could be made, progress had to be made at the Commonwealth Prime Ministers' Conference. It just happened that because of the difficulties of receiving the Mission we had to take any steps open to us to get the Mission received, or to find other means towards getting them round a conference table. My right hon. Friend will again be playing the fullest possible part when he is able to work with the Soviet Foreign Minister in calling that conference.
Several Hon. Members rose—
Mr. Speaker: We cannot debate this matter on supplementary questions.
Mr. Hale: On a point of order. May I put the right of back-bench Members occasionally to be called to ask a supplementary question?
Mr. Speaker: The hon. Gentleman will forgive me. He will know the difficulties. We took a long time on this owing to certain interruptions. I have to distribute my favours as best and fairly as may be. I wish that I could call everybody or representatives of everybody, but I must have regard to the progress of business.
Mr. Hale: May I, on a further point of order, put a second point, Sir? An hon. Gentleman opposite—I use the word in its academic sense—was permitted to make a reflection upon my hon. Friend the Member for Leek (Mr. Harold Davies), the authentic voice in this House of some

1825
of the sufferers in this war, a man of great courage. If an hon. Member opposite is called and permitted to make a reflection at a time when my hon. Friend is being sent as our envoy, surely it is right to call from this side someone who has known my hon. Friend for a quarter of a century, who loves him, who respects him, who trusts him, and who thinks that no one better could have been sent?
Mr. Speaker: The answer to the hon. Gentleman's point of order must be "No." I have to indicate that I regret that I cannot call as many Members as want to be called on these occasions, because the House would hold me most certainly to blame did I not reluctantly bring these matters to an end from time to time.

BUSINESS OF THE HOUSE
Sir Alec Douglas-Home: May I ask the Leader of the House whether he will state the business of the House for next week?
The Lord President of the Council (Mr. Herbert Bowden): Yes, Sir. It now seems likely that further time on the Report stage of the Finance (No. 2) Bill will be necessary. Thus, the Business for next week will be as follows:
MONDAY, 12TH JULY—Report stage of the Finance (No. 2) Bill.
TUESDAY, 13TH JULY—Private Members' Motions until seven o'clock.
Afterwards, completion of the remaining stages of the Murder (Abolition of Death Penalty) Bill.
WEDNESDAY, 14TH JULY—Supply [21st Allotted Day]: Committee.
There will be a debate on Technology, which will arise on the appropriate Vote.
Second Reading of the Judges Remuneration Bill.
THURSDAY, 15TH JULY—Third Reading of the Finance (No. 2) Bill.
Consideration of Lords Amendments to the Control of Office and Industrial Development Bill.
FRIDAY, 16TH JULY—Remaining stages of the Race Relations Bill, and of the Severn Bridge Tolls Bill.
MONDAY, 19TH JULY—The proposed business will be Supply [22nd Allotted Day]: Committee.
Subject to progress of business, there will be a debate on Foreign Affairs, which will be brought to a conclusion on TUESDAY, 20TH JULY.
Sir Alec Douglas-Home: Is the Leader of the House aware that before the House can accept any authoritative Business statement from him we must know what the Government intend to do about their humiliating defeats on the Report stage of the Finance Bill? Is he aware that at no time in the last 40 years have a Government been defeated on a Finance Bill? Can he say, in particular, what the Government intend to do about the new Clause and whether they intend to accept the decision of the House and give relief to small savers?
Mr. Bowden: I do not think that the right hon. Gentleman is quite correct. I seem to recall that in 1955 the Government of the day lost the whole Bill and that it had to be restored next day. [HON. MEMBERS: "No."] On the question of what happened on the Report stage of the Bill the other night, the Clause was added to the Bill. [HON. MEMBERS: "Hear, hear."] I do not know why right hon. Gentlemen should be so elated about this. There was a defeat for the Government on that occasion. I think that there was also a defeat for right hon. Gentlemen.
Mr. Delargy: Will my right hon. Friend find time for a discussion on a Motion which has appeared on the Order Paper today concerning Division bells in private houses?
[That this House do prohibit the ringing of Division bells in private houses, flats and clubs.]
Mr. Bowden: I am not really quite sure what is required here, but if it is felt that Division bells ought not to be sited in flats and clubs the House would have to have that matter looked at by an appropriate Committee. There is no reason why the Select Committee on Procedure should not look at it. If the point is whether the cost of Division bells in private houses and clubs is adequately covered by whatever rental is paid, that is a rather different matter.
Mr. Turton: Could the right hon. Gentleman make quite clear whether he accepts the decision of the House on the Clause to help small savers or whether he intends to correct this, or attempt to correct it, by recommitting the Finance Bill to a further stage?
Mr. Bowden: No. I cannot go beyond what I have already said, that the Clause has been added to the Bill.
Mrs. McKay: May I draw the attention of the Leader of the House to Motion No. 259 in the name of my hon. Friends and myself asking for a free pardon for Michael John Davies? Will my right hon. Friend find time for an early debate on this Motion?
[That, in view of all the circumstances as they have now been revealed, and the unsatisfactory nature of the evidence for the prosecution, some of which have been recently reviewed in a book entitled, The Plough Boy, this House is of opinion that a free pardon should be granted to Michael John Davies, who was wrongly convicted of murder, sentenced to death and subsequently reprieved.]
Mr. Bowden: No. I cannot promise time for a debate between now and the Summer Recess, unless my hon. Friend should be fortunate enough to get a half-hour Adjournment or an Adjournment on the Motion for the Summer Recess.
Mr. Boyd-Carpenter: Can the right hon. Gentleman tell us when the promised White Paper on land policy will be available, in view of the indications being given that local authority officers are to be informed of the Government's policy in this respect on the 20th of this month? Can he also give an assurance that there will be no question of presenting a White Paper on this highly controversial subject without the provision of an early opportunity for a debate?
Mr. Bowden: I cannot at this stage give the right hon. Gentleman the date for the publication of a White Paper.
Captain Orr: Can the Leader of the House tell us when we may expect the second half-day's debate on Northern Ireland?
Mr. Bowden: I hope this Session.
Mr. Sydney Silverman: I appreciate and express my gratitude to the Leader of the House for his helpfulness in finding
1828
time on Tuesday for the remaining stages of the Murder (Abolition of Death Penalty) Bill. In what I hope is the unlikely event of there not being sufficient time by ten o'clock to dispose of all the remaining stages, will extra time be afforded that night to enable us to finish the Bill?
Mr. Bowden: I think that we had better take the precaution of suspending the rule that night.
Mr. Hugh Fraser: What plans has the Leader of the House now for the debate on the Supplementary Estimates, of which there are 23, totalling £27 million? May I remind him that not so long ago the House sat until September getting these through? These are vital matters. I am sure that the hon. Member for Buckingham (Mr. Maxwell) will agree with me that these matters must be debated.
Mr. Bowden: I agree that these things should be debated, but the right hon. Gentleman will recall that Supply is a matter for the Opposition. It is for them to decide whether they select Supplementary Estimates for debate on any of the remaining five Supply days or on Guillotine days as they wish.
Mr. H. Fraser: Surely the right hon. Gentleman must agree that, whatever the procedures of the House, it is a very serious matter that £27 million of taxpayers' money is in danger of not being debated. What is the right hon. Gentleman going to do about it?
Mr. Bowden: I can recall Supplementary Estimates of £60 million not being debated. There again, it was a matter for the choice of the Opposition of the day.
Mr. Maxwell: Will my right hon. Friend find time for early debates on unit trusts and their relation to business in this House, having in mind recent Press reports—[HON. MEMBERS: "Speech."] I want to be very careful as well as being very accurate, if hon. and right hon. Members will allow me. Will by right hon. Friend find time for an early debate after those Press reports that the right hon. Member for Bexley (Mr. Heath) was acting under the instruction of the hon. Member for Taunton (Mr. du Cann), the Chairman of the Tory

1829
Party, when he carried out the putsch against the Finance Bill closure?
Mr. Speaker: Order. That seems to go rather far from a supplementary question to a business question in so far as I have heard it. If the hon. Member wishes to ask a business question, will he be good enough to do so?
Mr. Maxwell: My question stands, Sir. Will the Leader of the House find time for an early debate on unit trusts in relation to the business of the House?
Mr. Bowden: Not between now and the Summer Recess.
Mr. Frederic Harris: In view of the implications and effects on the staff of the Palace of Westminster of the continual late-night sittings and all-night sittings, will the Leader of the House think about making a considered statement about this or having a debate in the near future?
Mr. Bowden: We shall be having a debate on the whole question of the control of the Palace of Westminster when the Report comes from the Select Committee. That will not be for a week or two. I, too, am disturbed about the effect on the staff of all-night sittings and I hope that the whole House is. Because of that, I have had an extra day's debate arranged for Monday which should be adequate to complete the Report stage of the Finance Bill, and with a little good will on both sides by sitting till midnight tonight and on Monday I hope that we shall completely finish it.
Mr. Arthur Lewis: In view of the fact that the Opposition consistently complain about unnecessary and wasteful Government expenditure, may I ask why my right hon. Friend has put down the Second Reading of the Judges' Remuneration Bill as a second Order of the Day? In view of the fact that many of my hon. Friends are very much opposed to this public expenditure, will my right hon. Friend take notice that some of us will want adequate time to discuss the Bill and probably to put forward good ideas which the Government might accept?
Mr. Bowden: This, of course, is a Government Measure. I think that there is adequate time during which hon. and right hon. Members on both sides of the House can put their views.
Sir H. Butcher: Further to the question asked by the hon. Member for West Ham, North (Mr. Arthur Lewis), may I ask the right hon. Gentleman whether, having regard to the fact that judges' remuneration cannot be considered in isolation but must be considered as part of Government policy, consideration of the Bill will be entered upon at an appropriate hour and not late at night?
Mr. Bowden: I have already stated the hour at which it is proposed to take that Bill.
Mr. Rankin: Could my right hon. Friend find time, before the end of this part of the Session, to discuss the need for televising the proceedings of the House? Does not my right hon. Friend agree that it is important that the public should see for themselves how badly the Tory Party behaves in a national emergency?
Mr. Speaker: Order. I wish we could get rid of that sort of thing in business questions. It does not assist the progress of business. I do not know whether the Leader of the House wishes to answer the material part of that question.
Mr. Bowden: I would simply say that we had a debate on televising Parliament two months ago and that the matter is now before a Select Committee.
Sir C. Taylor rose—
Mr. Speaker: Order. The hon. Member for Eastbourne (Sir C. Taylor) has a point of order?
Sir C. Taylor: May I ask a question and not a point of order?
Mr. Speaker: That is a different proposition.
Mr. Gibson-Watt: Which day has the Leader of the House chosen for a debate on Welsh Affairs on the Floor of the House? It is always normal to have this debate before the House rises for the Summer Recess.
Mr. Bowden: Certainly not next week. I will announce it on the Thursday of the week before the week in which it takes place.
Mr. Popplewell: Will my right hon. Friend consider amending the Standing

1831
Orders, and if so, when, to allow sick Members to vote by proxy?
Mr. Bowden: This is not proving to be quite such a simple problem as we thought, but discussion has taken place through the usual channels. There would be some advantage in the Select Committee on Procedure looking at the question whether or not we could apply proxy voting to hon. and right hon. Members who are sick and unable to attend. At present, Members who are sick but attend the House and are unable to go through the Division Lobbies are nodded through.
Several Hon. Members rose—
Mr. Speaker: Order. We must move on.
Mr. Arthur Lewis: On a point of order. May I raise with you, Mr. Speaker, a point of order? I wish to seek your advice on Motion No. 293, on today's Order Paper.
[That this House, recalling the historic words of Sir Winston Churchill that "The Conservative Party is not a party but a conspiracy", his assertion that it stood for "the great vested interests banded together in a formidable federation; corruption at home, aggression to cover it up abroad, the trickery of tariff juggles, the tyranny of a party machine, sentiment by the bucketful, patriotism by the imperial pint, the open hand at the public exchequer, the open door at the public house, dear food for the million, cheap labour for the millionaire" and his warning that "the Conservative Party is nothing less than a deliberate attempt on the part of important sections of the propertied classes to transfer their burdens to the shoulders of the masses of the people and to gain greater profits for the investment of their capital by charging higher prices", notes that in the debates on the Finance Bill the Conservative Party has continued its traditional role.]
Mr. Speaker: Would it be convenient for the hon. Member to seek advice in
1832
private? It would save the time of the House.
Mr. Lewis: With great respect, Mr. Speaker, until you have heard the point of order, how can you say whether or not it is a point of order?
Mr. Speaker: I am not saying that it is not a point of order. I am just suggesting that if the hon. Member wants my advice I should be delighted to give it to him when I can, and if it need not be in public it will save time.
Mr. Lewis: I want to raise a point of order, Sir. I want to ask whether it is in order for that Motion to be placed on the Order Paper in view of your Ruling yesterday on a prima facie case of breach of privilege. I know that I cannot refer to that actual case, but here we have an hon. Member who has accused hon. Members opposite of trickery, of looking after their own vested interests, and of corruption. If that other matter, which I will not detail, was a prima facie breach of privilege, then surely for an hon. Member to put on the Order Paper a Motion accusing every hon. Member opposite of trickery, corruption, and various other matters expressed in epithets which I cannot read out in full, is something which is either out of order or should be referred to the Committee of Privileges.
Mr. Speaker: The hon. Member may take it that the Motion is only on the Order Paper because it is in order. No other point arises. The Clerk will now proceed to read the Orders of the Day.
Mr. Emrys Hughes: On a point of order. In view of the fact that I am responsible for this Motion, may I point out that I have not accused hon. Members of anything. I have merely quoted the historic words of Sir Winston Churchill.
Mr. Speaker: That greatly confirms my view that the Clerk should now proceed to read the Orders of the Day.

ORDERS OF THE DAY
  FINANCE (No. 2) BILL
  As amended, further considered.
  FINANCE (No. 2) BILL

    Clause 34.—(UNIT TRUSTS AND INVESTMENT TRUSTS.)
    4.18 p.m.
    Mr. Peter Walker: I beg to move Amendment No. 75, Clause 34, in page 40, line 19, at the beginning to insert:
    (1) If in accordance with section 63 of this Act the chargeable gains of a unit trust for an accounting period are apportioned to shares in the unit trust the amount apportioned to any such shares other than shares of which the holder is an individual person whose total income in the year of assessment in which the apportionment is made is such that he is not liable to surtax for that year shall be treated for the purposes of this Part of this Act as if it were—

    (a) a capital distribution received by him at the time of the apportionment and paragraph 3 of Schedule 7 to this Act shall apply thereto accordingly; and

    (b) expenditure allowable under paragraph 4 of Schedule 6 to this Act and incurred by the person holding the shares at the time when the amount was apportioned to those shares.

    Mr. Speaker: I suggest to the House that we discuss, with this Amendment, Amendment No. 76, Clause 34, in page 40, line 20, leave out "a unit trust or" and insert "an".
    Amendment No. 225, Clause 34, in page 40, line 26, at end insert:
    () A person holding shares in respect of which an apportionment is made under (1) above shall be deemed to have made a chargeable gain in the accounting period in which such apportionment is made equal to the aggregate amount of so much of the net gains as has been apportioned on his shares and of the tax deducted in arriving at so much of those net gains as has been so apportioned: and shall be deemed to have paid the tax deducted in arriving at so much of the net gains as has been so apportioned and shall accordingly be entitled to repayment of tax overpaid.
    A claim for relief under this subsection must be made to the Board not later than six years after the end of the accounting period in which the apportionment was made and the provisions of subsections (3) to (5) of section 200 of the Income Tax Act, 1952 shall apply in relation to claims under this subsection as they apply in relation to the claims mentioned in that section.
    and Amendment No. 226, Clause 34, in page 40, line 27, leave out "and the said section 63".
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    By reason of certain exciting events, Amendment No. 224, Clause 34, in page 40, line 19, to insert a new subsection (1) has become out of order.
    Mr. Walker: We are discussing here a matter of principle and of practice which has already been ventilated in Committee. The basic point which we are pressing yet again is what we consider to be the injustice of a system whereby those investing through the media of investment and unit trusts will suffer a rate of Capital Gains Tax considerably higher than they would have suffered had they invested as individuals.
    When new Clause No. 43 was accepted by the House, this principle, which had been argued on the other side was, completely and utterly violated. We observe various comments today attributed to Government sources, that they consider that the principle involved in new Clause No. 43 was of no great importance and implied that they were, therefore, willing for it to stand part of the Bill.
    If they stick to the view that the principle is of little importance, they should be able and willing to accept Amendment No. 75. If they consider that the principle involved in new Clause No.43 has no great financial importance in terms of the position of the Revenue, this is true also of Amendments Nos. 75 and 225. I guess that the reason that they are willing that new Clause No. 43 should stand part of the Bill, and that probably they are not willing to accept these Amendments, is that they would very much object to the considerable publicity which would be focused on the recommittal of the Bill, whereby the country would fully realise the injustice of the system of taxation which is being imposed by the Government's refusal to give any concession towards investment and unit trusts.
    These Amendments are of greater importance since the passing of certain Amendments yesterday. Amendments proposed by the Chancellor, resulting from the original approach which we made in Committee, have led to the position that the person paying the standard rate of Income Tax will be subject to Capital Gains Tax of a little over 20 per cent. This Amendment, creating the situation in which the individual paying the standard rate is subject to tax of only 20 per cent., makes

    1835
    an even wider gap between the tax which will be imposed on the unit and investment trusts and the taxation of the individual. On this year's basis, within the trusts, taxation would be 35 per cent., whereas the normal rate for the individual at the standard rate of Income Tax would be 20 per cent. Vast numbers of people who invest in the unit trust movement will be paying individual rates far lower than 20 per cent.
    I will comment, first, on Amendment No. 75. Its object is to see that the details of the capital gains which take place within the trust are given to the unit trust holders and that those unit trust holders paying Surtax will then have that amount of gain treated as if it were a capital distribution. They would, then, immediately, pay their appropriate rate of tax. Therefore, the Amendment completely meets the point made by the Treasury, that, otherwise, Surtax payers and people on high rates of tax would be able to retain investments in the unit trusts and not pay as realisations were made. Thus, the objection to the original proposals that unit and investment trusts should be deleted altogether is fully met by Amendment No. 75.
    Amendment No. 225 would establish a position whereby a person will pay the correct rate of tax by being able to obtain a rebate of taxation in respect of the extra tax created by the measures the Government have introduced. Both these Amendments are reasonable. I warn the Government that their general hostility to savings throughout our debates on the Bill is doing considerable harm. National Savings figures, for the first three months of this year, are alarming. The fact that new savings are 75 per cent. lower than in the corresponding three months last year must be a blow to the Government. The fact that investments in unit trusts in recent months have been at far lower levels than in previous months must also alarm the Government. Yet they introduce a Finance Bill in which those individuals using this very common means of investing through investment and unit trusts will suffer a penal rate.
    Throughout the Committee and Report stages of the Bill both opposition parties have endeavoured to make the Government see the importance of recognising
    1836
    this principle. Several hon. Members on the other side of the House have also constantly pointed out to the Government the injustice of these provisions. Finally, a few nights ago, the principle which the Government have stuck to was completely and utterly defeated by a vote of the House. There has been constant hostility from every commentator throughout the country to the manner in which the Government had dealt with this problem. I defy the Chief Secretary or the Chancellor to name or quote one responsible and respected financial journalist who has given any support to the manner in which the Government have dealt with this problem. Every such journalist has been opposed to the manner in which the Government intend to tax investments in unit and investment trusts at a far higher rate. Exactly the same argument applies to investments in life funds.
    I appeal to the Chancellor, after the defeat of two night ago, to accept the principle that the individual using the media of unit and investment trusts, or life assurance, as the method of saving should be treated in exactly the same way as if, as an individual, he decided to invest direct in to the market. This is surely not an unreasonable principle for the Chancellor to accept. It is completely unrealistic of him to suggest that a unit trust is exactly the same as any other form of company. He knows that it is a company designed to provide a means and a vehicle for the individual to invest. Because the individual has chosen this media, the Chancellor has decided to impose on him or her a higher rate of tax.
    It would be wrong to debate this Clause at length. The principle is clear, and has been established constantly by this side of the House. It was affirmed in new Clause No. 43 which we passed two nights ago. I hope that, on reflection, the Government will, in some wisdom, at last repent their position and do something which will give encouragement to savings instead of discouragement.
    4.30 p.m.
    Mr. Geoffrey Lloyd: We on this side of the House have constantly said that the only solution to this problem which would be both satisfactory and simple is exemption of the

    1837
    capital gains in unit and investment trusts and fixing the tax payment on the individual. The effect would be that the tax would then be payable at one point of time instead of two, and at the first moment that the gain could give rise to spendable income, which is a point on which the Chief Secretary has often dwelt. The Government have not accepted this position and have, instead, put forward a scheme which is not only complicated but also unfair. In passing, I would say that it will also be expensive for the investment trusts, in particular, to provide the staff to carry out meticulously the complicated rigmarole being laid down by the Government.
    If the Chief Secretary is prepared to accept complication, would it not be better to "go the whole hog" and adopt a comprehensive scheme which would be both logical and fair and which has stood up for many years to the test of practical administration? The right hon. Gentleman has told us on many occasions that the Government are modelling their Capital Gains Tax—perhaps "modelling" is going too far—on the United States scheme.
    Amendment No. 225, in effect, is the American scheme used with regard to investment trusts under the Capital Gains Tax system of the United States, which has stood the test of administration and criticism for many years. Under this scheme, embodied in Amendment No. 225, the shareholder in an investment or a unit trust holder would receive a certificate from the Inland Revenue showing the relevant capital gain arising in relation to his shares and the actual tax paid thereon. Both these figures would be incorporated in the taxpayer's return for the year. He would, therefore, in effect, pay Capital Gains Tax at his own individual rate which, following the passage of new Clause No. 43 the other night, would be not exceeding 30 per cent.
    The Surtax payer would not benefit. He would pay the same rate as that paid by investment or unit trusts under the new Clause. But those with smaller incomes would effectively pay much less because there would be due to them from the Inland Revenue a rebate or repayment in excess of the actual tax paid by the investment trust. Another important
    1838
    point is that charities and superannuation funds would get the proper benefit of their exemption from tax and would be able to claim back the whole of the tax.
    Our proposals would establish a far fairer and more logical scheme for this tax than the Government scheme, and there is an aspect which surely must appeal especially to the right hon. Gentleman. He has made considerable play with the fact that shareholders in investment trusts are not only individuals, but also companies. Under our Amendments, companies would, of course, be liable to a higher rate of tax than investment trusts—at present, 35 per cent. compared with 30 per cent. The companies would have to pay the excess between the rate paid by the investment trusts and that for which they would be due in their corporate capacity as Corporation Tax. They would, incidentally, have to pay that in the relevant year.
    The right hon. Gentleman has made considerable play with the possibility of deferment in these matters and, in this respect at any rate, the Revenue would be getting its tax at an earlier point than it would under the scheme proposed by the Government. I want to quote what the right hon. Gentleman said when resisting new Clause No. 43 the other night. Again and again he emphasised that he would not be concerned with the amount of money involved, because it was not very important, but with the principle, which was tremendously important.
    The right hon. Gentleman said:
    "Therefore, we could not accept the Clause because the rate of tax which should be borne by a corporation is that which is appropriate to a corporation … It would be a major breach of the principle of the tax to attempt to look through the corporation to the individual."
    The following passage shows what he especially had in mind:
    "It would be inappropriate to regard all investment trust shareholders as individuals when, in fact, a large number of them are companies."—[OFFICIAL REPORT, 6th July, 1965; Vol. 715, c. 1543.]
    Now that the new Clause has been passed, the only way in which the right hon. Gentleman can realise this principle in practice is by accepting Amendment No. 225.
    The Chief Secretary to the Treasury (Mr. John Diamond): It is clear that it is the wish of the House that there should not be a long debate on these Amendments, which have been debated in similar form in Committee. It will suffice, therefore, if I repeat what I have said many times.
    The Government are anxious to encourage savings, large and small, in all forms. It must not be assumed from that, as the hon. Member for Worcester (Mr. Peter Walker) occasionally assumes, that this means that the Government are exclusively committed to encouraging savings in the form of unit or investment trusts, or, as he suggested, in life insurance funds.
    The Government like to see savings of all kinds and through all the appropriate channels and machinery for saving. It would not be inappropriate for me to say that it certainly cannot be said on behalf of unit and investment trusts that their case has not been fully put, fully pressed and fully presented to this House on every conceivable occasion. And, of course, individual negotiations have taken place. We are, therefore, very well aware of their problems.
    I can only repeat that, as far as the machinery of the collection of the tax is concerned, we stand exactly where we stood—namely, that a Corporation Tax does differentiate between the individual and the company. That is an essential basis. We are prepared, as far as unit and investment trusts are concerned, to avoid what might otherwise be called "double taxation" in the sense that we would regard the unit and the investment trusts as a method whereby savings take place and, incidentally, gains arise.
    But it would not be right so to construct the tax system that individuals who, instead of investing by themselves, invested through these trusts, obtained a considerable benefit over the individual investing by himself. Therefore, I am bound to say that, in so far as some of these Amendments would create administrative nightmares for the Revenue, they could not be accepted. I appreciate the endeavour made to meet the Surtax point, but, administratively, it is quite unworkable.
    First, then, administration of this proposal would result in nightmares for the
    1840
    Revenue and our job in this House is to see that taxation is so devised as to be capable of being collected without very much difficulty. Secondly, inasmuch as the other Amendments would breach the principle to which I have referred, I must recommend the House not to accept any of these Amendments.
    Mr. Geoffrey Lloyd: Will not the right hon. Gentleman deal with Amendment No. 225? He talked about administrative nightmares, but this method has been in use for many years in the United States. Surely he cannot say that the Inland Revenue is incapable of coping with a problem with which the Internal Revenue Service of the United States is dealing every day?
    Mr. Diamond: A different situation exists with regard to trusts in the United States.
    Mr. Edward Heath: I want to say a few words in concluding the debate on these matters, which we have discussed frequently before. Once again, we heard the Chief Secretary express his desire to encourage savings, in all forms. We agree that he is interested not exclusively in unit and investment trusts and life assurance, but in all forms of savings. But the Government do something only when they are compelled to do so by being defeated in this House. They drove us to that dire extreme the other night.
    Mr. Harold Lever: Is the right hon. Gentleman correct in saying that? Have not the Government made unnumerable constructive concessions on these and related matters, without being defeated in the House?
    Mr. Heath: The hon. Member for Manchester, Cheetham (Mr. Harold Lever) cannot point to one thing which the Government have done which has not been done under pressure. I know that the Socialist Commentary has attributed Government Amendments to the pressure of the hon. Member for Cheetham. It said that by adopting the process of persuading them with his voice and never supporting them with his vote he has transformed the Finance Bill. Some of us may draw very different conclusions from his activities during recent weeks.

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    The other point that emerged from the Chief Secretary's speech was that, once again, a distinction was to be drawn between the company and the individual. What the
    defeats the other night did quite precisely and clearly was to break down that view.
    The Amendments on which they were defeated provided that, in the matter of unit trusts and investment trusts, companies would be treated in exactly the same way as individuals were treated. The Government had therefore accepted that there is no longer this distinction between the company and the individual. Defeats in the Division Lobby have forced them to accept what, intellectually, they have always quite unjustifiably tried to deny hitherto.
    I am glad to have the support of the right hon. Gentleman's Parliamentary Private Secretary, who is not allowed to speak by reason of his occupation, but has been nodding vigorously. We all recognise that he is one of the best economists on the Government Benches. It is clear that the Chief Secretary's argument is not valid. We regret the fact that he has not accepted the Amendments, and has put forward such untenable reasons for rejecting them, but at this stage the House must accept his view, and I do not advise my hon. Friends to divide the House.
    Amendment negatived.
    4.45 p.m.
    Mr. Diamond: I beg to move Amendment No. 150, Clause 34, in page 40, line 29, after "company", to insert:
    "which is not a close company as defined in Schedule 17 to this Act and which is".
    Perhaps it would be convenient to discuss, at the same time, the Government Amendment No. 151.
    Mr. Deputy-Speaker (Dr. Horace King): If there is no objection. I have a note that with Amendment No. 151 we are taking Amendment No. 130, Clause 34, in page 40, line 32, leave out "(a)", and Amendment No. 131, Clause 34, in line 33, leave out from "securities" to end of line 43 and insert "or other investments", so that all these will now be taken together.
    Mr. Diamond: I am sure that that would be for the convenience of the House, Mr. Deputy-Speaker.
    1842
    This Amendment, together with Amendment No. 151, implements the undertaking which the Financial Secretary gave in Committee. He spoke at some length, and is reported in the OFFICIAL REPORT of 31st May, when he indicated the Government's acceptance of the general ideas then being put forward. The first Amendment makes it clear that a company cannot be an investment company approved by the Board if it is a close company as defined in Part IV. The objective is to distinguish the genuinely public investment trust from an investment trust company under private control. The second Amendment contains a substantive alteration to the criteria which have to be satisfied before an investment trust can be approved by the Board for the purpose of Clauses 34 and 63.
    A number of criteria are altered in this way. First, the figure of 10 per cent. is increased to 15 per cent. That is the percentage of an investment trust company's investments which may take the form of a holding in any one other company. In this respect there is a saving in favour of an investment trust which had a holding of up to 25 per cent. in one other company at Budget day.
    Secondly, there is the provision that the 15 per cent. test is not to apply if the second company is itself an approved investment trust; thirdly, there is the requirement that shares or securities are quoted on a recognised Stock Exchange in the United Kingdom, thus ensuring that the investment trust is one in which the public has a substantial interest. Then there is the requirement that the investment company has no power to distribute capital gains as dividend.
    A clause to this effect appears in a standard form in the memorandum and articles of association of investment trust companies. I believe that it is known as the "self-denying clause". There is a continuation of the test in Clause 34(2,d) in respect of a company which regularly distributes its income derived from the shares or securities, but the test is relaxed from 90 per cent. to 85 per cent.
    There is a further provision with respect to a Budget day holding, to which I have already referred, so as to avoid the disqualification of existing investment trust companies which by the accident of

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    their origin had at Budget day a holding in another company which forms more than 15 per cent., by value of its investments, and thus is larger than that allowed by the new paragraph (b).
    The remaining alterations are minor in character, and are clearly expressed in the Amendments. I should be only too glad to go into them in further detail, if the House thought it necessary, in order to meet the points which have been put forward and have been considered. The Amendments meet the needs of the situation.
    Mr. Harold Lever: I wanted my right hon. Friend to tell the House whether he could now answer the question that was put in Committee, and to which an answer was given. Can he tell the House why the Government want these restrictions at all? What mischief are the Government afraid might occur if no such restrictions were placed on this relief from double taxation? Can we have an example of what might occur if we do not have these restrictions?
    Mr. Peter Walker: I thank the Chief Secretary for bringing forward these Amendments. They are in keeping with various Amendments that I moved in Committee. We then pointed out how completely impossible the original definitions were. It is probably correct to say that if the Bill had remained as originally worded virtually no investment trust company would have been included in the provisions of the Clause.
    I suppose that, like several other Clauses, this must be described as a tentative Clause. It was left for the Opposition to make it at least a feasible Clause. We are delighted that the Chief Secretary has accepted our Amendments and drafted them properly and legally.
    I was attracted by the right hon. Gentleman's description of the provision in the memorandum and articles of investment trusts, which he described as a self-denial clause. I would describe almost every one of the 90 Clauses of the Bill as such.
    Mr. Harold Lever rose—
    Mr. Deputy-Speaker: The hon. Gentleman has already made a speech.
    Mr. Lever: I asked a question, I thought, Mr. Deputy-Speaker.
    Mr. Deputy-Speaker: Order. The hon. Gentleman must resume his seat while the occupant of the Chair is standing. The hon. Gentleman has already made a speech, even if it was couched in interrogatory form, but, in view of the misunderstanding, I think that it would be hard if the House did not give him permission to speak now.
    Mr. Lever: I shall be greatly obliged if the House will give me leave to speak again, and I am greatly obliged to you, Mr. Deputy-Speaker, for assisting me to obtain that leave. I take it that I am right in thinking that one or two of my Amendments are being considered at the same time, but that is of no consequence because I am concerned with the Amendments by my right hon. Friend more than with any modest attempt that I have made to improve the Bill.
    I may be alone in this, but I find it extraordinary that the Opposition do not think it necessary before passing this Clause to ask why we should have it at all in the form in which it has been offered to us. The Opposition, who congratulate themselves on improving the Clause, did not in Committee and have not on this occasion asked the Government to explain why we should assent to any such restriction as is proposed in the Amendment except the one which I concede about the distribution of income.
    This is of considerable importance. I shall be as non-combative and as helpful as I can towards the exceptionally able team who have conducted the Finance Bill. They have served the House with great and indefatigable zeal. I do not want to obscure my appreciation of what they have done. On the other hand, I want my argument to be made.
    This is a Clause which will, so far as is reasonably practicable, avoid double taxation on capital gains. When an investment trust realises capital gains, its shareholders will receive a certificate which will enable them to recover Capital Gains Tax paid on their behalf or have it set off against a subsequent Capital Gains Tax payment on their own shares. That is sensible. The Government are thereby declaring that they do not wish to have double taxation inflicted on shareholders in that way. It seems to me that if the Government then say that they are going to restrict this right to

    1845
    relief from double taxation—I emphasise that the Clause is concerned only with relief on double tax—on shareholders in particular types of investment trust companies, they must tell us why the penal payment of double tax is right in the case of other investment trust companies.
    If I invest in an investment trust company which is quoted on the Stock Exchange but which fulfils every single one of the Chancellor's requirements except that, why should I pay double tax, whereas, say, the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd), who invests in a company which is identical with regard to its investments, size, number of shareholders, nature of its investments, and the amount of its capital profit, is exempt from double taxation merely because the company is quoted on the Stock Exchange?
    No one on this side of the House is more sympathetic to the constructive aspects of the Stock Exchange than I am. I am delighted that the Government show this sympathetic understanding of its functions. But I do not want them to carry it too far. I do not think the fact that one has a Stock Exchange quotation means that one's shareholders should be exempt from double tax and that other people should pay double tax. I cannot understand it.
    I cannot understand why if one hypothesises two such companies—the one being identical to the other as an investment trust company except that one company is quoted on the Stock Exchange and the other is not, the one company fulfilling every one of the Chancellor's requirements except the one about quotation on the Stock Exchange—the shareholders in the investment trust company not quoted should not be relieved from double tax in the same way as a man in a company which is quoted on the Stock Exchange.
    This is a simple enough question. I have asked it before. I am entitled to an answer. I very much hope that my right hon. Friend will, in clear and simple language which even I can understand, tell me why the Treasury should be able to collect double tax from a shareholder whose company does not happen to be quoted on the Stock Exchange but in every way fulfils the other aspects of the Chancellor's requirements. We have heard words uttered with gravity and
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    solemnity about the Treasury's anxiety to ensure that the investment trust company, before its shareholders get relief, is a genuine public trust company. What has that to do with it? If I have a private trust company, does it mean that I must pay double Capital Gains Tax?
    I have no doubt that at some point the word "avoidance" will rear its head. But the Clause cannot create tax avoidance because all it does is to give to an investment trust shareholder a piece of paper which says "Tax has been paid, and your proportion is so much." So nobody can avoid tax under the Clause. All he can do is to avoid paying double tax.
    I say very seriously to my right hon. Friend that unless he has a very comprehensive and sober look at the reasons for this provision he will be liable to the charge not that he is preventing tax avoidance but that he is permitting further relief avoidance by the Inland Revenue. In the case that I have mentioned, if I do not get relief from double taxation by this provision I shall be paying double tax. I am sure that my right hon. Friend does not want that to happen. Why should I pay double tax because my fellow shareholders do not want to have the shares quoted on the Stock Exchange?
    Another provision which is rather odd is that about the 10, 15 or 20 per cent. interest in one company. I cannot understand the reason for it. I do not normally mention names, but one springs to my mind here. However, it does not involve controversy. Let us say that the Daily Mail and General Trust has 40 or 50 per cent. of its assets in Associated Newspaper shares. I do not know the figures, but that is a convenient supposition. Let us imagine that the rest of its assets are in a miscellany of investments. Let us say that this qualifies it to be treated as what my right hon. Friend has called a genuine public investment trust.
    Suppose I hold shares in the Daily Mail and General Trust and the right hon. Member for Bexley (Mr. Heath) holds shares in the Second British Assets Trust. Let us suppose that both trusts own the same number of steel shares. Let us imagine that the right hon. Gentleman opposite has the same percentage of shares in Second British Assets Trust as I have in the Daily Mail and General

    1847
    Trust, and that identical profits are made by the two companies. Let us say that identical proportions of the profits are attributable to a £1 million profit on the steel shares when they are taken over, and that that will be double taxation. When I come to realise my shares I shall not get a certificate but the right hon. Gentleman will. Why? What need to protect the Revenue exists and demand that when the Daily Mail and General Trust sells its Imperial Chemical Industry and steel shares and makes a profit its shareholders cannot get double taxation relief, although that relief is available to the shareholders in the other company, which is in every respect identical except that the Daily Mail and General Trust has 30–40 per cent. of its assets in Associated Newspapers? What has that to do with it?
    5.0 p.m.
    To put it even more simply. Suppose my right hon. Friend excludes from the relief profits made on excessively large shareholdings, although I do not know why the Government care two hoots whether an investment trust has a 2 per cent., 20 per cent. or 80 per cent. share in a company. If the Government do care, then penalise such a company by saying that any profits made on such an excessive holding will be taxed in this way; but why so penalise an innocent little shareholding from the point of view of the shareholders in such an innocent shareholding? I cannot understand this.
    I could go through every Clause of this part of the Bill and ask similar questions—that is, apart from one provision. To simplify the discussion, I have deliberately avoided questioning my right hon. Friend about a company which does or does not distribute all of its income, but I have not proceeded with that matter because I have been told that by some means people may avoid paying Surtax. I am not sure how that would arise, but suffice to say that by introducing that argument the whole thing would become more complex and my questions not more logical.
    Are we in favour of double tax relief for people who hold shares in investment trusts? If we are, why do we allow the Government to collect this form of tax on some such trusts and exempt others? Is it not unjust that the Government
    1848
    should propose this course? There is a vast number of cases where it is exceedingly convenient for people to have family investment trusts. Consider the case, for example, of a man with a number of children of different ages who considers it convenient for the family assets to be held in a family investment trust. There, when a capital gain is realised, Capital Gains Tax is automatically paid on it. Why should that Capital Gains Tax, having been paid once, not redound to the relief of the shareholders, even if they are members of a private family investment trust and irrespective of the assets they are holding?
    Another matter in this connection appears equally important. I have already asked my right hon. Friend to say why he has this apparent compassion for Stock Exchange quotations before he will give relief against double taxation. Will he also say why the Government are so concerned about the nature of the investments? Why must they be in stocks and shares? What difference does it make? Consider this situation. An investment trust decides to invest in the Shell Mex building. Suppose that an investment trust bears all the apparently desirable characteristics mentioned in the Government's proposals and, therefore, qualifies for double tax relief, but sells all its stocks and shares and buys a number of properties as an investment with the money. Suppose, further, that after a number of years it sells the properties at a considerable profit, thereby making a capital gain. The trust would then pay Capital Gains Tax, but suppose, yet further, that it is then wound up. The capital gain will then pay tax again on the realisation of the shares by the shareholders, although that would not have been the case if it had been stocks and shares on which the gain had been made.
    Mr. Deputy-Speaker: Order. I am afraid the hon. Gentleman is going back to subsection (2,a). That is not within the compass of the Amendment.
    Mr. Lever: With respect, Mr. Deputy-Speaker, I thought that I was in order. I assure you that I am not trying to avoid the rule of order. I would be exceedingly ungrateful if I did so. On reflection, however, I would appear to be going back to subsection (2,a).
    Mr. Deputy-Speaker: We are not discussing amending subsection (2,a).
    Mr. Lever: I agree, Mr. Deputy-Speaker, and I will not pursue the matter further. I have made my point and I regret that I did not make it at a more appropriate time. I trust that if my right hon. Friend has time he will consider, by analogy, what I have said in connection with subsection (2,a) with the Amendment we are discussing.
    In short, for I do not wish to delay the House on such a complex question, I hope that my right hon. Friend will explain the matter clearly. One of my difficulties in the exposition of my questioning is that I have raised these matters in Committee had I still do not know the precise position. After matters in Committee and I still do not not know why these restrictions are thought to be necessary and why the Opposition accept them as being necessary. I am still waiting for a satisfactory explanation.
    Mr. Geoffrey Lloyd: I thank the Chief Secretary, on behalf of the investment trust movement, for these important concessions.
    Mr. Diamond: In replying to the questions put so clearly and succinctly by my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), I say straight away how grateful I am to him for the kind comments he made about what he was pleased to call the Treasury team and the obvious desire on the part of the members of that team to answer all the questions put to them. I reciprocate by saying that, having listened to many of the arguments adduced by my hon. Friend, nobody could ever say that there was anything wrong with the steps in those arguments or his steps in the Division Lobby. I am glad to know that.
    I am anxious to answer—not to explain, because my hon. Friend's understanding of these matters is as great, if not greater than any other hon. Member's—why the Government's approach does not run on all fours with his. In doing so, I must go back one step further. I must make it absolutely clear to my hon. Friend that Corporation Tax recognises that a company pays tax on its profits, be they drawn from income or
    1850
    capital, and that a shareholder in a company pays Capital Gains Tax on any capital gain to which he may be chargeable on the disposal of his shares.
    If my hon. Friend wants to call that double taxation as a form of shorthand, then I do not object to that phrase as a method of understanding just what we are talking about, for we are talking about the separation of the tax—the tax being paid by the company on its profits, be they capital gains or not, and the tax paid by the shareholder himself on the disposal of his shares. That form of double taxation, if my hon. Friend wishes to give it that title, applies almost universally. Why have the Government made an exception to that universality? The answer is that the Government want to encourage all forms of saving, in particular, but not exclusively, unit trusts and investment trusts.
    Therefore, the Government say, "We will go as far as giving special exemption from this general principle as a matter of public policy where certain broad considerations, and only where such considerations, are satisfied." The conditions are those defined in the Clauses and Amendments. They are, broadly, that there should be a machinery by which the small investor can get the benefit of guidance and expert management of his investments, that there should be a genuine public investment and that there should be a wide spread of investments. These are the general criteria on which, if satisfied, the Government are prepared to go exceptionally as far as I have indicated and not to ask for the kind of double taxation to which my hon. Friend has referred.
    I do not, therefore, have to answer my hon. Friend's questions in the precise form in which he put them because his argument rested on a different philosophical point. As usual, my hon. Friend and I are ad idem. We understand one another perfectly and it is even possible that we will see each other in the same Division Lobby. If my hon. Friend wants me to go further—although I do not think that he will—then of course he is right in saying that, this, by itself, has no relevance to tax avoidance. However, he will also know that the machinery of using other than a commercial investment trust—what I might call an ordinary private investment trust company—

    1851
    as a method of holding family funds is a method which has many, shall I say, tax advantages—although I will not put it as high as tax avoidance.
    There are Income Tax advantages, for instance, in converting unearned income into earned income by appointing oneself a director of one's own family trust and getting as director's salary what otherwise would arise as ordinary unearned income. There are methods of obtaining advantage for Surtax by leaving income in the company and collecting it only on a liquidation, paying a lower rate of Capital Gains Tax. There are methods of obtaining Estate Duty advantages. All these, which one might shortly describe at tax avoidance methods, are open to those with the possibility of having private family investment trust companies, and therefore it is not appropriate that the Government should extend these special exemptions to these kinds of investment trusts.
    With that explanation, I hope the House will be good enough to approve the Amendment which I am proposing.
    Amendment agreed to.
    Further Amendment made: Clause 34, in page 40, line 34, leave out paragraphs (b), (c) and (d) and insert:
    "(b) subject to subsection (3) of this section that no holding in a company, other than an investment trust or a company which would qualify as an investment trust but for paragraph (c) of this subsection, represents more than fifteen per cent. by value of the investing company's investments, and
    (c) that the shares or securities of the company, or a class of them, are quoted on a recognised stock exchange in the United Kingdom, and
    (d) that the distribution as dividend of surpluses arising from the realisation of investments is prohibited by the company's memorandum or articles of association, and
    (e) that the company does not retain in respect of any accounting period more than fifteen per cent. of the income it derives from shares and securities.
    (3) Subsection (2)(b) above shall not apply—

    (a) to a holding in a company acquired before 6th April 1965 which on that date represented not more than twenty-five per cent. by value of the investing company's investments, or

    (b) to a holding in a company acquired on or after that date which, when it was acquired, represented not more than fifteen per cent. by value of the investing company's investments.

    1852
    so long as no addition is made to the holding.
    (4) For the purposes of subsection (3) above—

    (a) "holding" means the shares or securities (whether of one class or more than one class) held in any one company, and

    (b) an addition is made to a holding whenever the investing company acquires shares or securities of that one company, otherwise than by being allotted shares or securities without becoming liable to give any consideration, and if an addition is made to a holding that holding is acquired when the addition, or the latest addition, is made to the holding, and

    (c) where in connection with a scheme of reconstruction or amalgamation, a company issues shares or securities to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, without those persons becoming liable to give any consideration, a holding of the shares or securities in the second company and a corresponding holding of the shares or securities so issued shall be regarded as the same holding,

    and in subsection (2)(c) above 'recognised stock exchange in the United Kingdom' has the same meaning as in the Prevention of Fraud (Investments) Act 1958 except that it includes the Belfast Stock Exchange."—[Mr. Diamond.]

    Clause 36.—(RELIEF IN RESPECT OF DELAYED REMITTANCES OF GAINS.)
    Mr. Peter Walker: I beg to move, Amendment No. 77, Clause 36, in page 42, line 12, at end insert:
    "(c) if at the time that the said conditions cease to be satisfied, a loss would have been incurred as a result of transferring the proceeds of the disposal or part thereof to the United Kingdom, the claimant shall be entitled to have that loss deducted from any chargeable gain which arose from the disposal including that arising on any other transfer to the United Kingdom of part of the proceeds of disposal."
    I apologise for disturbing the love-hate duet between the hon. Member for Manchester, Cheatham (Mr. Harold Lever) and the Chief Secretary. I can only believe the hon. Member tries to make up with praise for the unpopularity that Treasury Ministers currently suffer throughout the country.
    5.15 p.m.
    This Amendment to Clause 36, which deals with relief in respect of delayed remissions of gains, speaks for itself. It is an endeavour to see that if, as a result of having to remit, a loss has occurred that loss can be allowed for.

    1853
    Such losses can occur due to specific currency regulations of countries and certain tax regulations of countries when the proceeds of a disposal are taken out of the country. This is purely an endeavour to meet that point, which I hope the Government will find acceptable.
    Mr. Diamond: I can answer the hon. Member by saying that I do not think his Amendment, except as to one small point, is necessary. As to that one small point, I do not think it would be right that the Government should be asked to meet it. In general terms, I would remind the House that currency is itself a chargeable asset and, therefore, if there is either profit or loss on realising currency, it is a chargeable gain or loss which can be set off against the other transaction which is being referred to. Therefore, as far as I have gone, it is unnecessary to introduce an Amendment.
    The only thing the hon. Member's Amendment does, which I do not think I could ask the House to accept, is to allow the possibility of a future loss where foreign currency is not exchanged immediately. I suggest the attitude of the Government is right there, because there are two separate transactions: one is the main transaction, and the second is the decision of the vendor or the person entering into the transaction to defer until some future date the decision whether or not he makes a currency exchange.
    In those circumstances, I hope the hon. Member will not press his Amendment.
    Mr. Peter Walker: I am grateful to the Chief Secretary and recognise the point about the currency. I would naturally presume the factor of time of disposal would be treated reasonably by the Revenue. In view of those assurances, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.

    Clause 37.—(NON-RESIDENT COMPANY.)
    Mr. Diamond: I beg to move, Amendment No. 313, Clause 37, in page 42, line 28, leave out "and" and insert:
    "who, if an individual, is domiciled in the United Kingdom and who".
    This Amendment restricts the charge under Clause 37 subsection (2) to a person who is ordinarily resident in the United
    1854
    Kingdom and who, if an individual, is domiciled in the United Kingdom. It is a limitation, but it is thought reasonable to limit the charge in this way, otherwise a foreigner who happens to be resident in the United Kingdom in a particular year and who happens also to be a shareholder in an overseas company which is within the definition of a close company would be chargeable on his proportionate share of the company's gains. It seems right that some more permanent connection with the United Kingdom should be required before Clause 37 operates. The Amendment therefore secures this by introducing the test of domicile which was not there previously.
    Amendment agreed to.
    Mr. Diamond: I beg to move Amendment No. 152, Clause 37, in page 43, line 24, leave out subsection (8) and insert:
    "(8) So far as it would go to reduce or extinguish chargeable gains accruing by virtue of this section to a person in a year of assessment this section shall apply in relation to a loss accruing to the company on the disposal of an asset in that year of assessment as it would apply if a gain instead of a loss had accrued to the company on the disposal but shall only so apply in relation to that person; and subject to the foregoing provisions of this subsection this section shall not apply in relation to a loss accruing to the company."
    The reason for this Amendment is to be found in the discussion on the Committee stage debate on Clause 38 when my hon. Friend the Minister without Portfolio undertook to consider whether, in the light of the illustrations which were given, there were grounds for providing specifically in Clause 38 that, contrary to the impression which may have been given by subsection (3), only net gains accruing to an oversea trust should be apportioned to beneficiaries resident in the United Kingdom. We have come to the conclusion that the point ought to be met, and, at the same time, that an exactly parallel point which arises on Clause 37(8) of the Bill should also be met. The present Amendment corrects Clause 37(8) in that respect.
    Amendment agreed to.

    Clause 38—(NON-RESIDENT TRUST.)
    Mr. Deputy-Speaker: We come now to Amendment No. 153, with which, I understand, we can take Amendment No. 308, Clause 38, in page 43, line 38,

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    after "settlement", insert "made after the passing of this Act";
    Amendment No. 322, Clause 38, in page 43, line 40 leave out "is" and insert "was domiciled and either";
    Amendment No. 323, Clause 38, in page 43, line 41 leave out from "Kingdom" to "when" in line 42.
    Mr. Diamond: I beg to move Amendment No. 153, Clause 38 in page 43, line 40 after "is", insert "domiciled and either".
    The purpose of this and the other Amendments which you have kindly said, Mr. Deputy-Speaker, we might discuss at the same time, arise again from the Committee stage debate on Clause 38, during the course of which the Clause was criticised on five main grounds, and the Government promised to consider those matters before Report stage. In particular, my right hon. Friend the Chancellor, at columns 135 and 139 on the 1st June, made it clear that although he was determined to catch the tax avoider, he was not unsympathetic to the case of the genuine trust established before Budget day, and that it was a case he would try to meet.
    There are five grounds of criticism, by and large, which the Government are meeting, and it might be convenient if I refer to them very shortly, and to the solution shortly. The solution is to be found at length in the words of the various Amendments we are now discussing.
    The first criticism was that because it applied to all overseas trusts, including trusts in existence on Budget Day, the tax was retrospective in its effect. That point was made by the Leader of the Liberal Party. The solution to that is contained in our Amendment No. 306, Clause 38—the new subsection (4)—as a result of which a beneficiary under a pre-Budget trust is not to be charged unless and until he can lay his hands on capital—
    Mr. Marcus Kimball: Mr. Deputy-Speaker, are we discussing Amendment No. 306 as well as Amendment No. 153 and the others?
    Mr. Deputy-Speaker: I understand the right hon. Gentleman the Chief Secretary
    1856
    to be illustrating from this Amendment that he is answering criticisms made in Committee by some of the Amendments, in addition to those Amendments that we are now discussing.
    Mr. Eric Lubbock: Further to that point of order, Mr. Deputy-Speaker, would it not be convenient for us to deal with Amendment No. 306 at the same time, so that we can have from the Chief Secretary a complete explanation in one speech?
    Mr. Diamond: Perhaps I could put the following point to you, Mr. Deputy-Speaker, although I recognise the inconvenience of putting it to you in this way. I am so sorry that when you were describing which Amendments we could discuss, I had not got hold of all my papers. I put it to you that it might be for the convenience of the House if we were to discuss all these Amendments together; to wit, in addition to Amendment No. 153 which I have moved, and Amendments Nos. 308, 322 and 323, Government Amendments Nos. 154, 155, 156, 157, 267 and 306 in Clause 38. They all relate essentially to the same series of problems connected with the same Clause, and to the points put forward by the Opposition at that time.
    Mr. John Hall: Although we would like to meet the Chief Secretary in this respect, Mr. Deputy-Speaker, we prefer at this stage to stand by the original selection.
    Mr. Deputy-Speaker: If there is disagreement about this between the two sides, we must stand by the original selection. We are therefore back to the Amendment that has been moved and the three Amendments that I said could be taken with it. However, I might add that there is no reason why the right hon. Gentleman the Chief Secretary should not continue the argument he was making.
    Mr. Diamond: I am grateful to you, Mr. Deputy-Speaker.
    The second objection in principle was that the tax imposed a charge on beneficiaries who might not be aware of their liability, and who might, in any case, have no cash with which to pay the tax. I think that the hon. Member for Gainsborough (Mr. Kimball) recognises

    1857
    his own point, which he made in Committee on 31st May. It is to be found in col. 1351 of the OFFICIAL REPORT. The solution is the new subsection (3), under which no charge on discretionary interest is to be paid unless a beneficiary has received payment from the trust.
    The third criticism was that although the tax charges resident beneficiaries on their proportion of the gains accruing to a non-resident trust, it makes no allowance for losses accruing to the trust. The solution to that is that we now have the charge based on the amount on which trustees would have been chargeable if resident.
    The next, and fourth, major criticism was that the tax might bear hardly on the perfectly genuine non-resident settlor who became resident in the country, but might be defective in catching the resident beneficiary who goes abroad and who knows the money will accrue to the trustees. The solution is the provision that the settlor must be domiciled as well as resident or ordinarily resident in the United Kingdom.
    The fifth, and final, major criticism lay in the complaint that the formula in subsection (2) which governs the apportionment of trust gains between beneficiaries would be very difficult to interpret. The solution is that gains are now to be apportioned among the beneficiaries according to the value of their respective interests. Special rules will apply to discretionary trust interest in the new subsection (3) in Amendment No. 306, which we can discuss later in more detail.
    Mr. Kimball: I do not want in any way to be churlish to the right hon. Gentleman, because I appreciate that even after the debate in Committee he and his right hon. Friends have been at some considerable trouble, and have engaged in some very long and complicated negotiations in order to try to meet our point. I am very sorry that we should have got to this impasse. Amendment No. 153 deals specifically with domicile, with which the Chief Secretary dealt as the fourth point in his remarks. I appreciate the reasons for his tabling this Amendment, but the result is to make the Clause extremely objectionable. My Amendments seek to remove this particularly objectionable facet. His domicile
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    provision will cause great injustice, and even further administrative problems.
    Let us suppose that someone was resident abroad for many years and, while abroad, made a non-resident settlement without any beneficial interest for himself. He continued to live abroad, but his children, who were the sole beneficiaries of the settlement, came back to live in England. Quite suddenly—and it happens in many cases, particularly in, say, Kenya—the person who made the settlement finds that country impossible to live in. He may suddenly find that, in his old age, his farm is taken from him. One of his children invites him to return to this country to live. By this Amendment, his coming back here will mean not only that the beneficiary under the trust with whom he has taken up residence will be liable to Capital Gains Tax, but another beneficiary under the trust, who may have no knowledge whatsoever that the original settlor has come back, is also liable to Capital Gains Tax.
    The principle should not be where the settlor is now domiciled but where he was resident when he made the trust. That is the important principle. I am very worried, because the right hon. Gentleman's Amendment will have the very serious consequence that many people who are beneficiaries under a trust will find that they have to pay this tax. They will not know that the settlor has changed the liability, and will have no idea whatsoever that the tax liability has arisen.
    The right hon. Gentleman will know from his own very unhappy experience with his Domicile Bill what a very tricky problem domicile is. It might never be agreed in a person's lifetime. The Inland Revenue never makes up its mind about it. It just says, "It will be agreed" or "We will negotiate at some future date, but will accept the position for this one year". I therefore hope that the right hon. Gentleman will feel that these objections are well founded; that in stopping up one loophole he has created another uncertainty. I hope that he will either look at the matter again, or withdraw the Amendment.
    5.30 p.m.
    Mr. Lubbock: My right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) raised a number of points in Committee. He is very sorry that he

    1859
    could not be here to continue the discussion this afternoon, but he had to attend a meeting of a Select Committee. He has asked me to raise one or two points on his behalf. He thinks that the Clause would be considerably improved by the Amendment tabled by the Government.
    The Amendment we are discussing relates to the five points which the Chief Secretary has mentioned. It would have been more convenient, with great respect to you, Mr. Deputy-Speaker, to discuss all these Amendments together. I find it difficult to separate some of them in my mind when we are talking on the question of domicile.
    Mr. Deputy-Speaker: May I explain? I am not prepared at a moment's notice to make a grouping of Amendments if one major part of the House is opposed to such a grouping. If I had been informed of the suggested grouping before I might have considered it, but I cannot now in view of that fact.
    Mr. Lubbock: I perfectly understand Mr. Deputy-Speaker, that we are not entitled to discuss Amendment No. 306 with this group of Amendments, including Amendment No. 308, which would insert the words:
    "made after the passing of this Act".
    The Chief Secretary said that this point raised by my right hon. Friend was dealt with by the addition of the new subsection (3), which we are not entitled to discuss with these other Amendments. I find it difficult to express myself on these points.
    Mr. Deputy-Speaker: I would not prevent the hon. Member from straying a little at the moment but in any case he will not be deprived of his opportunity. My job is to preserve his rights.
    Mr. Lubbock: Thank you very much, Mr. Deputy-Speaker. Perhaps all that I need ask the Chief Secretary on this occasion, while reserving my right to say something when we come to Amendment No. 306, is why he did not adopt the simple words suggested by my right hon. Friend—why they should not have been accepted by the Government. The Chief Secretary said that the Government have agreed that retrospection is not advisable and that they have taken steps to eliminate it.
    1860
    I wish to reinforce what was said by the hon. Member for Gainsborough (Mr. Kimball). I stand to be corrected, but it seems that if a person comes back to the United Kingdom after what may have been a very long absence abroad, the beneficiaries of the trust may be suddenly placed in a completely different and less favourable position and may not even know that the settlor has returned. I should like the Chief Secretary to go a little further and to say that if in those circumstances the settlor returns after a long absence abroad, which may not be through any fault of his but owing to circumstances in the country in which he has been domiciled for a long time, the beneficiaries of the trust will not suffer.
    Mr. George Younger: I appreciate that the Chief Secretary and his colleagues have been doing their best since Committee to improve this Clause. I think the arguments put forward by my hon. Friend the Member for Gains-borough (Mr. Kimball) and on behalf of the right hon. Member for Orkney and Shetland (Mr. Grimond) are very good.
    I will summarise some of the problems of principle at which we would be grateful if the Chief Secretary would look again. There are three points in reference to the question of domicile. The first refers to the settlor. The settlor, by the act of making the settlement, has given up any interest in the trust from then on. He has gone off the stage altogether. Therefore, it is quite illogical to have any consideration about what he should do thereafter. His domicile thereafter must be irrelevant. His views and desires thereafter are totally irrelevant, and must be in logic, to the rest of the proceedings.
    The second point concerns the trust itself. Inevitably it must be a foreign trust. It is situated in a foreign country. Nothing can alter that fact. In common with all matters affecting trusts in foreign countries, it is subject to the tax laws of a foreign country. I cannot see any justification for bringing in a new principle whereby a trust completely domiciled and resident and legally in existence in another country, should be subject to the laws of tax in this country. It is quite a simple point of logic that it should not be so.
    The third point concerns the beneficiary. There is only one important point about

    1861
    the beneficiary. He is getting income from the trust and it is a perfectly simple fact that people who get income in this country pay Income Tax. So does the beneficiary. If he gets more income he pays more tax, and if he gets less income he pays less tax. His part in this proceeding is no more nor less than that. Therefore it seems quite illogical that there should be any question of any other tax affecting him in this matter.
    I hope that that is helpful to the Chief Secretary, because I feel that perhaps in our anxiety to improve the Clause we may have gone a little wide of three very simple points with very simple solutions to them.
    Mr. Diamond: I shall try to help the hon. Member for Orpington (Mr. Lubbock) if I can in relation to the point he raised about the retrospective effect of the Clause as previously claimed and why certain words should not be accepted. The simple reason is that the Clause was fully retrospective as alleged. If he would like me to go into that more fully, he will see if he looks at Clause 24 that we have the same position there in regard to gains accruing to trustees. One Clause is not in any sense more retrospective than another.
    The only difference is that in the case of an overseas trust within Clause 38 the liability attaches to the beneficiary who may have to meet it himself if the trustees have no powers under the terms of the trust to meet it on his behalf. This has little to do with arguments about retrospection and may apply equally to trusts set up after Budget day. We have recognised the force of the arguments advanced in Committee and gone some way to meet them. The concessions we are proposing turn on the proposition that in the case of trusts set up before Budget day the United Kingdom beneficiary should be charged under Clause 38 only if he is in a position to secure that the assets of the trust apply to his benefit.
    The new subsection (4) provides that in relation to a settlement made before Budget day the beneficiary would not be chargeable if his interest is solely an income and he cannot obtain for himself any part of the capital recognised by the settled property. In the case of a person with a reversionary interest, the tax
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    chargeable may be postponed until he disposes of his interest unless he can obtain any of the benefit of the interest represented by the settled property. The question which the hon. Member asks me relates to the problem of avoidance by going to the Bahamas, which is a method not completely unknown. As it stands, if I may refer to Clause 38(1), he will see that that applies to non-resident trusts and uses the words:
    "if the settlor, or one of the settlors, is resident or ordinarily resident in the United Kingdom, or was so resident or ordinarily resident when he made his settlement."
    The Clause is primarily aimed at the United Kingdom settlor who, being taxable on capital gains as a resident, cannot settle his gains on other residents. The primary test therefore is whether he was resident or ordinarily resident when he made the settlement. That is to say, was he removing chargeable assets from the scope of the tax? This primary test is not enough because he could avoid it by going to the Bahamas for a few years and just ceasing to be resident or ordinarily resident and making a settlement during that period. The Clause blocks up this exit by providing that even if he was not resident or ordinarily resident at the time of making the settlement, the resident's beneficiary shall be chargeable under trust gains for any particular year in which the settlor is resident, or ordinarily resident here.
    If the settlor goes to the Bahamas and makes his overseas trust while he is there, the Clause will still bite when he comes back to this country, and that is what we all want to happen. I do not deny that these matters are complex, and I would be very happy indeed to look once more at what has been said. I cannot, at this stage give any undertakings at all. One is anxious that the tax should work smoothly and should not be avoided unduly. In applying a tax to such esoteric branches of the law as trusts of one kind or another, one has to walk carefully and listen to all that is said, and I would be glad to look again at what has been said.
    Mr. John Hall: This is a very complicated Clause, as those of us who have had to study it during the Committee stage and now have discovered to our cost. Even the Financial Secretary, unlike his usual custom, had to stick rather

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    closely to his brief in reading out the legal implications of this Clause and Amendment. It is clear, from what he says, that my hon. Friend the Member for Gainsborough (Mr. Kimball) is absolutely right when he said that a settlor who, for one reason or another, had to return to this country, would find that he had made his children liable to Capital Gains Tax.
    We understand that this Clause is designed to prevent tax evasion, and we all know examples of the kind which the Chief Secretary hinted at, where there are attempts to evade tax. But there are many examples where, quite genuinely, without any desire to evade tax, persons resident abroad make settlements. Later, their children have come back to live in this country, and under normal circumstances, provided those settlors still remained abroad, their children living here would not be liable to Capital Gains Tax.
    One could have a case where there were two settlors who made settlements for the benefit of their issue, neither settlor retaining any interest in the settlement and, if the child of each settlor came to live in this country, there would arise the extraordinary situation in which, if the first settlor remained abroad to the date of his death, no liability for Capital Gains Tax would subsequently arise in respect of the interest of his child living in England.
    However, in the case of the second settlor, if for reasons mentioned earlier, he found he could no longer continue living abroad, and was perhaps forced out of the country by the conditions there but with no desire to come back here, he finds that by doing so he makes his child liable to Capital Gains Tax. The child has to have strong paternal affection to invite his parent back under those circumstances. No doubt he would, but it seems very hard that because of a Clause designed to catch tax evaders, a number of innocent parties are penalised.
    I beg the Chief Secretary to look at this point. I know the problems of trying to amend the Bill further at this stage, but it could be done, and the Bill may well be recommitted because of other things which have occurred earlier this week. Under those circumstances, I am sure that it would be possible for the
    1864
    Chief Secretary, if he is seized of and sympathetic to the case deployed, to put this right. I beg of the Government not to try to prevent tax evasion by a few by penalising the many, sometimes extremely harshly.
    I hope that the Chief Secretary will look at this again and when, and if, the Bill is recommitted, perhaps he will find some other form of wording which will deal with the fears expressed. We do appreciate the efforts made to meet the fears voiced during the Committee stage, but unfortunately they have given rise to another anomaly which could be disastrous.
    Amendment agreed to.
    5.45 p.m.
    Further Amendments made: Clause 38, in page 43, line 41, leave out
    "so resident or ordinarily resident" and insert "domiciled and either resident or ordinarily resident in the United Kingdom".
    In page 44, line 1, after "is", insert "domiciled and either".
    In page 44, line 2, leave out from "Kingdom" to "shall" in line 3 and insert "during any year of assessment".
    In page 44, line 5, leave out from first "the" to "shall" in line 6 and insert:
    "amount, if any, on which the trustees would have been chargeable to capital gains tax under section 19(4) of this Act, if domiciled and either resident or ordinarily resident in the United Kingdom in that year of assessment, had been chargeable gains accruing to the beneficiary in that year of assessment; and for the purposes of this section any such amount".
    In page 44, line 9, leave out from "reversion" to "and" in line 10.—[Mr. Diamond.]
    Mr. Diamond: I beg to move Amendment No. 306, Clause 38, in page 44, line 11, leave out from "be" to end of line 12 and insert:
    "according to the respective values of those interests, disregarding in the case of a defeasible interest the possibility of defeasance.
    (3) For the purposes of this section—

    (a) if in any of the three years ending with that in which the chargeable gain accrues a person has received a payment or payments out of the income of the settled property made in exercise of a discretion he shall be regarded, in relation to that chargeable gain, as having an interest in the settled property of a value equal to that of an annuity of a yearly amount equal to one-third of the total of the payments so received by him in the said three years, and

    1865

    (b) if a person receives at any time after the chargeable gain accrues a capital payment made out of the settled property in exercise of a discretion, being a payment which represents the chargeable gain in whole or part then, except so far as any part of the gain has been attributed under this section to some other person who is domiciled and resident or ordinarily resident in the United Kingdom, that person shall, if domiciled and resident or ordinarily resident in the United Kingdom, be treated as if the chargeable gain or as the case may be the part of the chargeable gain represented by the capital payment, had accrued to him at the time when he received the capital payment.

    (4) In the case of a settlement made before 6th April 1965—

    (a) subsection (2) of this section shall not apply to a beneficiary whose interest is solely in the income of the settled property, and who cannot, by means of the exercise of any power of appointment or power of revocation or otherwise, obtain for himself, whether with or without the consent of any other person, any part of the capital represented by the settled property, and

    (b) payment of capital gains tax chargeable on a gain apportioned to a beneficiary in respect of an interest in reversion in any part of the capital represented by the settled property may be postponed until that person becomes absolutely entitled to that part of the settled property, or disposes of the whole or any part of his interest, unless he can, by any means described in paragraph (a) above, obtain for himself any of it at any earlier time,

    and for the purposes of this subsection, property added to a settlement after the settlement is made shall be regarded as property under a separate settlement made at the time when the property is so added".
    Mr. Deputy-Speaker: We are taking with this Amendment the Opposition's Amendments to the Amendment in line 2, leave out "disregarding" and insert "taking into account".
    In line 2 at end insert:
    Provided that the amount of capital gains tax payable by a beneficiary in respect of any year of assessment shall not exceed the amount of any payments received by him under the settlement in respect of that year of assessment.
    In line 21, leave out from "beneficiary" to "who" in line 22.
    The fourth Amendment to the Amendment, in line 34, at end add:
    (5) In any case in which the amount of any capital gains tax payable by a beneficiary under a settlement in accordance with the provisions of this section is paid by the trustees of the settlement such amount shall not for
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    the purposes of taxation be regarded as a payment to such beneficiary—
    is down for separate discussion and will be put to the House at the appropriate time, if the hon. Member for Gains-borough (Mr. Kimball) so wishes.
    Mr. Kimball: I am obliged to you, Mr. Deputy-Speaker, for preserving the form as listed. This is a highly complicated subject and my three Amendments raise specific points which the right hon. Gentleman has moved formally.
    Mr. Deputy-Speaker: The hon. Gentleman can speak to all four Amendments and, if necessary, at the end of the debate can put formally the last one.
    Mr. Kimball: Only on Tuesday The Times, in its leading article, accused many politicians of always talking "gobbledygook". The more one looks at the Clause one has to face the fact that the right hon. Gentleman the Chief Secretary is now writing what is nothing more than "gobbledygook" into a very important Statute.
    I appreciate that this is a rehash of the liability on foreign discretionary trusts to pay Capital Gains Tax. It is marginally better than the first draft, but I must honestly tell the Chief Secretary that it is only marginally better. We have heard from the right hon. Gentleman, who, despite his great expertise, seems to be a little bit at sea on this Clause, that he will look at the first part of the domicile question again. I hope that he will, because his reply was based entirely on residence and not domicile. Perhaps he will proceed in the same spirit and will look at the objections which are made to his Amendment as they are set out in my four Amendments to the Amendment.
    The minimum requirement for any tax is that it should be justly spread among those who pay it and that the taxpayer must be able to understand what his liability is. It is grossly unfair to disregard the possibility, which the Government's Amendment does, that a beneficiary may be cut out at any possible moment. According to the Government's Amendment, Capital Gains Tax will be apportioned and people will have to pay it according to the respective values of their interest. How do we decide the respective values of people's interest? This is an

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    actuarial task which it is not possible to perform. Suppose that a child aged 10 years is the beneficiary of a trust. We may well say that his interest in the trust will last 60 years and that it will be very considerable but the trustees may have power of appointment and may decide to cut the child out of the trust. The child will pay Capital Gains Tax, to start with, on a 60-year interest in the trust. He may then marry someone of whom the trustees do not approve and they may cut him out from benefit. What would be the position in those circumstances?
    I know what the Chief Secretary's answer will be. He will say, "This will not be written in the Statute. All this will be administered by discussion and negotiation with the Inland Revenue". This is not a suitable answer. Neither in reply to the debate on this Clause in Committee nor during the negotiations on the Clause has the right hon. Gentleman answered concrete examples. He never told us how a taxpayer could be assessed on the example which I gave in Committee. How will the liability to Capital Gains Tax be assessed in the case of a person who makes a foreign discretionary settlement on his children? Suppose that in the first 15 years the property is worth £10,000, that after 10 years he sells for £15,000 and reinvests, and that after 15 years the total worth of the trust is £20,000. For the first 14 years while these negotiations are going on the income is paid to a non-resident beneficiary, but in the fifteenth year a grandchild domiciled in this country is sent to school in this country and the trustees decide to pay the school fees. They do not even pay the child: they pay the headmaster of the school out of the trust.
    What will be the liability to Capital Gains Tax on the share of the trust which has been paid on the grandchild's behalf by the trustees? Will the Inland Revenue go to the headmaster and say, "You have had these school fees. Capital Gains Tax is due on them"? All the difficulties which we originally envisaged over the Clause are inherent in the Government's Amendment, and the rehash only seems to make them worse.
    I accept that the Chief Secretary has made a concession on certain trusts
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    created before 5th April, 1965. I am grateful to him for sticking to 5th April, 1965, and not taking any other bogus or unsatisfactory dates suggested in Committee. I admit that he has made a concession that Capital Gains Tax will not be charged if a person is solely an income beneficiary of a foreign-based trust. But this is not a true concession. How many trusts are there which do not give power to the trustee to advance capital for school fees, operations and various other forms of crises?
    The more one looks at the Government's Amendment, the more one realises that it is not an improvement. Quite simply it merely makes the whole tax on foreign trusts a whim tax. It is a tax at the whim of the inspector of taxes. The Government cannot decide how they will legislate for the tax. They cannot lay down a formula which will make it perfectly clear what people's liability will be. They merely say that the burden of deciding how much tax a person shall pay will be negotiated between the person whom they think has incurred a liability and the Inland Revenue. This is not satisfactory.
    In the spirit that I see behind this whim tax, I tabled the fourth Amendment to the proposed Amendment. If the Government are successful in persuading the trustees that they have to pay Capital Gains Tax on behalf of a beneficiary resident in this country, and if there is a series of transactions in the trust so that the liability arises nearly every year, what will happen? The trustees will pay Capital Gains Tax on behalf of a resident beneficiary and the Chief Secretary will then say, "This is also the person's income". May we have an assurance that Capital Gains Tax paid on behalf of trustees for resident beneficiaries will not also be taken into account in their liability for Income Tax and Surtax?
    I am a little worried because the Chief Secretary mentioned the Bahamas earlier. I hope that I have not committed an impropriety. I should make it perfectly clear that certain members of my family have various kinds of trusts—I think that there was even one in my name—resident in the Bahamas and Bermuda. I am not to know whether I am a beneficiary. I may be cut out from the trust as a result of the failure of my efforts on this Clause.
    Mr. Younger: I should like to ask the Chief Secretary three fairly simple questions. The first concerns the point referred to by my hon. Friend the Member for Gainsborough (Mr. Kimball) which arises from the words in the first line of the Government's Amendment
    "disregarding in the case of a defeasible interest the possibility of defeasance".
    It could be most unfortunate to have clearly stated in the Bill the fact that this should be disregarded. I admit that it will be very difficult to make an exact assessment of how much an interest of this kind should be regarded. But it would be very wrong to state specifically that it should be disregarded for this reason. If there were an instruction in the Bill that it should be disregarded, supposing that the beneficiary was subject to defeasance after having paid a considerable amount in Capital Gains Tax and supposing that defeasance took place, it would preclude an adjustment being made.
    It is, I think, common ground between both sides of the House that if this were to happen it would be entirely just that an adjustment should be made to put right what would be an injustice. Would the right hon. Gentleman think about this point again? I should have thought that there was nothing to lose in allowing the possibility of defeasance to be taken into account. That would not commit any particular form of action, but it would allow it to be taken into account, which would be fair.
    The second point is this. It would not be fair for a beneficiary to have to pay Capital Gains Tax if he did not get any income from the trust in the given year. I think that the right hon. Gentleman agreed with that. He said that the tax would apply only if the beneficiary received some income from the trust. That is fair. Does it mean that if the beneficiary gets any income, however small, from the trust, he will be liable on any capital gains incurred, or that he is liable provided the amount gained in income by the beneficiary is equivalent to what he might have to pay in Capital Gains Tax? In other words, I hope that he is not going to lose on the transaction.
    6.0 p.m.
    My third point concerns what the Chief Secretary called a reversionary
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    interest. I appreciate that if a beneficiary has a reversionary interest—that is, a specific written-in right in the trust to some form of capital at a definite date—he has more than a purely income interest in the trust. What, however, would be the position if, as is often the case, the beneficiary has a contingent interest: in other words, if the trustees were to be enabled in certain circumstances to provide capital in an emergency to a beneficiary? As I see it, this could immediately make the beneficiary liable to Capital Gains Tax. There would be a possibility that he could get capital and interest from the trust. The emergency, however, in which the trustees might be enabled to help him by giving him capital from the trust might never occur. The fact that it could happen might render him liable for reasons of capital gains. I am sure that this is not what the Chief Secretary intends and I should like him to clarify the position of a beneficiary with a contingent interest.
    Mr. J. Grimond: I should like, first, to apologise to the Chief Secretary for not being present; I was in the Committee of Privileges. Secondly, I thank either the Financial Secretary or the Minister Without Portfolio for writing to me about this matter and meeting some of the points which I made in Committee. I know that some of these points have been gone over today, and I will not return to them, but I should like to follow the point which has been made on subsection (4) of the Government Amendment concerning settlements made before 6th April.
    There might be what in this country would be called a discretionary trust. I understand that to avoid the charges arising under the Clause, a beneficiary would have to establish both that he had solely an interest in the settled property—
    Mr. Lubbock: In the income.
    Mr. Grimond: —yes, an income interest in the property, and also that there was no means of the exercise of any power of appointment or revocation. I am advised that there are a great many trusts in which beneficiaries cannot be quite certain that in the case of a contingent interest they could establish that fact. There might be circumstances, possibly remote, in which trustees would

    1871
    be entitled to advance beneficiaries capital for a particular purpose. Some of these purposes have already been mentioned. The Clause might act unfairly in these circumstances. The beneficiaries could exercise little influence on the trustees, and the trust might have been made a long time ago. I do not, however, want to pursue that point further. I am grateful that capital losses as well as capital gains are to be taken into account and that the position of income beneficiaries is much more closely safeguarded.
    I recognise all the arguments against tax evasion. I still think that the Government might have risked a little by excluding trusts set up before a certain date, perhaps going back to the time of the 1962 short-term Capital Gains Tax, but they have chosen not to do this. I am grateful for the concessions that they are making, but under the Amendment there are dangers that beneficiaries under existing trusts which were set up with no thought of tax evasion in mind might be caught in a way which I do not believe the Government intend.
    Mr. Diamond: I gather from the various speeches that the Government's new Clause is generally welcome. I am bound to have regard to the Notice Paper in my interpretation of the feelings of right hon. and hon. Members about these matters, in the sense that had grave disquiet been felt about the methods by which the Government were proposing to deal with previous requests which have been made, Amendments would have been put down. I recognise that the time has not been long, but I hope that that is a reasonable way of looking at the matter.
    I then go on to say that a number of questions have been addressed to me which, had I been counsel, would, no doubt, have been generously marked on the brief with regard to the amount of fee which was appropriate for considering questions of such abstruseness and with a complete lack of the relevant papers. It is quite correct, as has been said, that it is the duty of a Minister replying at the Box to stick closely to his brief on a matter of this kind; and when an hon. Member puts questions and does so clearly, but, perhaps, not using precisely the words which he would use if he had the opportunity to put them in writing
    1872
    and in full detail, it might be easy to mislead although one's intention is to help.
    I am, therefore, sure that the House will agree with me that the best way of helping hon. Members who have detailed points of that kind is to ask them to be good enough to address to me in writing the questions which they have in mind, in as much detail as they care to do, and I will do my best to answer them fully and to say what the impact of the new provisions is. We have gone as far as we can in meeting all the points. We have fully understood all the representations which have been made. They have been considered carefully and the Amendments which my right hon. Friend the Chancellor has put down have met them to a large extent.
    I now come to the Amendments in the name of the hon. Member for Gains-borough (Mr. Kimball), who said that we were discussing his fourth Amendment, in line 34 of my right hon. Friend's proposed Amendment, with his first three Amendments but that they would be subject to separate discussion if necessary. I do not know whether the hon. Member would like me, as I am in a position to do, to explain in full detail why the first three of his Amendments are not acceptable, when I tell him that I will be glad to accept the fourth. I see the hon. Member brightening considerably. That will make a considerable impact upon his thinking. I am not doing a deal with the hon. Member; I am considering the Amendments on merit.
    The hon. Member's fourth Amendment is acceptable to the Government and we are grateful to him for having put it forward, even at this late stage. If this last Amendment is accepted, as I hope it will be, it may well have the result that trustees of overseas settlements look more sympathetically at the prospect of paying Capital Gains Tax assessed on beneficiaries, thus reducing the number of cases in which the tax is difficult or impossible to collect from the beneficiary. That is a sound reason and I very much welcome it.
    I am sorry that I cannot recommend the House to accept the other three Amendments of the hon. Member. The first, in line 2, in effect proposes that in the case of an interest which is de-feasible, the possibility of defeasance

    1873
    should be taken into account in valuing that interest for the purpose of apportioning to the beneficiary a proportion of the gains made by the trust. The reason why this is not acceptable is that valuation implies market value, and no one would buy an interest if, either by reason of a contingency or by reason of a power of appointment in the hands of someone other than the beneficiary, that interest might be terminated at any point of time. The only possible basis on which to proceed is that the interest is to be valued without any regard to contingencies. The hon. Member was on this point, and I thought that he would offer me a simple and satisfactory solution, but he drew attention sympathetically to the difficulties without going as far as offering an alternative solution. I refer the hon. Member for Gainsborough to Section 33(3) of the Finance Act, 1954, which applies this same rule in relation to Estate Duty on certain life assurance policies.
    The second Amendment to the Amendment is equally unacceptable. It would really do no more than provide an incentive to trustees to realise the maximum amount of gain in the year when the income or capital payments to the beneficiaries were at their lowest. We could have a wonderful switching arrangement as between beneficiaries and trustees under which they might have the money and not be liable to pay, or be liable to pay and not have the money. The net result of that would be that the beneficiary would be delighted and the Treasury extremely impecunious.
    The third Amendment proposes that no beneficiary should be charged under Clause 38(2) unless he has access to the capital of the trust; but when one thinks about it one realises that such a beneficiary might well be interested in the capital of the trust and the gains on the property of the trust might be accumulating for his ultimate benefit. In other words, he might be in the position of the reversioner under the new subsection (4,b) who, if he cannot gain access immediately, is allowed to defer the tax on his proportion of the gains till his reversion vests or he disposes of it. He clearly ought not to be excluded from the scope of the charge. So I am afraid that that Amendment cannot be accepted.
    1874
    I can say that I am grateful to the hon. Gentleman for the thought that he has given to these matters. I am sorry that we cannot accept the first three of his Amendments to the proposed Amendment, but when the time comes I shall be happy to recommend the House to accept the fourth of his Amendments to the proposed Amendment.
    Mr. John Hall: We are very grateful that the Government are accepting the fourth Amendment to the proposed Amendment. That is certainly a small step forward and a slight improvement. As I understand, the Chief Secretary found it difficult to reply to specific points put to him by my hon. Friend the Member for Gainsborough (Mr. Kimball). I would agree with him that if this case, with all its ramifications, had been put on the brief of learned counsel it would have commanded very high fees indeed. I should think it likely that in the days to come there will be many briefs for learned counsel trying to interpret this Clause.
    However, I would have thought, this proposed Amendment and the Amendments down to it having been before the House for some time, the Chief Secretary would have been able to tell the House how it would work in specific cases if they were given to him with sufficient information. If this hypothetical case advanced by my hon. Friend the Member for Gainsborough was not in sufficient detail I would be very happy to detail it much more closely so that the Chief Secretary could have all the facts on which he could express an opinion, and if he would like to do so, I will give way to him now so that he can say whether he would like me to do so.
    Mr. Diamond: By your leave, Mr. Deputy-Speaker, and that of the House, I was trying to make it quite clear to the hon. Gentleman that it would be a gross discourtesy to him and to the other hon. Members if I attempted to deal off the cuff with their questions on the Clause, questions to which they have given much thought, and that it would be more appropriate to give them careful consideration, and for me to seek advice on specific matters so as to give the right answers and give them in writing so that they might know exactly where they were.
    Mr. John Hall: I accept that from the hon. Gentleman, and if, when he has got that information, and has given careful attention to these questions, having sought the advice of his advisers, he in consequence comes to the decision that there should, perhaps, be further amendment of the Clause, to cover the points which have been raised, that would be highly satisfactory; but the hon. Gentleman does not need to refer to his advisers to reply to the question I now wish to put to him.
    Is it not a fact that the Clause, even as amended by the Government Amendment that we are now considering, means that there would be many cases where a beneficiary could be well liable for more tax than the amount he receives from the trust? Does it not also mean that if trustees are skilled in investment and invest the trust funds wisely, they can, by so doing, heavily penalise the life tenant of the trust by adding to his tax burden? Is that not the effect of this Clause, even as it is proposed by the Government to amend it? So does it not, in fact, provide a considerable injustice?
    6.15 p.m.
    I am sure that the Chief Secretary is as well aware as anyone on this side of the House of the problems which are presented by the complications of the Clause. I feel confident that, when he has had time to consider again some of the representations made to him from this side of the House, and when he has gained further information, which will, no doubt, be given to him by my hon. Friend the Member for Gainsborough and others, and if he finds that, despite the Amendments which have so far been tabled, and which are designed to undo some of the harm which the Clause in its original form would certainly have done, and the harm it could still do, he will find ways and means of amending it still further, even if that requires recommittal of the Bill, which might have to be recommitted for other reasons.
    I do not want to go into all the legal complexities of these Amendments or of the Clause because we deployed many of the arguments in Committee and they have been deployed again this afternoon, but I would hope that the hon. Gentleman, aware of the problems and of the complexities, will think the matter over again and find a way of making provision to lessen the burdens which may fall
    1876
    on quite innocent people because of the way the Clause may be implemented.
    Mr. Diamond: By leave of the House, may I say that I have listened very carefully to what the hon. Gentleman has had to say. I do not think that the burden he is concerned with is a real problem at all. It is a burden which relates to a capital gain being realised. No gain, no burden. However, I will look very carefully—as the hon. Gentleman has asked me to do—at what he has said; I will consider the matter very carefully; but I am bound to repeat that we had a very full discussion in Committee, and all the points were made and they were fully considered, and the Amendments which we have put down go as far as the Government feel it right to go to meet the problem; I do not want to mislead hon. Members into believing that the researches and investigations I intend to make are likely to lead to any immediate alteration in the Bill. But I shall be very happy to look at the points which have been raised.
    Mr. John Hall: The hon. Gentleman pointed out quite rightly that no burden arises till a capital gain arises. That is absolutely true, but is it not also true that if a capital gain does arise the tax to which the beneficiary could become liable as a result could fall on the beneficiary in a form which might exceed the total income he received from the trust? Would it not be so? Would it not mean that the beneficiary could be required to pay more in tax than he gets in income from the trust, and be penalised by the skilful investment policy carried out by the trustees?
    Mr. Diamond: I repeat that I do not think that would happen. I do not think that that is a practical problem. The difficulty of having to meet tax in excess of the income available to the beneficiary has been fully taken care of. The hon. Gentleman was speaking of English trusts? I repeat that I think the problem has been taken care of. I shall be very glad to look into the matter fully and write to the hon. Gentleman.
    Question, That the words proposed to be left out stand part of the Bill, put and negatived.
    Question proposed, That the proposed words be there inserted in the Bill.
    Amendment proposed to the proposed Amendment: At end add:
    (5) In any case in which the amount of any capital gains tax payable by a beneficiary under a settlement in accordance with the provisions of this section is paid by the trustees of the settlement such amount shall not for the purposes of taxation be regarded as a payment to such beneficiary.—[Mr. Kimball.]
    Question, That those words be there added to the proposed Amendment, put and agreed to.
    Proposed words, as amended, inserted in the Bill.

    Clause 40.—(VALUATION.)
    Mr. Diamond: I beg to move Amendment No. 160, Clause 40, in page 45, line 37, at the beginning to insert:
    "Subject to paragraph 21(2A) of Schedule 6 to this Act".
    This Amendment is necessitated by the new rule for valuations of quoted securities before Budget day which is contained in Amendment No. 164, Schedule 6, in page 67, line 36.
    Amendment agreed to.
    The Financial Secretary to the Treasury (Mr. Niall MacDermot): I beg to move Amendment No. 161, Clause 40, in page 46, line 18, at the beginning to insert:
    "Subject to paragraph 21(2A) of Schedule 6 to this Act."
    Would it be convenient, Mr. Speaker, to discuss with this Amendment the next two Amendments, Nos. 162 and 163?
    Mr. Speaker: Yes, if the House so pleases.
    Mr. MacDermot: These three are largely paving Amendments for Amendment No. 164, to which we shall come shortly. Their effect is to substitute the price at which a unit trust will buy back units instead of the mid price as the basis of valuation of holdings in unit trusts on any disposal other than a deemed Budget day disposal. This alteration will be wholly in favour of the taxpayer.
    Amendment agreed to.
    Further Amendments made: Clause 40, in page 46, line 22, after "the", insert "buying and selling".
    Clause 40, in page 46, line 24, leave out from beginning to "so" and insert:
    1878
    "equal to the buying price (that is the lower price)".—[Mr. MacDermot.]
    Mr. Speaker: My previous selection was wrong. The position is that Amendment No. 284, Clause 40, in page 47, line 10, leave out subsection (8) is really a paving Amendment for Amendment No. 126, Schedule 9, page 93, line 20, and I therefore suggest that it should be discussed with that Amendment in due course.

    Clause 41.—(INTERPRETATION AND OTHER SUPPLEMENTAL PROVISIONS.)
    Amendment made: Clause 41, in page 49, line 14, after "within", insert:
    "paragraph (a), (b), (c) or (d) of".—[Mr. Diamond.]

    Schedule 6.—(CAPITAL GAINS: COMPUTATION.)
    Mr. MacDermot: I beg to move Amendment No. 79, Schedule 6, in page 56, line 18, to leave out "on" and to insert:
    "to income tax as income of".
    This is a drafting Amendment, as is the next one.
    Amendment agreed to.
    Further Amendments made: Schedule 6, page 56, line 20, at end insert:
    (2) The foregoing sub-paragraph shall not be taken as excluding from the consideration so taken into account any money or money's worth which is taken into account in the making of a balancing charge under Part X or Part XI of the Income Tax Act 1952 (Capital allowances).
    Schedule 6, in page 57, line 2, leave out "to the person becoming" and insert:
    "deemed to be effected by him under section 24(3) of this Act when a person becomes".—[Mr. MacDermot.]
    Mr. MacDermot: I beg to move Amendment No. 159, Schedule 6, in page 57, line 46, to leave out sub-paragraph (9).
    This is not quite a drafting Amendment. It is a minor Amendment to remove an unduly restrictive definition of the date of disposal for the purposes of the long-term tax. The effect of the Amendment is that the date of disposal will depend on the facts in each case.
    Amendment agreed to.
    Mr. Michael Alison: I beg to move Amendment No. 280,

    1879
    Schedule 6, in page 58, line 7, after "behalf" to insert:
    "for the purpose of managing the asset whether alone or in conjunction with other assets or for the purpose of preserving the value of the asset or".
    The aim of the Amendment is straightforward. It is to encourage systematic and scientific attempts to enhance and increase the value of an asset by making any expenditure on professional or other similar advice from specialists an allowable expense in computing the capital gain. The sort of advice that we have in mind in this context is the specialist advice which is available today from such bodies as management consultants. An example is to be found in the Management Consultants' Association report, which was recently commissioned by N.E.D.C. Other bodies are the Centre for Business Research, different kinds of investment analysts, the stock study sections of banks and similar houses, and, last but not least, the sort of advice which may be derived from chartered accountants.
    It is not without irony that I received through the post today a prospectus of the advice which Members and others may receive from chartered accountants. Amongst such lines of advice the prospectus lists advice on the "costing" and "productivity". Again, it is not without irony that the advice which it claims to be able to give is summed up in a little paragraph under the heading, "for tax purposes", which says:
    "you may be paying more tax than is necessary. With the help of a Chartered Accountant you need pay no more tax than the law requires."
    I cannot help feeling that one chartered accountant with whom we have all become familiar will require us to pay more tax than we are paying at the moment.
    Those are the professional people who are available to give what is becoming increasingly desirable, namely, the sort of systematic and professional advice on investment policy and appraisal which the present situation demands. I shall elaborate a little why we need to encourage this sort of professional advice from specialists. It is because the present state of affairs is very unsatisfactory in regard to investment appraisal, and so on, and is likely to become more so as a result of the proposals in the Bill.
    1880
    Perhaps I might give one or two reasons why we need more of this professional advice. First, it is the avowed aim of the Chancellor in this Bill to encourage retentions, as a result of the provisions of Corporation Tax, but the point that cannot be made too often is that there is no logical and necessary connection between a high level of retentions in any corporation or company and the productive growth which one seeks to derive from those retentions, or, necessarily, a high rate of return on the assets or capital retained. There is no logical connection between these two phenomena. Indeed, it has been pointed out that within the quoted company sector the highest retention ratios at the present time are commonest among two particular groups of company. First, companies having a dominant family ownership—and it is self-evident why there should be high retentions there, and, secondly, the group consisting of the smaller quoted companies.
    It is, I suppose, a matter of dispute as to whether the smaller companies are the fastest growers, but there is no direct evidence that they are and one tends to think that probably they are not. The real question is, what is the relevant rate of return on the sort of retentions which the Chancellor is trying to encourage through the imposition of Corporation Tax? The snag is that one can have high retention ratios for very poor reasons. One reason for having high retention ratios may be that the return on the sums retained in a business is so low that it is expensive to raise capital in the market, and one therefore has to retain the income to finance the business oneself. In other words, high retention ratios are no sure guide to the productive use of the sums retained. These considerations are important, because we have evidence from the N.E.D.C. Report and the Management Consultants Association—
    Mr. MacDermot: I am trying to follow the hon. Gentleman's argument, but I cannot see what this interesting dissertation on retention rates has to do with the Amendment.
    6.30 p.m.
    Mr. Alison: The point is quite simple. The Bill proposes to try to encourage higher retention ratios than at present and we are seeking to provide an Amendment

    1881
    whereby the sums retained may be better applied and better used, that is to say, by encouraging the use of professional advice by a tax concession. I should have thought that that was desirable. The Report of N.E.D.C., which the Government themselves commissioned, made it plain that this sort of professional advice was desirable and that the proportion of companies using it was very small.
    Mr. J. T. Price: Listening to the hon. Gentleman's argument, the thought running through my mind is that he is presupposing that all professional advice is necessarily good advice. All through these debates we have been told by hon. Members opposite that in framing the Bill the Government have received bad professional advice. The suggestion that all professional advice is of necessity good advice does not make sense.
    Mr. Alison: I agree that one has to choose and be selective, but let us at least give an incentive through our tax system to people who know that their knowledge is limited to go to the specialist concerned. This is increasingly the habit nowadays and we want to encourage this sort of recourse to professional advice when it is necessary.
    The N.E.D.C. Report on the analysis of investment in machine tools in the engineering industry made it evident that less than 5 per cent. of all the firms it considered were using D.C.F. methods, for example.
    Mr. MacDermot: I am sorry to interrupt again, but I am still trying to follow the argument. Surely fees for the kind of professional advice of which the hon. Gentleman is speaking, professional consultants and so on, would be taken into account when assessing expenditure for Income Tax purposes.
    Mr. Alison: We are seeking to extend it so that it is allowable not only for Income Tax purposes but for computing the enhancement of gains. If enhancement can be measured, surely it is permissible to set against a proportion of the growth some of the expenditure which has been applied to causing the growth. That seems to be a perfectly straightforward argument. When encouraging the growth of the value of the asset, one wants to make certain that the value is enhanced
    1882
    as much as possible, and if it can be enhanced by spending money on professional advice in this direction, that is something which we ought to encourage.
    I refer to some explicit words written in a paper published only today by the Professor of Political Economy at the University of Manchester:
    "The Government should give an incentive to these desirable reforms"—
    and he is referring to modern capital investment appraisal methods—
    "by finding a tax incentive which really did affect decisions on lines suggested in the N.E.D.C. Report on investment in machine tools."
    As the Financial Secretary is no doubt aware, the N.E.D.C. Report says:
    "Methods of investment appraisal in use by the United Kingdom engineering industry are either non-existent or largely inaccurate and misleading."
    We should try to give some deliberate encouragement in our tax system to the use of greater and more scientific methods of investment appraisal.
    The economic aspects of the Bill, particularly the Corporation Tax proposals, are by no means wholly good or necessarily creative and productive. There are at least three snags. First, the Corporation Tax proposals generally are inflationary. Secondly, there is no guarantee that the quantity of capital retained in a business will be used productively. It is quality as well as quantity which we should encourage. Finally, Corporation Tax will discourage the buoyancy of the capital market which has always been one of the severest disciplines applied to assessments of capital projects. Against this we need to find some means to write into the Bill specific allowances for those who spend money on professional advice about capital appraisal, and for those reasons I ask the Financial Secretary to consider the Amendment sympathetically.
    Mr. MacDermot: The short answer to the arguments deployed by the hon. Member for Barkston Ash (Mr. Alison) is to refer him to paragraph 5 of the Schedule, which deals with the exclusion of expenditure by reference to Income Tax or Corporation Tax. He has argued his case in relation to expenditure which is allowed for Income Tax purposes and will be allowed for Corporation Tax purposes and would therefore automatically

    1883
    be excluded from any allowance for Capital Gains Tax purposes.
    However, to take the wider point of the Amendment, what it seeks to do is to effect the change that in computing a gain or loss on a disposal of an asset there shall be added to the cost of acquisition expenditure incurred in managing the asset or preserving its value, in other words, to depart completely from the capital account basis for the assessment of Capital Gains Tax.
    I must make it plain that this would strike at the root of our approach to this tax and would be quite unacceptable. The repercussions would be very wide, for an enormous range of expenditure
    would be opened up to be set off against Capital Gains Tax. I have been interested to learn of some remarkable kinds of expenditure which have been claimed against the short-term Capital Gains Tax. Owners of valuable pictures and other works of art have sought to claim part of the cost of heating the mansion in which they house them an a necessary expenditure incurred in preserving the value of the pictures.
    The ingenuity—I have no doubt of professional advisers—in these cases is almost without limit. We do not intend to allow that kind of expenditure, or that on the gardener who cuts the grass or the person who paints the house periodically, to be allowed for set-off against capital gains. If a person is carrying on a business or trade, some of those expenditures might be allowable for purposes of Income Tax and Corporation Tax, and that is the proper sphere in which to allow them. They are maintenance costs and in effect are the costs incurred in enjoying the asset.
    But this proposal is something quite different. Expenditure which goes to enhance the value of the asset and which is allowed to be set off is covered in paragraph 4(1,b) of the Schedule. I hope that I have said enough to show that on principle the Amendment is quite unacceptable.
    Amendment negatived.
    Mr. Jasper More: I beg to move Amendment No. 122, Schedule 6, in page 58, line 36, at the end to insert:
    (3) Where at the time of its acquisition, or if an election is made under paragraph 24
    1884
    of Schedule 6 to this Act then at 6th April 1965, agricultural land within the meaning assigned thereto by subsection (2) of section 1 of the Agricultural Holdings Act 1948, was held—

    (a) subject to a contract of tenancy on other interest in land other than a charge on incumbrance within the meaning of subsection (8) of section 21, and prior to the first disposal of the land after 6th April 1965 that tenancy or other interest in land terminates, then in computing the gain accruing on that disposal for the purposes of this Part of this Act there shall be added to the sums allowable as a deduction from the consideration in the computation of that gain the amount of any appreciation in the value of the land accruing by reason of the said termination of the tenancy or other interest in land; or

    (b) free of any tenancy or such interests in land as are referred to in (a) hereof but prior to the first disposal of the land after 6th April 1965 became subject to a tenancy or any such interest in land, then in computing the gain accruing on that disposal for the purposes of this Part of this Act there shall be subtracted from the sums allowable as a deduction from the consideration in the computation of that gain the amount of any depreciation in the value of the land caused thereby.

    Mr. Speaker: With this Amendment we are to discuss Amendment No. 123, Schedule 6, in page 71, line 33, at end insert:
    (5) Where at the time of its acquisition, or if an election is made under this paragraph, then at 6th April 1965, agricultural land within the meaning assigned thereto by subsection (2) of section 1 of the Agricultural Holdings Act 1948, was held subject to a contract of tenancy between the owner of the land as landlord and members of a partnership as joint tenants of which one is the landlord, and prior to the first disposal of the land after 6th April, 1965 that tenancy terminates, then in computing the gain accruing on that disposal for the purposes of this Part of this Act there shall be added to the sums allowable as a deduction from the consideration in the computation of that gain the amount of any appreciation in the value of the land accruing by reason of the said termination of the tenancy.
    Mr. More: This Amendment relates to the valuation of agricultural land for the purposes of Capital Gains Tax according to whether the land is leased to a tenant or with vacant possession. The subject was not specifically discussed on an Amendment in Committee, but, by a great deal of indulgence on the part of the Chair, we were able to discuss the matter when we debated Schedule 6, a debate which the Financial Secretary may still possibly remember. I shall not misrepresent the hon. and learned Gentleman if

    1885
    I say that, broadly, his reply to us on that occasion could be summed up as a summary dismissal of the case as being an ordinary and obvious instance of capital increase which would justify the levying of Capital Gains Tax. But, as the point was not made in an Amendment specifically moved in Committee, it is right now to give what was not properly given to the Committee, that is, something of the background against which the whole question has to be viewed.
    It arises from the traditional system of agricultural tenancies followed in this country in the present century. Although leases of farms and agricultural properties can be of many kinds, it is fair to say that for many years there has been a large preponderance in favour of what is called the year-to-year tenancy, a tenancy which, as its name implies, normally carries on from year to year. When there is any question of bringing the tenancy to an end, the position as between landlord and tenant farmer is that either has the right, before a certain date, usually Lady Day, to give one year's notice. Thus, the tenant is able to secure release from his obligations in 12 months and, likewise, the landlord is able to recover possession of his holding in 12 months. Strangely enough, after all these years, that is still the background as between landlord and tenant on which most of our farming tenancies still rest.
    Various Acts of Parliament have been passed affecting the relationship between agricultural landlords and tenants. Provisions were enacted before the war for a certain limited compensation to tenants to receive notice. During the war, there was legislation under which landlords were prevented from giving notice if the object was to sell the holding, and this carried on until the passing of the 1947 Act, which was re-enacted in the Agricultural Holdings Act, 1948, a consolidation Act, which brought into force the restrictions on eviction and the security of tenure provisions with which the agricultural community is now familiar and which have been in force now for about 18 years. But the presence of these provisions on the Statute Book does not alter the fact that there are still thousands of farms, probably tens of thousands, still held on the traditional year-to-year tenancy and which, as between landlord and tenant, are still liable to this purely
    1886
    contractual agreement that, on one year's notice, either the tenant can go or the landlord can get his holding back.
    The new legislation bit immediately on all tenancies in force before 1947, but, curiously enough, such tenancies have continually been made as a matter of course in the following years and the position is simply that the post-1947 tenancies are caught in exactly the same way as those made before. This is how landlord and tenant farming has been carried on for the past 18 years. Everyone knows why the new provisions were introduced. The object was to give farming tenants the opportunity for longer-term farming than was implied by the traditional year-to-year tenancy. It was thought that, if a tenant could plan his cropping programme for some years ahead, this would be of benefit to agriculture and to the land, more scientific techniques could be used, and general advantage would result.
    However, I do not think that anyone at that time—I have read some of the debates in the House in both 1947 and 1948—visualised what has been the most striking result of this legislation, the astonishing disparity in values which has been brought about by the operation of the Statute. Part of the reason, perhaps, was that, for a number of years, the disparity was not very great. Until the middle 1950s, there was not a very great disparity, and the marked increase which gives rise to the concern felt about the operation of the Capital Gains Tax as now proposed has really developed in the last few years, particularly in the last five years. When we discussed the matter in Committee, my hon. Friend the Member for Windsor, (Sir C. Mott-Radclyffe) gave several examples of the disparity in values, which he reckoned at about £100 an acre, and I suggested, on the basis of cases in my own experience in my part of the world, that it might be more like £200 an acre. There is no need to elaborate on this because it is generally known and admitted.
    6.45 p.m.
    As I recall it, the discussion in Committee was sufficiently wide to cover not only agricultural tenancies but urban tenancies as well. The present Amendment is confined to agricultural tenancies and is related to the specific legislation

    1887
    to which I have referred. I wish now, without wanting to sound critical, to make one or two observations about the Financial Secretary's comments on tenancies in that debate. He was speaking of all tenancies, of course, but the way he put the matter to the Committee would not be recognised by the ordinary agricultural owner as a very good representation of how he views his position under his tenancy agreement and the relevant legislation. The hon. and learned Gentleman said:
    "If there is an unrestricted freehold the interest is far more valuable than if there is a reversion of a tenancy or a reversion of a lease. What happens when vacant possession is acquired in these circumstances is that a restricted interest in the land is converted into a full and unrestricted interest in the land, and this is the clearest possible example of a capital gain."—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1403.]
    I do not think that any agricultural landlord would readily recognise himself in the description of an owner of a restricted interest. He is, in fact, the owner of the land. He has at some time signed with a particular tenant a document giving that tenant the right to farm the land from year to year, and it is only in consequence of an Act passed either before or after this document was signed that the present difficulty arises. The landlord's interest, in fact, never alters. It is not really true to say that it is a restricted interest. He is the victim of a statute which has come in fortuitously in such a way as to upset the balance of the contract voluntarily entered into between himself and a farming tenant.
    When we look at the matter in the context of the Capital Gains Tax, we see that there is, as between landlord and tenant, a double uncertainty. The Capital Gains Tax can fall on sale, on death, at the end of a 15-year period, on gift, or in the event of compulsory purchase. Equally, on the tenant's side, a tenancy can come to an end by death, by dispossession, by the tenant's voluntary departure, by notice, and so on. Consequently, there is here a double uncertainty, and this is really the essence of the difficulty in which the agricultural community will find itself.
    It is a situation which can hardly be familiar except to a very small section
    1888
    of the community which is interested in this particular matter, and it may be quite unfamiliar to many hon. Members. But there is a fairly close parallel with what happens when a Division is called in the House. Whether we are talking about the farming situation or the situation in a Division in the House, there are always two questions: at what time is the Division called or does the event occur, and what is the state of the territory, whether it is the farm or the precincts of the House of Commons, at the relevant time? It may fall at a time which is known or which is not known. The question will be, is the farm let or, in the House of Commons, are Government Members in bed, as was the Prime Minister? Has the notice to quit the farm expired or are Members of Parliament absent from the House unpaired at a Committee on Nuclear Disarmament? These questions are uncertainties of a double kind.
    It is then too late probably to do anything effective. One cannot let the farm on the telephone when one of these things has happened, just as one cannot always telephone Members to get them back to the House of Commons, even if one may get the Chancellor of the Exchequer back for the first Division. There are two differences about this comparison. First, there is a Patronage Secretary on the Government side of the House, whom we on this side of the House believe is responsible for co-ordination. There is nothing similar for a taxpayer faced with a problem in Capital Gains Tax matters. Equally, if things go wrong, as apparently they can go wrong in the House of Commons, the victim is the Government which introduced the Finance Bill. If they go wrong in Capital Gains Tax matters, presumably it is the unfortunate taxpayer who is the victim, and he was certainly not responsible.
    How is it possible to correct these anomalies, because anomalies they obviously are? I repeat what I said in Committee: we are not asking for an exemption or a privilege. The way to correct these anomalies must be to amend the valuation formula for Capital Gains Tax purposes in Schedule 6.
    Mr. William Baxter: To which anomalies is the hon. Member referring—anomalies

    1889
    appertaining to the House of Commons or anomalies appertaining to agriculture?
    Mr. More: They are the anomalies which I am about to explain in regard to the differences between the value of properties on acquisition if they are let and on disposal if they are vacant. The Amendment which I put to the House relates, as the hon. and learned Gentleman will see, to the two converse occasions—one on which it is acquired let and disposed of vacant and the other on which it is acquired vacant and disposed of let. To rectify that the Amendment has been drawn to produce what in the previous debate we called "like-with-like".
    It is entirely possible—and this might be unique in an Amendment to a Finance Bill moved from the Opposition side of the House—that the effect of the Amendment would be to benefit the Revenue and not to benefit the taxpayer. This is unlikely, however, because, as one of my hon. Friends pointed out on a previous occasion, it is almost certain that the tendency of owners will be to avoid making these leases which tend to produce these anomalous results.
    May I refer the hon. and learned Gentleman once again to the previous debate. He faced this problem, as reported in column 1405. He realised that this could bite both ways, and he said,
    "We certainly intend to apply this logically and fairly."—[OFFICIAL REPORT, 31st May, May, 1965; Vol. 713, c. 1405.]
    That can mean only that it will be a case of swings and roundabouts. In either case there may be injustice on the one hand to the taxpayer and on the other hand to the Revenue. We wish to avoid individual cases which might involve very substantial sums of money and in which there might be severe injustice to taxpayers who are owners of land and who, by no operation of cause of their own, find themselves caught in one of these unfortunate circumstances.
    With this Amendment, Mr. Speaker, you have also called Amendment No. 123, and I will briefly refer to it because it highlights the problem which we face and shows how grotesque the situation can be. Amendment No. 123 relates to the case of an agricultural landowner who at the time of acquisition has the farm in lease
    1890
    to a partnership of which he is one of the partners. It assumes that at the time of the disposal the lease has come to an end, and it seeks to correct the consequences of this situation. It is necessary to point out the grotesque result in respect of Capital Gains Tax which can occur in a case of that kind where the owner is also a partnership tenant.
    I hope that the hon. and learned Gentleman, having considered this matter, will be able to give us a more favourable reply and to accept both Amendments. If he cannot accept the first, I hope that at any rate he will accept the second, which highlights the grotesque results to which I have drawn attention.
    Mr. J. E. B. Hill: I should like to support and to reinforce what was said by my hon. Friend the Member for Ludlow (Mr. More). I do not want to take up the time of the House except to stress one very practical point which is likely to arise if the Amendment is not accepted.
    It is thought to be quite clear that there is a disparity at the moment between the value of land let and the value of that land with vacant possession. This is based on average figures. But when one comes to the valuation of any farm, unless one has a sale to test the market, the problem of valuation where there is a disposal arising from death or inheritance of the owner can be very great. It is no longer a question of valuing the land and its fixed equipment or even deriving the valuation from a total based on the rent.
    Nowadays, it is common to have to take into account such factors as the age of the tenant and the tenant's health and whether there are any other prospects of obtaining possession. For example, the farm might be in a bad condition, in which case an energetic landlord might obtain possession by reason of a certificate for bad husbandry. Without the test of the market it may be extremely difficult to arrive at a valuation.
    This difficulty would be avoided if the Financial Secretary accepted our Amendment. In its favour there is the longer-term reason that in pure economic theory there should be no difference between the value of land let and the value with vacant possession. It is only

    1891
    the temporary restrictions to which my hon. Friend referred which have produced the disparity. That can be seen by anyone who studies land values in the period up to the war and up to control, when there was no distinction in value between vacant possession and let land.
    In fact, in the 1930s, with a rather different economic atmosphere, land was sometimes more valuable if it had a tenant in it. At the moment we are perhaps passing through a peculiar period which may not last, and as presumably taxation is based on long-term principles and considerations, I hope that the Financial Secretary will accept the Amendment.
    7.0 p.m.
    Mr. MacDermot: As the hon. Member for Ludlow (Mr. More) said, we discussed this topic in Committee. On that occasion hon. Members opposite put down a very similar Amendment, which was not selected, and, as has been known to happen before, the subject therefore became a matter for discussion on the Question, That the Schedule be Schedule 6 to the Bill.
    The hon. Member referred to the rather categorical terms in which I rejected the underlying idea in Committee. He is showing an unusual spirit of hope today if he thinks that I have changed my mind on a matter such as this.
    In introducing his Amendment, the hon. Gentleman gave us an interesting dissertation on the history of the agricultural holdings legislation. In doing so he betrayed the mentality which, I suggest, underlies the Amendment, which I would describe as a nineteenth-century landlord's mentality. The hon. Gentleman calmly asserted that the ownership of land is all one and the same thing whether it is an unrestricted freehold ownership or whether the land is tenanted. If a man has land which is subject to a tenancy and then it comes into possession with vacant possession, the suggestion is that his ownership of the land and the value of his holding are the same thing and that it is extremely artificial to suggest that there has been any capital gain.
    I remind the hon. Gentleman that the value of land to a person is the value of his interest in the land, and if a person
    1892
    who is a freehold owner of land decides that he wants to derive an income from it by letting it out, he thereby limits and restricts the capital value of that land, so that when he wants to dispose of it it has a lesser value. The land is less valuable to him because his interest in the land has, by his own action, been qualified and restricted by the tenancy which he has granted from it. Then, when through one means or another, maybe by accident, the tenancy comes to an end and the man has unrestricted ownership, the land is in some cases greatly enhanced in value. As I said in Committee, this is the clearest possible example of a capital gain.
    I also remind the hon. Member that this is a form of investment, more particularly in the case of rented housing, which is deliberately undertaken by many people as a way of obtaining a capital gain. People choose to invest in rent restricted property which is tenanted by elderly people, hoping and expecting that within a few years' time they will get the property with vacant possession and make a considerable capital gain. That is something which up to now has been outside the tax net. The purpose of this Capital Gains Tax legislation is to bring that kind of gain within the tax net.
    This is just another example—I would hold it up as being a classic example—of the type of capital gain on which this tax is intended to bite. I reject the suggestion that hardship will be involved. The owner who finds himself, in the position of having the land with vacant possession has a most realisable asset. It is because he has obtained that gain that he is liable to the tax.
    The Amendment is limited in its scope and is expressed to apply only to the first disposal of the land after Budget day. If the principle is sound, I should have thought that it would have been sound for all time. But I suppose that the idea underlying this restriction to Budget day is that if the owner of the land who granted a tenancy before Budget day had known that there was a Capital Gains Tax coming along which might render him liable to taxation when he made the gain on recovering vacant possession he would never have let the land at all.
    Mr. J. E. B. Hill: He would have entered into a partnership and thereby

    1893
    preserved his freedom of action and his right to get back the farm. He would have struck a blow for landlord and tenant.
    Mr. MacDermot: If the hon. Gentleman is suggesting that we shall see landlords entering into partnerships with their tenants—
    Mr. Hill indicated assent.
    Mr. MacDermot: —that is a most interesting proposition and perhaps one that has considerable attraction. But what we are discussing is the effect upon a tenancy, and what I am suggesting is that we must follow through this hypothesis of a man who before the introduction of the tax had decided that he was not going to let the land. He then either retains it in the form of a partnership, in which case no question arises, or he decides to realise his asset and sell it. What is he then to do with the money? He invests it somewhere else, and again will be liable as from Budget day on any capital gain which he makes from his investment.
    What hon. Gentlemen opposite are seeking to do is to put the agricultural landlord in a privileged position where he is to be exempted when other owners of capital are liable in respect of the capital gains which they make. The suggestion that the effect will be to make landlords less willing to relet their land is, I should have thought, contrary to the facts. The security of tenure provisions for tenant farmers are already in existence, and it is the security which is given under the Agricultural Holdings Act—I thought I saw a tendency on the part of the hon. Member to deplore it—which diminishes the value of the landowner's asset when a tenancy is granted. If a man finds himself with the land in vacant possession and he is concerned that some circumstance may occur to make him liable to Capital Gains Tax as a result of that gain, all he has to do is to relet the land, when it reverts to its former value.
    I find it surprising that there is in many arguments an underlying assumption that everybody will be so anxious never to have to pay any Capital Gains Tax that they will never want to realise any capital gain. If that is the case, they will not be liable to the tax. In fact, it is because people are anxious to realise in some circumstances their capital
    1894
    gains that they will become liable to the tax. But the interest of the landlord who wants to avoid his liability in the case we are considering will lie in reletting the land, when it will, while in his hands, revert to its former value and he will no longer be burdened with the problem of how to avoid Capital Gains Tax.
    Mr. Simon Wingfield Digby: Is the hon. and learned Gentleman aware—I do not know what knowledge he has of agriculture—that there is a growing tendency on the part of landlords, particularly new landlords, to keep their land in hand and farm through a manager, and that that is creating a very serious social problem in respect of tenant farmers who have not the money with which to buy farms but hope to rent them? Every time a farm becomes vacant a tremendous number of people wish to have it. Surely the hon. and learned Gentleman's argument will encourage landlords never to relet their farms but to keep them in hand, and that will create very serious social problems in the countryside.
    Mr. MacDermot: The hon. Gentleman knows that there are other economic forces which have led to the kind of development about which he is talking and which long preceded any question of Capital Gains Tax. In the particular circumstances that I am asked to consider, the incentive of the tax will be to operate the other way round.
    Mr. James Scott-Hopkins: I am sorry that the Financial Secretary has followed the line that he has in rejecting the Amendment. On the whole, it is a fair and sensible one. I would impress on the hon. and learned Gentleman that by rejecting the first Amendment, and particularly the second one, he is encouraging bad practices, as was brought out just now by my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby).
    It would seem that the position in the past has been that if there was a partnership between a landlord and his tenant in this respect and if a tenancy had not been given, then the landlord got the benefit of that earned income—and I repeat, earned income—and on disposal, if the premises were still with vacant possession, he paid no Capital

    1895
    Gains Tax, that is, other than the tax payable on the normal increase in the value of the land or property between the two periods.
    If the landlord had been following good practices and had given a tenancy to his partner he would have been charged at the let value at the time of giving the tenancy. Now, however, if he breaks the partnership it will be on the basis of vacant possession and he would have to pay—as the Bill is drafted—a greater amount of Capital Gains Tax. In that case there would be the consideration of his having received no earned income benefit because it would have been unearned income.
    In both cases, whether the landlord follows good practices or whether he does not, he will suffer under the Bill. I am sure that the Financial Secretary, who is a fair man, will appreciate the injustice of this and will accept Amendment No. 123, if he cannot accept Amendment No. 122. I fear that this provision will encourage bad practices and will encourage landlords not to let but to enter into partnerships. No security of tenure will be given to the tenant and I am sure that insecurity of this sort is what the hon. and learned Gentleman and I both wish to avoid.
    I fear, too, that the Financial Secretary is trying to draw too fine a distinction when considering these Amendments. He is trying to equate them with the possibility of placing the agricultural landlord in a special position. I trust that he will realise that the matter is narrowly defined and that such a landlord would be in no better a position than any other landlord in similar circumstances, except that he would be completely circumscribed, as I pointed out in Committee.
    The 1947 and 1948 Acts completely removed from the landlord his right to

    Compensation and insurance money

    13.—(1) If the recipient so claims receipt of a capital sum within paragraph (a), (b), (c) or (d) of section 21(3) of this Act derived from an asset which is not lost or destroyed shall not be treated for the purposes of this Part of this Act as a disposal of the asset if—

    5

    (a) the capital sum is wholly applied in restoring the asset, or

    (b) the capital sum is applied in restoring the asset except for a part of the capital sum which is not reasonably required for the purpose and which is small as compared with the whole capital sum, or

    (c) the amount of the capital sum is small, as compared with the value of the asset, but, if the receipt is not treated as a disposal, all sums which would, if the receipt had been so treated, have been brought into account as consideration for that disposal in the computation under this Schedule of a gain accruing on the disposal shall be deducted

    give notice to his tenant. My hon. Friends and I welcome that step and the result has been that agricultural tenants have had a greater degree of security of tenure. However, we must remember that, as a result of the passing of those Acts, the relationship between the landlord and tenant was radically changed. The Financial Secretary accepted this on an earlier occasion, as he accepted the fact that this change did not apply in any of the other spheres which are concerned with the Capital Gains Tax.
    Because a totally different situation was created when the Bill was introduced—or even before that, with the Budget Statement—my hon. Friends have tabled the Amendment in the hope that even at this late stage we can persuade the hon. and learned Gentleman to be more reasonable. If he cannot accept Amendment No. 122, I trust that he will consider Amendment No. 123, which is particularly concerned with partnerships and in a much narrower way. That Amendment deals with a glaring injustice and shows that if the hon. and learned Gentleman does not accept our proposal he will be encouraging bad agricultural husbandry practices. He would be striking a blow at the agricultural industry, which is something I am sure he does not want to do.
    Perhaps he will take further advice on the matter. I hope that he will realise the blow that will be caused to agriculture if our proposal is not accepted. If he cannot accept Amendment No. 122, I trust that he will accept Amendment No. 123, for it is much more narrowly drafted and would greatly improve the Bill.
    Amendment negatived.
    7.15 p.m.
    Mr. MacDermot: I beg to move Amendment No. 83, Schedule 6, in page 63, line 48, at the end to insert:

    from any expenditure allowable under this Schedule as a deduction in computing a gain on the subsequent disposal of the asset.

    15

    (2) If, in a case not falling within sub-paragraph (1)(b) above, a part of a capital sum within paragraph (a) or paragraph (b) of section 21(3) of this Act derived from an asset which is not lost or destroyed is applied in restoring the asset, then if the recipient so claims, that part of the capital sum shall not be treated as consideration for the disposal deemed to be effected on receipt of the capital sum but shall be deducted from any expenditure allowable under this Schedule as a deduction in computing a gain on the subsequent disposal of the asset.

    20

    25

    (3) If an asset is lost or destroyed and a capital sum received by way of compensation for the loss or destruction, or under a policy of insurance of the risk of the loss or destruction, is within one year of receipt, or such longer period as the inspector may allow, applied in acquiring an asset in replacement of the asset lost or destroyed the owner shall if he so claims be treated for the purposes of this Part of this Act—

    (a) as if the consideration for the disposal of the old asset were (if otherwise of a greater amount) of such amount as would secure that on the disposal neither a loss nor a gain accrues to him, and

    30

    (b) as if the amount of the consideration for the acquisition of the new asset were reduced by the excess of the amount of the capital sum received by way of compensation or under the policy of insurance, together with any residual or scrap value, over the amount of the consideration which he is treated as receiving under paragraph (a) above.

    35

    (4) A claim shall not be made under sub-paragraph (3) above if part only of the capital sum is applied in acquiring the new asset but if all of that capital sum except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the old asset is so applied, then the owner shall if he so claims be treated for the purposes of this Part of this Act—

    40

    (a) as if the amount of the gain so accruing were reduced to the amount of the said part (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain), and

    45

    (b) as if the amount of the consideration for the acquisition of the new asset were reduced by the amount by which the gain is reduced under paragraph (a) of this sub-paragraph.

    (5) This paragraph shall not apply in relation to a wasting asset.

    Mr. Speaker: I suggest that it would be convenient to discuss at the same time Amendment No. 120, Clause 21, in page 20, line 25, at end insert:
    (11) Where, under the provisions of subsection (3) of this section, there is a disposal of assets and those assets are agricultural or forestry land or fixed equipment which at the time of the disposal is let, then the capital sum following within the terms of subsection (3) of this section shall be treated as if it constituted a consideration within the scope of section 31 of this Act, and the owner of the assets as if carrying on a trade (notwithstanding that the letting of agricultural or forestry land does not for the other purposes of this Part of this Act constitute a trade), and the assets disposed of, and the other assets subsequently acquired and put into use, as if they satisfied the conditions of the said section 31. For the purposes of this subsection "agricultural land" and "fixed equipment" shall have the meaning assigned to these terms by sections 1 and 94 of the Agricultural Holdings Act 1948, and "forestry land" means any woodlands in the United Kingdom which are occupied together with, and wholly or mainly for the purposes of, such woodlands.
    Mr. MacDermot: During our debates in Committee a number of hon. Members were concerned to ensure that the Bill made provision for compensation payments for damage to be excluded from
    1898
    the scope of the Capital Gains Tax to the extent that they were ploughed back into the replacement or restoration of the asset. The Amendment is designed to do that.
    It is a somewhat complicated Amendment and I will try to explain its provisions. It proposes to insert a new paragraph 13 into the Schedule to do two things. The first is that in the case of an asset which is not lost or destroyed, it allows the taxpayer to claim that a capital sum should be treated not as a disposal of that asset in whole or in part but as reducing the acquisition cost of the asset in question. Three tests must be satisfied before a claim of that nature can be allowed. First, the capital sum must be wholly applied in restoring the asset or, secondly, it must be so applied, except for a part of it which is not reasonably required for that purpose and which is small in comparison with the amount of the capital sum as a whole or, thirdly, the capital sum itself must be small in comparison with the value of the asset.
    I will give some examples of the kind of situation which could arise and to which these provisions would be applicable. On ecould imagine damage to an

    1899
    asset, say by fire, and the insurance money is paid out in respect of the damage and the whole of the money is used on the restoration of the asset. In that case there will be no liability to charge. Secondly, if one takes a similar case of damage and the insurance money is not all used to restore the damage, then if there is only a small part which is unused, the liability in respect of that small part will be deferred until eventually there is a disposal of the whole asset.
    The third illustration which I will give is one which was raised by the right hon. Member for Rushcliffe (Sir M. Redmayne) in Committee; the case of a land owner who grants wayleave or easement across his land where there is theoretically and in fact a small realisation of the capital value. Only a small capital gain may be involved, and it may be small in relation to the total value of his land. If that is the case the effect of these provisions will be to defer any liability in respect of that capital gain until such time as there is a disposal of the whole of the estate.
    One may get the case where a part of the compensation which is not used to restore an asset remains, as it were, in the pocket of the owner. When that part is not small compared with the whole capital sum and where he has realised a substantial part of his capital gain, then the part of the compensation which was applied to restore the asset would be deducted from the cost and would be balanced by an allowance for the expenditure undertaken in restoring it; the remainder would be treated as a part disposal and would be taxed.
    I suggest that these results are reasonable and do not offend against the general principle that the incidence of the Capital Gains Tax should not be such that a man is not able, out of the compensation which he receives, to replace or restore his asset.
    Subsections (3) and (4) deal with the case of an asset which is lost or destroyed. If in that situation the owner of the asset applies the compensation in acquiring a replacement asset within one year of the receipt of the compensation—and the one year may be extended in special circumstances—then, if he so claims, he is to be treated as if no loss or gain had accrued on the
    1900
    disposal of the old asset, but as if the cost of the new asset was reduced by any gain which would have been taxed if the receipt of the compensation had been treated as the disposal of the old asset plus any scrap value of the old asset.
    I was asked yesterday by my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) what the effect of the word "replacement" was in this context, and he raised the question of the replacement of a work of art. Most works of art, by definition, are unique, and, it could be argued, irreplaceable. We do not intend to and the Revenue will not apply "replacement" in that sense. They will apply an ordinary, sensible, commonsense test to the matter and if a painting is destroyed and another painting is acquired in its place, that will come within the term "replacement".
    Subsection (5) provides that these provisions are not to apply to wasting assets, and there was an Amendment to omit this, so I ought to explain that the reason for it is simply that, by definition, a wasting asset is one where the original cost wastes away to nothing over the predictable life of the asset, and any Capital Gains Tax has to be charged in such cases at the time when the capital sum is received. The reason is simple. To deduct the capital sum from the cost of the asset would do no more than hasten the process by which the cost wastes away, and the tax on the capital gain would as a result be lost in perpetuity.
    I apologise for wearying the House with a somewhat tedious explanation of complicated provisions, but it may be of interest to some people outside the House.
    Mr. Speaker: I think it is convenient for the hon. Member for Manchester, Cheetham (Mr. Harold Lever) to speak before I call the Amendment.
    Mr. Harold Lever: I do not wish to speak before the Amendment is called, Sir.
    Mr. Scott-Hopkins: I must confess that I listen with wonderment and amazement to the Financial Secretary whenever he is discussing this particular subject. Last night, we had a splendid run round the course with him. I am not certain what course it was, because he lost me halfway round, and he is doing the same thing this afternoon. I think that my hon.

    1901
    Friends will be taking up those parts of his explanation which sounded more like "Alice in Wonderland" than ever before.
    In the initial drafting of the Amendment there was some doubt as to whether it included fixed equipment as defined in the Agricultural Holdings Act, though I think that there was some argument that it might have done so. If the Financial Secretary will say that in the new drafting "the assets" has a very much wider definition—because I think that it mast cover the point completely, although there was some doubt in our minds why the Amendment was put down—I will not move the Amendment.
    Mr. MacDermot: Yes, it has.
    Mr. Scott-Hopkins: In that case, I can turn to the actual Amendment the hon. and learned Gentleman is himself moving. This concerns compensation, and it appears to provide a satisfactory solution for part disposals.
    Mr. Speaker: We are heading for confusion, I think. If I have understood what the hon. Gentleman is saying, the position is that he does not intend to move the Amendment. If that is so, he must ask for leave not to move it.
    Mr. Scott-Hopkins: Then I beg leave not to move that particular Amendment. However, I did understand you to say, Mr. Speaker, that we were also discussing Amendment No. 120.
    Mr. Speaker: I had misunderstood. I beg the hon. Gentleman's pardon.
    Mr. Scott-Hopkins: I do not wish to move Amendment No. 120 formally or to discuss it. However, I would like to say a few words about the Amendment which the Financial Secretary himself has moved, because it is relevant and germane to what I had intended to say.
    It seems satisfactorily to dispose of the point which arose and to which the Financial Secretary referred just now about disposals of large or small assets. This is of particular value with reference to mineral workings as well as to such minor disturbances as would arise in the case of roads, pipelines, and so on. To arrive at the valuation of a part, one has to value the whole, and the resultant valuation for this purpose would be an
    1902
    expensive business. I hope that the Financial Secretary will look at that.
    Amendment No. 120 refers to moneys received in compensation, or insurance payments for other reasons than those set out in subsection (2) of Clause 21, and it relates to Clause 31 as well. Under the terms of that Clause, a trader can reinvest moneys and escape liability to Capital Gains Tax. However, in those particular circumstances, the landlord engaged in the letting of agricultural land or forestry land is not a trader within the meaning of that Section, as we have already discovered.
    As a result, if a landlord receives an insurance payment following a total or partial loss of agricultural land or fixed equipment which is let, because he is not a trader he is prohibited from reinvesting the moneys without the penalty of paying Capital Gains Tax if they are invested in assets other than those destroyed. It could well be that the landlord would want to repair some other building with those moneys, but he would not be allowed to do it under the existing definition. That was the main point that my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne) and I put forward in our Amendment to the Financial Secretary's Amendment.
    Under the definition, that person can replace the asset as it stood, but he cannot reinvest in an alternative asset on the same farm, as we say he should be able to do, and as he could do under Clause 31. There is an anomaly here, and that is why we put our Amendment down. I hope that the Financial Secretary will see the reason for it. It is important that it should be established how exactly it will work.
    Mr. Harold Lever: It is to be welcomed, from every point of view that this Amendment should be put down. It mitigates quite substantially the original ferocity of the Clause, which deemed a man to have disposed of his asset at a profit when he had it burned and merely collected the insurance money. I would not like my gratitude to overflow in such bounteousness as to imply any approval in principle of Clause 21. That Clause has been sufficiently debated, and the Amendment is a significant and substantial mitigation of hardship.

    1903
    I ask my hon. and learned Friend to reflect whether the exercise was really worth while. He has added a substantial chapter to our tax law for the purpose of treating the revenue which comes to a man, not from his assets but from his insurance policy, as a capital gain from an asset. In consequence, the Inland Revenue inspectors will have to learn a complex chapter of the law. The hon. and learned Gentleman must bear in mind that those inspectors already have a formidable burden placed upon them by our new legislation and that we ought to keep it within some bounds.
    7.30 p.m.
    I am also troubled by the fact that the wording is rather loosely drawn. My hon. and learned Friend has given me an assurance—I know with full sincerity and candour—that "replacement of the asset" will be interpreted sensibly. I do not know what "sensibly" means here. I know that my hon. and learned Friend would interpret it sensibly, and that most inspectors of taxes, if told to do so will interpret it sensibly, but I think that my hon. and learned Friend should consider issuing a standard directive to apply to all parts of the country when this provision comes into force.
    Is it a "sensible" replacement of a lost painting if, instead of buying a painting, I buy a sculpture? I may have a Degas, which is burnt. I get £20,000, but it is difficult to find something to replace the painting—I have to find it within 12 months. If I fail but, instead, find a satisfactory sculpture, would the Inland Revenue regard that as a sensible replacement, not prejudicial to the interests of the Revenue? We should have a clear definition of replacement.
    There is also the question of partial restoration. My valuable painting, worth £100,000, may catch fire. As a result of a corner being burnt off, it is thereafter probably worth only £20,000 in the market. The insurance company pays me £80,000 as compensation for the loss I have suffered. I may need to spend only a fraction of that sum in restoring the corner of the painting. What am I to do to get the relief offered in the Amendment in respect of, say, £79,000? Have I to lavish all that money on the corner of a painting that cannot be restored, or am I allowed to buy another
    1904
    painting, or must I treat myself as having realised a partial gain because I have received £79,000 or £80,000 compensation for the diminution in the market value of my asset because of damage?
    Will my hon. and learned Friend help me here? Am I trapped—because the asset has been only partly damaged—into paying the tax because I cannot replace an asset that has not been totally destroyed, and where compensation is not an assessment of the cost of putting it right—because it cannot be put right—but an estimate of the depreciation in the capital value of the asset? In those circumstances, would it be possible for me, as I now have a burnt Rembrandt with a corner missing, to use the other £80,000 to buy another, small Rembrandt and then be deemed not to have had a partial depreciation in that Rembrandt?
    I regret having to trouble my hon. and learned Friend with these questions, and I also regret that the general public have to be troubled with these questions.
    Mr. Peter Walker: I beg to move, as an Amendment to the proposed Amendment, in line 46, to leave out subparagraph (5).
    I am sure that the House has listened with sympathy to the account of the potential ravages to the art collection of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) —
    Mr. Lever: Purely hypothetical.
    Mr. Walker: I hope that the Financial Secretary will be able to put the hon. Gentleman's mind at rest, lest any of his more valuable paintings are damaged.
    The hon. Member for Cheetham is one of those who yesterday pointed out what a complete nonsense the Government's attitude to insurance payments has been, and although it would be out of order for me to discuss Clause 21, which was discussed yesterday, the fact is that this entire Government Amendment is required to try in some way to repent for what has been a basically completely wrong principle. I say with sincerity that there are many parts of this Bill with which I have disagreed, and probably the disagreements have been due to political attitudes, and so on, but I think that this major part of the Bill is a fundamental nonsense of the first order. I

    1905
    therefore very much regret that we should have imposed on us an Amendment that has the aim somewhat to reduce that nonsense.
    Sub-paragraph (5) of the Government Amendment relates to the exclusion from the provisions of the paragraph of wasting assets. The Financial Secretary said that by its very nature a wasting asset is one that diminishes in value but, as defined by the Bill, a wasting asset may be an asset which, in certain possibilities, reduces in vail, but the items specified in paragraph (9) of Schedule 6 as being wasting assets are all items which should enjoy the benefits of this provision.
    First of all, paragraph 9(1,b) states:
    "… animals shall not be regarded as wasting assets so long as they are immature …"
    There must be mature animals which will be insured, and it could well be that payments under an insurance policy could result in a capital gain. The owner of the mature animal might immediately reinvest in a similar mature animal of the same age, and wasted to the same extent, but not enjoy the benefit of this Clause. The same thing applies to sub-paragraph (c), relating to property involved in a life tenancy, and to sub-paragraph (b), which relates to plant and machinery.
    There could be leasehold property with a lease of less than 50 years, where the wasting asset provision would apply, yet there would have been a capital gain at the time of the insurance payment, and although the person invests in a similar leasehold property he will not enjoy the benefit of the Clause.
    The deletion of sub-paragraph (5) would slightly improve the provisions of an Amendment that I regard as wholly unnecessary in the sense of making capital gains on insurance payments subject to Capital Gains Tax. To impose Capital Gains Tax upon something that has resulted from the payment of premiums is wrong in the first place, but, the Government having tried to mitigate the wrong, I believe that the mitigation would be improved by the deletion of the subparagraph.
    Mr. MacDermot: Perhaps I may have permission to speak again. First, I can tell the hon. Member for Cornwall, North
    1906
    (Mr. Scott-Hopkins) that the particular matter to which he referred in speaking of this Amendment is largely covered by the Government's Amendment, or is to a substantial extent. Dealing with the question of insurance money in the particular case to which the hon. Gentleman referred, if the landowner who has suffered damage or loss to his property uses the insurance moneys to replace the assets, he will be able to enjoy the advantage of the new paragraph.
    Applying this to agriculture, I would say again that the intention is to make a sensible approach to the problem. If, for example, certain farm buildings have been destroyed, the requirement will not be that identical farm buildings must be put up in their place. The owner will no doubt want to take the opportunity to put up a more modern type of buildings, and there is no reason why he should not do so if it amounts substantially to a replacement of the old buildings. A sensible approach would be made, but this would not enable him to use those moneys for some quite other type of investment elsewhere. Therefore, it will certainly not be as wide as the kind of provisions we find in Clause 31. I must make that quite clear.
    I sometimes feel that I should put wax in my ears when my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) is speaking because the temptation to be drawn on to the rocks by the carefully thought out examples upon which he entices me to try to comment are such that Ministers ought to avoid. [HON. MEMBERS: "Why?"] For a reason which I have stated a number of times during our discussions. All that it is right or sensible for me to try to do in these matters is to state the principles underlying a Clause or Amendment and to say again the principles upon which it is proposed to administer it if the House sees fit to accept them. It would always be a mistake to try off the cuff to give an answer to detailed borderline cases carefully thought out, which are the sort of problems which will have to be worked out in the course of the application of this or any similar sort of legislation.
    My hon. Friend said that he was glad to hear that the Inland Revenue—whom yesterday, I think, he called pedants—would be sensible in the administration

    1907
    of these provisions. He asked about replacement of a Dégas. He asked a question about initial damage to a Rembrandt. I find it difficult to follow through the circumstances of his particular illustrations, but in any event I shall not be drawn into trying to comment upon it.
    The hon. Member for Worcester (Mr. Peter Walker) spoke in support of his Amendment to leave out sub-paragraph (5), which deals with wasting assets. I do not think he challenged what I said—that the provisions in this sub-paragraph, which grant relief which I think have been generally welcomed by the House, would not be apt to be applied to wasting assets. The form in which they are cast would be impossible to apply to wasting assets. Possibly he is the only hon. Member who would be interested in a detailed explanation of the precise reasons for them. I shall gladly explain them to him in greater detail if he wishes.
    The effect, therefore, is that when a wasting asset is destroyed and insurance
    moneys are received, if there has been a capital gain realised at that time—and, of course, it does not follow by any means that there will have been—I am afraid there will be liability to tax on that gain.
    Mr. Peter Walker: If I may have leave of the House to speak again, I must say that the reply by the Financial Secretary was completely unsatisfactory. He must realise that it is completely wrong that if one suffers a loss of what is defined by the Bill as a wasting asset and one replaces it with a similar asset one should not receive the full benefits of this Amendment. I therefore urge my hon. Friends to divide the House.
    Question put, That the words proposed to be left out stand part of the proposed Amendment:—
    The House divided: Ayes 277, Noes 267.

    Division No. 245]

    AYES

    [7.43 p.m.

    Abse, Leo

    Darling, George

    Hale, Leslie

    Albu, Austen

    Davies, S. O (Merthyr)

    Hamilton, James (Bothwell)

    Allaun, Frank (Salford, E.)

    de Freitas, Sir Geoffrey

    Hamilton, William (West Fife)

    Alldritt, Walter

    Delargy, Hugh

    Hamling, William (Woolwich, W.)

    Atkinson, Norman

    Dell, Edmund

    Hannan, William

    Bacon, Miss Alice

    Dempsey, James

    Harper, Joseph

    Bagier, Gordon A. T.

    Diamond, Rt. Hn. John

    Harrison, Walter (Wakefield)

    Barnett, Joel

    Dodds, Norman

    Hart, Mrs. Judith

    Baxter, William

    Doig, Peter

    Hattersley, Roy

    Bellenger, Rt. Hn. F. J.

    Driberg, Tom

    Hazell, Bert

    Bence, Cyril

    Duffy, Dr. A. E. P.

    Healey, Rt. Hn. Denis

    Benn, Rt. Hn. Anthony Wedgwood

    Dunn, James A.

    Heffer, Eric S.

    Bennett, J. (Glasgow, Bridgeton)

    Dunnett, Jack

    Henderson, Rt. Hn. Arthur

    Binns, John

    Edelman, Maurice

    Herbison, Rt. Hn. Margaret

    Bishop, E. S.

    Edwards, Rt. Hn. Ness (Caerphilly)

    Hobden, Dennis (Brighton, K'town)

    Blackburn, F.

    Edwards, Robert (Bilston)

    Holman, Percy

    Blenkinsop, Arthur

    English, Michael

    Howarth, Harry (Wellingborough)

    Boardman, H.

    Ennals, David

    Howarth, Robert L. (Bolton, E.)

    Boston, T. G.

    Ensor, David

    Howell, Denis (Small Heath)

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

    Evans, Albert (Islington, S. W.)

    Howie, W.

    Boyden, James

    Evans, Ioan (Birmingham, Yardley)

    Hughes, Emrys (S. Ayrshire)

    Braddock, Mrs. E. M.

    Fernyhough, E.

    Hughes, Hector (Aberdeen, N.)

    Bradley, Tom

    Finch, Harold (Bedwellty)

    Hunter, Adam (Dunfermline)

    Bray, Dr. Jeremy

    Fitch, Alan (Wigan)

    Hunter, A. E. (Feltham)

    Broughton, Dr. A. D. D.

    Fletcher, Sir Eric (Islington, E.)

    Hynd, H. (Accrington)

    Brown, Rt. Hn. George (Belper)

    Fletcher, Ted (Darlington)

    Irvine, A. J. (Edge Hill)

    Brown, Hugh D. (Glasgow, Provan)

    Fletcher, Raymond (Ilkeston)

    Irving, Sydney (Dartford)

    Brown, R. W. (Shoreditch & Fbury)

    Floud, Bernard

    Jay, Rt. Hn. Douglas

    Buchan, Norman (Renfrewshire, W.)

    Foley, Maurice

    Jeger, George (Goole)

    Buchanan, Richard

    Foot, Sir Dingle (Ipswich)

    Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)

    Butler, Herbert (Hackney, C.)

    Foot, Michael (Ebbw Vale)

    Jenkins, Hugh (Putney)

    Butler, Mrs. Joyce (Wood Green)

    Ford, Ben

    Johnson, Carol (Lewisham, S.)

    Callaghan, Rt. Hn. James

    Fraser, Rt. Hn. Tom (Hamilton)

    Johnson, James (K'ston-on-Hull, W.)

    Carmichael, Neil

    Freeson, Reginald

    Jones, Dan (Burnley)

    Chapman, Donald

    Galpern, Sir Myer

    Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

    Coleman, Donald

    Garrett, W. E.

    Jones, J. Idwal (Wrexham)

    Conlan, Bernard

    George, Lady Megan Lloyd

    Jones, T. W. (Merioneth)

    Corbet, Mrs. Freda

    Ginsburg, David

    Kelley, Richard

    Craddock, George (Bradford, S.)

    Gourlay, Harry

    Kenyon, Clifford

    Crawshaw, Richard

    Gregory, Arnold

    Kerr, Mrs. Anne (R'ter & Chatham)

    Cronin, John

    Grey, Charles

    Kerr, Dr. David (W'worth, Central)

    Crosland, Rt. Hn. Anthony

    Griffiths, David (Rother Valley)

    Leadbitter, Ted

    Crossman, Rt. Hn. R. H. S.

    Griffiths, Rt. Hn. James (Llanelly)

    Ledger, Ron

    Cullen, Mrs. Alice

    Griffiths, Will (M'chester, Exchange)

    Lee, Rt. Hn. Frederick (Newton)

    Dalyell, Tam

    Gunter, Rt. Hn. R. J.

    Lever, Harold (Cheetham)

    Lever, L. M. (Ardwick)

    Page, Derek (King's Lynn)

    Spriggs, Leslie

    Lewis, Arthur (West Ham, N.)

    Paget, R. T.

    Steele, Thomas (Dunbartonshire, W.)

    Lewis, Ron (Carlisle)

    Palmer, Arthur

    Stewart, Rt. Hn. Michael

    Lipton, Marcus

    Pannell, Rt. Hn. Charles

    Stonehouse, John

    Loughlin, Charles

    Pargiter, G. A.

    Stones, William

    Mabon, Dr. J. Dickson

    Park, Trevor (Derbyshire, S. E.)

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

    McBride, Neil

    Parker, John

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

    McCann, J.

    Parkin, B. T.

    Summerskill, Hn. Dr. Shirley

    MacColl, James

    Pavitt, Laurence

    Swain, Thomas

    MacDermot, Niall

    Pearson, Arthur (Pontypridd)

    Swingler, Stephen

    McGuire, Michael

    Pentland, Norman

    Symonds, J. B.

    McInnes, James

    Perry, Ernest G.

    Taverne, Dick

    McKay, Mrs. Margaret

    Popplewell, Ernest

    Taylor, Bernard (Mansfield)

    Mackenzie, Gregor (Rutherglen)

    Prentice, R. E.

    Thomas, George (Cardiff, W.)

    Mahon, Peter (Preston, S.)

    Price, J. T. (Westhoughton)

    Thomas, Iorwerth (Rhondda, W.)

    Mahon, Simon (Bootle)

    Probert, Arthur

    Thornton, Ernest

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

    Pursey, Cmdr. Harry

    Tinn, James

    Manuel, Archie

    Randall, Harry

    Tomney, Frank

    Mapp, Charles

    Rankin, John

    Tuck, Raphael

    Marsh, Richard

    Redhead, Edward

    Urwin, T. W.

    Mason, Roy

    Rees, Merlyn

    Varley, Eric G.

    Mayhew, Christopher

    Reynolds, G. W.

    Wainwright, Edwin

    Mellish, Robert

    Rhodes, Geoffrey

    Walden, Brian (All Saints)

    Mendelson, J. J.

    Richard, Ivor

    Walker, Harold (Doncaster)

    Mikardo, Ian

    Roberts, Albert (Normanton)

    Wallace, George

    Millan, Bruce

    Roberts, Goronwy (Caernarvon)

    Warbey, William

    Miller, Dr. M. s.

    Robertson, John (Paisley)

    Watkins, Tudor

    Milne, Edward (Blyth)

    Robinson, Rt. Hn. K. (St. Pancras, N.)

    Weitzman, David

    Molloy, William

    Rodgers, William (Stockton)

    Wells, William (Walsall, N.)

    Monslow, Walter

    Rogers, George (Kensington, N.)

    Whitlock, William

    Morris, Alfred (Wythenshawe)

    Rose, Paul B.

    Wigg, Rt. Kn. George

    Morris, Charles (Openshaw)

    Ross, Rt. Hn. William

    Wilkins, W. A.

    Morris, John (Aberavon)

    Rowland, Christopher

    Willey, Rt. Hn. Frederick

    Mulley, Rt. Hn. Frederick (Sheffield Pk)

    Sheldon, Robert

    Williams, Alan (Swansea, W.)

    Murray, Albert

    Shinwell, Rt. Hn. E.

    Williams, Clifford (Abertillery)

    Neal, Harold

    Shore, Peter (Stepney)

    Williams, Mrs. Shirley (Hitchin)

    Newens, Stan

    Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)

    Williams, W. T. (Warrington)

    Noel-Baker, Francis (Swindon)

    Short, Mrs. Renée (W'hampton, N. E.)

    Willis, George (Edinburgh, E.)

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

    Silkin, John (Deptford)

    Wilson, Rt. Hn. Harold (Huyton)

    Norwood, Christopher

    Silkin, S. C. (Camberwell, Dulwich)

    Wilson, William (Coventry, S.)

    Oakes, Gordon

    Silverman, Julius (Aston)

    Winterbottom, R. E.

    Ogden, Eric

    Silverman, Sydney (Nelson)

    Woodburn, Rt. Hn. A.

    O'Malley, Brian

    Skeffington, Arthur

    Woof, Robert

    Oram, Albert E. (E. Ham, S.)

    Slater, Mrs. Harriet (Stoke, N.)

    Wyatt, Woodrow

    Orbach, Maurice

    Slater, Joseph (Sedgefield)

    Yates, Victor (Ladywood)

    Orme, Stanley

    Small, William

    Zilliacus, K.

    Oswald, Thomas

    Snow, Julian

    Owen, Will

    Soskice, Rt. Hn. Sir Frank

    TELLERS FOR THE AYES:

    Mr. Lawson and Mr. Ifor Davies.

    NOES

    Agnew, Commander Sir Peter

    Brown, Sir Edward (Bath)

    Currie, G. B. H.

    Alison, Michael (Barkston Ash)

    Bruce-Gardyne, J.

    Dalkeith, Earl of

    Allan, Robert (Paddington, S.)

    Bryan, Paul

    Dance, James

    Allason, James (Hemel Hempstead)

    Buchanan-Smith, Alick

    Davies, Dr. Wyndham (Perry Barr)

    Anstruther-Gray, Rt. Hn. Sir W.

    Buck, Antony

    d'Avigdor-Goldsmid Sir Henry

    Astor, John

    Bullus, Sir Eric

    Dean, Paul

    Atkins, Humphrey

    Burden, F. A.

    Digby, Simon Wingfield

    Awdry, Daniel

    Butcher, Sir Herbert

    Dodds-Parker, Douglas

    Baker, W. H. K.

    Buxton, Ronald

    Doughty, Charles

    Balniel, Lord

    Campbell, Gordon

    Drayson, G. B.

    Barber, Rt. Hn. Anthony

    Carlisle, Mark

    du Cann, Rt. Hn. Edward

    Barlow, Sir John

    Carr, Rt. Hn. Robert

    Eden, Sir John

    Batsford, Brian

    Cary, Sir Robert

    Elliot, Capt. Walter (Carshalton)

    Bell, Ronald

    Channon, H. P. G.

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

    Bennett, Sir Frederic (Torquay)

    Chataway, Christopher

    Emery, Peter

    Berkeley, Humphry

    Chichester-Clark, R.

    Errington, Sir Eric

    Berry, Hn. Anthony

    Clark, William (Nottingham, S.)

    Eyre, Reginald

    Biffen, John

    Cole, Norman

    Farr, John

    Biggs-Davison, John

    Cooke, Robert

    Fell, Anthony

    Birch, Rt. Hn. Nigel

    Cooper, A. E.

    Fisher, Nigel

    Black, Sir Cyril

    Cooper-Key, Sir Neill

    Fletcher-Cooke, Charles (Darwen)

    Blaker, Peter

    Cordle, John

    Fletcher-Cooke, Sir John (S'pton)

    Bossom, Hn. Clive

    Corfield, F. V.

    Foster, Sir John

    Box, Donald

    Costain, A. P.

    Fraser, Ian (Plymouth, Sutton)

    Boyd-Carpenter, Rt. Hn. J.

    Courtney, Cdr. Anthony

    Galbraith, Hn. T. G. D.

    Boyle, Rt. Hn. Sir Edward

    Craddock, Sir Beresford (Spelthorne)

    Gammans, Lady

    Braine, Bernard

    Crawley, Aidan

    Gibson-Watt, David

    Brewis, John

    Crosthwaite-Eyre, Col. Sir Oliver

    Giles, Rear-Admiral Morgan

    Brinton, Sir Tatton

    Crowder, F. P.

    Gilmour, Ian (Norfolk, Central)

    Bromley-Davenport, Lt.-Col. Sir Walter

    Cunningham, Sir Knox

    Gilmour, Sir John (East Fife)

    Brooke, Rt. Hn. Henry

    Curran, Charles

    Glover, Sir Douglas

    1910

    1911

    Glyn, Sir Richard

    Lloyd, Rt. Hn. Selwyn (Wirral)

    Ridley, Hn. Nicholas

    Godber, Rt. Hn. J. B.

    Longden, Gilbert

    Ridsdale, Julian

    Goodhew, Victor

    Loveys, Walter H.

    Roberts, Sir Peter (Heeley)

    Gower, Raymond

    Lucas, Sir Jocelyn

    Rodgers, Sir John (Sevenoaks)

    Grant, Anthony

    McAdden, Sir Stephen

    Roots, William

    Grant-Ferris, R.

    Mackenzie, Gregor (Rutherglen)

    Royle, Anthony

    Gresham Cooke, R.

    Mackie, George Y. (C'ness & S'land)

    St. John-Stevas, Norman

    Grieve, Percy

    McLaren, Martin

    Scott-Hopkins, James

    Griffiths, Sldon (Bury St. Edmunds)

    Maclean, Sir Fitzroy

    Sharples, Richard

    Griffiths, Peter (Smethwick)

    Macleod, Rt. Hn. Iain

    Shepherd, William

    Grimond, Rt. Hn. J.

    McMaster, Stanley

    Sinclair, Sir George

    Gurden, Harold

    McNair-Wilson, Patrick

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

    Hall, John (Wycombe)

    Maginnis, John E.

    Smyth, Rt. Hn. Brig. Sir John

    Hall-Davis, A. G. F.

    Marples, Rt. Hn. Ernest

    Soames, Rt. Hn. Christopher

    Hamilton, Marquess of (Fermanagh)

    Marten, Neil

    Spearman, Sir Alexander

    Hamilton, M. (Salisbury)

    Mathew, Robert

    Speir, Sir Rupert

    Harris, Frederic (Croydon, N. W.)

    Maude, Angus

    Stainton, Keith

    Harris, Reader (Heston)

    Maudling, Rt. Hn. Reginald

    Stanley, Hn. Richard

    Harvey, John (Walthamstow, E.)

    Mawby, Ray

    Stodart, Anthony

    Harvie Anderson, Miss

    Maxwell-Hyslop, R. J.

    Studholme, Sir Henry

    Hastings, Stephen

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

    Talbot, John E.

    Hawkins, Paul

    Meyer, Sir Anthony

    Taylor, Sir Charles (Eastbourne)

    Heald, Rt. Hn. Sir Lionel

    Mills, Peter (Torrington)

    Taylor, Edward M. (G'gow, Cathcart)

    Heath, Rt. Hn. Edward

    Mills, Stratton (Belfast, N.)

    Temple, John M.

    Hendry, Forbes

    Miscampbell, Norman

    Thatcher, Mrs. Margaret

    Higgins, Terence L.

    Mitchell, David

    Thomas, Sir Leslie (Canterbury)

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

    Monro, Hector

    Thompson, Sir Richard (Croydon, S.)

    Hirst, Geoffrey

    Morrison, Charles (Devizes)

    Thorpe, Jeremy

    Hobson, Rt. Hn. Sir John

    Mott-Radclyffe, Sir Charles

    Tiley, Arthur (Bradford, W.)

    Hopkins, Alan

    Munro-Lucas-Tooth, Sir Hugh

    Tilney, John (Wavertree)

    Hordern, Peter

    Murton, Oscar

    Turton, Rt. Hn. R. H.

    Hornby, Richard

    Neave, Airey

    Tweedsmuir, Lady

    Hornsby-Smith Rt. Hn. Dame P.

    Nicholson, Sir Godfrey

    van Straubenzee, W. R.

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

    Noble, Rt. Hn. Michael

    Vaughan-Morgan, Rt. Hn. Sir John

    Hunt, John (Bromley)

    Nugent, Rt. Hn. Sir Richard

    Vickers, Dame Joan

    Hutchison, Michael Clark

    Onslow, Cranley

    Walder, David (High Peak)

    Iremonger, T. L.

    Orr, Capt. L. P. S.

    Walker, Peter (Worcester)

    Irvine, Bryant Godman (Rye)

    Orr-Ewing, Sir Ian

    Walker-Smith, Rt. Hn. Sir Derek

    Jenkin, Patrick (Woodford)

    Osborn, John (Hallam)

    Wall, Patrick

    Jennings, J. C.

    Osborne, Sir Cyril (Louth)

    Walters, Dennis

    Johnson-Smith, G. (East Grinstead)

    Page, John (Harrow, W.)

    Ward, Dame Irene

    Jopling, Michael

    Page, R. Graham (Crosby)

    Weatherill, Bernard

    Jones, Arthur (Northants, S.)

    Pearson, Sir Frank (Clitheroe)

    Webster, David

    Joseph, Rt. Hn. Sir Keith

    Peel, John

    Wells, John (Maidstone)

    Kaberry, Sir Donald

    Percival, Ian

    Whitelaw, William

    Kerby, Capt. Henry

    Peyton, John

    Williams, Sir Rolf Dudley (Exeter)

    Kerr, Sir Hamilton (Cambridge)

    Pickthorn, Rt. Hn. Sir Kenneth

    Wills, Sir Gerald (Bridgwater)

    Kershaw, Anthony

    Pike, Miss Mervyn

    Wilson, Geoffrey (Truro)

    Kilfedder, James A.

    Pitt, Dame Edith

    Wise, A. R.

    Kimball, Marcus

    Pounder, Rafton

    Wolrige-Gordon, Patrick

    King, Evelyn (Dorset, S.)

    Powell, Rt. Hn. J. Enoch

    Wood, Rt. Hn. Richard

    Kirk, Peter

    Price, David (Eastleigh)

    Woodhouse, Hn. Christopher

    Kitson, Timothy

    Prior, J. M. L.

    Woodnutt, Mark

    Lagden, Godfrey

    Pym, Francis

    Wylie, N. R.

    Lancaster, Col. C. G.

    Quennell, Miss J. M.

    Yates, William (The Wrekin)

    Langford-Holt, Sir John

    Ramsden, Rt. Hn. James

    Younger, Hn. George

    Legge-Bourke, Sir Harry

    Rawlinson, Rt. Hn. Sir Peter

    Lewis, Kenneth (Rutland)

    Rees-Davies, W. R.

    TELLERS FOR THE NOES:

    Litchfield, Capt. John

    Renton, Rt. Hn. Sir David

    Mr. MacArthur and Mr. More.

    Proposed words there inserted in the Bill.
    Mr. MacDermot: I beg to move Amendment No. 84, Schedule 6, after "trees", insert "standing or".
    Perhaps it would be convenient also to discuss Amendments Nos. 85 and 86.
    These three Amendments implement an undertaking which I gave in the Committee stage to preserve for woodlands, in relation to the Capital Gains Tax, the existing favourable treatment which they enjoy for Income Tax. We went into the matter in some detail in Committee and I think it is fully covered.
    Mr. Wingfield Digby: These three Amendments, taken together, are of some considerable importance to forestry, in which I must declare an interest. I have an interest in this, in contrast to shipping, where I have none at all. The Financial Secretary gave an undertaking, at about 2 o'clock on the morning of 1st June, that he would take steps to remove the Capital Gains Tax from growing trees. We could never see that there was any case for imposing it in the first instance.
    The first of these Amendments makes he exemption quite clear in the case of

    1913
    growing trees for sale to the timber merchant. The other two are of even greater importance, as they make it quite clear that in no case will the actual growing tree have to bear the Capital Gains Tax. This is a logical position, because I cannot think of anything else which is growing and which bears the tax. I understand the Timber Growers' Organisation have examined these Amendments and are quite satisfied that they cover the case completely. I am therefore glad to be able to welcome the Amendments which I think are only right.
    It might be worth mentioning to the House that last year we spent £545 million on the import of timber and timber products, which is more than double the total amount that we have spent since 1919 on the Forestry Commission. It will be seen that our efforts towards our timber requirements are not very great, and that is why we are importing 90 per cent. of timber required. These Amendments deal with the private sector of the industry, which has a very big part to play. Planting by private owners is very considerable. In 1961 it was not less than 36,800 acres. I am sure those who are interested in forestry, and interested in saving imports of timber, would wish to see this planting encouraged.
    Had this Amendment not been moved there would have been two consequences. The first would have been that far less timber would have been grown, and the second would have been that far more trees would have been felled during the lifetime of an owner, so that we should have seen a depletion of our woodlands. At least we are grateful to the Government on this occasion for saying, "Woodman, spare that tree". I welcome this Amendment, which I think is going to give more confidence to those who plant timber. Unlike farmers, they have no guaranteed market and no guaranteed prices. Planting trees which will be of benefit only in 60 or 100 years' time is a considerable act of faith in the future. We are today benefiting from trees which were planted by our forefathers.
    I am sure that there are many hon. Members on both sides of the House who have an affection for trees and who believe that it is right to encourage, or at any rate not to discourage, their
    1914
    planting. I therefore welcome these Amendments.
    Amendment agreed to.
    Further Amendments made: Schedule 6, in page 66, line 23, at end insert "under Schedule B".
    In line 27, leave out sub-paragraph (3) and insert:
    (3) In the computation under this Schedule of the gain accruing on a disposal of woodland in the United Kingdom so much of the consideration for the disposal as is attributable to trees growing on the land shall be excluded.—[Mr. MacDermot.]
    8.0 p.m.
    Mr. MacDermot: I beg to move Amendment No. 164, Schedule 6, in page 67, line 36, at the end to insert:
    (2A) For the purpose of ascertaining the market value of any shares or securities in accordance with sub-paragraph (2) above—

    (a) section 40(3)(a) of this Act shall have effect as if for the words "one-quarter" there were substituted the words "one-half", and as between the amount under paragraph (a) and the amount under paragraph (b) of the said section 40(3) the higher, and not the lower, amount shall be chosen;

    (b) section 40(4) of this Act shall have effect as if for the reference to an amount equal to the buying price there were substituted a reference to an amount half-way between the buying and selling prices;

    (c) where the market value of any shares or securities not within the said section 40(3) falls to be ascertained by reference to a pair of prices quoted on a stock exchange, an adjustment shall be made so as to increase the market value by an amount corresponding to that by which any market value is increased under paragraph (a) above.

    This Amendment, which is of some importance, has been tabled as a result of a point raised by the hon. Member for Worcester (Mr. Peter Walker) in Committee. Clause 40(3) as originally drafted laid down that the way to assess the market value on Budget day of shares in unit trusts was to calculate a figure of a quarter up from the lower price of the Stock Exchange quotation, or the mean of the bargains for the day if that be lower. The criticism was made that this would be unduly severe and, in its application to Budget day valuations, would give the Revenue a somewhat artificially increased gain in the event of later disposal.
    I think that the estimate which the hon. Member for Worcester made of the gain was slightly exaggerated, but we take his point as being valid. We think

    1915
    it right, therefore, to take instead the halfway figure between the highest and lowest prices or the mean of the bargains, whichever is the lower. I think that in this way we will get a fairer Budget day valuation with the result that on subsequent disposals a better assessment of the gain involved will be given.
    Mr. Peter Walker: I am grateful to the Financial Secretary for this Amendment. I accept his point that perhaps the estimates which I made were slightly exaggerated. I feel rather guilty at perhaps having robbed the Treasury of a potential taxable capital gain of a little less than £477 million. I appreciate the generous way in which the hon. and learned Gentleman moved the Amendment. I forgive him for the fact that at one o'clock in the morning of 31st May, when replying to an almost identical Amendment, he said:
    "I cannot accept the arguments advanced by the hon. Member for Worcester (Mr. Peter Walker). They are based on a fallacy."—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1371.]
    I am pleased that he has now recognised that they are not based on a fallacy. I am sure that justice has been done by this Amendment.
    Amendment agreed to.
    Mr. MacDermot: I beg to move Amendment No. 87, Schedule 6, in page 67, line 48, to leave out "but" and to insert:
    "and accordingly the amount of the gain or loss accruing on the disposal shall be computed without regard to the provisions of this Part of this Schedule except that".
    This is a drafting Amendment.
    Mr. Heath: I wish to ask whether this Amendment is only a drafting Amendment. The same applies to Amendments Nos. 88, 89 and 90. They are all connected with the same part of the Schedule. This is an extremely difficult section of the Schedule to understand, and the Amendments seem to make it even more difficult to understand in many ways.
    Those who have been studying the matter with great care, particularly the actuaries, find themselves completely at a loss to understand what this part of the Schedule means. It would therefore be of great assistance to them and, in particular, to those concerned with the gilt
    1916
    edged market if the Financial Secretary could tell us exactly what it will mean after these Amendments are made to it.
    Mr. MacDermot: I should be assisted if the right hon. Gentleman could tell me what his difficulty is. I do not know whether he wants me to go back and to give a full account of the whole paragraph. Obviously he has a particular point in mind which I should be glad to try to answer. Alternatively, if it is a detailed matter, if he cares to get in touch with me I shall be glad to try to assist.
    Mr. Heath: May I, with the leave of the House, say that the problem arises, in particular, when one takes Amendments Nos. 88, 89 and 90 together. However, these are extremely detailed points and, if the Financial Secretary is prepared to explain them to me in writing later, I will put them to him.
    Amendment agreed to.
    Mr. MacDermot: I beg to move Amendment No. 88, Schedule 6, in page 68, line 8, after "of" to insert "(a)".
    This Amendment, and Amendments Nos. 89, 90 and 91, which can be taken with it, are all drafting Amendments, connected with these rather complicated provisions. They are intended to make them clearer, and, in spite of what the right. hon. Member for Bexley (Mr. Heath) said, I hope that they do that.
    Amendment agreed to.
    Further Amendments made: Schedule 6, in page 68, line 9, after "acquired", insert:
    "and
    (b) identifying the shares or securities held on that date with shares or securities subsequently disposed of, and distinguishing them from shares or securities acquired subsequently".
    In page 68, line 13, after "shares", insert "or securities".
    In page 69, line 9, leave out "but" and insert:
    "and accordingly the amount of the gain or loss accruing on the disposal shall be computed without regard to the provisions of this Part of this Schedule except that".—[Mr. Mac-Dermot.]
    Mr. J. E. B. Hill: I beg to move Amendment No. 230, Schedule 6, in page 70, line 21, to leave out "not be earlier than 6th April 1945" and insert:
    "be the beginning of the period of ownership".

    1917
    This Amendment refers to the time apportionment formula which was first mentioned in the Budget speech on 6th April when the Chancellor of the Exchequer said:
    "For other assets"—
    that is, other than quoted shares and market valued securities—
    "I do not propose that there should be an immediate valuation. Instead, my solution is that the taxable fraction of the total gain realised—that is, the part which accrues after today—shall be arrived at by a simple process of time apportionment."
    A little later he said:
    "Where an asset was acquired more than 20 years ago, however, the period of time between acquisition and disposal will be treated as the period between today"—
    that is, Budget day—
    "and the date of disposal plus 20 years. I think that 20 years is far enough to look back for this purpose."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 248.]
    There is some confusion as to what that meant and whether looking back no further than 20 years was confined to time or included value, but it is clear that the Bill and its accompanying memorandum mean that the value to be taken for this computation is the value at the time of the original acquisition before or after 1945, and that value is to be the base value for computing the capital gain.
    Sub-paragraph (6) of paragraph 23 says that the period over which the gain or the loss shall be spread shall not begin before 6th April, 1945. The object of the Amendment is to substitute the true period of ownership for this arbitrary limitation to 20 years.
    This limitation is important when making the calculation of liability for Capital Gains Tax. By the formula which can be seen in sub-paragraph (3) of paragraph 23 of the Schedule, there is a rather complicated formula of T/P+T, where T is the time from Budget day to disposal of the asset—that is, the numerator of the fraction—and P in the denominator is the time from acquisition to Budget day, plus T, again the time from 1965 to disposal. That fraction is applied to th notional capital gain. Where the asset was acquired before 1945, it will be found that the fraction of Capital Gains
    1918
    Tax is markedly higher than if the true period of ownership were allowed.
    It is, perhaps, easier to explain this rather complicated conception by an example. Of many examples, I hope that this one is reasonably simple. Suppose that one has an asset which was acquired in 1925 and is sold in 1970. The time of ownership before Budget day would be 1965 less 25, or 40 years. The time of ownership between Budget day and disposal would be from 1965 to 1970, or 5 years. Therefore, under the Bill the numerator of the fraction would be 5 and the denominator would be, not 40, which is the actual time of ownership, but limited by sub-paragraph (6) to 20 years. Therefore, the denominator would be 20 plus 5 and the fraction 5/25, or one-fifth, as the relevant fraction to apply to the capital gain. If, on the other hand, the Amendment were accepted, the denominator in the fraction would be 40 plus 5 and the fraction 5/45, or one-ninth, which 45, is little more than half the liability to tax under the existing Schedule.
    Many other cases could be worked out, but to save time I will summarise by saying that in all cases the Capital Gains Tax is higher than if the true dates were chosen. Therefore, we say that this is an element of retrospection despite the general belief that this tax contains no retrospection, which was confirmed by the Financial Secretary yesterday, when he said:
    "There is no retrospective element in the Capital Gains Tax. It applies only as from Budget day and there is no taxation of any pre-Budget day gains."—[OFFICIAL REPORT, 6th July, 1965; Vol. 715, c. 1533.]
    I would say that there is here an element of retrospection, because it is hitting more severely the asset that is held longer and which has grown over a longer period than an asset which has been held for a shorter period.
    The Financial Secretary may say that if the taxpayer dislikes the time apportionment rule, he can opt for a Budget day—1965—valuation as an alternative. When one thinks of actual circumstances, however, there may be many cases when it is not possible to get a 1965 valuation, or, at least, one that is not markedly unfavourable, often through temporary circumstances.

    1919
    8.15 p.m.
    To take the example of farmland, on Budget day, 1965, a farm might be under a severe disability, which might only be temporary but would make it difficult to value or, if it had to be valued, might result in an unfairly low valuation. I have in mind a farm that might recently have had a severe outbreak of foot-and-mouth disease or which may be under threat of a motorway route going right through it and destroying it as a farm.
    Perhaps the most likely case will in future arise precisely because the Financial Secretary rejected an earlier Amendment in not disregarding the fact that a farm was tenanted when valuing the land. If a farm were purchased in, say, 1925 with vacant possession and subsequently let so that it was tenanted at Budget day, 1965, and if in 1970 or later it had vacant possession, there would be a marked difference in value between Budget day, 1965, and the date of disposal, so marked that it would be clearly against the taxpayer's interest to adopt the alternative Budget day option.
    The same considerations and similar difficulties will arise in respect of other assets and chattels, particularly works of art, for which it may be impossible to get a satisfactory Budget day valuation. In each case the taxpayer will have to revert to the method of the time apportionment with its existing discrimination against assets acquired more than 20 years before Budget day. Those assets, however, might often be the ones that have been held without any thought of disposal—for example, family portraits or an agricultural estate which a family is trying to keep intact and to pass on as a going concern from generation to generation.
    It may be argued that the 20-year limit is necessary because one has to stop somewhere for reasons of administrative convenience. I suggest that there is no argument, certainly no overwhelming argument, for that decision. Admittedly, this tax will involve complicated calculations. In any event, one would have to find the original value at the time of acquisition, and that can hardly be done without ascertaining at the same time the date of acquisition. I suggest, therefore, that the taxpayer should be allowed to put in the correct date and thereby have a fraction which works not more markedly
    1920
    in his favour than any other fraction where the asset has been held for less than 20 years. This calculation will operate only once in respect of each chargeable asset on the occasion of its first disposal after Budget day, 1965.
    It is desirable that any new tax, particularly a tax as sweeping, as drastic and as novel in conception as this one, should in its detail operate as fairly as possible between different taxpayers in the light of the principles on which the tax is said to be based. I understood the idea to be that there would be no retrospection. Although I agree that it is arguable exactly how retrospective this tax is, I regard it as incontrovertible that there is an element of retrospection. For these reasons, the Amendment should be accepted.
    Mr. Nicholas Ridley: I should like to support my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill) because I referred to this on Tuesday night when the Financial Secretary was good enough to wind up the debate we had on chattels and at that time I said that I was thoroughly unhappy about the time apportionment formula, and this seems the moment to raise the point which I have in mind.
    The Financial Secretary was very pleased with the time apportionment formula and thought it very fair and he thought it would encourage people to accept the tax because it was an alternative to the valuation on Budget day. I personally feel one very great disadvantage of the formula remains. For a long past valuation, for something which was acquired 60 or 80 years ago, it is necessary, to have the time apportionment valuation, to value it at the time of its acquirement those many years ago, and that, I think, is a very much more difficult and unfair thing to ask the taxpayer to do than to ask him to accept the Budget day 1965 valuation, when it is much easier to get somewhere near the right point. With this formula which my hon. Friend mentioned T over P+T, there is really an element of retrospection coming in, because the figure P in the bottom half of the fraction is limited by Clause 23(6) to 20 years ago, though the actual period may have been 46, 60 or 70 years, to be within the scope of a man's lifetime. Nevertheless, because the Government are

    1921
    limiting the bottom half of the fraction to an arbitrary period of 20 years from Budget day in the bottom half of the fraction it seems to me it must work against the interests of those who have possessed objects for a long time, longer than 20 years. There is no complaint in the case of possessions owned for 20 years or less, but where the possession is of older origin there must be an element of retrospection.
    I will give another example from chattels to support my hon. Friend's case. Suppose that a picture worth £10,000 was inherited in 1895 and that it was sold or got rid of for £50,000 in 1975, in that 80-year period there was a gain of £40,000, an ascertainable gain, which is what we are considering. On the facts of the case, the Capital Gains Tax would have been, in effect, only for 10 out of those 80 years. Therefore, one would expect that man to pay one-eighth or 10 over 80 of the gain which would amount to £5,000, but as the Schedule is drafted the portion of the gain which he has to pay is 10 over 30, or one-third, making the total sum of £13,333 and that means he is being called upon to pay tax of £8,333 more on the gain than if the thing were organised on the principle of the genuine straight-line basis. So that £8,333 extra is retrospective and that cannot be denied.
    I cannot for the life of me understand how the Financial Secretary came on Tuesday morning—or was it Tuesday night?—to claim that this tax was not retrospective. As he leaves this formula with the limiting date of April, 1945, there is bound to be a retrospective element, and I urge him most strongly to live up to his undertaking and to his desire not to have this tax made retrospective, and to accept this Amendment which, I believe, would do the trick.
    I do not think that people will opt for the time apportionment formula as the Financial Secretary claimed, that in the vast majority of cases it will be in the interests of the taxpayer to adopt the straight-line basis because it will operate to his benefit. I do not think that is so. In nearly every case they will have to pay more Capital Gains Tax, and the longer a man has owned an object, an heirloom, say, or something going back many years in his possession, the more there will be a retrospective element in
    1922
    the taxable gain. This will bring more and more people to opt for Budget day valuation of the two methods, and this will put a greater strain upon the resources of the Treasury, about which, I know, both sides of the House are not entirely agreed, to provide the valuations which are necessary.
    Finally, I would ask the hon. and learned Gentleman to tell us what is the reason for inserting this arbitrary date of April, 1945, in this Schedule? Why has he chosen this period of 20 years which gives an advantage to anybody who has acquired an asset within 20 years and must make any asset which was acquired more than 20 years retrospectively treated under the tax? Why cannot he accept this Amendment and cut out this extraordinary insertion of the 20-year period which must make his whole tax retrospective in regard to this formula? I feel certain that it is not his intention. Therefore, I urge him most strongly to accept the Amendment.
    Mr. MacDermot: To deal first with the last point raised by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), I was not sure whether he was thinking that a person who had acquired an article less than 10 years before Budget day would have an advantage of a 20-year addition for purposes of calculating the straight-line apportionment?
    Mr. Ridley: No.
    Mr. MacDermot: Of course he would not. In this we appear to be at one.
    When the hon. Member for Norfolk, South (Mr. J. E. B. Hill) moved the Amendment he began by reading a passage from the Budget speech of my right hon. Friend. May I continue the passage he read by reading the next sentence:
    "I hope that by this simple device we shall save a great deal of valuation work; but I should make it plain that in all cases which are prima facie subject to a time apportionment the taxpayer will have an option to take the actual value of the asset today"—
    that is, Budget day—
    "as the starting figure, instead of the value calculated by means of the formula."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 248.]
    This tax is proposed on capital gains as from Budget day. The liability is in respect of capital gains as from Budget

    1923
    day. Therefore, whatever was the value on Budget day is the true base figure in assessing the capital gain. Therefore, since there is an option, the taxpayer will never be called upon to accept the time apportionment valuation if he thinks it is going to operate to his detriment.
    Whenever it is accepted, it will be because the taxpayer thinks it is going to operate to his benefit and the Revenue is going to be the loser. This is an incontrovertible fact. Therefore, when the hon. Member for Cirencester and Tewkesbury and his hon. Friend suggest that there is some element of retrospection here, it is a complete fallacy. There is no element of retrospection at all. What we have devised—and devised in order to simplify the admittedly serious problem of Budget day valuation—is a formula which we believe the taxpayer will opt for in the vast majority of cases because it will operate to his advantage and to the detriment of the Revenue and save the trouble of valuation.
    8.30 p.m.
    The hon. Member for Cirencester and Tewkesbury said that this would result in the need for allowing past valuations in the case where the owner of a chattel had no idea what its value was at any past date—he may have acquired it by gift—and therefore one had to proceed by valuation. In most such cases he will want to proceed—in fact both sides will—on the basis of obtaining the best valuation that can be made of its value at Budget day. This time apportionment will normally apply when somebody has acquired an article, perhaps by inheritance, perhaps by purchase, and therefore has an Estate Duty valuation or a purchase price valuation.
    What the Amendment is asking is that for the purposes of straight-line time apportionment we should accept that date of acquisition for the purposes of this calculation, and give an apportionment as from that date. Superficially that sounds attractive, but there is a fallacy in it, and it is that any straight-line valuation is unduly favourable to the taxpayer. The reason is that it assumes that the value increases at a simple interest rate, and not at a compound interest rate. One leaves out of account fluctuations in the market. One knows that works of art come into fashion and that a work increases in
    1924
    value because there is a sudden vogue for that artist. We must leave that kind of thing out of account altogether and assume an article which over a period of time has increased in value at a steady rate, to use a neutral term. If it increases at a steady rate, it will not increase at a straight line rate. It will increase at a rising curve, if one is to put it mathematically, and therefore to take a straight-line valuation is to take something which is very favourable to the taxpayer.
    It is for that reason that we must put a limit on it. This is not a question of administrative convenience. I am not arguing the 20-year period for administrative convenience. I am saying that in this matter there should be a limit to the generosity of the Revenue, because that is all that it is. The whole of this straight-line valuation basis is always, ex hypothesi, a basis which is more favourable to the taxpayer than his true liability, which is his liability to his gains as from Budget day.
    Mr. Robert Cooke: The hon. and learned Gentleman has talked about generosity. It means that the Revenue is taking away a little less.
    Mr. MacDermot: The generosity lies in allowing tax to be assessed on a basis which will arrive at a figure which is less than the true liability.
    It was suggested that by this means Capital Gains Tax would be higher than if the true dates were chosen. That is not so, because the true date is Budget day. The hon. Member for Norfolk, South shifted his ground and sought to support his argument by saying, "Your argument that you can choose the true valuation at Budget day may operate very unfairly, because at Budget day an asset may have been at a lower value, for example if it was agricultural land because it was subject to a tenancy, and later, at the time of disposal, the owner had it with vacant possession".
    I would remind the hon. Gentleman that that is a classic example of the way in which a man is going to benefit by time apportionment, because his true gain will be hidden. If one assumes that he acquired the land with vacant possession, and he disposed of it with vacant possession, but at Budget day it is subject to a tenancy, he will in fact make a

    1925
    capital gain as between Budget day and the time of disposal, and that will be hidden. It will be lost to the Revenue because he will enjoy the benefit of time apportionment.
    I was asked why we had chosen the arbitrary period of 20 years. The answer is that any period is arbitrary. Any period that we took could rightly be described as arbitrary, and so it is. One has to make an arbitrary decision as to the number of years. Bearing in mind the way in which this provision will operate, we think that the 20-year figure in general will produce a fair result. If we are wrong about that, we will be proved wrong very quickly, because taxpayers will opt for the Budget day valuation and not for the time apportionment. We will experience who is right, but, for the reasons which I have indicated, we think that the 20-year period will operate favourably to the taxpayer.
    To take up the example given by the hon. Member for Cirencester and Tewkesbury about the picture which in 1895 was worth £10,000 and in 1975 will be worth £50,000, a £40,000 gain; the hon. Gentleman did not tell us what he was assuming to be the true Budget day valuation, and this is a very pertinent consideration. It may well be that a greater part of the gain in the value of that picture will have been through a sudden revival of interest in a Victorian artist, whoever it may have been, so as greatly to increase the value of the picture in the latter years of the post-Budget period. By the straight line method, the taxpayer will achieve a more favourable result, and if he does not think so he can proceed on the basis of the Budget day valuation.
    We have put forward a figure which, we believe, will operate in the vast majority of cases to the benefit of the taxpayer and which is, therefore, what we believe to ge a fair figure.
    Mr. Robert Cooke: Having heard the Financial Secretary, I must say that I am supremely unconvinced by his arguments. He said that the time apportionment formula would save the need for many valuations, which would suggest that it would find widespread acceptance. Yet he went on to say that it would probably always act to the disadvantage of the taxpayer who would be better to have a real
    1926
    valuation at Budget day. He then went on to explain that the 20-year period would be even more disadvantageous to the taxpayer and that it would be much better if he could have a true period and reckon the real life of the article and the gain applied over the actual period of ownership. Finally, he made the point that the greater part of the gain might have taken place because of changing fashions after Budget day.
    I must leave the House with the thought that the value of almost any article of real property, any tangible moveable property, or anything else worth having, went down severely on Budget day and stayed down severely after that. As long as the present Government are in office, no doubt it will remain severely down. I do not think much of the argument on that score. I could go on a great deal longer on this subject, but I think that I have said enough to make it clear, when the OFFICIAL REPORT is read tomorrow, that the hon. and learned Gentleman has not answered our arguments.
    Mr. J. E. B. Hill: By leave of the House, may I say that I disagree with the Financial Secretary's view? I grant that, given the time apportionment method with only simple interest, the straight line, the Treasury is being favourable to the taxpayer. Personally, I do not mind the Treasury being favourable to the taxpayer. The Financial Secretary ought not to have a guilty conscience about it.
    With the 20-year rule, the Treasury is acting unfavourably to some taxpayers, which is the point of the Amendment. Sometimes, Budget day valuation may be impossible simply because there is no hope of agreement. For example, what would be the value on Budget day of an unrecognised Stubbs standing at £100 until discovery and valued after Budget day at £25,000? What hope would there be of getting a Budget day valuation?
    I adhere to the view that this provision is retrospective. I would have liked to have pressed the Amendment to a Division, but, because I want to be much fairer and more helpful to the Financial Secretary than he is being to the taxpayer and in order to save him time, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Amendments made: Schedule 6, in page 70, line 48, at end insert:
    (10) If under this paragraph part only of a gain is a chargeable gain, the fraction in section 28(3) of this Act shall be applied to that part instead of to the whole of the gain.
    Schedule 6, in page 71, line 36, leave out from "shares" to end of line 37 and insert:
    "which are to be treated under this Part of this Act as if disposed of and immediately re-acquired by him on that date".—[Mr. MacDermot.]

    Schedule 7.—(CAPITAL GAINS: MISCELLANEOUS RULES.)
    The Minister without Portfolio (Sir Eric Fletcher): I beg to move Amendment 94, Schedule 7, in page 75, line 45, at the end to insert:
    (3) A person who is dissatisfied with the refusal of the inspector to give a direction under this paragraph may appeal to the Commissioners having jurisdiction on an appeal against an assessment to tax in respect of a gain accruing on the disposal.
    It will be appreciated that under paragraph 3 of Schedule 7 it is open to the inspector of taxes not to charge to Capital Gains Tax any distribution in respect of shares, but, instead of so doing, to deduct the amount of the distribution from the acquisition value of those shares, provided that he is satisfied that the amount of the distribution is small as compared with the value of the shares. In other words, the paragraph imports a tolerance which makes it unnecessary to make any formal Capital Gains Tax charge in respect of trivial capital distributions.
    Representations have been made to the Revenue that the individual ought to have a right of appeal against the inspectors' decision, if the inspector decides that the amount of the capital distribution is not small and insists on assessing it to Capital Gains Tax. We think it reasonable that this right of appeal should be given, and the Amendment secures that object.
    Amendment agreed to.
    Further Amendment made: Schedule 7, in page 77, line 38, at end insert:
    (2) If in consequence of a conversion on their redemption date of securities of one of the descriptions in Schedule (Capital gains: Government securities issued at a discount) to this Act any securities of that description and a new holding of Government securities are, under paragraph 4(2) of this Schedule as applied by this paragraph, to be treated as the same asset acquired as the converted securities were
    1928
    acquired, and the adjusted purchase price (as defined in section 26(2A) of this Act) of the converted securities is less than one hundred pounds then, in computing under Schedule 6 to this Act the gain accruing on the acquisition and disposal of the new holding, or any part of the new holding, there shall be added to the amount of the expenditure which is allowable as a deduction the amount of the gain which would have been exempted from being a chargeable gain by virtue of the said section 26(2A) if the converted securities, or as the case may be the corresponding part of them, had been disposed of at the time of their redemption for a consideration equal to their nominal value.—[Sir Eric Fletcher.]
    Sir Eric Fletcher: I beg to move Amendment No. 96, Schedule 7, in page 80, line 5, to leave out from "passed" to the end of line 9.
    Paragraph 9 of the Schedule contains what is really a purely machinery provision designed to ensure that Capital Gains Tax can be assessed centrally on the trustees of any Lloyd's special reserve fund instead of being assessed separately on the underwriters who have interests in assets of that fund. In this respect we followed the provisions of Section 16 of the Finance Act, 1962, but representations have been made to us that we do not secure the ideal result by following the exact language of that Act. The deletion of these words on page 80 has been agreed with Lloyd's underwriters and, in fact, is made at their request.
    I commend the Amendment to the House.
    Amendment agreed to.
    8.45 p.m.
    Mr. Peter Walker: I beg to move Amendment No. 339, Schedule 7, in page 80, line 18, to leave out from the beginning to "neither" in line 22.
    The Amendment seeks to remove capital redemption policies from the Capital Gains Tax. On 31st May, at an early hour in the morning, we moved a similar Amendment in order to ascertain what the Government's view was on this matter. We did this because we felt that they could not possibly be serious in including such policies, and we were startled when in his reply the Solicitor-General said:
    "In our view there is a very clear distinction between an ordinary life policy and the kind of policy with which we are now concerned. We are dealing with a simple form of capital investment. Whatever may be said about insurance generally we submit it is right that

    1929
    capital redemption policies should be subject to Capital Gains Tax …."—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1432.]
    I hope that the fact that the Solicitor-General is not with us at the moment and that the Minister without Portfolio is with us is an indication that not only has there been a change of Minister but that there has been a change of mind on this subject. In Committee I gave notice that we were surprised by the Solicitor-General's reply and that we should return to the matter on Report.
    Capital redemption policies are of some importance to the economy. I submit that there is no justification whatever for taxing this form of policy. A capital redemption policy is nothing more than a system of regular contributions, accumulated with interest, which bear full taxation in the hands of the life office, and to subject the proceeds to tax on charged gains is a complete form of double taxation.
    I gather that perhaps the Government's only fear is that capital redemption policies would be used by Surtax payers wishing to accumulate money free of Surtax. I can assure the House that, in practice, capital redemption policies are never used by Surtax payers to accumulate money free of Surtax, because if they wished to use this method of avoiding Surtax they would be much better advised to take out a life policy or an endowment policy of a normal nature, whereby they would not only avoid Surtax upon the investment by the life company but would also enjoy the benefits of the various tax deductions on life policies. For the Surtax payer the capital redemption policy would be far less attractive than the conventional life policy, and the Government have decided as a matter of Government policy to exempt the proceeds of life policies from Capital Gains Tax. On the Surtax argument, therefore, there is no justification whatever for including capital redemption policies in the Bill.
    I warn the House that from every advice that I can receive from those life offices which engage in the issue of this type of policy, it seems that if the Government insist on continuing to include these policies as being subject to Capital Gains Tax, the result will be that life offices will stop issuing this type of policy.
    1930
    Obviously, it would be directly against the interests of anybody to repay a loan by means of a capital redemption policy. The offices would probably have to advise their existing holders of such policies to liquidate the arrangements and to arrange a mortgage. This would be a less attractive basis from the point of view of both the client and the insurance company.
    The practice of life offices is to issue these policies to companies, and the majority of them are issued to smaller and medium-sized companies, companies normally of a range too small to obtain their capital by means of public subscriptions. They normally obtain a capital redemption policy for sums which vary, starting with quite substantial sums of £50,000 or so and sometimes ranging up to £1 million. This means of financing has proved a very convenient instrument in the capital market of this country, and it would have an adverse effect on medium and smaller-sized growth industries if the Government, for no valid reason at all, decided that this form of policy were to be taxed in future. They would be penalising a class of business by, I believe, having a wrong understanding of what the function of the policies is.
    I hope that the Minister without Portfolio will be able to accept the Amendment and thus avoid what would be a ridiculous form of double taxation upon a means of providing an important rôle for our capital market.
    Sir Eric Fletcher: The hon. Member for Worcester (Mr. Peter Walker) was right in what he said in his opening sentence. We had a very short debate on this subject in the early hours of the morning of 1st June when my hon. and learned Friend the Solicitor-General resisted an almost identical Amendment moved by the hon. Member, and the hon. Member indicated that he would return to the matter on Report.
    In fairness to the rather lengthier argument which the hon. Gentleman has adduced today, I must try to amplify the reasons given by my hon. and learned Friend for resisting the Amendment on the previous occasion. Although I have listened very carefully to what has been said today, and although in the interim representations have been made by the life offices concerned to the Treasury on this subject, I am afraid that I must

    1931
    disappoint the hon. Member and tell him at the outset that the Government do not feel able to accept the Amendment. There are reasons which I think will satisfy the House that it would be inappropriate and inconsistent with our general thesis to do otherwise. Nor is it true to say that in our opinion the unfortunate consequences that the hon. Gentleman foresees will result from our resistance to the Amendment.
    In the first place, capital redemption policies are totally different from life assurance policies. The reasons which have quite legitimately justified the Government in treating life assurance policies quite differently from other forms of assets and exempting them from liability to Capital Gains Tax were stated originally when my right hon. Friend the Chancellor of the Exchequer introduced the Budget on 6th April, but they have been repeated over and over again. Life assurance policies are a form of investment which has long been recognised and established, and it would be quite inappropriate for such policies to be subject to Capital Gains Tax. The only other similar exemption that arises is in respect of the special treatment given to unit trusts and investment trusts. These exemptions are all designed to help the small man.
    The hon. Gentleman has said that capital redemption policies are not, in fact, used for tax avoidance purposes. I do not know to what extent they are used, but there is no doubt that they could be quite extensively used for such purposes because a capital redemption policy is, in effect, a provision of income to enable capital to be repaid at a later date. Therefore, it is a transference of income over a period of years into a form of capital, and it would be a standing temptation to high Surtax payers to resort to capital redemption policies for that purpose. They would get an advantage compared with the person who, instead of taking out a capital redemption policy, made an investment which attracted—
    Mr. Peter Walker: Before the hon. Gentleman proceeds, would he explain why any Surtax payer would take out a
    1932
    capital redemption policy rather than an ordinary life policy, which does exactly the same thing; the dividends accumulate to the policy holder, who obtains the proceeds completely tax-free and, in addition, obtains Income Tax benefits?
    Sir Eric Fletcher: One reason is that he might not want to take out a life policy. He might prefer a limited form of capital redemption policy. The fact remains that it is open to that form of exploitation, and for all I know it does exist. That being so, it would be quite indefensible to differentiate between a capital redemption policy taken out by an individual and a capital redemption policy taken out by a company. In fact, capital redemption business has been diminishing in recent years and in so far as the hon. Gentleman says that it is undertaken in respect of companies, to introduce an exemption would run counter to the whole philosophy of the Bill, which draws a distinction between tax on companies and tax on individuals. I do not think that I need labour further the reason why my right hon. Friend feels that it would be quite impossible for us to accept the Amendment.
    Mr. Peter Walker: I am most disappointed with the Minister's reply. He has not made a case against the Amendment. When making a comparison with life assurance policies he said that we all knew the reasons why the Chancellor had decided not to tax the proceeds of such policies. We know those reasons and they are identical to the reasons why the Government should exempt this type of policy—the basic reason being life funds are taxed in any case. Likewise, the accumulated income that takes place on a capital redemption policy is first of all taxed, and the life company must pay the tax before it is paid on the capital redemption policy.
    I assure the Minister that by persisting in the view he has expressed he will stop an important form of financing the small and medium-sized company. He is absolutely wrong in principle and, because of that, I must ask my hon. Friends to divide the House.
    Question put, That the words proposed to be left out stand part of the Bill:—
    The House divided: Ayes 278, Noes 274.

    Division No. 246.]

    AYES

    [8.58 p.m.

    Abse, Leo

    Fraser, Rt. Hn. Tom (Hamilton)

    Manuel, Archie

    Albu, Austen

    Freeson, Reginald

    Mapp, Charles

    Allaun, Frank (Salford, E.)

    Galpern, Sir Myer

    Marsh, Richard

    Alldritt, Walter

    Garrett, W. E.

    Mason, Roy

    Atkinson, Norman

    George, Lady Megan Lloyd

    Mayhew, Christopher

    Bacon, Miss Alice

    Ginsburg, David

    Mellish, Robert

    Bagier, Gordon A. T.

    Gregory, Arnold

    Mendelson, J. J.

    Barnett, Joel

    Grey, Charles

    Mikardo, Ian

    Baxter, William

    Griffiths, David (Rother Valley)

    Millan, Bruce

    Bellenger, Rt. Hn. F. J.

    Griffiths, Rt. Hn. James (Llanelly)

    Miller, Dr. M. S.

    Bence, Cyril

    Griffiths, Will (M'chester, Exchange)

    Milne, Edward (Blyth)

    Benn, Rt. Hn. Anthony Wedgwood

    Gunter, Rt. Hn. R. J.

    Molloy, William

    Bennett, J. (Glasgow, Bridgeton)

    Hale, Leslie

    Monslow, Walter

    Binns, John

    Hamilton, James (Bothwell)

    Morris, Alfred (Wythenshawe)

    Bishop, E. S.

    Hamilton, William (West Fife)

    Morris, Charles (Openshaw)

    Blackburn, F.

    Hamling, William (Woolwich, W.)

    Morris, John (Aberavon)

    Blenkinsop, Arthur

    Hannan, William

    Mulley, Rt. Hn. Frederick (Sheffield Pk)

    Boardman, H.

    Harper, Joseph

    Murray, Albert

    Boston, T. G.

    Harrison, Walter (Wakefield)

    Neal, Harold

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

    Hart, Mrs. Judith

    Newens, Stan

    Boyden, James

    Hattersley, Roy

    Noel-Baker, Francis (Swindon)

    Braddock, Mrs. E. M.

    Hazell, Bert

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

    Bradley, Tom

    Healey, Rt. Hn. Denis

    Norwood, Christopher

    Bray, Dr. Jeremy

    Heffer, Eric S.

    Oakes, Gordon

    Broughton, Dr. A. D. D.

    Henderson, Rt. Hn. Arthur

    Ogden Eric

    Brown, Rt. Hn. George (Belper)

    Herbison, Rt. Hn. Margaret

    O'Malley, Brian

    Brown, Hugh D. (Glasgow, Provan)

    Hobden, Denis (Brighton, K'town)

    Oram, Albert E. (E. Ham, S.)

    Brown, R. W. (Shoreditch & Fbury)

    Holman, Percy

    Orbach, Maurice

    Buchan, Norman (Renfrewshire, W.)

    Howarth, Harry (Wellingborough)

    Orme, Stanley

    Buchanan, Richard

    Howarth, Robert L. (Bolton, E.)

    Oswald, Thomas

    Butler, Herbert (Hackney, C.)

    Howell, Denis (Small Heath)

    Owen, Will

    Butler, Mrs. Joyce (Wood Green)

    Howie, W.

    Page, Derek (King's Lynn)

    Callaghan, Rt. Hn. James

    Hughes, Emrys (S. Ayrshire)

    Paget, R. T.

    Carmichael, Neil

    Hughes, Hector (Aberdeen, N.)

    Palmer, Arthur

    Chapman, Donald

    Hunter, Adam (Dunfermline)

    Pannell, Rt. Hn. Charles

    Coleman, Donald

    Hunter, A. E. (Fetham)

    Pargiter, G. A.

    Conlan, Bernard

    Hynd, H. (Accrington)

    Park, Trevor (Derbyshire, S. E.)

    Corbet, Mrs. Freda

    Irvine, A. J. (Edge Hill)

    Parker, John

    Craddock, George (Bradford, S.)

    Irving, Sydney (Dartford)

    Parkin, B. T.

    Crawshaw, Richard

    Jackson, Colin

    Pavitt, Laurence

    Cronin, John

    Jay, Rt. Hn. Douglas

    Pearson, Arthur (Pontypridd)

    Crosland, Rt. Hn. Anthony

    Jeger, George (Goole)

    Pentland, Norman

    Crossman, Rt. Hn. R. H. S.

    Jeger, Mrs. Lena (H'b'n & st. P'cras, S.)

    Perry, Ernest G.

    Cullen, Mrs. Alice

    Jenkins, Hugh (Putney)

    Popplewell, Ernest

    Dalyell, Tam

    Johnson, Carol (Lewisham, S.)

    Prentice, R. E.

    Darling, George

    Johnson, James (K'ston-on-Hull, W.)

    Price, J. T. (Westhoughton)

    Davies, Ifor (Gower)

    Jones, Dan (Burnley)

    Probert, Arthur

    Davies, S. O. (Merthyr)

    Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

    Pursey, Cmdr. Harry

    de Freitas, Sir Geoffrey

    Jones, J. Idwal (Wrexham)

    Randall, Harry

    Delargy, Hugh

    Jones, T. W. (Merioneth)

    Rankin, John

    Dell, Edmund

    Kelley, Richard

    Redhead, Edward

    Dempsey, James

    Kenyon, Clifford

    Rees, Merlyn

    Diamond, Rt. Hn. John

    Kerr, Mrs. Anne (R'ter & Chatham)

    Reynolds, G. W.

    Dodds, Norman

    Kerr, Dr. David (W'worth, Central)

    Rhodes, Geoffrey

    Doig, Peter

    Lawson, George

    Richard, Ivor

    Driberg, Tom

    Leadbitter, Ted

    Roberts, Albert (Normanton)

    Duffy, Dr. A. E. P.

    Ledger, Ron

    Roberts, Goronwy (Caernarvon)

    Dunn, James A.

    Lee, Rt. Hn. Frederick (Newton)

    Robertson, John (Paisley)

    Dunnett, Jack

    Lever, Harold (Cheetham)

    Robinson, Rt. Hn. K. (St. Pancras, N.)

    Edelman, Maurice

    Lever, L. M. (Ardwick)

    Rodgers, William (Stockton)

    Edwards, Rt. Hn. Ness (Caerphilly)

    Lewis, Arthur (West Ham, N.)

    Rogers, George (Kensington, N.)

    Edwards, Robert (Bilston)

    Lewis, Ron (Carlisle)

    Rose, Paul B.

    English, Michael

    Lipton, Marcus

    Ross, Rt. Hn. William

    Ennals, David

    Loughlin, Charles

    Rowland, Christopher

    Ensor, David

    Mabon, Dr. J. Dickson

    Sheldon, Robert

    Evans, Albert (Islington, S. W.)

    McBride, Neil

    Shinwell, Rt. Hn. E.

    Evans, Ioan (Birmingham, Yardley)

    McCann, J.

    Shore, Peter (Stepney)

    Fernyhough, E.

    MacColl, James

    Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)

    Finch, Harold (Bedwellty)

    MacDermot, Niall

    Short, Mrs. Renée (W'hampton, N. E.)

    Fletcher, Sir Eric (Islington, E.)

    McGuire, Michael

    Silkin, John (Deptford)

    Fletcher, Ted (Darlington)

    McInnes, James

    Silkin, S. C. (Camberwell, Dulwich)

    Fletcher, Raymond (Ilkeston)

    McKay, Mrs. Margaret

    Silverman, Julius (Aston)

    Floud, Bernard

    Mackenzie, Gregor (Rutherglen)

    Silverman, Sydney (Nelson)

    Foley, Maurice

    McLeavy, Frank

    Skeffington, Arthur

    Foot, Sir Dingle (Ipswich)

    Mahon, Peter (Preston, S.)

    Slater, Mrs. Harriet (Stoke, N.)

    Foot, Michael (Ebbw Vale)

    Marion, Simon (Bootle)

    Slater, Joseph (Sedgefield)

    Ford, Ben

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

    Small, William

    Snow, Julian

    Tinn, James

    Williams, Alan (Swansea, W.)

    Soskice, Rt. Hn. Sir Frank

    Tomney, Frank

    Williams, Clifford (Abertillery)

    Steele, Thomas (Dunbartonshire, W.)

    Tuck, Raphael

    Williams, Mrs. Shirley (Hitchin)

    Stewart, Rt. Hn. Michael

    Urwin, T. W.

    Williams, W. T. (Warrington)

    Stonehouse, John

    Varley, Eric G.

    Willis, George (Edinburgh, E.)

    Stones, William

    Wainwright, Edwin

    Wilson, Rt. Hn. Harold (Huyton)

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

    Walden, Brian (All Saints)

    Wilson, William (Coventry, S.)

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

    Walker, Harold (Doncaster)

    Winterbottom, R. E.

    Summerskill, Hn. Dr. Shirley

    Wallace, George

    Woodburn, Rt. Hn. A.

    Swain, Thomas

    Warbey, William

    Woof, Robert

    Swingler, Stephen

    Watkins, Tudor

    Wyatt, Woodrow

    Symonds, J. B.

    Weitzman, David

    Yates, Victor (Ladywood)

    Taverne, Dick

    Wells, William (Walsall, N.)

    Zilliacus, K.

    Taylor, Bernard (Mansfield)

    Whitlock, William

    Thomas, George (Cardiff, W.)

    Wigg, Rt. Hn. George

    TELLERS FOR THE AYES:

    Thomas, Iorwerth (Rhondda, W.)

    Wilkins, W. A.

    Mr. Gourlay and Mr. Fitch.

    Thornton, Ernest

    Willey, Rt. Hn. Frederick

    NOES

    Agnew, Commander Sir Peter

    Dalkeith, Earl of

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

    Alison, Michael (Barkston Ash)

    Dance, James

    Hunt, John (Bromley)

    Allan, Robert (Paddington, S.)

    Davies, Dr. Wyndham (Perry Barr)

    Hutchison, Michael Clark

    Allason, James (Hemel Hempstead)

    d'Avigdor-Goldsmid, Sir Henry

    Iremonger, T. L.

    Anstruther-Gray, Rt. Hn. Sir W.

    Dean, Paul

    Irvine, Bryant Godman (Rye)

    Astor, John

    Digby, Simon Wingfield

    Jenkin, Patrick (Woodford)

    Atkins, Humphrey

    Dodds-Parker, Douglas

    Jennings, J. C.

    Awdry, Daniel

    Doughty, Charles

    Johnson Smith, G. (East Grinstead)

    Baker, W. H. K.

    Drayson, G. B.

    Johnston, Russell (Inverness)

    Balniel, Lord

    du Cann, Rt. Hn. Edward

    Jones, Arthur (Northants, S.)

    Barber, Rt. Hn. Anthony

    Eden, Sir John

    Jopling, Michael

    Barlow, Sir John

    Elliot, Capt. Walter (Carshalton)

    Joseph, Rt. Hn. Sir Keith

    Batsford, Brian

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

    Kaberry, Sir Donald

    Bell, Ronald

    Emery, Peter

    Kerby, Capt. Henry

    Bennett, Sir Frederic (Torquay)

    Errington, Sir Eric

    Kerr, Sir Hamilton (Cambridge)

    Berkeley, Humphry

    Eyre, Reginald

    Kershaw, Anthony

    Berry, Hn. Anthony

    Farr, John

    Kilfedder, James A.

    Biffen, John

    Fell, Anthony

    Kimball, Marcus

    Biggs-Davison, John

    Fisher, Nigel

    King, Evelyn (Dorset, S.)

    Birch, Rt. Hn. Nigel

    Fletcher-Cooke, Charles (Darwen)

    Kirk, Peter

    Black, Sir Cyril

    Fletcher-Cooke, Sir John (S'pton)

    Kitson, Timothy

    Blaker, Peter

    Foster, Sir John

    Lagden, Godfrey

    Bossom, Hn. Clive

    Fraser, Ian (Plymouth, Sutton)

    Lancaster, Col, C. G.

    Box, Donald

    Galbraith, Hn. T. G. D.

    Langford-Holt, Sir John

    Boyd-Carpenter, Rt. Hn. J.

    Gammans, Lady

    Legge-Bourke, Sir Harry

    Boyle, Rt. Hn. Sir Edward

    Gardner, Edward

    Lewis, Kenneth (Rutland)

    Braine, Bernard

    Gibson-Watt, David

    Litchfield, Capt. John

    Brewis, John

    Giles, Rear-Admiral Morgan

    Lloyd, Ian (P'tsm'th, Langstone)

    Brinton, Sir Tatton

    Gilmour, Ian (Norfolk, Central)

    Lloyd, Rt. Hn. Selwyn (Wirral)

    Bromley-Davenport, Lt.-Col. Sir Walter

    Gilmour, Sir John (East Fife)

    Longden, Gilbert

    Brooke, Rt. Hn. Henry

    Glover, Sir Douglas

    Loveys, Walter H.

    Brown, Sir Edward (Bath)

    Glyn, Sir Richard

    Lubbock, Eric

    Bruce-Gardyne, J.

    Godber, Rt. Hn. J. B.

    Lucas, Sir Jocelyn

    Bryan, Paul

    Goodhart, Philip

    McAdden, Sir Stephen

    Buchanan-Smith, Alick

    Goodhew, Victor

    MacArthur, Ian

    Buck, Antony

    Gower, Raymond

    Mackenzie, Alasdair (Ross & Crom'ty)

    Bullus, Sir Eric

    Grant, Anthony

    Mackie, George Y. (C'ness & S'land)

    Burden, F. A.

    Grant-Ferris, R.

    McLaren, Martin

    Gresham Cooke, R.

    Maclean, Sir Fitzroy

    Butcher, Sir Herbert

    Grieve, Percy

    Macleod, Rt. Hn. Iain

    Buxton, Ronald

    Griffiths, Eldon (Bury St. Edmunds)

    McMaster, Stanley

    Campbell, Gordon

    Griffiths, Peter (Smethwick)

    McNair-Wilson, Patrick

    Carlisle, Mark

    Grimond, Rt. Hn. J.

    Maginnis, John E.

    Carr, Rt. Hn. Robert

    Gurden, Harold

    Marples, Rt. Hn. Ernest

    Cary, Sir Robert

    Hall, John (Wycombe)

    Marten, Neil

    Channon, H. P. G.

    Hall-Davis, A. G. F.

    Mathew, Robert

    Chataway, Christopher

    Hamilton, Marquess of (Fermanagh)

    Maude, Angus

    Chichester-Clark, R.

    Hamilton, M. (Salisbury)

    Maudling, Rt. Hn. Reginald

    Clark, Henry (Antrim, N.)

    Harris, Frederic (Croydon, N. W.)

    Mawby, Ray

    Clark, William (Nottingham, S.)

    Harris, Reader (Heston)

    Maxwell-Hyslop, R. J.

    Cole, Norman

    Harvey, John (Walthamstow, E.)

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

    Cooke, Robert

    Harvie Anderson, Miss

    Meyer, Sir Anthony

    Cooper, A. E.

    Hastings, Stephen

    Mills, Peter (Torrington)

    Cooper-Key, Sir Neill

    Hawkins, Paul

    Mills, Stratton (Belfast, N.)

    Cordle, John

    Heald, Rt. Hn. Sir Lionel

    Miscampbell, Norman

    Corfield, F. V.

    Heath, Rt. Hn. Edward

    Mitchell, David

    Costain, A. P.

    Hendry, Forbes

    Monro, Hector

    Courtney, Cdr. Anthony

    Higgins, Terence L.

    More, Jasper

    Craddock, Sir Beresford (Spelthorne)

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

    Morrison, Charles (Devizes)

    Crawley, Aidan

    Hirst, Geoffrey

    Mott-Radclyffe, Sir Charles

    Crosthwaite-Eyre, Col. Sir Oliver

    Hobson, Rt. Hn. Sir John

    Munro-Lucas-Tooth, Sir Hugh

    Crowder, F. P.

    Hopkins, Alan

    Murton, Oscar

    Cunningham, Sir Knox

    Hordern, Peter

    Neave, Airey

    Curran, Charles

    Hornby, Richard

    Nicholson, Sir Godfrey

    Currie, G. B. H.

    Hornsby-Smith, Rt. Hn. Dame P.

    Noble, Rt. Hn. Michael

    1936

    1937

    Nugent, Rt. Hn. Sir Richard

    Roots, William

    van Straubenzee, W. R.

    Onslow, Cranley

    Royle, Anthony

    Vaughan-Morgan, Rt. Hn. Sir John

    Orr, Capt. L. P. S.

    St. John-Stevas, Norman

    Vickers, Dame Joan

    Orr-Ewing, Sir Ian

    Scott-Hopkins, James

    Walder, David (High Peak)

    Osborn, John (Hallam)

    Sharples, Richard

    Walker, Peter (Worcester)

    Osborne, Sir Cyril (Louth)

    Shepherd, William

    Walker-Smith, Rt. Hn. Sir Derek

    Page, John (Harrow, W.)

    Sinclair, Sir George

    Wall, Patrick

    Page, R. Graham (Crosby)

    Smyth, Rt. Hn. Brig. Sir John

    Walters, Dennis

    Pearson, Sir Frank (Clitheroe)

    Soames, Rt. Hn. Christopher

    Ward, Dame Irene

    Peel, John

    Spearman, Sir Alexander

    Weatherill, Bernard

    Percival, Ian

    Speir, Sir Rupert

    Webster, David

    Peyton, John

    Stainton, Keith

    Wells, John (Maidstone)

    Pickthorn, Rt. Hn. Sir Kenneth

    Stanley, Hn. Richard

    Whitelaw, William

    Pike, Miss Mervyn

    Stodart, Anthony

    Williams, Sir Rolf Dudley (Exeter)

    Pitt, Dame Edith

    Studholme, Sir Henry

    Wills, Sir Gerald (Bridgwater)

    Pounder, Rafton

    Talbot, John E.

    Wilson, Geoffrey (Truro)

    Powell, Rt. Hn. J. Enoch

    Taylor, Sir Charles (Eastbourne)

    Wise, A. R.

    Price, David (Eastleigh)

    Taylor, Edward M. (G'gow, Cathcart)

    Wolrige-Gordon, Patrick

    Prior, J. M. L.

    Teeling, Sir William

    Wood, Rt. Hn. Richard

    Quennell, Miss J. M.

    Temple, John M.

    Woodhouse, Hn. Christopher

    Ramsden, Rt. Hn. James

    Thatcher, Mrs. Margaret

    Woodnutt, Mark

    Rawlinson, Rt. Hn. Sir Peter

    Thomas, Sir Leslie (Canterbury)

    Wylie, N. R.

    Rees-Davies, w. R.

    Thompson, Sir Richard (Croydon, S.)

    Yates, William (The Wrekin)

    Renton, Rt. Hn. Sir David

    Thorpe, Jeremy

    Younger, Hn. George

    Ridley, Hn. Nicholas

    Tiley, Arthur (Bradford, W.)

    Ridsdale, Julian

    Tilney, John (Wavertree)

    TELLERS FOR THE NOES:

    Roberts, Sir Peter (Heeley)

    Turton, Rt. Hn. R. H.

    Mr. Pym and Mr. Dudley Smith.

    Rodgers, Sir John (Sevenoaks)

    Tweedsmuir, Lady

    Amendments made: Schedule 7, page 81, line 8, leave out from "debt" to "from" in line 9 and insert:
    "acquired by the person making the disposal".
    Schedule 7, page 81, line 12, leave out "and".—[Sir Eric Fletcher.]
    Mr. Deputy-Speaker (Sir Samuel Storey): The next Amendment is Amendment No. 231, in page 81, line 32, Schedule 7, at end insert:
    "or by his assignee under any disposition not being a disposition for a consideration in money or money's worth other than consideration consisting of another interest under the settlement and provided that for the avoidance of doubt no chargeable gain shall arise in consequence of either:—

    (i) a variation of the trust of a Settlement or a resettlement pursuant to any power or provision contained in the settlement: or

    (ii) any variation of the trusts of any Settlement approved by an order of the Court pursuant to the Variation of Trusts Act 1958".

    With this Amendment can be discussed Amendment No. 278, in page 81, line 40, Schedule 7, at end insert:
    But in computing gains accruing to him on the disposal of his interest the total net chargeable gain accruing to the trustee subsequent to such acquisition shall be treated as if it were expenditure incurred by that person allowable under paragraph 4 of Schedule 6 to this Act.
    Mr. Peter Walker: Amendment No. 231 was put on the Notice Paper to deal with an anomaly which exists if a person is entitled to property subject to a life interest and comes into that property
    1938
    on the death of the tenant. No Capital Gains Tax is payable, but if that person's interest is settled by him under the trusts of a marriage settlement—instead of being his absolute property—Capital Gains Tax is payable on the death of the same life tenant.
    There is also a point of clarification which was required and which we feel this Amendment will deal with. The Minister without Portfolio has kindly contacted me to say that there are certain drafting faults in this Amendment but the Government wish to accept its spirit. I wonder if I may have leave to withdraw the Amendment in order that the Minister without Portfolio may put forward a manuscript Amendment and explain it to the House.
    Mr. Deputy-Speaker: There is no need to withdraw the Amendment for it has not been moved.
    Sir Eric Fletcher: I have heard what the hon. Member for Worcester has said. He is quite right, except in one respect. I am not sure that this is actually an anomaly. There is a point of some substance and, with your permission, Mr. Deputy-Speaker, I shall move a manuscript Amendment which, for the sake of convenience, I call Amendment No. 231A. I hope that will make it unnecessary for the hon. Member to move or proceed with his Amendment No. 231. For the convenience of the House, I shall read the manuscript Amendment.

    1939
    I beg to move, as a manuscript Amendment, in page 81, line 32, Schedule 7, to leave out, "his legatee", and to insert:
    "any other person except one who acquired, or derives his title from one who acquired, the interest for a consideration in money or moneys' worth, other than consideration consisting of another interest under the settlement."
    9.15 p.m.
    With your leave, Mr. Deputy-Speaker, I would like to say a few short words in explanation of the Amendment. In substance it deals with the same point as is raised by the first part of Amendment No. 231. As the hon. Member for Worcester (Mr. Peter Walker) indicated, we are dealing here with interests under a settlement. Both my Amendment and that of the hon. Member for Worcester are designed to ensure that if interests under a settlement are disposed of by gift, the life, or other interests of such disposal, should not give rise to a claim for Capital Gains Tax. The reason is that to do so would introduce an element of double taxation, because the capital funds from which the life interests are derived are themselves subject, at periodic intervals, to Capital Gains Tax.
    This applies in the case of gifts of life interests. The position is different in the case of sales of life interests. There the position is that in the case of a company which makes it a business to collect reversionary interests under the settlement, they carry on a trade and are subject to Income Tax or Corporation Tax, as the case may be in the ordinary way. If, on the other hand, there is an instance of a speculative purchase of reversionary interests, we think it is appropriate that Capital Gains Tax should be charged there. That is not provided for in this Amendment.
    I ought to add that the Amendment of the hon. Gentleman the Member for Worcester contains a proviso, said to be for the absence of doubt, and relates to the kind of case in which there is a variation of trust to the settlement pursuant to an order of the court under the 1958 Act. My own view, and I am advised by those who have considered the matter, is that first of all there is no doubt that there are reasons which would make it undesirable to make an express proviso for the avoidance of doubt in this particular case because it
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    might lead to the creation of doubts in various other cases. Therefore, we do not think it is necessary or desirable to have that proviso.
    Mr. Peter Walker: I would like to express my appreciation to the Minister without Portfolio, firstly for moving this Amendment, which basically meets the point we intended to make in Amendment No. 231, and secondly for his assurance on a question of doubt concerning variations of the trusts of any settlement approved by order of the court, pursuant to the Variation of Trusts Act 1958. I gather there is some considerable doubt on this particular point, and I hope that the words of the Minister without Portfolio will serve to remove that doubt. Since his advisers think that the doubts are unfounded I would certainly urge my hon. Friends to support the Amendment.
    Amendment agreed to.
    Sir Eric Fletcher: I do not desire to move Amendment No. 314, Schedule 7, in page 81, line 40, at end insert:
    "deemed to be effected by him under section 24 (3) of this Act).
    (3) So far as, in computing under Schedule 6 to this Act the gain accruing on the disposal of a defeasible interest which was created by or arose under a settlement and which was acquired by the person making the disposal otherwise than for consideration in money or money's worth, it is necessary to ascertain the market value of that interest at any time, the possibility of defeasance shall be disregarded, but this sub-paragraph shall not operate to create or increase a loss",
    because, in view of the acceptance just now of the manuscript Amendment, it would not be appropriate.
    In its stead, I desire, with your permission, Mr. Speaker, to move a manuscript Amendment which, for the sake of convenience, I will call Amendment No. 314A.
    Mr. Speaker: Very well.
    Sir Eric Fletcher: I beg to move, as a manuscript Amendment, Schedule 7, in page 81, line 40, to insert:
    "deemed to be effected by him under section 24(3) of this Act".
    I have circulated with the previous manuscript Amendment a note containing those words. This is a purely consequential proposal, and I hope that it is acceptable.
    Amendment agreed to.
    Further Amendments made: Schedule 7, in page 83, line 30, to leave out "his" and insert "an".
    Schedule 7, page 85, leave out lines 19 to 21 and insert:
    "grossing up at the marginal rate of tax, that is to say taking capital gains tax on a chargeable gain at the amount which would not have been chargeable but for that chargeable gain".
    Schedule 7, page 85, line 34, leave out sub-paragraph (5).—[Sir Eric Fletcher.]
    Sir Eric Fletcher: I beg to move Amendment No. 276, Schedule 7, in page 86, line 32, at the beginning to insert:
    "Except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements".
    Mr. Speaker: We can discuss, at the same time, Amendment No. 275, Schedule 7, page 86, line 32, leave out subparagraph (4).
    Sir Eric Fletcher: The curious thing about Amendment No. 276 is that it stands in the names of my right hon. Friend the Chancellor of the Exchequer and the hon. Member for Crosby (Mr. Graham Page), which leads me to hope that it will be acceptable to the House.
    Mr. Graham Page: My name was on the Notice Paper first.
    Sir Eric Fletcher: I was not proposing to deny the hon. Member for Crosby any share of the credit for having initiated this Amendment. I was merely expressing the hope that in the interests of time, and in view of the consensus of opinion between us, the House would not think it discourteous if I did not spend too long in explaining the Amendment.
    Broadly, the purpose of the Amendment is this. It will be observed towards the end of the Schedule that for Capital Gains Tax purposes partners are treated as connected persons. Where there are transactions between connected persons, it is the market value that has to be taken into account for purposes of assessing Capital Gains Tax and not any value that may appear in any transaction between them.
    A number of bodies, including the Law Society, have pointed out that in certain forms of partnership transactions, with which the hon. Member for Crosby will
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    be as familiar as I am, somewhat special, quite bona fide arrangements are made between outgoing and incoming partners. In those cases, it is not appropriate to talk about market value, and justice and common sense are both served if provision is made that the ordinary rules about transactions between connected persons are subject to the exception that in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements, the ordinary law with regard to transactions between other connected persons does not apply.
    Amendment No. 275, in the name of the hon. Member for Crosby, would eliminate subsection (4). That is not acceptable. It is important that to preserve the structure of the liability to Capital Gains Tax as between connected persons, partners should still be treated as connected persons. There may be cases in which it would be right and proper that they should be, and we think that this exception would meet all the reasonable objections that have been taken to the drafting of this part of the Schedule.
    Mr. Graham Page: Amendment No. 275 was, of course, an alternative to Amendment No. 276, and I would not wish to press it. I am grateful to the Minister without Portfolio for introducing the Amendment. It is, perhaps, ironical that this is an exception to the connected persons when I find at the head of the Amendment the strange connection between myself and the Chancellor of the Exchequer. This is certainly the exception to connected persons and I never thought that I should find myself running in double harness with the Chancellor of the Exchequer from the other side of the House.
    However, I am indeed grateful. Considerable hardship would in many cases have been caused had this exception not been made to the general rule of the Schedule as to connected persons.
    Mr. Lubbock: Having listened to the Minister without Portfolio, I am entirely convinced that the Amendment is a sensible one. I want, however, to place on record that simply because there happens to be agreement between the Chancellor of the Exchequer and the

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    hon. Member for Crosby (Mr. Graham Page) on any subject, it does not necessarily follow that it is acceptable to the House of Commons.
    Mr. Graham Page: Nonsense. The hon. Member could have put his name to the Amendment as well.
    Amendment agreed to.

    Schedule 9.—(CAPITAL GAINS: ADMINISTRATION.)
    Mr. William Roots: I beg to move Amendment No. 126, Schedule 9, in page 93, line 20, to leave out from end of line to end of Schedule and to insert:
    (4) Notwithstanding the provisions of the foregoing sub-paragraphs of this paragraph this paragraph shall not apply to the estimation of the market value of any shares or securities in a company resident in the United Kingdom, being shares or securities that are not dealt on a Stock Exchange in the United Kingdom, and the market value of any such shares or securities shall be determined by the Commissioners of Inland Revenue as if the value of the said shares or securities fell to be ascertained in accordance with the provisions of subsections (1) and (2) of section 40 of this Act, for the purposes of Estate Duty.
    (5) Any person aggrieved by the decision of the Commissioners of Inland Revenue with respect to any such determination as is mentioned in sub-paragraph (4) of this paragraph may appeal to the High Court within the time and in the manner directed by the Rules of Court for the time being applicable to section 10 of the Finance Act 1894 and the value of the said shares or securities shall be determined by the High Court. The provisions of subsections (2) and (5) of the said section 10 shall apply to any such appeal.

  TABLE

    INCOME TAX PROVISIONS APPLIED TO CAPITAL GAINS TAX
    The Income Tax Act 1952
    Section 47 (time limit for assessments).
    Section 63 (grounds of appeal to be stated, and recovery of tax not in dispute).
    Sections 65 and 66 (relief against double assessment or error or mistake in return).
    Chapter IV of Part II (collection) except section 72.
    Part XV (representative assessments) except section 367.
    Section 370 (assessment of agent and non-resident).
    Sections 495 to 497 (interest on overdue tax).
    Sections 500 to 505 (penalties).
    Section 507 with the amendment in Schedule 4 to the Income Tax Management Act 1964 (time limit for claims).
    Sections 510, 513 to 515 and 520 (miscellaneous).
    The Finance Act 1953
    Section 29 (assessments in Scilly Isles).
    The Finance Act 1956
    Section 10(3) (question of ordinary residence).
    The Finance Act 1960
    Part III (penalties)
    The Income Tax Management Act 1964
    The whole Act.
    Regulations about appeals
    2.—(1) The Board may make regulations—

    (a) as respects the conduct of appeals against assessments and decisions on claims under this Part of this Act,

    (b) entitling persons, in addition to those who would be so entitled apart from the regulations, to appear on such appeals,

    (c) regulating the time within which such appeals or claims may be brought or made,

    (d) where the market value of an asset on a particular date, or an apportionment or any other matter, may affect the liability to capital gains tax of two or more persons, enabling any such person to have the matter determined by the tribunal having jurisdiction to determine that matter if arising on an appeal against an assessment, and prescribing a procedure by which the matter is not determined differently on different occasions, and enabling all those interested in the ascertainment of the said value to be heard before the matter is determined,

    (e) authorising an inspector or other officer of the Board, notwithstanding the obligation as to secrecy imposed by virtue of this or any other Act, to disclose to a person entitled to appear on such an appeal the market value of an asset as determined by an assessment or decision on a claim, or to disclose to a person whose liability to tax may be affected by the determination of the market value of an asset on a particular date, or an apportionment or any other matter, any decision on the matter made by an inspector or other officer of the Board.

    (2) Regulations under this paragraph may contain such supplemental and incidental provisions as appear to the Board to be expedient including in particular—

    (a) provisions as to the choice of the Commissioners, whether a body of General Commissioners or the Special Commissioners, to hear the appeal where, in addition to the appellant against an assessment, or the claimant in the case of an appeal against the decision on a claim, and in addition to the inspector or other officer of the Board, some other person is entitled to be a party to the appeal, and

    (b) provisions corresponding to section 329 of the Income Tax Act 1952 (Procedure on apportionments where more than one body of General Commissioners has jurisdiction), and

    1945

    (c) provisions authorising the giving of conditional decisions where, under section 40 or any other provision of this Act, questions on an appeal against an assessment or a decision on a claim may go partly to one tribunal and partly to another.

    (3) Regulations under this paragraph—

    (a) shall be made by statutory instrument but no such instrument shall have effect unless it is approved by a resolution of each House of Parliament, and

    (b) shall have effect notwithstanding anything in the provisions of the Income Tax Acts applied by this Schedule.

    Married Women
    3.—(1) Subject to this paragraph, the amount of capital gains tax on chargeable gains accruing to a married woman in a year of assessment, or part of a year of assessment, during which she is a married woman living with her husband shall be assessed and charged on the husband and not otherwise but this sub-paragraph shall not affect the amount of capital gains tax chargeable on a man apart from this sub-paragraph nor result in the additional amount of capital gains tax charged on a man by virtue of this sub-paragraph being different from the amount which would otherwise have remained chargeable on the married woman.
    (2) Sub-paragraph (1) above shall not apply in relation to a husband and wife in any year of assessment if, before 6th July in the year next following that year of assessment, an application is made by either the husband or wife, and such an application duly made shall have effect not only as respects the year of assessment for which it is made but also for any subsequent year of assessment;
    Provided that the applicant may give, for any subsequent year of assessment, a notice to withdraw that application and where such a notice is given the application shall not have effect with respect to the year for which the notice is given or any subsequent year.
    A notice of withdrawal under this proviso shall not be valid unless it is given within the period for making, for the year for which the notice is given, an application similar to that to which the notice relates.
    (3) Returns under section 7 or section 9(6) of the Income Tax Management Act 1964 as respects chargeable gains accruing to a married woman may be required either from her or, if her husband is liable under sub-paragraph (1) above from him.
    (4) Section 359 (collection from wife of tax assessed on husband attributable to her income) and section 360 (right of husband to disclaim liability for tax on deceased wife's income) of the Income Tax Act 1952 shall apply with any necessary modifications in relation to capital gains tax as they apply in relation to income tax other than surtax.
    (5) An application or notice of withdrawal under this paragraph shall be in such form and made in such manner as may be prescribed by the Board.

  Part II

    PROVISIONS FOR CAPITAL GAINS TAX AND CORPORATION TAX
    General
    4. This Part of this Schedule has effect in relation to capital gains tax, including capital gains tax chargeable under section 77 of this Act, and also in relation to corporation tax and in this Part of this Schedule "tax" shall be construed accordingly.
    Information as to assets acquired
    5.—(1) A notice under section 7 or section 9(6) of the Income Tax Management Act 1965 (return of total income and return of income for purposes of a claim) may require particulars of any assets acquired by the person on whom the notice was service in the period specified in the notice, being a period beginning not earlier than 6th April 1965 but excluding—

    (a) any assets exempted by section 26 of this Act, or

    (b) unless the amount or value of the consideration for its acquisition exceeded one thousand pounds, any asset which is tangible moveable property and is not within the exceptions in section 29(6) of this Act, or

    (c) any assets acquired as trading stock.

    (2) The particulars required under this paragraph may include particulars of the person from whom the asset was acquired, and of the consideration for the acquisition.
    Special reurns
    6.—(1) For the purpose of obtaining particulars of chargeable gains the inspector may by notice in writing require a return under any of the provisions of this paragraph.
    (2) An issuing house or other person carrying on a business of effecting public issues of shares or securities in any company, or placings of shares or securities in any company, either on behalf of the company, or on behalf of holders of blocks of shares or securities which have not previously been the subject of a public issue or placing, may be required to make a return of all such public issues or placings effected by that person in the course of the business in the period specified in the notice requiring the return, giving particulars of the persons to or with whom the shares or securities are issued, allotted or placed, and the number or amount of the shares or securities so obtained by them respectively.
    (3) A person not carrying on such a business may be required to make a return as regards any such public issue or placing effected by that person and specified in the notice, giving particulars of the persons to or with whom the shares or securities are issued, allotted, or placed and the number or amount of the shares or securities so obtained by them respectively.
    (4) A member of the Stock Exchange in the United Kingdom, other than a jobber, may by notice in writing served on him be required within such time not less than twenty-eight days as may be specified in the notice—

    (a) to state whether he has acted on behalf of a person who it appears to the

    1947
    inspector is or may be chargeable to tax on capital gains in connection with any acquisition or disposal of assets by that person;

    (b) if so, to furnish information in his possession with respect to the acquisition or disposal, being information as to

    (i) the assets comprised in the acquisition or disposal and the consideration for the acquisition or disposal; and

    (ii) the date and manner on the acquisition or disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition;

    and Part III of the Finance Act 1960 (which relates to penalties) shall have effect as if this subsection were among the provisions specified in the second column of the Sixth Schedule to that Act.
    (5) The Committee or other person or body of persons responsible for managing a clearing house for any terminal market in commodities may by notice in writing served on him be required within such time not less than 28 days as may be specified in the notice:—

    (a) to state whether he has any information as to transactions on behalf of a person who it appears to the Inspector is or may be chargeable to tax on capital gains in connection with any acquisition or disposal of assets by that person; and

    (b) if so, to furnish information in his possession with respect to the acquisition or disposal being information as to:—

    (i) the assets comprised in the acquisition or disposal and the consideration for the acquisition or disposal; and

    (ii) the date and manner of the acquisition and disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition;

    and Part III of the Finance Act 1960 (which relates to penalties) shall have effect as if this subsection were among the provisions specified in the second column of the Sixth Schedule to that Act.
    (6) An auctioneer and any person carrying on a trade of dealing in any description of tangible moveable property, or of acting as an agent or intermediary in dealings in any description of tangible moveable property may be required by notice in writing to state the price at which any such property specified in the notice was disposed of together with the date of such disposal.
    (7) No person shall be required under this paragraph to give particulars of any transaction effected before 7th April 1965 or more than three years before the service of the notice requiring him to give particulars.
    (8) Part III of the Finance Act 1960 (penalties) shall have effect as if this paragraph were among the provisions specified in the second column of Schedule 6 to that Act.
    Nominee shareholdings
    7.—(1) Section 250 (4) of the Income Tax Act 1952 (information from nominee shareholders)
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    shall apply for the purposes of obtaining particulars of chargeable gains, but a notice under that subsection as so applied may be given by an inspector or other officer of the Board.
    (2) The said section 250 (4) as applied by this paragraph shall have effect as if references to shares included references to securities and loan capital.
    Returns of assets in settlements
    8. Section 410 of the Income Tax Act 1952 (power to obtain information for purposes connected with settlements) shall apply for the purposes of this Part of this Act as it applies for the purposes of Chapter III of Part XVIII of that Act.
    Partnerships
    9. A return of income of a partnership under section 144 of the Income Tax Act 1952 shall include—

    (a) with respect to any disposal of partnership property during a period to which any part of the return relates the like particulars as if the partnership were liable to tax or any chargeable gain accruing on the disposal, and

    (b) with respect to any acquisition of partnership property the particulars required under paragraph 5 of this Schedule.

    Information as to non-resident companies and trusts
    10.—(1) A person holding shares or securities in a company which is not resident or ordinarily resident in the United Kingdom, or who is interested in settled property under a settlement the trustees of which are not resident or ordinarily resident in the United Kingdom, may be required by a notice by the Board to give such particulars as may be known to him and are reasonably required to determine whether the company or trust falls within section 37 or section 38 of this Act, and whether any chargeable gains have accrued to that company, or to the trustees of that settlement, in respect of which the person to whom the notice is given is liable to capital gains tax under the said section 37 or the said section 38.
    (2) Part III of the Finance Act 1960 (penalties) shall have effect as if this paragraph were among the provisions specified in the second column of Schedule 6 to that Act.
    Liability of trustees, etc.
    11.—(1) Capital gains tax chargeable in respect of chargeable gains accruing to the trustees of a settlement or capital gains tax due from the personal representatives of a deceased person may be assessed and charged on and in the name of any one or more of those trustees or personal representatives, but where an assessment is made in pursuance of this sub-paragraph otherwise than on all the trustees or all the personal representatives the persons assessed shall not include a person who is not resident or ordinarily resident in the United Kingdom.
    (2) Subject to section 21(5) of this Act, chargeable gains accruing to the trustees of a

    1949
    settlement or to the personal representatives of a deceased person, and capital gains tax chargeable on or in the name of such trustees or personal representatives, shall not be regarded for the purposes of this Part of this Act as accruing to, or chargeable on, any other person, nor shall any trustee or personal representative be regarded for the purposes of this Part of this Act as an individual, but the provisions of Part XV of the Income Tax Act 1952 as applied by this Schedule shall not affect the question of who is the person to whom chargeable gains accrue, or who is chargeable to capital gains tax, so far as that question is relevant for the purposes of any exemption or of any provision determining the rate at which capital gains tax is chargeable.
    (3) Chargeable gains which accrue to an individual on the disposal of assets deemed to be made by him on his death shall be regarded for the purposes of this Part of this Act as accruing to an individual notwithstanding that capital gains tax in respect of the gains is chargeable and assessable on his personal representatives.
    Conclusiveness of income tax decisions
    12. Any assessment to income tax or decision on a claim under the Income Tax Acts, and any decision on an appeal under the Income Tax Acts against such an assessment or decision, shall be conclusive so far as under section 20 of this Act or Schedule 6 to this Act or any other provision of this Part of this Act liability to tax depends on the provisions of the Income Tax Acts.
    13.—(1) For the purposes of this part of this Act and subject to the provisions of this section the Board may authorise an Inspector or other officer of the Board to inspect any property for the purpose of ascertaining its market value;
    (2) When such authorisation is given the Inspector shall give fourteen days notice to the person having the custody or possession of the property and specifying the property in question and such person shall permit the Inspector or other officer of the Board so authorised to inspect it at such time or times as may be reasonable in the circumstances. The person can, if he so wishes, take the specified property to the offices of the Inspector providing the specified property is taken there within fourteen days of the expiry of the Inspector's notice that he wishes to examine the specified property;
    (3) The property which may be inspected under this paragraph is property which has been the subject matter of an acquisition or disposal within six months of the date of the notice referred to in sub-paragraph (2) above;
    (4) If any person wilfully delays or obstructs an Inspector or other officer of the Board authorised in writing and acting in pursuance of this paragraph he shall be liable on summary conviction to a fine not exceeding five pounds.
    Priority of tax in bankruptcy
    14.—(1) In a bankruptcy under the law of any part of the United Kingdom capital gains tax and corporation tax shall each have the same priority as income tax.
    (2) In the application of this Part of this Act to Northern Ireland the reference in this paragraph to priority in bankruptcy includes a reference to any other priority given to income tax under the Bankruptcy Acts (Northern Ireland) 1857 to 1964.
    Form of declaration of Commissioners and others
    15. In the form of declaration in Part I of Schedule 1 to the Income Tax Management Act 1964 for the words "the profits tax" (in both places) there shall be substituted the words "any tax on company profits or capital gains", but not so as to invalidate any declaration made before the passing of this Act.
    Forms of assessments and returns and other documents
    16. Any return or assessment or other document relating to chargeable gains or tax on capital gains may be combined with one relating to income or income tax.
    Northern Ireland
    17. Any reference in this Part of this Act to the General Commissioners shall in its application to Northern Ireland be a reference to the Special Commissioners.
    There was at an earlier stage in the proceedings on the Bill some discussion on the Ninth Schedule, and as a result of the rather unsatisfactory explanations which were given we on this side of the House have thought it both necessary and, I hope, helpful to move what is almost a new Schedule, with substantial alterations of the existing one.
    I will start with the proposal to amend Part I of the Ninth Schedule, which is the portion relating to the Capital Gains Tax, by the addition of two new sub-paragraphs, (4) and (5). The effect of this Amendment, which relates to shares not quoted on a stock exchange in the United Kingdom, is simply this, that we feel sure that where it is necessary to value them a far better procedure than that detailed earlier in the Bill would be to operate the provisions relating to Estate Duty, in particular Section 10 of the Act of 1894.
    The fact is that the Estate Duty office is far more experienced in dealing with valuations of this kind, which really—I say this in no sense of disrespect—are outside the ambit of the General Commissioners of Income Tax. Excellent though they may be, the fact remains that the Estate Duty office has experience of valuations of such shares, which can, of course, be extremely complicated, involving such matters as normal and special procedures, whether to value on a yield or an asset

    1951
    basis, restrictions on marketability, minority interests, and so forth.
    For that reason we feel that the Estate Duty procedure is well suited to that, and that is what these two sub-paragraphs are designed to do. I hope that the Financial Secretary will feel that the commendations which I am giving to the Estate Duty office are valid and valuable, and will be able to recognise that this procedure to deal with this class of asset has every advantage.
    The next point I draw attention to occurs in paragraph 2(1,d), the last words. This is a paragraph empowering the Board to make regulations about appeals, a very important power, and it details in a number of sub-paragraphs the matters which are to be covered by the regulations.
    Mr. Lubbock: I must say that this is an enormously long Amendment and rather difficult to read. Before the hon. and learned Gentleman gets to subparagraph (1,d) would he just tell me whether there is any difference between the table in the Schedule and the table as set out in the Amendment?
    Mr. Roots: The words to which I want to draw attention are the final words of that sentence:
    "enabling all those interested in the ascertainment of the said value to be heard before the matter is determined".
    I think that one should link that with the rather similar wording in sub-paragraph (b), which says:
    "entitling persons, in addition to those who would be so entitled apart from the regulations, to appear on such appeals."
    We have thought it right to draw particular attention to the importance of making sure that people with a similar asset to one which is the subject of an appeal should not be prejudiced by a case which has been heard before. I shall not attempt to detail the many examples which can be given of the sort of thing I have in mind, but, obviously, there can be variations between two pictures by the same master.
    Experience in recent years shows that where a Government Department is a party to a series of appeals, automatically having the power to influence the order in which those appeals are heard and decisions taken can give rise to an unsatisfactory
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    state of affairs. In my experience it originated with war damage cases. The practice there was to get a number of decisions on cases in which one of the parties, in fact a member of the public, was not in a position to contest the case. Having obtained a number of decisions on a certain point, or a number of settlements on a certain point, somebody else was then faced with, as it were, a precedent, and was told, "Oh, but 20 people have already agreed the value of this article".
    This practice has been continued, for example by the London County Council in compulsory acquisition cases, which was the subject of very sturdy comment by the Lands Tribunal. It obtains in many appeals on rent valuation to rent valuation courts, or at any rate the public have that impression. It does not follow that the Department is acting dishonourably at all. It has a choice, and it naturally chooses the sequence which suits it best.
    Mr. MacDermot: Surely that is not right in the case of rent appeals. I do not think that the Department has any choice. It is a matter for the court.
    9.45 p.m.
    Mr. Roots: It has a power which it can bring forward, and which in certain areas, for instance in my constituency, is the subject of harsh comment. I am not accusing the Valuation Department of dishonesty. It may suit it to deal with certain forms of property, and it may not be a matter of design to do anyone down. I am not anxious to imply that the Department does anything dishonourable because that is neither necessary nor particularly valuable to my argument, but when, as in this paragraph, one is detailing the subjects on which regulations should be made, it is most important that this House should declare all the aspects which it regards as particularly important. I hope that the Government will recognise that this is a very important aspect when one is detailing the subjects for regulation.
    I pass now to paragraph 2(3), where we propose that these regulations should be approved, to use the colloquial term, by a positive Resolution of the House. A new system is being set up. Amendments to existing regulations which had been basically approved by the House could be subject to the negative procedure,

    1953
    such as is proposed in the Bill, but entirely new regulations should be subject to the positive Resolution of the House.
    Paragraphs 6(4) and (5) relate to members of the Stock Exchange and persons responsible for managing a clearing house for any terminal market in commodities. The Amendment closely follows the powers given to the Revenue by Section 16(7) of the Finance Act, 1962. Our criticism is that the Bill might require a general return. There is no great magic about a return, but it could be unlimited as to period or number of transactions and it might be possible to serve a requirement on a Stock Exchange firm, or one of the commodity market firms, to give a complete list of all its transactions for the last three or four years, or whatever the period might be.
    This kind of power to order wholesale returns is quite improper. If the Revenue believes that someone has falsified or erred in his accounts for tax purposes, it could perfectly well ask for particulars of transactions. It must be given the power to make such inquiries and in the 1962 Act it was given comprehensive powers to make inquiries about transactions which might have resulted in capital gains. Incidentally, the mere selling or buying price by itself would not be sufficient even then to determine whether there had been a chargeable gain.
    We propose that the Revenue should be given the power to ask for particulars and to require an answer within 28 days. The cases are identical, but I will deal with the Stock Exchange provision when the firm would have to state whether it had acted on behalf of a person who, it appeared to the inspector, might be chargeable to tax on capital gains, to furnish information about acquisition or disposal of assets comprised in the acquisition or disposal and the date and manner of the acquisition or disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition.
    The House has to remember that there is to be a penalty clause; in other words, either error or failure in furnishing the return could result in an appreciable penalty.
    Perhaps the most important matter from the point of view of the House of Commons is this. Neither before the Bill
    1954
    was introduced nor during our consideration of it have we heard any criticism of the operation of the powers under the 1962 Act. We have never been told that further powers must be given because the 1962 Act powers have proved unsatisfactory. Until a very strong case is made for extending those powers, the House should be very cautious. I wait with interest to hear whether we are to be given positive particulars showing why the existing wide powers are unsatisfactory and why it is necessary to give carte blanche to the Revenue to require further particulars, perhaps quite unreasonably.
    I do not wish to impute to the Revenue the attributes of a malefactor, but one can understand that, perhaps, enthusiasm may lead authorities, quite bona fide, to put burdens on a partnership or undertaking on the Stock Exchange or the commodity market which, looked at both from the point of view of the taxpayer and from the point of view of common sense, are quite unnecessary and extremely onerous. In the circumstances, until the powers under the 1962 Act are shown conclusively to be unsatisfactory, the House should maintain them and not extend them.
    Mr. A. P. Costain: Before he leaves that point, perhaps my hon. Friend will assure the House that the misspelling in the heading at line 125, "Special reurns", does not mean that he wants to bury the whole Bill in an urn.
    Mr. Roots: I had considered whether powers of cremation fell within the Bill, but I have come to the conclusion, from the legal point of view, that they would be outside the Title and, therefore, I need not concern myself with them. While we are on the point about printing, perhaps I may mention that the word "Valuation" should precede paragraph 13. I was sure that the House would wish to sympathise with the printers on this Bill, and I felt that even indirect criticism would be misplaced.
    I turn next to paragraph 6(6). Paragraph 6(6) of the Schedule in the Bill gives power to require a return from an auctioneer or any person carrying on the trade of dealing in tangible movable property. He must give particulars of

    1955
    any transactions effected by or through him
    "in which any asset which is tangible moveable property is disposed of for a consideration the amount or value of which, in the hands of the recipient, exceeds £1,000."
    Again, a virtually unlimited return except that in this case it relates to articles of value above £1,000.
    Tangible movable property is readily identifiable and the Revenue will be inquiring about it in respect of the dealings or business of a particular taxpayer or taxpayers. Until the House is convinced to the contrary, the price and the date of disposal should be accepted as giving to the Revenue all it needs to ascertain a price history for the purpose of assessment. To require auctioneers to keep a record of all buyers, all sellers, amounts and dates, and to make this return, failure to keep which information may render them subject to penalty—
    Mr. Harold Lever: They keep it anyway.
    Mr. Roots: The hon. Gentleman says that, but I am instructed that they do not. The hon. Gentleman has helped the House a great deal, but, knowing what I do of his profession, I hope, in his own interest, that he will not declare that he is carrying on a side-trade as an auctioneer. Otherwise, we may be in difficulties. Auctioneers have a large number of cash transactions, and the precise record of the person and his particulars and dates are not kept.
    The special case is the London market where there is a substantial foreign trade of enormous value to the country. Undoubtedly, there would be greatest objection by foreigners if they knew that full particulars had to be recorded, including their names, which could then be required by the British Government. It may be that they have not all that confidence in their own Government and they may attach to our Government the same lack of confidence.
    Mr. Lubbock: Would the hon. and learned Gentleman say why he has deleted from the original Clause the words referring to transactions of over £1,000 and why he is now requiring these people to give the less onerous details of all transactions whether or not they concern considerations of more than £1,000?
    Mr. Roots: If the requirement were limited in the way suggested in the Amendment, it would be reasonable to require the price and date, which are known to auctioneers. The auctioneer knows when it is sold, and the price is recorded. If in those circumstances there is a special reason for wanting to know the price, which is below £1,000, it would be reasonable to give that information, particularly as it is known to auctioneers. A carte blanche should not be given in circumstances which we cannot envisage unless it is shown that there is no other way of giving the Revenue powers which are essential for them to carry out their functions.
    I do not want to delay the House. I pass to paragraph 10. The words in the Bill to which I draw attention are in line 6, which states that a person
    "may be required by a notice by the Board to give such particulars as the Board may consider are required to determine whether the company or trust falls within"
    the relevant Sections. Again there is a penalty. The Amendment states that the person
    "may be required by a notice by the Board to give such particulars as may be known to him"—
    for overseas concerns the particulars may not be known to him—
    "and are reasonably required to determine whether the company or trust falls within"
    the relevant Sections. The wording in the Bill reserves to the Board the right to decide whether these particulars are required.
    If there is a penalty provision, as there is here, it should be left to the court, if there is a prosecution, to consider the defence that the particulars which are required are unreasonable. It is not a matter which should be reserved solely to the Board, which could say, "We consider that they are necessary, and if you do not like it you will be fined". That wording causes considerable objection. I hope that the Government will realise that it is reasonable, first, to ask that the facts should be known to the person of whom inquiry is made and, secondly, that it should be possible to argue whether the requirement is necessary.
    Finally, in paragraph 13 we suggest that the inspector may be given authority to inspect and that he should

    1957
    give 14 days notice to the person having custody of the property that he wishes
    "to inspect it at such time or times as may be reasonable in the circumstances".
    or, alternatively, that the person having possession of the property should produce it. There is no real reason why the inspector should have power to go on somebody's property. It should be made clear that the person may produce the property to the inspector.
    I remind the House that we are dealing with a very general power in the sense that a man may have a picture which he bought some time before and may suddenly get a demand for inspection which is in connection with somebody else's tax. It may have nothing to do with him. It may be a sale which occurred previously.
    It may be that the Revenue needs to inspect a picture, but I suggest that the word "reasonable" is extremely important. The Bill as it stands contains an authorisation to inspect:
    "at such reasonable times as the Board may consider necessary."
    If one is to fine a man, the question of reasonableness should not be reserved to the Revenue. [Interruption.] The hon. Member for Manchester, Cheetham (Mr. Harold Lever) and I must disagree on this. I think that it is clear from the wording. If the hon. Member appreciates that, I think that he will be able to support the Amendment because it makes it abundantly clear that that is not reserved for the Board. It is clear that the point could, and would, be raised before the court that in relation to the times it is "reasonable" as the Board considers necessary. There are a number of decisions by the courts making it clear that on this wording or wording like this the decision would be one for the Board.
    If the hon. Member for Cheetham disagrees, at least he can say that the wording proposed in the Amendment makes it abundantly clear that this decision is not finally reserved to the Board. There are two sides to the question of "reasonableness". There is "reasonableness" on the part of the taxpayer and "reasonableness" on the part of the Board. There is in that respect, or should be, common ground.
    1958
    For those reasons, I hope that the Government will realise that this Schedule merits considerable alterations. It has considerable defects. It should be both improved and made clearer.
    10.0 p.m.
    Mr. MacDermot: I will try, in a few words, to comment on the few words on the Notice Paper—[Laughter.]—and the remarks of the hon. and learned Member for Kensington, South (Mr. Roots). I hope that I will be able to dispose of my reply rather more shortly.
    The hon. and learned Gentleman's first point dealt with the question of the procedure under the Bill for dealing with the valuation of unquoted shares and appeals against valuation. The Bill provides that appeals should go to the general commissioners and the reason for this was explained in Committee. It is that we want to secure some consistency in the valuation of these shares. We will be dealing for the most part with the valuation of shares in a large number of small private companies, many of them of a local character. The general commissioners have a wide range of experience, mostly business experience, and they include accountants and people with legal training. They will be able, over a period of time, to build up a considerable corpus of local knowledge and experience.
    The shares which must be valued may be held by people who are dispersed widely throughout the country and it is obviously desirable that the same body of people should do the valuation for a particular company. The general commissioners may become concerned with the tax affairs of that company, and will have a considerable knowledge of it. We feel, therefore, that this is the fairer way of ensuring a proper and equitable system of valuation.
    As to the appeal procedure, the proposition as put forward rather surprisingly suggests that there should be the right of appeal only to the High Court, as in the Estate Duty procedure. This is something which has been the subject of widespread criticism by those in the Estate Duty sphere, but, I hasten to say, not criticism directed against the Estate Duty office; it is remarkable that in the last 20 years there has been, I

    1959
    think, only one appeal on valuation to the High Court. It has been suggested by some that that is because the expense involved in appealing to the High Court acts as a deterrent effect and that people would prefer the much easier, straightforward, ready and cheaper method of appealing to the general or special commissioners, and that is what we are providing for.
    I should answer the point made about the great experience which the Estate Duty office has in this matter. That is recognised and it is the Board's intention to make full use of that knowledge and experience and make it available to inspectors of taxes throughout the country. As hon. Members who are familiar with this subject will know, there are many specialist branches at head office, the members of which have great experience, which is made available generally to tax inspectors throughout the country. That is what will be done in this case to ensure that the benefit of that experience is spread.
    The next matter which the hon. and learned Gentleman raised concerned appeals and he pointed out, under paragraph 2(1,d), how important it is to ensure that interested parties who are not directly engaged in a dispute may be allowed to be represented and have their interests heard if a matter goes to appeal. That point has been well taken and I assure the hon. and learned Gentleman that we have it in mind. The regulations which are to be made will have power to make provision for this and it is our full intention to do so. This point also came up in Committee.
    The other point in connection with the regulations is the suggestion that they should be subject to the affirmative Resolution procedure and not the negative Resolution procedure. Almost without exception, any kind of regulation which involves imposing any incidence of tax must be subject to the affirmative Resolution procedure. This is, as it were, a classic example of the kind of matter which must be subject to the affirmative procedure. However, these regulations are concerned essentially with matters of machinery and procedure and not with the incidence of tax. They will not affect in any way anyone's liability to tax. There is clear precedent in this. There are
    1960
    many regulations of this kind made in the Income Tax field; for example, the whole of the P.A.Y.E. machinery and procedure is laid down in Regulations made under Section 157 of the Income Tax Act, which is subject to the negative procedure.
    The next point which the hon. Gentleman mentioned was the question of returns made by the stockbrokers, and it was suggested that the powers which we are seeking here are intolerably and unnecessarily wide. May I repeat the assurance I gave in Committee and which has been formally given by my right hon. Friend to the Chairman of the Council of the Stock Exchange. The powers will not be used in any oppressive way and will be used solely on a sample basis. We consider it is essential when imposing a comprehensive tax of this kind to take powers for sample test returns; otherwise, if everyone knows that the Revenue will only have power to call for information when they already have a lead to suggest there has been some concealment, it will be an encouragement to that small minority of people who seek to evade their responsibilities and will operate extremely unfairly on the majority of people who are making perfectly honest and legal tax returns.
    The proposal which is contained in the Amendment is that we should repeat the restricted powers under Section 16(7) of the Finance Act, 1962. I would remind the House that it was not the proposal originally put forward in the Bill by the Government of the day. It was the proposal which they were driven to by strong back bench pressure from hon. Members opposite when they were in Government.
    I also remind hon. Members that in quite a different field there is a requirement for very considerable returns to be made; namely, the requirement under the 1951 Act for banks to make returns of payments of interest exceeding £15 a year. That was introduced by the Labour Government in 1951. It was hotly and bitterly contested by hon. Members opposite as being an intolerable infringement on the liberty and freedom of the subject. Nevertheless, they continued in power for 13 years using that power and never attempted to get rid of it, because they found it was a valuable, necessary and useful means of detecting tax evasion and tax avoidance.

    1961
    I think that provision has led to more back duty cases than almost any other provision in our law.
    We do not propose to use the power by calling for regular returns of that kind. It will be used purely on a sample basis. But if we are introducing such a tax, we consider it essential to put in the hands of the Revenue proper powers and instruments to check the returns they receive from independent sources, and that is what the Amendment does.
    Mr. Stratton Mills: Has it been the experience of the Revenue that the absence of using the sample powers under the short-term speculative gains tax has proved unsatisfactory?
    Mr. MacDermot: It is not for me to speak of any period for which we are not responsible. What we are doing is to arm the Revenue with the necessary instruments and means to enable them to check that the returns they are receiving are proper ones.
    The next point that was raised was a similar one in relation to auctioneers. This is in a much smaller field, because it only deals with returns of transactions of chattels of over £1,000 in value. Again, though, I repeat the assurance that has been given: we are not going to call for returns over long periods of time, or regular returns of all transactions. Again we shall proceed on a sample check basis.
    The next point raised was in connection with returning information about nonresident companies and trusts. The Amendment proposes that the Board should have power to require only such particulars as are known to the taxpayer and as are reasonably required, rather than such particulars as the Board may consider are required. We are here dealing essentially with family companies and family trusts for the most part. Shareholders and beneficiaries will commonly be in a position to acquire and find out the information called for, although they may not be in possession of it at the time when they are asked for the return. If one framed this provision in a limited way that merely enabled the taxpayer to say, "I don't know what the answer is," and that was the end of the matter, the Revenue would be inhibited from a perfectly proper means of obtaining the
    1962
    information that is required about the operations of the company or the trust.
    I may be asked what the position will be if the Revenue calls for information that is not within a person's knowledge, and he makes reasonable inquiries of the directors of the company or the trustees of the trust, and is unable to obtain the information. If the question is asked: "In that situation, will the Revenue start proceedings before the court or the commissioners?" the answer is, of course, that the Revenue will not be so foolish as to take proceedings in such circumstances. If it did, the proceedings would very quickly be thrown out by the court or the commissioners.
    The final point relates to the question of valuation, about which we had some lengthy and, at times, heated discussions in Committee. This is a provision upon which hon. Members opposite have, at times, allowed their imaginations to run riot, with visions of snoopers having power to enter people's premises to inspect chattels, and so forth. I would again remind hon. Members of the error into which they fall in reading this provision, an error that was repeated by the hon. and learned Member for Kensington, South who, in moving the Amendment, said that Inland Revenue staff should not have power to go on someone's property.
    The answer is that they do not have power to go on someone's property. No power is written in; there is no power of entry at all. What is conferred by this provision is a right to inspect a property. If they are denied the exercise of that right their only remedy is to prosecute before the courts where, I think, the maximum penalty is £10. It is an extremely moderate and modest enforcement provision, and one that will only be used as a reserve power.
    In the normal case, the matter will be dealt with, as in Estate Duty procedure, in a courteous and reasonable way, with co-operation on both sides. Appointments will be made, and arrangements will be made for inspection, usually by valuers, and negotiations will take place. It is only to deal with someone who completely refuses to co-operate that these provisions are written in, and I say again that they can be as much in the interests of the taxpayer as of the

    1963
    Revenue. As the hon. and learned Member pointed out himself valuation of these assets can affect their purchase.
    The valuation will not only concern the particular taxpayer who is negotiating with the Revenue. The decision may affect other people. For example in the case of the gift of a chattel, what is the realisation price for one taxpayer will be the acquisition price for another. The Revenue must therefore have adequate powers for inspection and valuation. That is what is provided for, and the provision is of a very moderate character. I cannot of course accept the Amendment, but the hon. Member made the point that there should be an objective rather than a subjective test by the Commissioners. That is a point we might take an opportunity to rectify, but I am afraid that this hammer is not the one to deal with that nut.
    10.15 p.m.
    Mr. Grimond: I do not want to delay the House for long on this matter. In spite of what the Financial Secretary said, I should have thought that where, as in this case, we are bringing in a new form of tax there would be a case to revert to the positive procedure which can be quoted, although I do not put a great deal of weight on that argument.
    Where I thought the Financial Secretary was not entirely convincing was in his resistance to the Amendment about giving powers to auctioneers and stockbrokers and other persons to furnish particulars of their transactions. The Schedule as drafted is exceptionally wide. There is no limitation on the type of transaction. I should have preferred to have started on a narrower basis. If then the Revenue said that it found itself hampered and peculiarly restricted, it might have gone on to a wider sample. I am afraid that to suspicious minds like mine the argument that very wide powers were written into previous Acts and everyone found them very convenient is not convincing. The onus lies on the Treasury to show that it requires these exceptionally wide powers by coming to the House and making a case for them.
    I have a question to ask in relation to powers to demand the production of property from the person who has the custody or possession of it. I must apologise
    1964
    to the Financial Secretary because he might say that I ought to have put down an Amendment on this, but I thought it was covered and now, looking at the Measure, I am not sure that it is. The powers in the Bill are such, I understand, that the power is given to demand the production of an asset or demand to see it without informing the owner. Suppose that the asset is in the custody of a bank, as it may well be. Am I right in thinking that notice will be served on the bank and the asset can be seen without informing the owner? I thought the point was covered in the Clause, but I cannot find it. Everyone would think it reasonable that an owner should be informed and that there should not be power to require the production from anyone who has custody of the asset. I should like the Financial Secretary to assure me on this point, or to say that if there is an opportunity he might deal with it.
    Mr. Peter Walker: When we last debated this Schedule it was at an early hour in the morning and we received very little satisfaction on the Amendments which we put forward. We consider the Schedule to be of tremendous importance. It was, therefore, our aim to reproduce the Schedule almost in its entirety and to deal with the many unsatisfactory features in it. Having listened to the Financial Secretary, I believe that he has decided to accept everything for which the Revenue asked without any consideration of the individual position.
    This is a very bad principle for Treasury Ministers to work upon. All the Amendments we put forward on the Schedule, mentioned in detail by my hon. and learned Friend the Member for Kensington, South (Mr. Roots) were perfectly reasonable about this. Listening to the Financial Secretary commenting upon them, I felt that there was not one Amendment on which he made a convincing case that it should not be accepted. For example, there was the Amendment dealing with the fact that an affirmative Resolution of the House was needed on an appeal procedure from a particularly new form of tax.
    I would have thought that any reasonable Treasury Minister, recognising that the House was concerned about such regulations, would have happily agreed to

    1965
    this particular Amendment. I can see no objection at all why the Financial Secretary should not do so. As to the provisions as far as the Stock Exchange is concerned, I would agree with the remarks made by the right hon. Gentleman the Leader of the Liberal Party on this subject. The significant thing is that when the Treasury Minister was asked whether there was any dissatisfaction about the manner in which the previous regulations worked under the 1962 Act, he was unable to say that there was any dissatisfaction at all with the manner in which these had worked.
    What the Revenue has said is that it would like even more powers than it has, and the Treasury has said it would include these in the Act. This is not good enough, because these previous powers were carefully considered upon the basis of protecting the position of the individual and stopping too widespread powers of the Revenue. I can imagine nothing more unreasonable than for a Minister to refuse to insert into the Schedule the phrase which says that the particulars required by the Revenue from an individual should be known to him and should be reasonable. Alas, this also was rejected.
    Then we come to the unpopular Section 13 of this Schedule, described as the
    "snooper's" section of the Schedule. The Financial Secretary said there was a great deal of emotion upon this particular subject. I personally hope that there will always be a great deal if emotion on this type of subject. Any hon. Member on this side of the House reading the Amendment we have suggested to subsection (13) must consider that this gives all of the powers that the Revenue or the Treasury could reasonably require. The power for that individual to select to take the particular article concerned to the inspector of taxes is surely one which could have been granted by the Treasury. Any person reading those four subsections of Section 13, proposed by my right hon. and hon. Friends, must agree that they are far better provisions than are provided in the Schedule as it now stands.
    The Minister's reply has been a very real disappointment to us. We tried to give every power that was reasonable, and this attempt has been rejected. I urge my right hon. and hon. Friends to divide the House.
    Question put, That the words proposed to be left out, to the end of line 38, in page 95, stand part of the Bill:—
    The House divided: Ayes 276, Noes 272.

    Division No. 247.]

    AYES

    [10.24 p.m.

    Abse, Leo

    Chapman, Donald

    Finch, Harold (Bedwellty)

    Albu, Austen

    Coleman, Donald

    Fitch, Alan (Wigan)

    Allaun, Frank (Salford, E.)

    Conlan, Bernard

    Fletcher, Sir Eric (Islington, E.)

    Alldritt, Walter

    Corbet, Mrs. Freda

    Fletcher, Ted (Darlington)

    Atkinson, Norman

    Craddock, George (Bradford, S.)

    Fletcher, Raymond (Ilkeston)

    Bacon, Miss Alice

    Crawshaw, Richard

    Floud, Bernard

    Bagier, Gordon A. T.

    Cronin, John

    Foley, Maurice

    Barnett, Joel

    Crosland, Rt. Hn. Anthony

    Foot, Sir Dingle (Ipswich)

    Baxter, William

    Crossman, Rt. Hn. R. H. S.

    Foot, Michael (Ebbw Vale)

    Bellenger, Rt. Hn. F. J.

    Cullen, Mrs. Alice

    Ford, Ben

    Bence, Cyril

    Dalyell, Tam

    Fraser, Rt. Hn. Tom (Hamilton)

    Benn, Rt. Hn. Anthony Wedgwood

    Darling, George

    Freeson, Reginald

    Bennett, J. (Glasgow, Bridgeton)

    Davies, Ifor (Gower)

    Galpern, Sir Myer

    Binns, John

    Davies, S. O. (Merthyr)

    Garrett, W. E.

    Bishop, E. S.

    de Freitas, Sir Geoffrey

    George, Lady Megan Lloyd

    Blackburn, F.

    Delargy, Hugh

    Ginsburg, David

    Blenkinsop, Arthur

    Dell, Edmund

    Gourlay, Harry

    Boardman, H.

    Dempsey, James

    Gregory, Arnold

    Boston, T. G.

    Diamond, Rt. Hn. John

    Grey, Charles

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

    Dodds, Norman

    Griffiths, David (Rother Valley)

    Boyden, James

    Doig, Peter

    Griffiths, Rt. Hn. James (Llanelly)

    Braddock, Mrs. E. M.

    Driberg, Tom

    Griffiths, Will (M'chester, Exchange)

    Bradley, Tom

    Duffy, Dr. A. E. P.

    Gunter, Rt. Hn. R. J.

    Bray, Dr. Jeremy

    Dunn, James A.

    Hamilton, James (Bothwell)

    Broughton, Dr. A. D. D.

    Dunnett, Jack

    Hamilton, William (West Fife)

    Brown, Rt. Hn. George (Belper)

    Edelman, Maurice

    Hamling, William (Woolwich, W.)

    Brown, Hugh D. (Glasgow, Provan)

    Edwards, Rt. Hn. Ness (Caerphilly)

    Hannan, William

    Brown, R. W. (Shoreditch & Fbury)

    Edwards, Robert (Bilston)

    Harrison, Walter (Wakefield)

    Buchan, Norman (Renfrewshire, W.)

    English, Michael

    Hart, Mrs. Judith

    Buchanan, Richard

    Ennals, David

    Hattersley, Roy

    Butler, Herbert (Hackney, C.)

    Ensor, David

    Hazell, Bert

    Butler, Mrs. Joyce (Wood Green)

    Evans, Albert (Islington, S. W.)

    Healey, Rt. Hn. Denis

    Callaghan, Rt. Hn. James

    Evans, Ioan (Birmingham, Yardley)

    Heffer, Eric S.

    Carmichael, Neil

    Fernyhough, E.

    Henderson, Rt. Hn. Arthur

    Herbison, Rt. Hn. Margaret

    Mikardo, Ian

    Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)

    Hobden, Dennis (Brighton, K'town)

    Millan, Bruce

    Short, Mrs. Renée (W'hampton, N. E.)

    Holman, Percy

    Miller, Dr. M. S.

    Silkin, John (Deptford)

    Howarth, Harry (Wellingborough)

    Milne, Edward (Blyth)

    Silkin, S. C. (Camberwell, Dulwich)

    Howarth, Robert L. (Bolton, E.)

    Molloy, William

    Silverman, Julius (Aston)

    Howell, Denis (Small Heath)

    Monslow, Walter

    Silverman, Sydney (Nelson)

    Hoy, James

    Morris, Alfred (Wythenshawe)

    Skeffington, Arthur

    Hughes, Emrys (S. Ayrshire)

    Morris, Charles (Openshaw)

    Slater, Mrs. Harriet (Stoke, N.)

    Hughes, Hector (Aberdeen, N.)

    Morris, John (Aberavon)

    Slater, Joseph (Sedgefield)

    Hunter, Adam (Dunfermline)

    Mulley, Rt. Hn. Frederick (Sheffield Pk)

    Small, William

    Hunter, A. E. (Feltham)

    Murray, Albert

    Snow, Julian

    Hynd, H. (Accrington)

    Neal, Harold

    Spriggs, Leslie

    Irvine, A. J. (Edge Hill)

    Newens, Stan

    Steele, Thomas (Dunbartonshire, W.)

    Irving, Sydney (Dartford)

    Noel-Baker, Francis (Swindon)

    Stewart, Rt. Hn. Michael

    Jackson, Colin

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

    Stonehouse, John

    Jay, Rt. Hn. Douglas

    Norwood, Christopher

    Stones, William

    Jeger, George (Goole)

    Oakes, Gordon

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

    Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)

    Ogden, Eric

    Summerskill, Hn. Dr. Shirley

    Jenkins, Hugh (Putney)

    O'Malley, Brian

    Swain, Thomas

    Johnson, Carol (Lewisham, S.)

    Orbach, Maurice

    Swingler, Stephen

    Johnson, James (K'ston-on-Hull, W.)

    Orme, Stanley

    Symonds, J. B.

    Jones, Dan (Burnley)

    Oswald, Thomas

    Taverne, Dick

    Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

    Owen, Will

    Taylor, Bernard (Mansfield)

    Jones, J. Idwal (Wrexham)

    Paget, R. T.

    Thomas, George (Cardiff, W.)

    Jones, T. W. (Merioneth)

    Palmer, Arthur

    Thomas, Iorwerth (Rhondda, W.)

    Kelley, Richard

    Pannell, Rt. Hn. Charles

    Thomson, George (Dundee, E.)

    Kenyon, Clifford

    Pargiter, G. A.

    Thornton, Ernest

    Kerr, Mrs. Anne (R'ter & Chatham)

    Park, Trevor (Derbyshire, S. E.)

    Tinn, James

    Lawson, George

    Parker, John

    Tomney, Frank

    Leadbitter, Ted

    Parkin, B. T.

    Tuck, Raphael

    Ledger, Ron

    Pavitt, Laurence

    Urwin, T. W.

    Lee, Rt. Hn. Frederick (Newton)

    Pearson, Arthur (Pontypridd)

    Varley, Eric G.

    Lever, Harold (Cheetham)

    Peart, Rt. Hn. Fred

    Wainwright, Edwin

    Lever, L. M. (Ardwick)

    Pentland, Norman

    Walden, Brian (All Saints)

    Lewis, Arthur (West Ham, N.)

    Perry, Ernest G.

    Walker, Harold (Doncaster)

    Lewis, Ron (Carlisle)

    Popplewell, Ernest

    Wallace, George

    Lipton, Marcus

    Prentice, R. E.

    Warbey, William

    Loughlin, Charles

    Price, J. T. (Westhoughton)

    Watkins, Tudor

    Mabon, Dr. J. Dickson

    Probert, Arthur

    Weitzman, David

    McBride, Neil

    Pursey, Cmdr. Harry

    Wells, William (Walsall, N.)

    McCann, J.

    Randall, Harry

    Whitlock, William

    MacColl, James

    Rankin, John

    Wigg, Rt. Hn. George

    MacDermot, Niall

    Redhead, Edward

    Wilkins, W. A.

    McGuire, Michael

    Rees, Merlyn

    Willey, Rt. Hn. Frederick

    McInnes, James

    Reynolds, G. W.

    Williams, Alan (Swansea, W.)

    McKay, Mrs. Margaret

    Rhodes, Geoffrey

    Williams, Clifford (Abertillery)

    Mackenzie, Gregor (Rutherglen)

    Richards, Ivor

    Williams, Mrs. Shirley (Hitchin)

    Mackie, John (Enfield, E.)

    Roberts, Albert (Normanton)

    Williams, W. T. (Warrington)

    Mahon, Peter (Preston, S.)

    Roberts, Goronwy (Caernarvon)

    Willis, George (Edinburgh, E.)

    Mahon, Simon (Bootle)

    Robertson, John (Paisley)

    Wilson, William (Coventry, S.)

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

    Robinson, Rt. Hn. K. (St. Pancras, N.)

    Winterbottom, R. E.

    Manuel, Archie

    Rodgers, William (Stockton)

    Woodburn, Rt. Hn. A.

    Mapp, Charles

    Rogers, George (Kensington, N.)

    Woof, Robert

    Marsh, Richard

    Rose, Paul B.

    Wyatt, Woodrow

    Mason, Roy

    Ross, Rt. Hn. William

    Yates, Victor (Ladywood)

    Maxwell, Robert

    Rowland, Christopher

    Zilliacus, K.

    Mayhew, Christopher

    Sheldon, Robert

    Mellish, Robert

    Shinwell, Rt. Hn. E.

    TELLERS FOR THE AYES:

    Mendelson. J. J.

    Shore, Peter (Stepney)

    Mr. Howie and Mr. Harper.

    NOES

    Agnew, Commander Sir Peter

    Bossom, Hn. Clive

    Channon, H. P. G.

    Alison, Michael (Barkston Ash)

    Box, Donald

    Chataway, Christopher

    Allan, Robert (Paddington, S.)

    Boyd-Carpenter, Rt. Hn. J.

    Chichester-Clark, R.

    Allason, James (Hemel Hempstead)

    Boyle, Rt. Hn. Sir Edward

    Clark, Henry (Antrim, N.)

    Anstruther-Gray, Rt. Hn. Sir W.

    Braine, Bernard

    Clark, William (Nottingham, S.)

    Astor, John

    Brewis, John

    Cole, Norman

    Atkins, Humphrey

    Brinton, Sir Tatton

    Cooke, Robert

    Awdry, Daniel

    Bromley-Davenport, Lt.-Col. Sir Walter

    Cooper, A. E.

    Baker, W. H. K.

    Brooke, Rt. Hn. Henry

    Cooper-Key, Sir Neill

    Balniel, Lord

    Brown, Sir Edward (Bath)

    Corfield, F. V.

    Barber, Rt. Hn. Anthony

    Bruce-Gardyne, J.

    Costain, A. P.

    Barlow, Sir John

    Bryan, Paul

    Courtney, Cdr. Anthony

    Batsford, Brian

    Buchanan-Smith, Alick

    Craddock, Sir Beresford (Spelthorne)

    Bell, Ronald

    Buck, Antony

    Crawley, Aidan

    Bennett, Sir Frederic (Torquay)

    Bullus, Sir Eric

    Crosthwaite-Eyre, Col. Sir Oliver

    Berkeley, Humphry

    Burden, F. A.

    Crowder, F. P.

    Berry, Hn. Anthony

    Butcher, Sir Herbert

    Cunningham, Sir Knox

    Biffen, John

    Buxton, Ronald

    Curran, Charles

    Biggs-Davison, John

    Campbell, Gordon

    Currie, G. B. H.

    Birch, Rt. Hn. Nigel

    Carlisle, Mark

    Dalkeith, Earl of

    Black, Sir Cyril

    Carr, Rt. Hn. Robert

    Dance, James

    Blaker, Peter

    Cary, Sir Robert

    Davies, Dr. Wyndham (Perry Barr)

    1968

    1969

    d'Avigdor-Goldsmid, Sir Henry

    Johnston, Russell (Inverness)

    Pounder, Rafton

    Dean, Paul

    Jones, Arthur (Northants, S.)

    Powell, Rt. Hn. J. Enoch

    Digby, Simon Wingfield

    Jopling, Michael

    Price, David (Eastleigh)

    Dodds-Parker, Douglas

    Joseph, Rt. Hn. Sir Keith

    Prior, J. M. L.

    Doughty, Charles

    Kaberry, Sir Donald

    Quennell, Miss J. M.

    Drayson, G. B.

    Kerby, Capt. Henry

    Ramsden, Rt. Hn. James

    du Cann, Rt. Hn. Edward

    Kerr, Sir Hamilton (Cambridge)

    Rawlinson, Rt. Hn. Sir Peter

    Eden, Sir John

    Kershaw, Anthony

    Redmayne, Rt. Hn. Sir Martin

    Elliot, Capt. Walter (Carshalton)

    Kilfedder, James A.

    Rees-Davies, W. R.

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

    Kimball, Marcus

    Renton, Rt. Hn. Sir David

    Emery, Peter

    King, Evelyn (Dorset, S.)

    Ridley, Hn. Nicholas

    Errington, Sir Eric

    Kirk, Peter

    Ridsdale, Julian

    Eyre, Reginald

    Kitson, Timothy

    Roberts, Sir Peter (Heeley)

    Farr, John

    Lagden, Godfrey

    Rodgers, Sir John (Sevenoaks)

    Fell, Anthony

    Lancaster, Col. C. G.

    Roots, William

    Fisher, Nigel

    Langford-Holt, Sir John

    Royle, Anthony

    Fletcher-Cooke, Charles (Darwen)

    Legge-Bourke, Sir Harry

    St. John-Stevas, Norman

    Fletcher-Cooke, Sir John (S'pton)

    Lewis, Kenneth (Rutland)

    Scott-Hopkins, James

    Foster, Sir. John

    Litchfield, Capt. John

    Shepherd, William

    Fraser, Ian (Plymouth, Sutton)

    Lloyd, Ian (P'tsm'th, Langstone)

    Sinclair, Sir George

    Galbraith, Hn. T. G. D.

    Lloyd, Rt. Hn. Selwyn (Wirral)

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

    Gammans, Lady

    Longden, Gilbert

    Smyth, Rt. Hn. Brig. Sir John

    Gardner, Edward

    Loveys, Walter H.

    Soames, Rt. Hn. Christopher

    Gibson-Watt, David

    Lubbock, Eric

    Spearman, Sir Alexander

    Giles, Rear-Admiral Morgan

    Lucas, Sir Jocelyn

    Speir, Sir Rupert

    Gilmour, Ian (Norfolk, Central)

    McAdden, Sir Stephen

    Stainton, Keith

    Gilmour, Sir John (East Fife)

    MacArthur, Ian

    Stanley, Hn. Richard

    Glover, Sir Douglas

    Mackenzie, Alasdair (Ross & Crom'ty)

    Stodart, Anthony

    Glyn, Sir Richard

    Mackie, George Y. (C'ness & S'land)

    Studholme, Sir Henry

    Godber, Rt. Hn. J. B.

    Macleod, Rt. Hn. Iain

    Talbot, John E.

    Goodhart, Philip

    McMaster, Stanley

    Taylor, Sir Charles (Eastbourne)

    Goodhew, Victor

    McNair-Wilson, Patrick

    Taylor, Edward M. (G'gow, Cathcart)

    Gower, Raymond

    Maginnis, John E.

    Teeling, Sir William

    Grant, Anthony

    Marples, Rt. Hn. Ernest

    Temple, John M.

    Grant-Ferris, R.

    Marten, Neil

    Thatcher, Mrs. Margaret

    Gresham Cooke, R.

    Mathew, Robert

    Thomas, Sir Leslie (Canterbury)

    Grieve, Percy

    Maude, Angus

    Thompson, Sir Richard (Croydon, S.)

    Griffiths, Eldon (Bury St. Edmunds)

    Maudling, Rt. Hn. Reginald

    Thorpe, Jeremy

    Griffiths, Peter (Smethwick)

    Mawby, Ray

    Tiley, Arthur (Bradford, W.)

    Grimond, Rt. Hn. J.

    Maxwell-Hyslop, R. J.

    Tilney, John (Wavertree)

    Gurden, Harold

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

    Turton, Rt. Hn. R. H.

    Hall, John (Wycombe)

    Meyer, Sir Anthony

    Tweedsmuir, Lady

    Hall-Davis, A. G. F.

    Mills, Peter (Torrington)

    van Straubenzee, W. R.

    Hamilton, Marquess of (Fermanagh)

    Mills, Stratton (Belfast, N.)

    Vaughan-Morgan, Rt. Hn. Sir John

    Hamilton, M. (Salisbury)

    Miscampbell, Norman

    Vickers, Dame Joan

    Harris, Frederic (Croydon, N. W.)

    Mitchell, David

    Walder, David (High Peak)

    Harris, Reader (Heston)

    Monro, Hector

    Walker, Peter (Worcester)

    Harvey, John (Walthamstow, E.)

    More, Jasper

    Walker-Smith, Rt. Hn. Sir Derek

    Harvie Anderson, Miss

    Morrison, Charles (Devizes)

    Wall, Patrick

    Hastings, Stephen

    Mott-Radclyffe, Sir Charles

    Walters, Dennis

    Hawkins, Paul

    Munro-Lucas-Tooth, Sir Hugh

    Ward, Dame Irena

    Heald, Rt. Hn. Sir Lionel

    Murton, Oscar

    Weatherill, Bernard

    Heath, Rt. Hn. Edward

    Neave, Airey

    Webster, David

    Hendry, Forbes

    Nicholson, Sir Godfrey

    Wells, John (Maidstone)

    Higgins, Terence L.

    Noble, Rt. Hn. Michael

    Whitelaw, William

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

    Nugent, Rt. Hn. Sir Richard

    Williams, Sir Rolf Dudley (Exeter)

    Hirst, Geoffrey

    Onslow, Cranley

    Wills, Sir Gerald (Bridgwater)

    Hobson, Rt. Hn. Sir John

    Orr, Capt. L. P. S.

    Wilson, Geoffrey (Truro)

    Hopkins, Alan

    Orr-Ewing, Sir Ian

    Wise, A. R.

    Hordern, Peter

    Osborn, John (Hallam)

    Wolrige-Gordon, Patrick

    Hornby, Richard

    Osborne, Sir Cyril (Louth)

    Wood, Rt. Hn. Richard

    Hornsby-Smith, Rt. Hn. Dame P.

    Page, John (Harrow, W.)

    Woodhouse, Hn. Christopher

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

    Page, R. Graham (Crosby)

    Woodnutt, Mark

    Hunt, John (Bromley)

    Pearson, Sir Frank (Clitheroe)

    Wylie, N. R.

    Hutchison, Michael Clark

    Peel, John

    Yates, William (The Wrekin)

    Iremonger, T. L.

    Percival, Ian

    Younger, Hn. George

    Irvine, Bryant Godman (Rye)

    Peyton, John

    Jenkin, Patrick (Woodford)

    Pickthorn, Rt. Hn. Sir Kenneth

    TELLERS FOR THE NOES:

    Jennings, J. C.

    Pike, Miss Mervyn

    Mr. MacLaren and Mr. Pym.

    Johnson Smith, G. (East Grinstead)

    Pitt, Dame Edith

    Mr. MacDermot: I beg to move, Amendment No. 103, Schedule 9, in page 95, line 38, at the end to insert:
    4.—(1) Capital gains tax chargeable on gains accruing—

    (a) on the disposal of assets deemed to have been disposed of by a deceased person on his death, or

    (b) on the disposal of settled property deemed to be effected on any occasion in
    1970
    accordance with subsection (3) or subsection (4) of section 24 of this Act,

    being chargeable gains accruing—

    (i) on the disposal of land or an estate or interest in land, or

    (ii) on the disposal of shares or securities of a company the value of which at the time of the disposal is to be ascertained for the purposes of estate duty duty under section 55 of the Finance Act 1940 (valuation

    1971
    by reference to assets of the company) or the corresponding enactment forming part of the law of Northern Ireland, or would fall to be so ascertained if estate duty were leviable on the shares or securities on a death at the time of the disposal, or

    (iii) where the Board are satisfied that the capital gains tax chargeable on gains accruing on the disposal of any shares or securities of a company not falling within paragraph (ii) above, and not quoted on a recognised stock exchange in the United Kingdom or elsewhere, cannot be paid at once without undue hardship, on the disposal of those shares or securities,

    may, at the option of the personal representatives or as the case may be of the trustees, be paid by eight equal yearly instalments or sixteen half-yearly instalments, but subject to the payment of interest under sections 495 to 497 of the Income Tax 1952 as applied by this Schedule.
    (2) The first instalment shall be due at the expiration of twelve months from the time of the disposal and the interest on the unpaid portion of the tax shall be added to each instalment and paid accordingly; but the tax for the time being unpaid, with interest to the date of payment, may be paid at any time and, if the property is disposed of for valuable consideration, shall become due and payable on the disposal.
    (3) If relief is given under section 23(2) or section 24(4A) of this Act in respect of an aggregate sum which includes gains to which this paragraph applies and other gains, then for the purpose of ascertaining the amount of capital gains tax chargeable on the gains to which this paragraph applies, that relief shall be treated as having been applied rateably in respect of tax on those respective gains.
    In Committee, we had quite a considerable debate, I think initiated by the right hon. Gentleman the Leader of the Liberal Party, on the incidence of the charge to Capital Gains Tax when assets are passed on death and also in the case of a notional disposal by trustees, and it was pointed out that in some of these cases, particularly with certain forms of assets, there would be difficulty in finding the money to pay the tax. Now it is of course a matter of Estate Duty practice in such cases to allow time to pay over a period of years, and it has been the intention all along to apply similar provisions
    1972
    for the purpose of the Capital Gains Tax, but in view of the arguments in Committee we have acceded to the request that this procedure should be formally written into the Bill, and that is what this Amendment proposes to do.
    It makes statutory provision for payment by instalments of gains accruing either at death or on a notional disposal by trustees. It will not apply to gifts because we take the view that a gift by its nature is a voluntary act and that the donor is not obliged to make it unless he is in a position to make provision for any tax which is payable. It will be restricted to cases where their assets are of an illiquid nature, that is to say land, a controlling interest in private companies, and where the Board is satisfied that hardship would otherwise result, and unquoted shares. The instalment provisions will be at the option of the personal representatives or trustees, and tax can be paid over eight equal yearly instalments or in 16 half-yearly instalments, with interest at a rate of 3 per cent. on amounts outstanding.
    The final point I would make is that if the property in respect of the gains on the disposal of which the tax is being paid by instalments is itself disposed of, the tax becomes payable forthwith.
    Mr. Peter Walker: We very much regret that the Government have decided to add to the heavy burden of death duties by adding Capital Gains Tax at death, but we are pleased that they have tabled this Amendment, which makes similar provisions to those for death duties. I recommend my hon. Friends to support it.
    Amendment agreed to.
    Further consideration of the Bill, as amended, adjourned.—[Mr. George Rogers.]
    Bill, as amended, to be further considered Tomorrow.

  ELECTRICITY (CONNECTION CHARGES)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. George Rogers.]
  10.41 p.m.
  Mr. Harry Howarth: The question which I wish to raise tonight is that of the charge made by the electricity board for houses where freedom of choice is not given for water heating. I do not pretend that this is a problem which has suddenly come to light, and it may be that the subject has had the attention of the House on previous occasions before I came here. It appears, however, that little or no progress has been made, and I am hopeful that as a result of the appeal which I am making tonight the Minister will be able to say that something will be done in the interests of all those who are hoping for a solution to this problem.
  Wellingborough Urban District Council is particularly concerned at what is taking place at the present time. The council has for some time past been developing industrial estates not only in the interests of the area which it represents, but also to help industry move from the congested London area. It is a pleasure for me to say that the development has been rapid and continuous, and that more and more firms are finding that a move to this central part of the country is of benefit to their industries and to the staff who move with them.
  Such industrial growth usually brings with it the problem of housing, for it is reasonable for management to say, "If we move our premises to a new town, what about housing the staff who come with us?" I said that this usually presents a problem, but in Wellingborough the urban district council, working in conjunction with the former London County Council, and the present Greater London Council, has shown considerable initiative in the housing programme planned to cope with this development, and houses are ready for occupation as workers arrive in this overspill town.
  It is to those and future houses that I am referring tonight. There have been teething troubles from time to time but in
  1974
  general these have been overcome, and the one problem which remains is the policy of the East Midlands Electricity Board on the subject of connection charges. May I say now that I am not complaining, neither, so far as I know, is the council, about the co-operation that it has received in dealing with this extensive development. Relations between the council and all those who have assisted in what has been, and is being, done to provide the necessary services have been extremely good. Any criticism that I may have is in regard to a certain policy, and not to the work which is involved.
  During the past two years there have been several meetings between representatives of the council and officers of the electricity board at which the council has objected to the demands of the board for a capital contribution of £10 per house in respect of those dwellings where other water heating equipment indirectly prevents the tenant from having freedom of choice for water heating. The board has remained adamant that these charges must be paid despite the fact that some of the houses built by the authority are designed to be all-electric whilst others are serviced by gas.
  It is important to note that the gas boards make no similar charge on the ground that there is no freedom of choice. The East Midlands Electricity Board says that it does not insist on the provision of electrical equipment such as cookers and water heaters in new houses and asks only that the occupants shall be free to use such equipment if they wish and that the houses should be equipped with the necessary circuits plus an immersion heater boss on the hot water tank so that appliances can be readily installed and connected. In any case, the houses which are serviced by gas in the overspill town of Wellingborough also have electricity connections, or other apparatus for water heating. The district council has in practice divided sensibly and equitably between the two rival sources of supply and the proportion of houses using electricity for water heating is roughly equal to that using gas.
  The district council believes that the electricity board has failed to take into account the overall position concerning the housing development. As the matter could not be resolved with the electricity

  1975
  board, it was subsequently referred to the East Midlands Electricity Consultative Council, which supported the views of the board. It is difficult to see why the board should stick to the principles which I have outlined.
  It appears that it adheres to an agreement of 1956, an agreement known as the working formula, which was reached between the local authority associations and the predecessors of the electricity board. The agreement provided that unless costs were exceptional, no charge would be made by the board towards the cost of substations and mains—apart from any service charge normally made for electricity supplies to new local authority housing—where the electrical installations were in accordance with the prescribed minimum standards and the occupiers had freedom of choice to use electrical appliances if they so desired.
  The representations made by the district council are reasonable when one considers the industrial development in this overspill town and the resulting use of electricity on the industrial estates.
  I have referred to the situation which is giving concern to the Wellingborough Urban District Council, but the general principle does not apply only to that area. This is a nationwide problem. Writing in the Spectator of 12th March, this year, Mr. Leslie Adrian said:
  "The underground war being waged by the local electricity boards against the installation of gas appliances in new houses has still not come to the surface as far as the general public is concerned, although it is at their expense. The first rumblings were heard a year or two ago, when electricity boards began to bargain with private developers and local authorities about the connecting charges levied for wiring new houses into the mains. If the houses were constructed without any gas installations at all, some electricity boards were prepared to waive their installation charge completely."
  That article may have been brought to the notice of my hon. Friend.
  In fairness to him, I must say that I have reason to think that his right hon. Friend the Minister is not completely satisfied with the present position. That at least is my impression from his letter to me after my representations on the subject. I am further encouraged by the reply to a Question on 6th July when the hon. Member for Cirencester and
  1976
  Tewkesbury (Mr. Ridley) asked the Minister whether he would make a statement about the terms under which the gas and electricity boards were allowed to compete for business from new housing estates. In reply to a supplementary question, my hon. Friend said:
  "Some competition between the fuel industries is inevitable and, indeed, very desirable, but there must be co-operation between nationalised industries and that should be in the consumers' interests."—[OFFICIAL REPORT, 6th July, 1965; Vol. 715, c. 1339.]
  I entirely agree with my hon. Friend.
  I gather that the East Midlands Electricity Consultative Council also is not satisfied, for in a letter to the Clerk of the Wellingborough Urban District Council on 16th June it suggested that it might well be that a new formula would be evolved in the not too distant future.
  I am, therefore, encouraged in raising this subject tonight, since it is essential to help local authorities which face enough problems in their housing programmes without having to overcome hurdles and incur expenditure of this kind, especially those authorities which are taking overspill and which have acted fairly and responsibly towards both the electricity and the gas boards. It gives me no satisfaction to have to criticise the electricity boards tonight. I fully recognise the great work which they are doing for the nation. But sometimes one has to criticise one's friends in an effort to show them that something is wrong. I hope that a solution can be quickly found.
  I appreciate that my hon. Friend inherited this problem. It is not of his making. It existed under the previous Administration. But, if he can give some hope to the Wellingborough Urban District Council and to the other councils which are seeking a solution, he will have their very grateful thanks.
  10.51 p.m.
  The Parliamentary Secretary to the Ministry of Power (Mr. John Morris): It is my pleasure to congratulate my hon. Friend the Member for Wellingborough (Mr. Harry Howarth) on his perseverance in raising this matter. He first raised it with my right hon. Friend in correspondence, and, not being satisfied with the situation as it was then put to him, he has, as a good constituency Member,

  1977
  raised it on the Floor of the House tonight. We have had the pleasure of listening to an able and reasoned speech from hill, and I am sure that his constituents will be very proud of the manner in which my hon. Friend has made representations on their behalf.
  I have not been able to go in detail into the facts of the Wellingborough case. There are good reasons for that. But my understanding of the case is that it is not unlike many others elsewhere in the country. It is not a local problem, as my hon. Friend said, but a national one. Since I took office as Parliamentary Secretary, I have had occasion to look at a number of these cases, and, as recently as last Tuesday, I had a Question about it, as my hon. Friend said.
  The conclusion to which my right hon. Friend and I have come is that the present situation is manifestly unreasonable. It is not new. It is a problem which we have inherited. It has been going on for years. But my right hon. Friend and I have the will to find a solution to it. A parallel can be found in the resale of electricity. On occasion, unscrupulous landlords would take advantage of tenants of flats, bed-sitting rooms and the like and charge extortionate prices for electricity resold to them. The situation had reached a stage when it was possible for the unscrupulous to advertise meters as a method of making money. If a landlord had a fair amount of property and a certain number of electricity meters, he could set the meters at whatever pace he liked and make money out of the resale of electricity.
  My right hon. Friend was determined to find a solution to this well known problem which had been with us for many years, and I am very glad that he was able to find one which has been seen to be fair. In like manner, he is equally determined to find a solution to the problem which my hon. Friend has raised tonight.
  My right hon. Friend has no power to intervene in the specific case raised by my hon. Friend. This is a day-to-day matter within the powers of the publicly-owned industry itself. The Minister has reserve powers, and if it is in the national interest he is able to issue a general direction, but this kind of problem is a matter within the powers and duties of the board.
  1978
  Leaving aside the individual problem raised, and my hon. Friend having said that it is a national and not a local problem, the House will want to know what my right hon. Friend is doing. The solution is not easy. If it were, perhaps it would have been found years ago. But the Minister is discussing with the Electricity and Gas Councils how this kind of problem can be resolved. It is a difficult matter because there is reason and justice on both sides. It costs an electricity board practically the same to connect a house to the mains whether for lighting and small appliances or for a supply including electric cooking, water and space heating. But the revenue in the first case is very much less, and electricity boards have found that in general it does not cover the capital cost of the connection. They therefore seek to preserve their freedom to compete for the water heating and space heating loads.
  The electricity boards do not insist that gas should be excluded or that particular electrical appliances should be installed when the house is built—only that there should be wiring so that the occupier may put them in, if he wishes to do so, without great expense. Because appliances such as cookers and water heaters are put in by a local authority or private developer, electricity boards may think it necessary to make a connection charge, because their ability to compete for these loads is reduced. It must be recognised that this has the effect on occasion of excluding gas, since the local authority or developer may find it uneconomic to provide both services and must inevitably choose electricity.
  The Minister's aim is to achieve a sensible solution which will ensure freedom of choice for occupiers of houses to choose the fuel which they prefer where both fuels can economically be made available. He is not prepared to let the matter drag on and would not rule out the possibility of imposing a settlement if agreement is not reached in a reasonable time. Perhaps that meets the point made by my hon. Friend. Certainly there is the will to achieve a solution, and the Minister is prepared to take whatever steps are necessary to achieve a sensible solution.
  A settlement will need to be on broad lines and will not necessarily cover every

  1979
  case. Although there has been no opportunity to study the details in Wellingborough, it seems possible that the eventual agreement would not preclude a connection charge. The terms of the agreement have not yet been settled, but it is clear that the occupier's freedom of choice should be preserved wherever possible. My hon. Friend indicated that his council has tried to find a solution on its own by seeing that some houses were connected and supplied with electricity and others mainly with gas. But when houses from time to time became vacant for new tenants, there would be no freedom of choice for the individual who took a particular house. That is an indication in one small aspect of the complexity of this problem. Our aim is to ensure that a fair and just solution is reached as speedily as possible to ensure that the consumer has freedom of choice wherever possible.
  Mr. Howarth: If it is correct for the electricity board to make a connection charge, why does the gas board not insist on a similar charge, when electricity is used in every house for lighting and television whereas gas has only secondary consideration? The gas board does not insist on a connection charge.
  Mr. Morris: I tried to indicate earlier that there were arguments on both sides here, and if there was time I could go into the arguments on behalf of the attitude taken up by the gas industry. But one thing that is apparent is that every house must have some electricity, and the amount that is consumed simply for lighting and/or the television set alone is very small indeed. The point I was trying to make is that the amount used for these purposes alone frequently does not cover the capital cost of connection, whereas—although I speak off the cuff—if there is a gas user, in all probability he is a substantial consumer and uses at least sufficient to justify a good part, if not the whole, of the capital cost of connection. But I should not like to pursue the argument in detail. All I say is that there are arguments on both sides, and cases have been put forward by both industries.
  What we are anxious to find is a proper and just solution. We have had a number of representations from many hon.
  1980
  Members from time to time, including my hon. Friend, and I think that at the end of the day he will take pride in the knowledge that among the representations that have been made to ensure that the pot is kept on the boil is the one by himself on behalf of his own local authority. I hope that before long my right hon. Friend will be able to announce a proper solution to the problem.
  11.2 p.m.
  Mr. Robert Cooke: I think I am in order in raising another topic on the Adjournment. I hope so.
  Mr. Deputy-Speaker (Dr. H. King): Before the hon. Gentleman goes on, might I ask two questions. Has he informed Mr. Speaker of his intention to do so, and has he informed the Minister concerned?
  Mr. Cooke: The answer to both questions, Mr. Deputy-Speaker, is no, but I would hope to be in order in making a few—
  Mr. Deputy-Speaker: Before the hon. Member continues, I would just inform him that if he has not done those things and if he speaks now, he is within his rights but is doing something which has been deprecated from the Chair on a number of occasions for reasons of courtesy.
  Mr. Cooke: No discourtesy is intended, Mr. Deputy-Speaker, if in the few moments that remain I say what I have to say, because I feel that I have a right to make these remarks in the light of the way in which I have been treated by Her Majesty's Government in seeking to ventilate a particular problem.
  The subject I want to raise is the question of the National Youth Theatre Centre. I put a Question to the Parliamentary Secretary in charge of the arts when that hon. Lady was at the Ministry of Public Building and Works. The hon. Lady was transferred to the Department of Education and Science—
  Mr. Deputy-Speaker: I am sorry that the hon. Gentleman is continuing but so that the record may be quite clear, I should like him to understand that the Chair deprecates his continuing a speech raising a matter of which he has not given the Minister or Mr. Speaker notice.
  Mr. Cooke: I am in great difficulty. I apologise, Mr. Deputy-Speaker, if I have in any way put the Chair in a difficult position. But I am not criticising a particular Minister. I am criticising the Government's attitude on this subject, and there are so many Ministers involved that I thought it would be difficult to have them all here at this time of night. Perhaps I could just finish my remarks, and if I have strayed too far I apologise.
  I have no doubt that the hon. Lady was anxious to answer the Question which I put to her, but she was transferred to another Department. The Question, because of the rules of the House, did not follow her to that other Department, and I did not discover this until some weeks had elapsed. Then I transferred the Question to the Department of the Secretary of State for Education and Science, and I thought that the hon. Lady would be in a position to answer it. But apparently because my Question had the word "youth" in it, the Parliamentary Secretary in charge of sport took it upon himself to answer it.
  I received an Answer about the National Youth Theatre. Because the Question had the word "youth" in it it was apparently lumped in with sport. The hon. Gentleman gave me an Answer which said that a grant was to be made. A grant was made by the previous Government. But I had asked for a grant for the National Youth Theatre Centre, which is a building to be created in some part of London, one hopes—the Centre for the National Youth Theatre. The National Youth Theatre itself is something which exists all over the country. So I was given a reply to a Question which I had not asked by a Minister to whom I had not addressed it. That put me in considerable difficulty.
  I looked around to try to find ways in which I could raise these matters. It was impossible to reach any of the Ministers concerned because time is running out and we are reaching the end of the Session. When there was time left over this evening I decided that I would try to make my case. If I have given any offence to anyone, or if I have put the Chair in a difficult position—
  Mr. Deputy-Speaker: Order. The hon. Member flatters himself if he thinks that
  1982
  he has put the Chair in any difficulty. The Chair is simply asking him to conform to the ordinary practices and courtesies of the House. If he cares to look at Erskine May, seventeenth edition, page 391, the hon. Member will see that he is transgressing against the whole spirit of the Adjournment debate procedure.
  Mr. Cooke: Perhaps I have chosen an unhappy word, but what I was trying to say was that I had hoped I had not transgressed to the extent of putting anybody in a difficult or unhappy situation. What I was trying to say is that I hope I have given no offence to anyone. If I have used a device which, although legal, is not within the usual practice of the House, I apologise; but my point is simply that here is a worthy institution which should have support but which has not received any support, while Questions which I have put down have not been answered because of transferences.
  I hope that right hon. and hon. Members of the Government will read HANSARD, for I am sure that they would then agree that I have a valid complaint. This was the one opportunity that I could find, with what ingenuity I have, for raising this matter. Many brave policies and many splendid schemes, we are told, are to be put into operation for the furtherance of the arts, and I have taken the only opportunity open to me to ventilate this matter. Perhaps the Government will consider that here is something worthy of more than private patronage, and, in putting my case, I hope I have not transgressed. If I have, I apologise.
  Mr. Harry Howarth rose—
  Mr. Deputy-Speaker: Order. The hon. Gentleman the Member for Wellingborough (Mr. Harry Howarth) has exhausted his right to speak. It is not for the Chair to reprove an hon. Member, but if the hon. Member for Bristol, West (Mr. Robert Cooke) had wished to raise a matter of this kind on the Adjournment, he should have informed Mr. Speaker, and also have let the Minister, or group of Ministers, concerned know of his intention.
  Mr. Cooke: On a point of order, Mr. Deputy-Speaker. It was purely fortuitous

  1983
  that I was able to raise the matter. When I saw that the opportunity was likely to arise I took that opportunity to inform the Chair of my protest, and I hope that
  1984
  I have conformed with both of your requirements.
  Question put and agreed to.
  Adjourned accordingly at eight minutes past Eleven o'clock.

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Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of St. Albans

AUTOMATION INSTRUCTION IN SCHOOLS
3.6 p.m
LORD ABERDARE: 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 what action is being taken to develop the knowledge of automation in schools and technical colleges, and how many computers are available in schools and technical colleges.]
THE MINISTER OF STATE FOR EDUCATION AND SCIENCE (LORD BOWDEN): My Lords, there are many short courses provided in technical colleges on various aspects of computers as applied to automation, as well as other general courses on computer programming and principles. In an increasing number of schools, simple programming and computer mathematics are taught. The provision of expensive computers in schools would not be justified, but college installations are made available for school teachers and sixth form pupils. My right honourable friend the Secretary of State for Education and Science and his predecessors have approved digital computer installations at 27 technical colleges, and further proposals are now under consideration. Many colleges possess simple analogue computers.
LORD ABERDARE: My Lords, I thank the noble Lord for that Answer. Is he aware of the vital importance of spreading a knowledge of automation if we are to compete effectively industrially in the future? Does he not agree that this relates especially to young people in schools and technical colleges? Can he give me any information on the practice of some schools who have shown
1434
their own interest in this matter by making their own computers?
LORD BOWDEN: Indeed, my Lords, this is very much in our minds. The whole of the future development of computers will be at peril unless we can provide more mathematicians who are able to use them. I suspect that it will be more difficult to educate programmers than to build machines. On the other point, schools have been extremely enterprising, and I know of several which have built their own computers. There are two in particular which spring to mind, Marlborough College and Bury Grammar School, both of which were helped by Manchester University. The second computer, the larger of them, is to be described in an article which will appear in the columns of the International Journal of Engineering Education next week.
LORD REA: My Lords, could the noble Lord give the House any indication as to the approximate cost of the programme which he has just outlined?
LORD BOWDEN: To which programme is the noble Lord referring?
LORD REA: The encouragement of the supply of computers to some schools.
LORD BOWDEN: Only very limited funds have, in fact, been made available for computers in schools; but, as I said, some schools have enterprisingly built their own. There has, however, been an extensive programme of encouraging school teachers to use computers in university and technical colleges. It is usual to make it a condition of the provision of a computer in a technical college that it should be made readily available to schools. These things are in large measure a matter for local enterprise and arrangement. To my own knowledge, many schools have already taken great interest in this most important subject.
LORD BROWN: My Lords, would my noble friend not agree that it is a little unfortunate that the public mind is a little over-concerned with computers? The principles normally associated with computers are, in fact, found embedded in a range of sometimes much simpler equipment. Therefore, it is not only computers which need this encouragement, but many other types of equipment as well.
LORD BOWDEN: My Lords, I am well aware of the force of what the noble Lord has said. This is one of the bases on which our policy has been founded.

EXCISE DUTY ON FARM VEHICLES
3.10 p.m.
LORD ALLERTON: 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 increasing difficulty of farming land which is astride busy public roads, they will consider extending the facility contained in Section 6(6) of the Vehicles (Excise) Act, 1962, to exempt agricultural tractors and vehicles from payment of Excise duty, provided they use public roads no more than twenty-five miles in any one week when passing between land in the operator's occupation.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD LINDGREN): My Lords, it is doubtful whether an alteration from six miles to twenty-five miles of the distance limit which exempts vehicles from Excise duty would be of any significant value in helping those who farm land which is astride busy public roads.
LORD ALLERTON: My Lords, I am unable to agree with the noble Lord that the alteration from six miles to twenty-five miles would be of no value. I should have thought—
SEVERAL NOBLE LORDS: Question!
LORD ALLERTON: Would the noble Lord not agree that twenty-five miles would be sufficient in almost every case?
LORD LINDGREN: This exemption is intended for vehicles which normally do not use the roads but are required to go across them to get from one field to another with farm equipment. The normal tractor already gets a very heavy concession. The Excise duty rate for a tractor is £3 15s. 0d., while for a normal haulage contractor's vehicle it is £45. I would recommend noble Lords to read the debates in another place yesterday when the concessions for farming vehicles were under discussion.
LORD ALLERTON: Does not the noble Lord agree that it is more a tax on the tools of a farmer's trade than it is a justifiable tax on genuine road-using vehicles?
LORD LINDGREN: Yes, my Lords; but, after all, a factory which is astride a roadway also has its trucks going across the road, a civil engineer has his earth-moving equipment, which are all part of the tools being used. So where does one draw the line?

R.A.F. STAFF COLLEGE TRAINING
3.12 p.m.
EARL JELLICOE: 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 what their future plans are for Staff College training in the Royal Air Force.]
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, the Royal Air Force has at present two staff colleges, one at Andover, and the other at Bracknell. It has now been decided that all staff college training in the Royal Air Force can be concentrated at Bracknell. We therefore intend to close the College at Andover. This amalgamation of training, which is not expected to take effect until about 1968, will result in useful savings in running costs, without any detriment to the effectiveness of the training or the standard of instruction.
EARL JELLICOE: My Lords, while thanking the noble Lord for his reply, may I congratulate him on his achievement in securing at least one decision on Defence policy from the Government in advance of this Defence review of which we hear so much? May I ask him two supplementary questions? The first is: what does he anticipate the scale of the savings which he forecast in his Answer will be? It was suggested in the Estimates Committee that the savings resulting from this amalgamation would not be very great. Secondly, may I ask him to give an assurance that it is the intention of the Royal Air Force to continue to provide facilities for the staff training

1437
of officers from overseas countries, from both the Commonwealth and other countries overseas?
LORD SHACKLETON: My Lords, it astonishes me that any member of the previous Government refers to the question of decisions, when so many of our decisions spring from their vacillation. But I do not take the noble Earl's point very seriously. The savings are expected to be between £30,000 and £40,000 a year which, in my opinion, are worth while, even if not in the opinion of the previous Administration. There will, of course, be an avoidance of further expenditure of a capital kind on a large scale, which otherwise would have been necessary, at Andover. On the subject of the training of foreign and Commonwealth students, I share the noble Earl's view of the importance of this. It is a matter which I personally, and others concerned, considered very carefully, and I am glad to say that the new arrangements will not reduce the number of places available for the training of foreign and Commonwealth students.
EARL JELLICOE: My Lords, may I thank the noble Lord for the assurance which he has given me in reply to my second supplementary, and may I just correct him on one point in connection with my first supplementary question? It was the Estimates Committee who thought the savings would not be very great; it was nothing to do with the opinion of the previous Government.

THE CONGO: UNITED NATIONS REHABILITATION WORK
3.15 p.m.
LORD COLYTON: 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 what part the civil and technical officers of the United Nations and other international agencies are taking in rehabilitating the areas of the Congo liberated by the Congolese national forces from the terrorists in the provinces of Orientale and Kivu since November last in such matters as health, education, agriculture and communications.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD WALSTON): My Lords, the United Nations Information Centre in London can provide a full account of the activities undertaken. I can, however, give some examples of the action taken by United Nations officials and technicians in the areas concerned. At the Congolese Government's request, the United Nations has taken immediate steps for the welfare of Congolese people in the liberated areas. The day after the liberation of Stanleyville, a general purpose team of United Nations personnel arrived there. World Health Organisation doctors and public works officials are still working there and the United Nations' local representative has distributed food to the people in the area and has visited Paulis. Doctors from the World Health Organisation have also been to Bunia, where there was a threat of smallpox. In Bukavu the United Nations High Commission for Refugees and World Health Organisation doctors are engaged in extensive famine relief, which involves the feeding of some 20,000 children. Although the United Nations has not yet established a local office in that part of the North-East Congo which is still under military control, individual experts visit the area as required. I should like to emphasise that all these and other activities undertaken by the United Nations have been carried out at the request of the Congolese Government.
I think your Lordships will agree that this gives clear evidence of the extremely valuable work which the United Nations and other organisations are continuing to perform in the Congo.
LORD COLYTON: My Lords, I should like to thank the noble Lord for his reply, which will give great satisfaction to all of those who are interested in the welfare of the Congo.
LORD BROCKWAY: My Lords, is my noble friend aware of the very great appreciation which, I am quite sure, is felt on both sides of the House of what the United Nations is doing in this matter?
LORD WALSTON: My Lords, it is an appreciation which is certainly shared by Her Majesty's Government.

LORD SHEPHERD: My Lords, shortly after 3.30 p.m. I hope to make a Statement on future Business of this House.

SHOPS (EARLY CLOSING DAYS) BILL
3.18 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Haire of Whiteabbey.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MERTHYR in the Chair.]
Clause 1:
Selection of shop's early closing day by its occupier. 1950 c. 28
1.—
(2) The occupier of every shop to which the said section 1 applies—
(a) shall keep conspicuously displayed in the shop, so as to be visible from outside the shop at an entrance used by its customers, a notice specifying the day selected by him as the early closing day for the shop; and
LORD AIREDALE LORD AIREDALE moved, in subsection (2)(a), to leave out ("an") and insert ("every"). The noble Lord said: This Amendment is to amend that paragraph of the Bill which requires the shopkeeper to put up a notice stating which is the shop's early closing day. The noble Lord in charge of the Bill, Lord Haire of Whiteabbey, told us on Second Reading that the paragraph would require the shopkeeper to put up the notice at the entrance most used by his customers. The paragraph does not, in fact, reproduce those words and, as your Lordships will see, all it says is:
"at an entrance used by its customers".
That would entitle the shopkeeper, if he chose to select the entrance least used by his customers, to put up the notice there, which would entirely frustrate the purpose behind this paragraph of the Bill.
Some amendment therefore seems called for, and I should have thought that a common-sense Amendment was one which
1440
required the shopkeeper to put up the early closing notice, not at one entrance, but at every entrance used by his customers. Then, in the case of shops having more than one entrance, all the customers would have the opportunity of discovering which was the early closing day, not only the customers who happened to use the entrance which the shopkeeper chose for this purpose, which might be the entrance used by fewest of his customers. Accordingly, I have put down this Amendment to require a notice to be put at every entrance to the shop used by customers. I beg to move.
Amendment moved—
Page 1, line 19, leave out ("an") and insert ("every").—(Lord Airedale.)
LORD DERWENT: I hope the noble Lord will not press this Amendment, but if he does, I hope the noble Lord, Lord Haire of Whiteabbey, will not accept it. To begin with, I think this requirement would be unduly onerous on shopkeepers. What this Amendment is in effect saying is that, if you have a shop like Selfridges, with perhaps twenty public entrances (I do not know the number), and if, through some inadvertence or even redecoration going on—whatever the reason may be—on one of those doors there is not a notice on a particular day, then an offence is committed. To that extent, I think it is too onerous.
Secondly, I would remind the noble Lord that the wording of this subsection was put into the Bill by an Amendment in the other place, and that its sole purpose was enforcement. What this subsection seeks to do is to ensure that, whether a shop be open or shut—and I emphasise the words "or shut"—an inspector appointed under the Shops Act can see the notice through one of the doorways. That is the sole object of this subsection. Normally, in their own interests, shops put up notices about their early closing day, for the benefit of their customers, and very often these notices are inside the shop—some of them are, anyhow—and cannot be seen from outside at all. But that is not the purpose of this subsection.
Further, the Home Secretary has promised that there is going to be much wider legislation on shops; and, if this particular matter does not work properly, it can be altered then. Lastly, this is

1441
a Private Member's Bill, and if we put in what is, as I believe, a quite unnecessary Amendment we may lose the Bill. This Bill is awaited with great eagerness by both large and small shops, so I do hope the noble Lord will not press it.
THE JOINT PARLIAMENTARY UNDER SECRETARY OF STATE, HOME OFFICE (LORD STONHAM): As the noble Lord, Lord Derwent, has reminded us, this is a Private Member's Bill, but it is one in which the Government are very interested and which they support. I regret to say that this is one of the very rare occasions on which I find myself in disagreement with the noble Lord, Lord Airedale, and one of the not so rare occasions on which I find myself in agreement with the noble Lord, Lord Derwent, who in this matter speaks with the authority of President of the Institute of Shops Act Administration.
The noble Lord, Lord Airedale, said that the Bill as at present drafted would permit the early closing notice to be put up at the least-used entrance. That is quite so; but, in stressing that, he is virtually doubting the sanity of the shopkeepers, in whose interests it is to inform as many customers as possible of when their shops will be closed. The noble Lord may say, "Then they should accept my Amendment so that that information may be as widely distributed as possible". But, as the noble Lord, Lord Derwent, said, the reason for the addition that was made on Report in another place was, first of all, so that the Shops Act inspectors will be able to carry out their duty under the Act without undue difficulty. Moreover, if we insisted on the notice being visible at every entrance, it would create considerable difficulties for shopkeepers and place them at risk without, in my submission, any real advantage to customers.
The noble Lord, Lord Derwent, mentioned Selfridges as having 20 entrances. To be strictly impartial, I will mention Harrods as having 24 entrances. But it becomes really farcical to insist that there should be a notice at every entrance which is visible from outside, and to make it an offence in the Bill for a shopkeeper to fail to comply with this provision. If the Amendment were accepted, a shopkeeper would be liable to a fine on conviction if, by some mischance, at just one of the many entrances to his
1442
shop he omitted to display a notice—or, indeed, if a notice became defaced or illegible. I do submit to the noble Lord that it is necessary to balance the desirability of securing that an early-closing notice is placed at every one of the entrances to a shop against the desirability of not creating new offences unless it is absolutely essential and is going to serve a useful purpose for someone.
The Bill already deals adequately with the display of a notice for enforcement purposes, and a shopkeeper who thinks it will assist the public to be able to exhibit at each entrance to his shop copies of the notice which must be
displayed in accordance with Clause 1 can do so. It is a help to shoppers to know the time at which a shop opens and closes each day of the week, but it is not an offence for a shopkeeper to fail to state his shop hours at the entrance to his shop, and this seems right. We feel that it is right to limit the offences under the Bill to the minimum necessary to secure the Bill's proper enforcement. I hope that, with this explanation, the noble Lord, Lord Airedale, will feel able to withdraw his Amendment, happy that his point has been duly discussed and considered; but, if not, I hope that my noble friend Lord Haire of Whiteabbey will indicate that he is unable to accept it.
LORD HAIRE OF WHITEABBEY: The noble Lord, Lord Airedale, has stated that he wants a conviction for a failure to display a notice on every entrance to a shop. This, surely, is contrary to the Bill which is before us. The spirit of this Bill asks for one notice, so that the shopkeeper can tell his public what his early-closing day is and so that his shoppers will know on what day he will close his shop. I think that it would be quite unnecessary to require a shopkeeper, especially a large shopkeeper, to put a notice on every single door of his shop. This, in fact, would be increasing the risk of conviction of large shopkeepers. I should have thought that many shopkeepers would, in any case, in their own interests, be quite willing to put up notices on other doors of their shops without, in fact, being compelled to do so by legislation.
It is not my intention in this Bill to increase the risk of conviction, and I hope that the noble Lord, Lord Airedale,

1443
will withdraw his Amendment, not just for the reasons which I have adduced now, but for those which my noble friend Lord Stonham has so ably put forward, and for those which have come from the noble Lord, Lord Derwent, with all his authority in this field. I would hope that the noble Lord may yet withdraw his Amendment.
LORD AIREDALE: I am obliged to those noble Lords who have taken part in this short debate. It is always interesting to hear all the views that can be expressed on a very narrow subject matter. I
was told by the noble Lord, Lord Haire of Whiteabbey, that I had stated that I wanted a conviction against shopkeepers. I think that, when the noble Lord comes to read Hansard to-morrow, he will not find that I said anything of that kind.
This debate has reminded me, if I may say so, of part of the debate we had on the Committee stage of the Protection of Birds Bill, when we were told that, if we made it an offence to take eggs from birds' nests, we should thereby be making criminals of well-behaved little boys who took one egg out of a thrush's nest. But, in the end, good sense prevailed, and we realised that the people we were really legislating against were the hooligans who ransack a whole nest, throw it on the ground and stamp on it. In the same way, no doubt, if this Amendment were accepted, technical offences would be committed from time to time against the provisions of this Bill; but I do not suppose for a moment that any inspector would think of prosecuting a shopkeeper for some technical offence committed through inadvertence. He would surely remind the shopkeeper of his duty to put up a notice at every entrance. If the shopkeeper deliberately refused to co-operate he would, no doubt, then be prosecuted; but he would have deserved it. That part of the argument, I must confess, did not impress me very much.
The part of the argument that impressed me most was the suggestion put forward by the noble Lord, Lord Derwent, that if this Bill is amended this afternoon by your Lordships it may be lost altogether. It seems to me to be true that a Private Member's Bill cannot have full justice done to it in Parlia-
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ment in the month of July. That is something which might have the attention of those who at the moment are very interested in the subject of Parliamentary procedure reform. However that may be, I will not take any more time this afternoon on this matter because your Lordships have many weightier matters to discuss. I accordingly beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Remaining clauses agreed to.
House Resumed: Bill reported without amendment; Report received.

FUTURE BUSINESS
3.32 p.m.
LORD SHEPHERD: My Lords, I think it would be for the convenience of the House if I intervened at this point to make a statement on the Murder (Abolition of Death Penalty) Bill. It has just been announced in another place by my right honourable friend the Leader of the House of Commons that the Government have agreed to provide time on Tuesday, July 13, for the conclusion of the remaining stages of this Bill. If the Bill passes on that day it will be brought up and read a first time in your Lordships' House on Wednesday, July 14. I am sure that it would be the wish of this House to give time for consideration of this Bill, subject to the House being informed at an early date. Informal discussions lead me to believe that Monday, July 19, would be a suitable date for the Second Reading, which will be moved by my noble friend Lady Wootton of Abinger. If necessary, the debate will be continued on Tuesday, July 20, with the possibility of a morning sitting. It is proposed that the Committee stage should be taken on Tuesday, July 27, and Thursday, July 29.
The Committee stage of the Rent Bill, which had provisionally been arranged for Monday, July 19, will now take place on Thursday, July 22.
LORD CARRINGTON: My Lords, I think that that arrangement is probably all right, so far as it goes. The Chief Whip will realise that this is a very tight programme indeed. We want to be as

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helpful as possible, but there are certain points beyond which I do not think we can go. May I ask the noble Lord, since he is talking about Business of the House, when he thinks the House will rise?
LORD SHEPHERD: My Lords, the noble Lord the Leader of the Opposition is asking me to tread on very dangerous ground. I cannot possibly answer that question at the moment, but I will do so as soon as I am able. In regard to the tightness of Business, we appreciate this, and we will do our best to inform the House as early as possible of Business arrangements. We are having informal discussions with a number of noble Lords to take the sense of the House.
LORD CARRINGTON: My Lords, I am grateful for what the noble Lord has said, again so far as it goes. The Government are in such a terrible muddle about their Business that it is difficult to know exactly where we are. They are certainly in a muddle in the House of Commons. There has been some speculation as to whether we shall be asked to sit after the House of Commons has risen. I should like to tell the noble Lord that that would be totally unacceptable to those of us who sit on these Benches. We will go a long way to help the noble Lord in his difficulties; but not so far as that. It will also be totally unacceptable if we are asked to come back before the House of Commons.
LORD SHEPHERD: My Lords, there has been a great deal of speculation about this House. I think we should await events. I do not think there is any muddle here. Things are going very well indeed; and I hope they will continue to do so.

ADMINISTRATION OF ESTATES (SMALL PAYMENTS) BILL
House in Committee (according to Order).
House resumed: Bill reported without amendment; Report received.

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

HIGHWAYS (AMENDMENT) BILL
Read 3a (according to Order), and passed.

FIREARMS BILL
3.39 p.m.
Order of the Day for the Third Reading read.
LORD STONHAM: My Lords, the Firearms Bill, in its final form, has almost reached the end of its journey. When it came to your Lordships from another place its scope had been considerably extended since my right honourable and learned friend the Home Secretary first presented it in March. This House has suggested further Amendments and improvements, which have been incorporated in the Bill. I believe that it is now a fully comprehensive measure, designed to stamp out the menace of the armed criminal and armed hooligan. It tightens up substantially the existing legislation relating to firearms and creates new offences which will greatly improve our chances of catching the armed criminal or hooligan before he has had an opportunity to cause injury or damage. It also creates additional powers which will enable these dangerous offenders to be dealt with effectively.
Although the provisions of the Bill are wide, we have been at great pains to avoid any undue or unnecessary limitation of the proper freedom of the individual, and not to interfere with the legitimate interests of sportsmen or members of the gun trade. Indeed, your Lordships have agreed to two important Amendments designed specifically to obviate cases of hardship which the gun trade thought might occur. These provisions permit, under effective control, the repair of shot-guns by the sleeving method and, at the instance of the noble Lord, Lord Chesham, relieve the craftsmen who make only shot-gun components of the obligation to keep records. Both these changes have been achieved without changing our firm intention of making the illegal acquisition of firearms as difficult as we possibly can.
In addition, we have introduced a number of Amendments designed to

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remove ambiguities, correct minor anomalies and generally to improve the drafting. I should like to thank your Lordships for the many valuable comments and suggestions that you have made at all stages, although, arising out of the comments made on Report, I have to inform the noble Lord, Lord Derwent, that I am satisfied that our retention of the word "either" is right and to tell the noble Lord, Lord Chesham, that his advocacy of the word "their" is wrong. However, we now have a Bill which deals firmly and effectively with the misuse, or potential misuse, of firearms and which I believe will be of considerable help in reducing the number of these offences. The Bill is a fine example of what may be achieved by co-operation on the part of both Houses and of all Parties in Parliament working to the common good. My Lords, I beg to move.
Moved, That the Bill be now read 3a—(Lord Stonham.)
3.43 p.m.
LORD CHESHAM: My Lords, the noble Lord, Lord Stonham, has referred to this Bill going on its way, and I am sure that responsible interests on both sides of the House and outside will wish it well. From what it seeks to do, I think that the Bill is a good one. Those affected, particularly the members of the gun trade, are quite at one with those who believe in the principle of the Bill. I should like to remind your Lordships why, and the reason is that nobody who has given responsible thought to these matters would wish to have it made any easier for those who desire to commit crimes to acquire firearms illegally; indeed, the opposite is the case: he would want it made much more difficult. Therefore the provisions in the Bill, in so far as they tighten up the security of premises where firearms are customarily kept in the course of legitimate trade, are welcomed by all those affected. They had certain things to say, and I should like, here and now, to thank the noble Lord, Lord Stonham, and those on the Benches behind him for being as helpful as they could in the circumstances and for listening and paying attention to what was seriously put forward, which, as the noble Lord said, resulted in Amendments which have improved the Bill while doing no harm to the principle.
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The noble Lord referred also to the additional powers which, for reasons I have stated, I do not think will prove objectionable to anybody. I would only say, in passing, that these additional powers, if carried to the extreme, might impose considerable administrative burdens on those who deal in one way or another in firearms. I am perfectly sure that anything of that kind is not the intention of Her Majesty's Government and that they wish merely to ensure the control and security necessary to prevent the illegal acquisition of firearms. I should therefore welcome from the noble Lord, when he replies, a word of assurance that when the Bill becomes an Act Her Majesty's Government will do their best to see that the operation of its provisions is no more than is necessary to the carrying out of what is the purpose of the Bill, and not such as to impose a burden on the trade that would be a handicap in such a competitive sphere as that of the manufacture of firearms. That is all I propose to say except this, regarding my own last Amendment to which the noble Lord referred. If "its" is the word, "it's" all right with me; if "their" is not the word, there is no doubt in my mind.
3.45 p.m.
LORD DERWENT: My Lords, may I thank the noble Lord for having, for the third time, looked at a particular point that I raised? I said on Report that I was happy to leave it in his hands, and it is kind of him to have had yet one more look. I must also thank him for having accepted one of my Amendments: it is very unusual. Finally, I hope—and this point has been mentioned before—that the Home Office will see that full publicity is given to the terms of the Bill in the months immediately after it becomes an Act. It is essential that the public should know all about the provisions in the Bill, and I hope that special arrangements, even unusual arrangements, may be made for publicity purposes.
3.46 p.m.
LORD STONHAM: My Lords, I am most grateful to the noble Lords, Lord Chesham and Lord Derwent, for the welcome which they have given to the Bill. As we think that the Bill is a good

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one, I can assure the noble Lord, Lord Derwent, that we will neglect no opportunity, not merely when it receives the Royal Assent but continuously, to make its terms as widely known as we can. It is essentially a deterrent measure, we hope, and if its terms are fully known, as they must be, we shall be half-way to-wards achieving the object of the measure.
I was glad to learn from the noble Lord, Lord Chesham, that the gun trade firmly believes in the principle of the Bill and supports the new steps which will have to be taken to strengthen the security of premises. Some suggestions have been made by the trade relating to the type of extra security measures which could be taken, although under the terms of the Bill that will always be decided by the chief of the police for the area. The noble Lord referred to necessary powers—we might call them statutory powers—relating to the keeping of records and so on—which, it carried to the extreme, would impose very heavy burdens on the gun trade. Having regard to what I said on Report about the craftsmen, he will be aware of the attitude of the Home Office and of the police in this matter. We are determined by every means in our power to make it as difficult as we possibly can for the criminal to secure illegal possession of a weapon which he might use for the purposes of committing a crime. We seek the co-operation of the gun trade in taking such administrative steps as are necessary—and only such steps as are necessary—to help towards that objective.
He is aware himself, from his knowledge of the Birmingham area, of the sensible and co-operative attitude of the police in these matters. The methods of control will be largely their responsibility. He can be sure that the responsible members of the gun trade—I think that is all of them—will have nothing to fear in this regard; but the powers are there, and if anyone seeks to infringe those powers then they will be fully employed, with, I hope, the full approval of the gun trade and of the British public.
On Question, Bill read 3a, with the Amendments, and passed, and returned to the Commons.

RENT BILL
3.52 p.m.
Order of the Day for the Second Reading read.
THE JOINT PARLIAMENTARY-SECRETARY, MINISTRY OF LAND AND NATURAL RESOURCES (LORD MITCHISON): My Lords, I beg to move that this Bill be now read a second time. Its main purpose, the first purpose in the Long Title, is to restore the right to retain possession of certain dwellings. To make the right effective one has also to deal with rents, otherwise a tenant would have to leave if his rent were raised to an unreasonable amount beyond his means. Like the long series of previous Rent Acts, this is not a Bill to provide more houses, and it is little concerned with local authority houses or with those occupied by their owners. Again, it is not a Bill about the general relations between landlord and tenant: on that broad subject my right honourable friend the Minister promised a further measure in due course.
Subject to one or two particular changes, the Bill leaves under existing control the tenancies which are still subject to it—that is to say, rather over two million tenancies in England and Wales. Before the 1957 Rent Act about 4½ million tenancies were controlled in England and Wales, and another half a million or more in Scotland. The effect of the Bill is to restore Rent Act control to the groups of tenancies which lost it as a result of the 1957 Act, but to do so with the important change that in those cases the rent limit will be a fair rent and not, as under previous Rent Acts, any particular figure. As I shall show in a moment, the groups to which rent regulation—that is to say, with a limit based on a fair rent—will apply will be smaller than the total number of houses decontrolled since the 1957 Act, because many of the decontrolled houses have passed into owner occupation or been taken over by local authorities, or, for instance, demolished in the process of slum clearance. My right honourable friend estimated that the number of households
which will be subject to rent regulation as distinct from rent control will be about 800,000 in England and Wales, including 300,000 in Greater London. No

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doubt the great majority of those cases will be in London or the great conurbations, but others will be scattered in smaller numbers all over the country.
I will try to be sparing with statistics, but perhaps on two matters some figures may be useful by way of background. In the first place, since the 1957
Act there has naturally been a marked decrease of privately-rented houses, and there have been corresponding increases both of owner-occupied and of local authority houses. This has been a continuous process, the progress of which can be traced by surveys in 1956, 1958 and 1960, by the 1961 Census, and an estimate for 1964. Using percentages of the total number of households, 45 per cent. Were
privately-rented in 1956, and only 25 per cent. in 1964. The 20 per cent. thus lost went as to 13 per cent. to owner-occupation and as to 7 per cent. to local authority housing. These figures support what I think most people know already, that a large number of people who would have preferred privately-rented houses have been driven to buy their own houses because of shortage and high rents. Before 1957 their rents were controlled, and it was the 1957 Act, as well as the general policy of successive Tory Governments, that drove so many of them to buy instead of renting. In London, for instance, the Milner Holland Report refers, on page 43, to the rise in rent levels since 1957 and comments:
"Many families who were content to remain tenants while they enjoyed a controlled rent appear to have decided to become owner-occupiers once they were faced with the alternative of paying full market rent without security of tenure, or leaving their old accommodation."
In the second place, let us look at two of the effects of the 1957 Act. Before that Act, dwellings were controlled if under the rateable values of £100 in London, £90 in Scotland, and £75 elsewhere. The change under the 1957 Act, to rateable values of £40 in London and Scotland and £30 elsewhere, resulted in about 380,000 tenancies coming out of control in England and Wales, including 135,000 in Greater London, and another 40,000 in Scotland. Over the years, the effect of creeping decontrol has been greater than the direct effect of the change in valuation limits. Creeping decontrol, of course, means the decontrol arising out of the
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provision in the 1957 Act that new tenancies should be free of control. This has resulted directly in the decontrol of 830,000 houses in England and Wales, including 330,000 in Greater London, and another 55,000 in Scotland; and these are only the figures of houses re-let by private owners after decontrol and do not include houses which, after decontrol, have passed into owner-occupation or local authority management. That is to say, the direct effect of creeping decontrol up to date has been considerably more than double the effect of the change of valuation limits, both in Greater London and in England and Wales as a whole. In Scotland, too, it has been larger, but not by so much.
Before the 1957 Act control attached to the house. The house remained controlled, notwithstanding changes of ownership, if it was below the valuation limits. Creeping decontrol, however, confined control to the tenancies then in existence, so that the control related to those tenancies instead of to the property itself. The present Bill will restore control of the property by attaching to the house, according to its rateable value, whatever the date or origin of the tenancy, subject, of course, to a few special exceptions. It will apply to dwellings under a rateable value of £400 in London or £200 elsewhere, whether in Scotland or in parts of England and Wales outside Greater London. As I have already said, it will not be a control by fixing rents but by imposing a fair rent as a limit.
If noble Lords care to look at the Allen Report on the question of the increase in rateable values, they will see that the rateable value of £200 nowadays is the rough equivalent of the two rateable values I have mentioned as applicable before 1957. The £400 limit in Greater London is a little more than the equivalent of the pre-1957 £100. Perhaps the best way to judge these limits is to see what they leave out of rent regulation at the top of the valuation scale. The number of dwellings outside London which were excluded from pre-1957 control because of their high valuation, was 160,000 in England and Wales; and about the same number are excluded by the present figure of £200. In London, the pre-1957 figure was 30,000, and the present figure on a valuation of £400 is

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15,000; but these figures are of dwellings as a whole, whether privately rented or not, and your Lordships will remember that I mentioned the present proportion of privately-rented houses as 25 per cent. of the total stock; the proportion in the higher range may well be lower. In short, the effect of a reduction of the limit for rent regulation to £300, the figure last suggested by the Opposition in another place, would be small, and the London conditions are such that it is wise to start on the safe side. There is power in the Bill to lower the limit if need be. As to Scotland, I may perhaps add that the number of houses there excluded by reason of the high valuation was negligible before 1957, and will be negligible now.
I now turn to the machinery for regulating rents—that is to say, for arriving at a fair rent as a limit. The fair rent, once arrived at, by agreement or otherwise, will be registered; and Clause 3(2) of the Bill provides that nothing beyond it will be recoverable from the tenants. There will be an interval before that machinery for regulating rents can be set going—as short an interval as we can manage. During that interval, the rents of houses affected—that is to say, privately-rented houses not at present controlled but below the rateable value limits I have mentioned—will be "frozen", and in general no increase will be permissible. As soon as the appropriate machinery can be set up, there will be rent officers in each county, county borough and London borough. Their first duty will be to promote agreement as to a fair rent between landlord and tenant.
The Milner Holland Report, which of course covers only London, encourages us to hope that even in that most difficult of all areas agreement will be forthcoming in most cases, and that the rent so agreed will be registered as a fair rent. Failing a ready agreement, it will be the duty of the rent officer to act as a conciliator and try to reconcile the views of landlord and tenant. The fair rent may be agreed, perhaps at somewhere between the first demands on either side. Failing agreement, or in those exceptional cases where agreement might result in an unfair figure, it will be the duty of the rent officer to decide on a fair rent. I call such cases exceptional, because there will no longer be the possibility of the land-
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lord evicting the tenant who does not agree to the landlord's views of a proper rent.
The Bill provides, as did the Protection from Eviction Act, that there shall be no eviction without a court order, and it provides too that there shall be no Rachmanism, no harassment of the tenant in order to get him out. It is of course true that cases of harassment have been only a minority, but they have been a significant minority, and a blot on the record of a civilised society. In that matter the provisions of the Bill follow legislation which has been in force in New York, and was recommended to our attention by the Milner Holland Committee at pages 177 and 178 of their Report. These provisions are in Part III of the Bill and apply to local authority houses as well as to privately rented ones—not that I know of any Rachmans among councils.
The rent officer will be a person with considerable responsibility in practice. He will be appointed by the clerk of the local authority and paid by the local authority; but his pay will be refunded completely by my right honourable friend the Minister; and if there is a case for his dismissal the consent of my right honourable friend will be required. The local authority will have no power to give him directions as to his job.
From the decision of the rent officer as to what is a fair rent, there will be an appeal by either party to a rent assessment committee. The arrangements for these Committees are set out in Schedule 2 of the Bill, and at this stage I need say no more than that their members will be drawn from panels of persons appointed partly by the Minister and partly by the Lord Chancellor. The president of such a panel is to be nominated by the Minister from among the persons appointed to the panel by the Lord Chancellor, and he is to determine the number of committees to act for any area and their constitution. Each committee will normally be of two or three persons. There will be fifteen or so regional areas. The persons appointed to the rent assessment committees, particularly their presidents, will play an important part, both in determining some standard of fairness in the large region, and also, no doubt, by consultation between the presidents in co-ordinating such standards over the whole country.

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I now turn to the conception of a fair rent. It is to be found in Clause 26 of the Bill. In the first place, in determining a fair rent regard is to be had to all the circumstances other than personal circumstances, and in particular to age, character and locality of the dwelling-house and to its state of repair. But there follows a most important exception, directed to removing what may be called the scarcity factor in rents. It is to be assumed that the number of would-be tenants of similar dwelling-houses in the locality, on similar terms, is not substantially greater than the number of dwelling-houses available for letting in that locality.
This clause, with its conception of a fair rent, has of course been subjected to criticism—who would expect anything else?—for it represents an entirely new concept in the control or regulation of residential rents. Hitherto, as I pointed out earlier, there has always been a fixed figure, dependent, for instance in the 1957 Act, on a multiplier applied to the rateable value such as it was at the time. It is not only changes in rateable value that have affected the operation of such fixed limits; they have also been affected by differences existing and developing between one locality and another, differences which in fact do not get properly or swiftly deflected in rating valuations. I need not refer to some criticisms of particular valuations which are at present sub judice. It is enough, I suggest, to say that the judgment of experienced, informed and fair-minded men is likely to be a better guide in the diversity of rents and lettings than any fixed formula. The Bill accepts that; and the Bill, with its machinery and directions as to fairness, represents an endeavour to secure and apply such human judgment in what is, after all, a human question.
My Lords, I have picked out what I take to be the substance of the Bill without going through it clause by clause, and in mentioning, as I now propose to do, one or two clauses, I shall not repeat at any length what I have said about the main points. Clause 1 is concerned with the scope of the Bill, the maintenance by subsection (7) of existing control where it applies, and the field within which regulated tenancies, that is to say rents regulated by reference to fairness, are to
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apply. Clauses 2 and 3 start to apply regulation, and subsection (3) of Clause 3 provides for the period before a fair rent can be ascertained and registered. Clauses 4 to 8 provide for various adjustments, and Clause 9 deals with notices of increase. Clause 10 deals with the special case of houses which were formerly requisitioned. Clauses 11 and 12 are of general importance, since the former empowers the Minister to convert controlled tenancies in any area into regulated tenancies, and the latter empowers the Minister to release from regulation houses in any area above a given rateable value where he is satisfied that there are enough of them available. The exercise of each of the powers I have mentioned is subject to Affirmative Resolution. The result of converting controlled tenancies into regulated tenancies—that is to say, the exercise of the power under Clause 11—may in some cases be an increase in the rent, and to avoid too sudden an increase in arriving at a fair rent, no increase in any one year must exceed 15 per cent. of the original controlled rent.
Clause 13 is the only material alteration in existing control. At present there may be one transmission, perhaps from a husband to his widow, in a statutory tenancy, as it is commonly called, and this clause provides for a second transmission, still within the resident family. I may mention that there has been a similar provision in Northern Ireland for some time past.
Clauses 14 and 15 provide for two special cases. Clause 14 allows a landlord who requires a house in the future for his own residence, or that of someone in the family living with him, to give notice before letting the house and to recover it on the date on which he requires it. It deals, for instance, with the case of the officer going on service abroad, which your Lordships had in mind under the Protection from Eviction Act. Clause 15 provides for the recovery of houses held for occupation by a minister of religion for the purposes of his religious duties and temporarily let. The ordinary Anglican parsonage is protected by a provision in the Pluralities Act of 1838; but Clause 15 would no doubt cover some cases of curates, as it would cover the cases of ministers of other religious persuasions than the Anglican.

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I do not think that I need go at length into further clauses, many of which are more appropriate to consideration in Committee than on Second Reading. Part II of the Bill, that is to say, Clauses 20 to 28, deals with the machinery for the ascertainment and registration of fair rents which I have already described, and Part III with protection against harassment and against eviction without due process of law. In that Part an important clause is Clause 31, which gives further protection to agricultural workers by allowing the court a wide discretion to suspend the execution of the possession order on tied cottages. Subsection (5) enjoins the court to have regard to what I may summarise as alternative accommodation, efficient agricultural management, and questions of greater hardship. My right honourable friend in another place recognised that this was not a complete fulfilment of the promise, undoubtedly made, that no agricultural worker should lose his house unless alternative accommodation was available. It is a compromise, because my right honourable friend was impressed by the difficulty of allowing agricultural workers in effect to jump the queue of available houses to the detriment of other applicants.
Among the miscellaneous clauses in Part IV, perhaps at this stage I need only mention Clause 37, which relates to furnished houses. Broadly speaking, the Bill leaves arrangements for dealing with furnished lettings under the 1946 and 1949 Acts in their present form, except that rent tribunals may give security of tenure up to six months at a time.
Before I leave the text of the Bill, perhaps I may mention that Schedules 2, 3 and 4 require to be read in close conjunction with Part II of the Bill. They are brought in under Clauses 24 and 25, and I found it useful to refer to them at that stage by way of following the clauses in Part II.
My Lords, this is a complicated Bill, and necessarily so. The language, as well as the substance of it, has been criticised; and I would only say that it seems to me to be the best alternative to a different and much longer Bill which would reenact and perhaps modify the Rent Acts as a whole, and also bring in the provisions of this Bill. As it is, if we are to
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have the shorter Bill, my answer to many of these criticisms is that if you think it can be improved from what it is, have a try. Personally, I think it is an excellent piece of drafting for its purpose. If we had had to wait for a longer Bill, then a great many injustices and a great deal of hardship which at present calls urgently for a remedy would have had to wait on the protracted process of drafting and consideration. Rent Bills, after all, differ one from another. They originated in an emergency measure during the 1914–18 war. There followed one after another of them, each directed to changing circumstances and changing policies. But they had one thing in common: they all dealt with questions, rightly or wrongly, which were urgent questions at the time, and human ones.
I much regret that during recent years the most notable previous Rent Act was that of 1957. I took a part in opposing it at the time and trying to improve it. It was, I think, beyond any question of mere improvement. It was wrong in principle, where this Bill is right, if only because it tried to deal with arithmetical limits instead of limits imposed by fair and experienced judgment. It was wrong in practice, because those responsible for it expected to achieve results by way of improving the stock of houses to let, and those results they failed completely and conspicuously to achieve. I doubt even whether they foresaw the effect which creeping decontrol has had in the condiditions of London to-day. No one can prophesy that in any Rent Bill they have found the right answer for all time. All I can say about this one, in commending it to your Lordships, is that I think it is far more likely to lead to a solution of the main problem than any other Bill we have yet had, and that main problem is security of tenure, a man's right to stay in his own home. If the relations between landlord and tenant cannot be adjusted to cope with that problem, then the whole conception of tenancy, the idea of living in a housed owned by someone else, will have failed completely to meet the needs of the time.
LORD MESTON: My Lords, before the noble Lord sits down, may I ask whether he could give a classical disquisition of Schedule 5, which deals with the payment of premiums? So far as I

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am concerned, it might have been published in Chinese so far as intelligibility is concerned.
LORD MITCHISON: My Lords, I do not think I had better fall for this. There are a great many things in the Bill. We shall have to go through it in Committee clause by clause and Schedule by Schedule. I have tried to remember that there is soon going to be a debate on the length of speeches in this House, and to confine myself to what I thought were the main points. I am quite certain that the noble Lord will explain his difficulties and tell us what he has in mind by way of an alternative remedy. Is it not better at this stage to leave it as if is and to come back to this point, as to other points, in Committee? At any rate, I dare not reply, because if I yielded to that I might be asked half a dozen more questions. Even if I know the answer—and I do not always know it—it all takes time.
Moved, That the Bill be now read 2a.—(Lord Mitchison.)
4.18 p.m.
LORD NEWTON: My Lords, I must apologise to those of your Lordships who, having studied the list of speakers, were expecting now to have the pleasure of listening to my noble friend Lord Hastings. Something seems to have gone wrong behind the scenes, but may I suggest that your Lordships should console yourselves with the knowledge that all bad things come to an end and that all good things are worth waiting for. For half a century in this country, the State—and I say the State because all Governments have been involved—has made it its business, for benevolent reasons, to see that there is no completely free market in rented accommodation. This object has been achieved mainly by subsidising privately owned houses at the expense of their owners and local authority houses at the expense of the community. The motive has been humanitarian, and although there has been much argument about it—almost endless argument—on the whole it has tended to be about the amount of interference with the market, rather than with the principal interference.
Subsidised housing in this country has become a British institution. Indeed, the
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subsidised tenant, whether private or council, is to-day a member of the Establishment, with a capital "E". Inevitably, however, down the years our benevolent distortion of a major item in the national economy has necessitated, as the noble Lord, Lord Mitchison explained to us, periodic bouts of remedial surgery; but the surgery has never been curative. Indeed, my Lords, to change the metaphor, the story of rent control in this country is like that of a team of gardeners perpetually labouring to keep down the weeds in a garden which is too big for them. All they can do is to clear a patch at a time. So it is not very surprising that there is on the Statute Book a great mass of highly complicated legislation dealing with landlords and tenants and rents.
This particular Bill, as Mr. Crossman himself has admitted, is particularly opaque, to use his own word, because so much of it is, notwithstanding the noble and learned Lord on the Woolsack, legislation by reference. This makes it difficult for laymen, such as myself, to be quite certain that we know what it is all about, but that only makes us perhaps even more grateful than we should otherwise have been to the noble Lord, Lord Mitchison for the trouble he took to explain the Bill to us, and I would congratulate him on the rapidity with which he managed to do it. I do not think it is necessary for me this afternoon to go into anything like as much detail as the noble Lord did. As he said, there will no doubt be opportunities later on for us to do that. What I should like to do is to confine myself to a few observations about the philosophy of rent control and the main principles of the Bill, and in so doing I will try, as hard as the noble Lord did, not to give any ammunition to my noble friend Lord Egremont, who, perhaps fortunately, is not here.
This is a subject to which I come with clean hands and, I hope, a pure heart. That is to say, my Lords, that I have never served in, or even answered for, the Ministry of Housing and Local Government, and to the best of my recollection this is the first occasion upon which, in either House of Parliament, I have ever made a speech about rents. Therefore, there is nothing on the record which can be brought up and used in

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evidence against me, and in this respect at least I fancy that I am more fortunate than the noble Lord, Lord Mitchison.
I suspect that the social historian of the future will be much puzzled by the fact that subsidised housing was allowed to become a national institution and remain one even in an era when the motor car, the television set, the washing machine, the refrigerator and all the rest were generally held to be necessities of life. He will probably compliment his earlier countrymen more upon their humanitarian instincts than upon their economic wisdom. He will agree—at least I presume he will agree—that adequate shelter is one of the three basic necessities of life, but he will note that, of the other two, clothing and food, clothing was not subsidised and food ceased to be subsidised before that particular interference with the market became an inviolable institution.
If he reads it, I fancy he will not agree with a statement in the third paragraph of the White Paper, Command 2622, entitled Rents and Security of Tenure: the Rent Bill, which was issued with the Rent Bill, the statement being this:
"Ever since World War 1, a long series of measures of rent restriction has been forced upon successive Governments. The cause has always been the same—the chronic shortage of rented housing."
fancy that he will be much more likely to say that ever since World War I successive Governments forced upon themselves a long series of measures of rent restriction, and the consequence was always the same: a chronic shortage of rented housing. He will probably conclude that the policy of keeping down the rents that people had to pay raised the standard of living higher than it might otherwise have been, though not the standard of housing, but in the process had far-reaching effects upon the national economy as a whole. That is to say, it made a significant contribution towards the maintenance of permanent inflation in this country, artificially stimulated the growth of the hire purchase system and boosted the manufacture for home consumption of motor cars and all the articles of domestic or private equipment which make for a fuller and more comfortable life. "All very nice", he will probably say, "until you come back to the fact that there were never
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enough houses to put all those good things in".
I personally am sure that the institution of subsidised housing came into being more by accident than by design. As the White Paper points out, and I have just read out the relevant part of it, rent controls were adopted during the First World War as an expedient. After that war they were retained, but the intention and the belief were that it would be only temporarily, because it was confidently expected that all prices, including rents, would fall after quite a short time, and that money would return to its pre-war value. But it never did, and rent control never ceased to be thought necessary. And around it there grew up, as so often happens in the case of British institutions, a mythology peopled by characters like the characters in a mediæval pageant, who are always expected to play their well-loved or their well-loathed rôles: the poor but deserving tenant; the wicked landlord; the cruel bailiff; the enlightened local housing authority; the sympathetic politician, at both local and national level, and, in the background, the hard-hearted Minister and the mean Chancellor of the Exchequer. This mythology has been sustained by the very prevalent feeling, which is almost instinctive with some people, that there is something disreputable about privately letting a house for personal gain and that those who do so should be required to maintain their properties in a suitable state with little, or preferably no, reward for the services they provide. Surely this is a very odd attitude if one reflects that it has never, at any rate so far as I know, been held to be disreputable to manufacture and sell clothes and food for personal gain.
I personally believe (this is my own belief and I do not expect anybody necessarily to agree with me) that the big mistake, first made many years ago and with the best intentions, was to subsidise the house instead of subsidising the tenant. Of course, a policy of subsidising the tenant would have been highly controversial. But let us remember that for many years now rents have been
subsidised by the National Assistance Board, with, I believe, general approval. The advantages of this policy of subsidising the tenant to my mind, would have been these. It would have

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been economically worthwhile for entrepreneurs to modernise and convert old properties, and build new ones to let, and therefore they would have done so. The poorer members of the community would have been decently housed, or at any rate much better housed than they have been down the years, and there would not have been for so long an acute shortage of houses to rent in many parts of the country.
I do not wish to appear to be "starry-eyed" about this matter. If such a policy had been pursued from 1918 or thereabouts I do not imagine that the extent of subsidy would have been such that my fictitious social historian of the future would necessarily have noticed those distortions of the economy which I attributed to him. The sophisticated modern comforts might not to-day be so widely enjoyed as they are, but I am quite certain in my own mind that the nation would have been better housed, and the sum total of human happiness might have been higher. All this is hypothesis, and your Lordships may not agree with a word of it. But, however that may be, do not let us forget that we have only ourselves to blame, and a long stream of past Governments to blame, for the fact that there is, and has been, a perpetual shortage of accommodation to rent. The fact is that, on the one hand, private enterprise has not provided enough because it has not been a good enough business proposition, and, on the other, the cost of indiscriminately subsidising council houses has inevitably limited the number of such houses that could be built.
Towards the end of his speech the noble Lord, Lord Mitchison, made some observations about the 1957 Rent Act, although in rather more moderate terms than one might have anticipated. Whatever may be said about the 1957 Act, it was a brave attempt to dismantle the institution, to break out of the jungle; and so, to a lesser extent, is this Bill. To quote again from the White Paper, paragraph 5, it is said, truthfully, if a little patronisingly:
"By 1957, the comparison of the number of houses available with the number of households requiring separate homes suggested the comfortable conclusion that the housing shortage was well nigh overcome".
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Whether or not that conclusion was comfortable, it was not startlingly novel. It had been foreshadowed as long ago as November, 1953, in a speech in another place by Mr. Aneurin Bevan.
Although there is much that I think is wrong in this Bill, it is, I think, the sort of Bill that any Government would have introduced at this time, following the Report of the Milner Holland Committee. If I may say so, I think that in many ways it is a courageous Bill for a Labour Government to have introduced. Mr. Crossman has been courageous in his advocacy of it, and I, for one, do not hold against him his occasional ritualistic obeisance to the mythology I have described. The Bill is courageous because it must have been a disappointment to all those who voted for the Labour Party nine months ago in the belief that the promise to repeal what was described as the "notorious Rent Act" meant a promise to restore the pre-1957 position, which of course the Bill does not begin to do. The noble Lord shakes his head, but if repeal means anything, I should have thought that it meant that.
LORD MITCHISON: Since I shake my head, perhaps I might say that I think that, in its effect and its action, this Bill does repeal the 1957 Act. True, it does not do so formally. But I do not think that people were expecting formal repeal. I disagree with the noble Lord in the suggestion that anybody really expected to go back to the position that existed before the devastation wrought by the 1957 Act.
LORD NEWTON: I am much obliged to the noble Lord for his view on what I am saying. I do not want to get into a long argument about the meaning of words, but I should have thought that, to the ordinary simple person, to announce that you would repeal something was likely to convey the intention to put things back where they were before. But the noble Lord does not agree.
This is a Bill which anybody who had read the proceedings in another place will realise has annoyed an important section of the Labour Party, and I believe that the noble Lord, Lord Mitchison, who, as he reminded us in his own speech, led for the then Opposition in another place in 1956 and 1957, during the passage of the 1957 Act, and now to-day is in charge

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of this Bill in your Lordships' House, will agree with me that this Bill testifies to a marked change in Labour doctrine on rents. I have taken the precaution of reading up much of what the noble Lord, Lord Mitchison, said in another place during the passage of the 1957 Act.
I personally welcome—and so, I imagine, do most people—the provisions in the Bill dealing with harassment and the enunciation of what I can perhaps describe as the general principle of "no eviction without a court order." As to security of tenure and rent control, it seems to me clearly right to restore them in London, and in other large cities where there is a great shortage of rented accommodation. But I cannot see that there is any case for restoring them over the whole country, and I venture to think that Mr. Crossman, the Minister, has, uncharacteristically, been most unconvincing in his defence of this particular provision in the Bill. The noble Lord, Lord Mitchison, did not touch very much upon it this afternoon; and I do not blame him.
It really is not reasonable to ask us to accept that there is insufficient evidence to show that over large parts of the country there is no shortage of accommodation to rent. It may be, of course, that reimposition of blanket control over the whole country, which is what the Bill does, is the political price that Mr. Cross-man had to pay for other provisions in the Bill but that does not make it either right or sensible. It is control for control's sake. Where there is no scarcity it is ethically wrong, because inability to obtain possession of a house where there is no scarcity may be just as cruel to the owner in one case as in another case arbitrary eviction may be to a tenant. Moreover, in areas where there is no scarcity, to deny a landlord the right to strike a free bargain about rent is an act of injustice to him which is not mitigated by any advantage; unless, of course, favouritism of the tenant is considered to be mitigation. But apart from ethics, it seems to me that this blanket control is not sensible, inasmuch as it will lead to the wasteful setting up of unnecessary administrative machinery and add to the already existing discouragement to the private individual or firm to provide new accommodation for rent.
Another major weakness in the Bill is fixing too high the upper limits of rate-
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able value, the limits, as the noble Lord explained to us, up to which the control will apply. As I recall, the Milner Holland Committee found that there is plenty of good accommodation in London to let at rents of £400 and above; yet, as I understand it, the Government's proposals in the Bill will mean that rents in London up to about £900 per annum will be subject to rent regulation. I cannot see that there is any justification for this, but there is a very practical objection to it. I imagine everybody will agree with me that it is desirable that the most urgent cases of hardship should be dealt with first; but one way of ensuring that this will not happen is to fix the upper limits of rateable value too high, and therefore unnecessarily to add to the number of potential cases which will have to be dealt with by the rent officers and the rent assessment committees. In any event, I foresee a clogging up of the works; and I think that the Government will have to be prepared for virtually every tenant who is not protected by the 1957 Act, in London and in the conurbations where there is a shortage, applying for a rent reduction.
I do not think it is any good making comfortable assumptions about this on the basis of the fact that the Milner Holland Committee found that something like 60 per cent. of tenants in London were satisfied with the way in which their landlords treated them. It seems to me that tenants in London and in the conurbations where there is a definite shortage of accommodation will say to themselves that they agreed to the rent they are paying under conditions of scarcity, that the Bill expressly eliminates scarcity as a factor to be regarded when a fair rent is being fixed, and that consequently the current rent they are paying is too high; and so they will all apply for a reduction in rent. Certainly I would do so myself if I were a London tenant. This seems to me to be the strongest possible argument against control for control's sake, against fixing the upper limits of rateable value too high. I should be most grateful if, when he comes to reply, the noble Lord, Lord Champion, would give us the benefit of his observations on this argument.
Perhaps the biggest weakness of all in the Bill is the definition, or lack of definition, of a fair rent. There is no

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formula for application; there is no yardstick. I can, and I do, understand the Minister's reasons for rejecting reference to rateable value and for rejecting a formula related to the current level of rents prevailing in the area; and I can see, too, the theoretical attractions of having no yardstick at all, which is the position in the Bill. But what an appalling task is thereby inflicted on the rent officers and the members of the rent assessment committees, even if one assumes, which I do not, that they are all going to be as wise as Solomon!
I invite each of your Lordships to imagine for a moment or two that you are sitting for the first time as a member of a rent assessment committee, for the purpose of fixing a fair rent. What are your terms of reference? You are required by the Bill particularly to have regard to the age, character, locality and state of repair of the house. These are most helpful guides for the purpose of adding a little bit to or knocking a little off the norm, if you have a norm. But you have not got a norm. You are not allowed to use rateable value as a yardstick. You are not allowed to consider the prevailing level of rents in the locality because they have substantially been determined by scarcity, and indeed, you are required expressly to assume that there is no scarcity. As I understand it, you are not allowed to consider the means of the tenant or his ability to pay, or the capital outlay of the owner and his return on it. Nevertheless, you are permitted and required to consider all the circumstances, and whatever that is, it seems to be a non sequitur after all these exceptions which I have mentioned.
How, then, are you going to set about your task as a member of the assessment committee fixing a fair rent? One's mind boggles, does it not? I should just like to say to the noble Lord, Lord Champion, that of course my invitation to your Lordships to imagine yourselves to be sitting on a rent assessment committee naturally embraces him; and it would be nice if, when he speaks, he would tell us how he would set about his task if he found himself as a member of a rent assessment committee.
Is it right, I wonder, to eliminate scarcity as a fact altogether? Mr. Cross-
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man has said—he said it in another place—that the whole purpose of rent regulation is to protect the tenant from the market. Certainly, there should be substantial protection, sometimes very substantial protection. But is it really unfair for a tenant who chooses to live in a locality which is highly sought after to pay a higher rent than another tenant living in a similar house in another locality where there is little or no scarcity because it is not sought after? What about justice to the potential tenants who would like to live in the first locality, and who are prepared to pay a little more rent? However that may be, and whatever one decides as to the merits of the situation, I personally doubt whether, in practice, the committees will really be able to eliminate consideration of scarcity in making their decisions.
LORD SILKIN: My Lords, may I just ask the noble Lord—I am sorry to interrupt him—to clarify this matter? Does not Clause 26 relate to locality as one of the criteria that must be taken into account, in regard to the fact that one area is more desirable than another?
LORD NEWTON: My Lords, I am obliged to the noble Lord. Of course that is so. It is the point to which I was about to come. I doubt whether the committees will, in practice, really be able to eliminate consideration of scarcity in making their decision about fair rents. As I said earlier, and as the noble Lord, Lord Silkin, has reminded us, the committees are required particularly to consider the locality as one of the factors. If that means anything, it means that the committees will have to assess the relative desirability of different localities. In other words, they will have to decide whether, for instance, houses North of Hyde Park are more or less desirable than houses South of Hyde Park. How on earth are they going to do that without having regard to the pressure of demand? Are they just to give effect to their own individual and personal preferences? Is it going to be the case that one member of the committee will say, "Well, I prefer the North side"; a second member will say, "I do not agree: I prefer the South" and the third member, if there is a third member, will have the casting vote? What happens if there are only two

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members?—and Lord Mitchison said that there might in fact be only two. If this is how the local assessment committees are going to decide that one locality is more attractive than another, then it seems to me that, before very long, many strange anomalies will appear on the registers of the rent officers. I am sorry to have gone on so long, but it seems to me that those are the main defects of the Bill.
In conclusion, I would mention two unfortunate consequences which I think will follow from the Bill. The first is that there is bound to be a further drop in the stock of rented accommodation. There is every inducement in the Bill for owners to sell at the first opportunity, and there is active discouragement of new building and conversion of large properties. It seems fairly evident that the Government realise this but do not particularly care. They appear to be content that in future the provision of new accommodation for letting should be left to the local housing authorities. But that attitude is flying in the face of the views of the Milner Holland Committee. Secondly, it seems to me that the Bill is likely to increase the shortage of all types of housing in London. It is the magnetic pull of London which has created the present acute shortage of houses to let in London, and the present high level of rents. Yet it is of the essence of the Bill, as I understand it, that regulated rents in London shall not reflect the scarcity which the magnetic pull of London has created. The pull in future will be even greater than it is now, and so will be the shortage of accommodation in relation to the demand. On the other hand, I believe it to be the policy of the present Government, as indeed it was of the last, somehow to reduce the pull of London, somehow to check the invasion. So what it amounts to is that the Government are pursuing two contradictory policies at one and the same time.
As I said earlier, I consider that in many ways this Bill is a courageous one. There are things in it that are good and sensible, and others that are bad and foolish. Recently The Times described it as being "as much an act of faith as an Act of Parliament" and in another place some of my honourable and right honourable friends have described it as "a
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curate's egg". With both those judgments I concur.
4.53 p.m.
LORD MESTON: My Lords, this is a very important Bill, but it is not easy to understand. For example, Clause 1(2) reads as follows:
"The Rent Acts shall not by virtue of this section apply to a tenancy of a dwelling-house unless they would, if amended in accordance with Part I of Schedule 1 to this Act, apply to that tenancy but for one or more of the following…."—
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, might I interrupt the noble Lord? Would he kindly help me by moving a little nearer to the microphone? I am afraid that I cannot hear what he is saying.
LORD MESTON: Clause 1(2) of the Bill, which I read out, contains four negatives, and I hope that some genius (and I understand that the noble Lord, Lord Mitchison, took a Double First at Oxford and Cambridge) will be able to explain precisely what is meant by those four negatives. In other parts of the Bill there are many examples of legislation by reference.
LORD MITCHISON: May I protest at the attribution of Cambridge to me?
LORD MESTON: I am very glad to hear that. I hope that the noble Lord was at Balliol—that would be all right.
LORD MITCHISON: My Lords, may I, with great respect, say that I object equally to Balliol.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): Order!
LORD MESTON: There are in other clauses of the Bill examples of legislation by reference. I hope that some equal genius will be able to explain those.
On general grounds, in my own personal opinion this Bill is a mistake. I am not suggesting that there should be any further orders under the Rent Act, 1957, extending decontrol, but that the situation should be left where it stands for the moment. There should be no further extension of rent restriction, by whatever name it is called. The extension of rent control will militate against development and will certainly militate against the building of houses for letting.

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Incidentally, I see that the Explanatory Memorandum to the Bill says that it is unlikely that in the initial period the total annual cost will exceed, in England and Wales, £1,250,000. So that throughout the years several million pounds will be spent on administration—money which, in my view, would be far better spent in erecting accommodation, even temporary accommodation, so as to assist in defeating the situation which exists in London, rather than on administration. At the same time I, like most people, am in favour of Clause 29 which renders harassment of occupiers a criminal offence. I have nothing to say in favour of landlords who harass their tenants. They should be in the magistrates' court within 24 hours. However, it is gratifying to know that the majority of landlords are reasonable people and act in a reasonable manner and, in view of the cost of carrying out repairs, under considerable difficulties.
Let us see how the Bill is going to work. Those tenants controlled under the 1957 Act enjoy the same protection as before. I am not daylight-clear in my own mind whether they are going to be statutory tenants or regulated tenants. Perhaps the noble Lord, Lord Champion, will explain when they pass from one category to the other. I understand that the rents of these old controlled tenancies cannot be reviewed until after the rents of decontrolled tenants have been reviewed. It may take about six months to establish rent assessment committees, which will be virtually flooded with hundreds of thousands of applications for determination of fair rent. Then, eventually, the rent assessment committees will be able to deal with any applications which come before them from what one can describe as the old controlled tenancies. Am I correct in suggesting to the noble Lord that probably a year, or even longer, will elapse before the attention of the rent assessment committees will be directed towards the old controlled properties?
One then has the tenancies of dwelling-houses which were decontrolled by the 1957 Rent Act or which have become decontrolled by the process of creeping decontrol. I understand that those are regulated tenancies and will be the first category of tenancies whose rents can
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be reviewed by the rent assessment committees. There are also certain free tenancies of dwelling-houses which have never been controlled by the Rent Acts. It may be that they were always above the rateable value of the Rent Acts, but of course if they now come within Clause 1 of the present Bill they will be regulated. Apart from Clause 14, which contains special provisions for the recovery of possession of owner-occupied houses, how will security of tenure operate in the future? At present, if a controlled tenant is protected by the Rent Acts, so long as he pays his rent and performs the other obligations of his tenancy he can continue to remain in possession. There are certain grounds on which a landlord can obtain possession in the county court. Broadly speaking, these involve the landlord in finding alternative accommodation or proving greater hardship. Is that going to be the position in future in connection with the millions of regulated tenancies throughout the country? I am only asking for information on the subject.
By way of criticism, I think it would be unfortunate if, after the 1965 Bill comes into operation, newly-constructed properties should be affected by the Rent Acts in any way. I know it will be said that in the same area you may have two types of properties; one controlled by the Rent Acts and the other free from control. But that is really an artificial objection. The main object is to encourage development and, in particular, to build houses for letting. Likewise, I think it unfortunate that the conversion of existing houses should be affected
by the 1965 Bill. I know that there are various types and degrees of conversions. You may have a very elementary type of conversion, by simply dividing rooms and passages by boarding. On the other hand, you may have a really substantial conversion whereby a large dwelling-house is converted into two or more flats, with the necessary offices in each flat. That makes a most valuable contribution to the amount of housing accommodation in the country.
I appreciate that under Schedule 4 of the Rent Bill, a person intending to provide a dwelling-house by erection or conversion of any premises may apply to the rent officer and, if necessary, to the rent assessment committee for a certificate of

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fair rent before he starts the work of erection or conversion. That looks sound on paper, but in practice what developer or builder can go through the business of applying for a fair rent, at the same time arranging workmen and materials for doing the work, in the hope that a certificate of fair rent will be promptly granted and will be adequate in the sense of making it worth his while to start doing the work? All these matters would be interesting if only we had some Members of your Lordships' House who were actually in the building trade. In my view, there is far too much theory adumbrated in Parliament, and adumbrated by people who will never have to carry out the work which will be required.
In conclusion, I can only say that this Bill is a very interesting one on paper. It will give a lot of work to a certain unmentionable profession, but as for providing any houses for the people of this country the answer is—Nothing.
5.3 p.m.
LORD SILKIN: My Lords, I rise to extend a very cordial welcome to this Bill. I regard it as possibly the most important measure that this Government will be introducing in the course of its life, affecting the welfare of a very large number of families in this country. I particularly welcome it because it does not in terms repeal the 1957 Act but takes away all the evil which that Act introduced.
Unlike the noble Lord, Lord Newton, I have taken an active part in every housing debate in this House since 1950, and, in particular, I followed in 1957 the then Minister who introduced this Bill in this House. I refreshed my memory as to what I said about the 1957 Bill, and perhaps I may be allowed to quote it:
"…this is a thoroughly bad Bill. It is ill-considered, unjust, abrupt and harsh. It will inflict grave hardship on many families least able to sustain the changes effected by the Bill."—[OFFICIAL REPORT, Vol. 203, cols. 22–23, April 16, 1957.]
On consideration of those words, I would not retract one word of them. In fact, I think I was much too kind to the Bill, because I did not realise all the evil effects which that Bill would bring about: for instance, thousands of families rendered homeless, very large numbers of families having their rents increased to such a point as to inflict the gravest pos-
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sible hardship on their standard of living, and so on.
I was very interested in the speech of the noble Lord, Lord Newton, and I want to congratulate him on his first effort in the field of housing. I thought he made a most interesting speech and I have no complaint about the terms of it, except that in the main I disagree with every word he said. But he is entitled to say it. He talked about the philosophy of housing, and I do not want to take him up too much on that. He talked of the fact that housing, of all services—and housing is a service—has been subsidised for forty years or thereabouts. That is perfectly true. He referred to the fact that of the three essential necessities of life, housing was the only one which was being subsidised in one form or another.
LORD NEWTON: Turned into an institution.
LORD SILKIN: That is quite so. That is what he said. But I think it is a mistake to compare the provision of food and clothing with housing. There is no shortage of food; there is no shortage of clothing. Both of them are in plentiful supply, and their prices are regulated in the way in which the noble Lord wishes them to be regulated—by free competition.
LORD NEWTON: My Lords, may I just point out this?—this is really my argument but the noble Lord is putting it the other way around. The trend of my argument was that there is plenty of food and plenty of clothing, because they have not been subsidised for about half a century.
LORD SILKIN: My Lords, that is of course a non sequitur. The noble Lord has failed to establish that housing is in short supply because it has been subsidised. That is not necessarily the case. The noble Lord did not go on to establish that. He merely said that of the three essentials of life, housing was the only one which was being subsidised; and I am trying to show that the comparison is wrong. You cannot compare clothing or food with housing.
Housing has remained in short supply for over forty years, and to-day is still in short supply. In fact, the amount of housing that is available for rent is less to-day than it was when the 1957 Act was

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passed. One of the arguments for the 1957 Act was that it would make available much more accommodation for renting than was the case at that time, but that has not happened. The amount of accommodation available to-day for rent is 1¼, million dwellings less than it was when the 1957 Act was passed. It is true that the noble Lord did not attach any political implication to his philosophy. He admitted that all Governments have thought it necessary to retain control, and I hope that they will continue to do so as long as the scarcity of houses continues. The noble Lord congratulated the Government on their courage. He thought that the Bill was good in parts and referred to certain parts that were not good, unlike the noble Lord, Lord Meston, who had not a good word to say for it.
I want to deal very briefly with some of the criticisms which the noble Lord made on the Bill. I agree with him in one respect, and that is that this is a very difficult Bill to follow. With all respect to my noble friends—and I think that, in part, the noble Lord, Lord Mitchison, agreed with this—it is one of the worst cases of legislation by reference that I have come across. Indeed, unless one has a complete law library at one's disposal, so that one can refer to the very many Acts of Parliament that are mentioned in the Bill, one is almost at a complete loss to understand many of the provisions. I am very glad indeed that the Minister in another place has promised that there will be a statement in simple language available to the general public so that they may understand the terms of this measure. Without that, they might just as well be reading a Bill in Greek or Latin: with it, I hope that the Bill will be understood by most of the members of the public, because it is one which vitally affects them.
We shall, I hope, have a fairly extensive Committee stage, when I hope it will be possible to deal with most of the points that have been and will be raised in this debate, but I should like to deal very briefly with some of the more important criticisms that have been levelled against the Bill. The first, I think, is not one of principle but is one of detail—that is, that the limits of the Bill, the
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rateable values, are too wide. The noble Lord, Lord Newton, does not criticise the introduction into this Bill of the conception of rateable values limiting the scope of the Bill, but he says that the rateable values of £400 a year for London and £200 outside are too high. My Lords, are they? These are the recent rateable values—which, as noble Lords will know, have been increased in some cases twofold and, in extreme cases, even more than that, as compared with the earlier rateable values.
I do not altogether agree with the noble Lord that the rateable value of £400 in London, which is the extreme case, represents a rent of £900 a year. I would say that it represents, rather, a rent of something of the order of £700 to £750 a year. But, be that as it may—and, in Committee, we can all, possibly, fortify our views with actual examples—I would not agree, even in spite of the authority of the admirable Milner Holland Report, that there is no scarcity in London of houses to rent at £700, £750 or £800 a year. There is an extreme scarcity, and people seeking accommodation will appreciate that there is. Of course, this is the upper limit, but I believe that people prepared to pay even that amount of rent are entitled to protection against eviction; and I do not myself agree that it will necessarily clog the machine. In the country, the limit is £200 a year and the equivalent rent would therefore be something like between £300 and £400 a year. I would certainly agree that there is a need, in the conurbations and in other parts of the country, for protection against eviction.
Whether the limits are too high is a matter which we can thrash out in Committee, but, of course, the Bill provides that if, eventually, it is found that those limits are too high, then the Minister has power to reduce them. I think it would be a mistake to put the limits too low in the first instance and compel the Minister to come to Parliament and ask for an increase in them. I think the limits are right; but if it should turn out that they are not right, or if, in due course, circumstances lead us to believe that they can be lowered, then there is provision in the Bill for lowering them. The same sort of thing applies to places in the country, where it is alleged that

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there is no scarcity of housing of the kind we are talking about. I noticed that a former Minister of Housing and Local Government gave examples of the kind of areas where there is no scarcity—Anglesey, Radnor, Merioneth and certain restricted areas in other parts of the country; in Norfolk, I think he said. But there is no large area with an extensive population where that is the case.
Moreover, his criterion was that there are more houses than families; but that is not proof that houses of the character we are dealing with in this Bill are in plentiful supply. It may be a different type of house altogether which is in plentiful supply, and there may still be a shortage of the kind of house we are dealing with in this Bill. I would respectfully suggest that it is much wiser to include them in the Bill and to find out definitely where there are extensive areas—not small areas, but extensive areas—in which the Bill can be relaxed, possibly in the first instance by lowering the rateable value limits. Indeed, that is provided for in the Bill. The Minister, if he is satisfied that the scarcity has been dealt with or that there is no scarcity can (under, I think it is, Clause 11) reduce the rateable value limits in any particular region. I think that is the right way to do it.
The other main criticism of the Bill has been in relation to the test of what is a proper rent; and the noble Lord, Lord Newton, would wish to eliminate that provision which says that, in considering what is a proper rent, there should be no reference to scarcity. The noble Lord shakes his head, but, if he did not say that, then I must say that, in spite of his usual clarity, I failed to understand what was the point of his criticism.
LORD NEWTON: The point, my Lords, I think, is whether the factor of scarcity should be completely eliminated. What I said was that, of course, there is a case for giving substantial protection—sometimes very substantial protection—against the rigors of the free market, but what I questioned was whether it is right or wise to eliminate completely the factor of scarcity.
LORD SILKIN: I do not know whether we are really disagreeing as much as the
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noble Lord would wish us to. I thought that was what he said. In fact, he was arguing that the mere reference in the Bill to locality as a factor to be taken into account is not enough, and that you have to take account also of the desirability of the locality, the number of people who want to live there, and so on. I should have thought myself that the reference to locality as one of the criteria to be taken into account was sufficient to enable a tribunal to come to the conclusion that one area was more desirable than another, not because of scarcity but because it is a better place to live in. Though judgments may differ as to whether South of the Thames is better than North of the Thames, or vice versa, nevertheless sensible people will come to the conclusion as to which is more desirable. I think we should all agree that proximity to one of the main parks of London is a factor but that whether there is a scarcity of houses of that kind is not a factor in determining what is a proper rent. I think the Minister was right to eliminate the test of scarcity. That has to be eliminated.
The argument that it would be difficult to work out what is a fair rent is, I agree, something that we can understand. Tribunals do not always agree; neither do Judges. We all know that Judges of first instance are very often upset by the Court of Appeal and finally by the House of Lords. That is part of our institution. But the fact remains that criteria sufficient to enable a fair rent to be decided upon are clearly laid down in the Bill. I think they are sufficient in the majority of cases to enable sensible people to arrive at a fair conclusion. This Bill is not intended to discourage landlords from providing houses to let. It will enable them to get a fair rent on their outlay; it will not enable them to get excessive rents due to scarcity of housing in a particular locality. That is something we want to avoid; and I am glad that this Government in this Bill has introduced provisions that in future will prevent tenants from being exploited by landlords.
I want to say in conclusion—because we shall have many opportunities of discussing these subjects in the Committee stage and possibly at Report stage—that, speaking for myself, I think the main

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advantage of this Bill is not so much the regulation of rents as security of tenure. I do not think that in his heart of hearts even the noble Lord, Lord Newton, would justify landlords being able to charge rents due to scarcity or, in other words, monopoly rents.
LORD NEWTON: My Lords, I hope the noble Lord is not suggesting that I said anything that would faintly suggest that. I hope I did not say anything which could lead the noble Lord even remotely to think that I was suggesting such a thing as that.
LORD SILKIN: My Lords, I am glad to hear that. I must repeat that if the noble Lord meant anything, I thought he was being rather critical of omitting the taking into account of the scarcity factor in assessing rents. That is what I understood his speech to mean in part. What I am saying now is what he has just said: that in his heart of hearts he does not really mean that. He cannot mean that landlords should be entitled to charge a rent in which the scarcity factor is taken into account.
In my view, the main justification for this Bill is that it will provide tenants with security of tenure so long as they are well-behaved and so long as there is a shortage of accommodation. As regards the rents, I myself have always taken the view that many of the controlled rents provided under the Rent Act were unfair to the landlords. I took that view when we were discussing the 1957 Act. If we could have devised something which would have provided a landlord with a fair rent but which would have given the tenant security of tenure, then there would not have been the same opposition to the 1957 Bill as there was; and the probability is that this Bill would not have had such a high priority in a Labour Government's programme as it has to-day. As it is, I am glad this Bill has been introduced; I welcome it cordially, and I hope that it will go through in, substantially, its present form.
5.26 p.m.
LORD MOLSON: My Lords, if this is the Bill to redeem the pledge given by the Socialist Party to repeal the 1957 Act, I think it will prove very disappointing to many of their supporters in the
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country. But I am bound to say that it is a very much better Bill than I had expected to see. So far as the repeal of the Act of 1957 is concerned, Schedule 7, in a very convincing form, sets out how much of it is repealed. There is so little of it repealed that I shall not be taking up very much of your Lordships' time when I say that the Schedule says that of the 1957 Act this Bill would repeal: in Section 11(3), in Section 12, in Schedule 4, paragraph 1, a few words; in Schedule 5, a few words; and in Schedule 6, a few words. So it is very far from being a repeal of the 1957 Act.
However, I agree with my noble friend Lord Newton that the Minister of Housing and Local Government has shown very considerable political courage in not attempting to return to the rigid controls that existed before 1957. If I did not think that he took a certain perverse and intellectual pleasure in demolishing the arguments of his faithful supporters, I should have an even greater admiration for his courage than I have. But certainly he has learned many lessons from the Milner Holland Report. What he says in his various speeches on this Bill about the undesirability of rigid controls and rents being too far below the economic level is, I think, very creditable to him and very encouraging for the future.
So far as this Bill is based on the recommendations of the Milner Holland Report, it is a good Bill. It seems to contain four main features. The first is the prohibition of harassment and intimidation of tenants, of what we might call "Rachmanism". I am sure we should all welcome that. There were a number of my noble friends on this side of the House who pressed upon the Conservative Government regarding their last Bill that more drastic steps should be taken, even in advance of the publication of the Milner Holland Report, to deal with this admitted evil. That is all contained in Clause 29 and I am convinced that that will be entirely non-controversial and universally welcomed by your Lordships.
The second point is the repetition in this permanent legislation of the prohibition of the eviction of tenants without recourse to the courts. It may be that in places where accommodation is very

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plentiful that may not be entirely necessary, but, speaking broadly, I think we should all agree that the eviction of tenants without recourse to law, which has for so long been unlawful in Scotland, should be prohibited in this country.
The third point is security of tenure. This may be necessary when shortage exists, although there is no need for it. where there is a plentiful supply of houses. We should aim at mobility for tenants to enable them to move from one house to another. The effect of the old rigid control of rents was to make tenants unwilling to move because if they stayed in their accommodation they were likely to have a lower rent than if they moved. I welcome the provision in this Bill which means that a tenant who moves takes with him the right to a regulated rent.
We come to the matter of fair rents. In principle, I am not against this. Indeed, I well remember that in 1952 I urged on Mr. Harold Macmillan, when he was Minister of Housing and Local Government, that the radical amendment of the Rent Restriction Acts was necessary as I believed was the case. I suggested to him something in the nature of tribunals to determine fair rents and quoted the example of the nineteenth century tribunals of this kind which were set up in Ireland to deal with agricultural rents.
Clause 26 is extremely vague and I doubt very much whether it is right to legislate in such vague terms. It will be nothing more than the opinion, or the "hunch", of a rent officer or a rent assessment committee which will determine what is a fair rent. In the first place there is to be a standstill on uncontrolled rents subject to review by rent officers and the rent assessment committees. That is given priority by the Government in the terms of this Bill. I think it extremely important that we should make sure that it does not result in rents, even though they be unduly high at present, being reduced to an unduly low level. During the Committee stage we shall have to go into the matter very carefully.
I welcome unreservedly that the Minister of Housing and Local Government said that the same machinery was to be used at a later stage for reviewing
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controlled rents with a view to their being raised. Broadly, these controlled rents stand at present at twice the gross annual value of 1959, as provided by the 1957 Act. The cost of repairs has gone up to something like four times what it was in 1959. If houses are to be maintained in a proper state of repair, it is essential that in fixing the fair rents provided for in the Bill account should be taken of the increase in building and house repairs costs which has taken place since the existing rents were fixed. I am very much encouraged to think that Amendments which we may put down to try to give effect to this would be sufficiently in line with what the Minister said in another place for them to receive at any rate sympathetic consideration from the Government.
There were a number of Labour Members of Parliament in another place who objected to the very idea of any increase in rents, which is what will result from rent regulation. On June 29 the Minister was very frank and straightforward about this. He said:
"I think that rent regulation, for the tenant as well as for the landlord, will produce great advantages. It will improve the chances of having a house repaired and improved in conditions which would be quite impossible under control."—[OFFICIAL REPORT, Commons, Vol. 715 (No. 142), col. 435.]
That is an expression of opinion which would be quite unexceptional if it came from a Tory Minister of Housing and Local Government. In order to leave his friends in no doubt of how this is expected to work when the provisions in the Bill come into operation Mr. Crossman said:
"Nevertheless, it would be quite unrealistic to deny that this will imply change. A great many people are on controlled tenancies; their rents have been frozen and costs have risen steadily. Of course, there will be increases."—[ibid.]
My Lords, if we have rent regulation which takes into account the immense increase in building costs and the need for landlords to have sufficient money to maintain their houses in a proper state of repair, then certainly the rent regulation provided for in the Bill will be far less harmful than the rent restriction which has applied in the past. Even if we amend the clause so as to give clearer directions and guidance to the rent officers and assessment committees, it will be still of the utmost importance that they

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should be fair-minded and reasonable people with some knowledge of property management.
One of the clauses which I especially welcome is Clause 12. Here we are looking to the future and giving to the Minister the power by Order to release from rent regulation areas in England and Wales or in Scotland where he is of opinion that the number of applicants for houses is not substantially greater than the number of such dwelling houses. This is an admirable clause. Its provisions contemplate the time when it will be possible progressively to do away not only with rent restriction but also with rent regulation. It looks forward to the time, in a way which I hardly expected to find in a Bill promoted by a Socialist Government, when there will be the restoration of free negotiation between tenant and landlord. The noble Lord, Lord Mitchison, skated over this clause
rather lightly. I cannot feel that it is approved by the noble Lord. I think he regards this as a clause for which he would rather not be responsible.
LORD MITCHISON: My Lords, I regret to have to say that the noble Lord is mistaken.
LORD MOLSON: Of course, the views of the noble Lord may have changed since he was speaking on a similar matter during the discussions on the Bill which became the 1957 Act. The two clauses are not identical, but they are extremely similar, as was pointed out in another place by some of his honourable friends. The clause to which the noble Lord took such exception in 1957 enabled the Minister, by Order, subject to Affirmative Resolution by both Houses of Parliament, to extend decontrol. Speaking on Committee stage, Lord Mitchison expressed his strong disapproval of that. He regarded this safeguard of the Affirmative Resolution as quite inadequate. He said this:
"An Affirmative Resolution comes before the House and is subject to what is, in effect, a Second Reading discussion only. There is no opportunity whatever for detailed discussion, there is no opportunity for any Amendment, and there are, of course, no Committee proceedings. What happens is that it goes through Parliament without the people in the country affected realising what is happening until it is too late".
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He went on:
"…I call both the subsection itself and the use which it is proposed to be made of it"—
and I leave out two or three words—
"an abuse of the power of the Ministry as against Parliament, an abuse of the power of the Government as against the country and an inroad into the liberties of the people in a matter which, I repeat, vitally and directly concerns them."
LORD MITCHISON: My Lords, would the noble Lord permit me—
LORD MOLSON: The quotation is too good to be interrupted. It goes on:
"I hope and pray that no Labour Government will ever sink to depths of oppression and duplicity which this clause and the use of it represents "—[OFFICIAL REPORT, Commons, Standing Committee A, col. 957–60. February 26, 1957.]
LORD MITCHISON: My Lords, I think that it was a very good speech and I am glad the noble Lord has read out the whole extract. The differences are these: it was a different clause, the circumstances were different and, above all, the Minister was different.
LORD MOLSON: My Lords, one of the points which the noble Lord has made on many occasions, and which can well be made on this occasion, is that this is a Statute. Ministers may change and the powers incorporated in this Bill when on the Statute Book will be exercised by other Ministers than the present one.
I welcome this clause. I regard it as one of the best in the Bill, and I am glad to know that the noble Lord, Lord Mitchison, will not be in any way embarrassed when we come to consider it in Committee stage. If then, as is indicated by this clause, decontrol of housing is the ultimate object of this Bill, it seems to be unreasonable that the regulation of rents is being applied to such a large proportion of houses in the country, including houses and dwellings of such annual value that there is in fact, as was found by the Milner Holland Committee, no shortage of them at all. In 1964–65, of the domestic properties in this country, 83·5 per cent. were found to be of £100 or less in value, 14·8 per cent. of £101 to £200 in value, and only 1·7 per cent. were of more than £200 value. If we desire this Bill to prove workable when it is on the Statute Book

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and if the Government desire it to work speedily and effectively, I think it will be essential for your Lordships to reduce very substantially the level at which it is to apply.
In Clause 4(5) there is a repetition of what has been contained in a number of Conservative measures—that is that the value of improvements added to controlled rents is to be restricted to 12½ per cent. per annum. I pressed upon Conservative Ministers that this 12½ per cent. is an inadequate inducement to landlords to carry out improvements, particularly in the case of small men of limited means. It is eight years before they get back in rents the cost of such improvements as putting in a bathroom, internal sanitation or hot water. I pressed this on Conservative Governments in the past and I hope that I may press it more successfully on this Government. If they
gave something like 20 per cent. of the cost of an improvement in rent it would have a remarkable effect in encouraging the improvement of unsatisfactory houses. The Times in its leading article said that this Bill would not encourage improvement of houses. I believe a fairly small change of this kind would greatly encourage landlords to improve them.
I come to the case of tied cottages. I think it is unreasonable that, whereas all tied houses except agricultural ones should be dealt with under Clause 30(2), by which an employer who desires to obtain possession of the house occupied by a dismissed employee can obtain possession, there is discrimination against agricultural tied houses and various conditions applied by Clause 31.
I hope that when the noble Lord, Lord Champion, comes to reply he will repeat what I think was a promise made by the Minister in another place, that this complicated measure of legislation by reference will in the very near future be the subject of consolidation. The noble Lord, Lord Silkin, referred to the publication of some popular explanation of the Bill. That is useful for the layman, but it does not meet the need of the lawyer and of the expert who at the present time has to go over legislation extending back so far as 1922 in order to find what the law is on this complicated and difficult subject. I hope, as
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the noble and learned Lord the Lord Chancellor is so anxious that the law should be simple and intelligible, that priority will be given to the consolidation of all Rent Acts now on the Statute Book.
This is not a bad Bill. Some parts of it are extremely good. I believe that if it is substantially amended in your Lordships' House it may turn out to be a very good Bill indeed and one which holds out great prospects for the provision of private housing to let in this country in the future.
5.49 p.m.
LORD LLOYD OF HAMPSTEAD: My Lords, I should like to welcome this Bill most warmly, first, because it implements a vital measure of social justice and, secondly, because it initiates a new and, I think, extremely constructive approach to the whole problem of rent control. This could lead to a new era in the relations between landlords and tenants, hitherto the hapless victims of either rigid control or haphazard decontrol.
The 1957 Act can now be seen for what it was—a doctrinaire piece of laissez-faire thinking. If I may, I will quote one sentence from page 186 of the Milner Holland Report:
"The prime cause of most of the hardship, misery and anxiety which we have described is the absence of any adequate security of tenure in the situation which prevails in London of a grave shortage of accommodation for rent at the lower end of the rental scale, and the absence of any provision for the regulation of rents at levels which will do justice both to the landlord and to the tenant".
This Bill effectively cures both these defects. By conferring immediate security of tenure, broadly speaking, on all that class of tenants who lost it under the 1957 Act, it removes at a blow the haunting fear for the loss of their homes which has since afflicted countless families. By the same stroke it puts tenants in a situation where they can bargain on a basis of real equality with their landlords—not the doctrinaire equality of the market, which is so utterly unrealistic in conditions of scarcity.
All the same, we all know that security of tenure is worthless without rent control. A tenant has no genuine security if a landlord is free to impose upon him any level of rents he thinks or knows

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the traffic can bear. The Milner Holland Report rightly condemned any rigid system of rent control. Instead of that, we have a flexible scheme of rent regulation. This scheme contains a number of novel features which are likely to prove extremely valuable. The principal novelty is the two-tier structure of rent officers and rent assessment committees. The main aim here is to introduce a climate of conciliation. This approach, it is fair to say, has been welcomed by all sections of the legal profession. There is good reason to believe that when both tenants and landlords understand that they can bargain freely as to what is a fair rent, without the tenant being subject to the fear of immediate eviction, and when the bargain is subject to the approval of an independent arbitrator—the rent officer, a man familiar with the area and close to the problems of ordinary people—there will be little difficulty, in the majority of cases, in settling the rent by agreement. But if agreement proves unattainable, as it will in many cases, then the new rent assessment committees seem to be the best and most appropriate machinery for resolving the dispute.
Of course, the success of this machinery must depend, like any other human process, on those who operate it. The Minister has been reproached in some quarters for putting his faith in people rather than in rigid or mathematical formulae. But I venture to think that the public in general will applaud his adherence to the tradition of sturdy British common sense as a means of resolving these problems. Where are we to find, the critics ask, all these paragons needed to man this service? The answer, surely, is that we need not be so pessimistic regarding the resources of our people as to suppose that there is not available, out of a population of more than 50 million, a considerable pool of people, without specialist knowledge but able to size up sensibly a practical problem, who will admirably fill the rôle of rent conciliation officers.
As to the personnel of rent assessment committees, these will need to be of real quality to inspire public confidence, which is so important in a matter of this kind. But there seems little doubt that there are considerable numbers of people
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with experience in many walks of life relevant to this task who will be ready and able to participate in a full-time or a part-time capacity. Naturally, in these days, you have to pay the rate for the job, and if you want first-rate people you have to offer adequate remuneration. But this will be money extremely well spent, and will be a trifle in the context of the national economy as a whole.
I should also like to congratulate the Minister on standing firm against imposing any rigid formula for the assessment of the level of rents. The past history of rent control in this country provides dismal enough evidence of the consequences of attempting to fix rents by any such formulae, which either are arbitrary from their inception, or speedily become so. Take, for instance, the suggestion of adopting gross rateable value as the yardstick. This not only is out of date before you start, but will manifestly lead to absurd discrepancies, as the Milner Holland Report showed beyond question. It is significant that the critics seem far readier to denounce the flexible approach of the Bill than to commit themselves to what they regard as a viable formula. On the morning of the Second Reading in another place The Times tried to put forward a formula of sorts. The Minister, in one short paragraph of his speech, disposed of this, and, as one would expect, it immediately sank without trace. The other day, the same newspaper returned to its theme, but this time was cautious enough not to suggest a specific formula. The reason for this is simple: there is none that is workable.
However, a day or two ago a correspondent in The Times made the attempt. I am very glad that he did, because his effort exposes so clearly the fallacy of this kind of thinking. A so-called formula is put forward which contains a whole series of individual judgments built into it; for instance, as to how property is, or can be, classified and the exact weight to be given to a variety of factors. This is then to be applied mechanically to every property. Those who argue in this way have mesmerised themselves into accepting their own subjective judgments, simply because those judgments are dressed up in a soi-disant mathematical equation. If I may say so, it is

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rather like the old Russian story of the mechanical chess player. An inventor produced a large machine which played chess with great effect. Inside a man was concealed, but everyone was happy because it all seemed to be done by science. By refusing to face up to the need for individual judgment, you are to get the worst of both worlds: a rigid and artificial result in every case, based on arbitrary assumptions, but without the possibility of adjusting individual rents fairly to the particular circumstances.
If I may attempt to clear up one misconception of which, if I may say so, the noble Lord, Lord Newton, seemed to be guilty, it is quite wrong to say that under this Bill the tribunals or the rent officers are prevented from taking into account such matters as rateable value, capital value or anything of that sort. They have a free hand in the matter. It is entirely open to them to give these matters such weight and significance as they think proper in arriving at a fair rent. What this Bill precludes them from doing is regarding themselves as tied to a rigid mathematical formula which necessarily involves them in basing themselves on something like rateable value, capital value or whatever it may be. So that it is incorrect to say that there are no yardsticks available to the tribunal. The tribunal, by being entitled under the Bill to take all relevant circumstances into account, except that it is bound to exclude scarcity value, is fully entitled—and one can expect that it will—to give appropriate weight to such matters, though without being technically tied to them.
It is difficult to see what advantage is to be gained by writing into the Bill specific fetters on the discretion of the committee: for instance, saying that they shall take into account gross rateable value. The only benefit in doing this would be to the legal profession, since this would open up the prospect of endless litigation as to whether a committee had or had not performed its legal duty. The Times, again, has taken the Minister to task for trying to avoid what he called a "lawyers' paradise".
"Litigation".
says The Times,
"is tiresome, but it is the safeguard against arbitrary interference."
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Perhaps inspired by the recent celebrations; The Times has seemingly been studying Magna Carta. But surely there is a remarkable lack of realism in the suggestion that it is a greater evil to risk the committees' occasionally ignoring a relevant factor in fixing a rent than to impose the enormous burden on tenants and landlords of the prospect of litigating on a registered rent through court after court, until they may even arrive at this House in another capacity. The whole object of this Bill is to dispel the atmosphere of forensic dispute; but here we are urged to restore it for no real gain to anyone but lawyers.
Perhaps I may be allowed to say a brief word about two further particular criticisms which are levelled against the Bill. It is now apparently conceded, even by noble Lords opposite, that there is an overwhelming case for control in London and other great urban centres, but as for the rest of the country it is said that the Bill either should not be applied at all or should be applied only if scarcity is proved in a particular area. This may be plausible at first blush, but there is, I suggest, a simple answer. Not only is there no detailed, or very little detailed, information available as to the precise situation regarding rented dwellings in different parts of the country, but, quite apart from this, it is easy, as my noble friend Lord Silkin pointed out, to have scarcity of a particular class of dwelling, even if there is an overall surplus of dwellings. There is ample provision in the Bill for a gradual release from control by areas as the situation becomes clearer. But in the meantime in, say, Devonshire, tenants are to enjoy, and are entitled to enjoy, equal protection from exploitation as those in London, even if the problem in that area proves much less intractable than in the great urban centres.
Secondly, it is said that the new limits of £400 in London and £200 elsewhere are too high. The real reason for choosing this level—which substantially, at present valuations, restores the pre-1957 levels—has been clearly explained and justified by the Minister. It is that by fixing the limits at a relatively high level so as to include at least some rents which are hardly or not at all affected by scarcity, you will provide a valuable

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yardstick for the rent officers and committees to assess fair levels of rent lower down the scale where the real bite of scarcity is felt. Frankly, all this anxiety expressed about the situation at the top of the scale seems a bit overdone. Perhaps there may be few cases of exploitation at that level, though many of those with experience in these matters think otherwise. And if it turns out eventually that there are very few cases which need to be reassessed at this level, then so much the better.
Lastly, my Lords, I should like to commend this Bill for establishing a new and permanent principle in our law. This is its recognition that no person should suffer eviction from his home—I emphasise the word "home"—without an order of the court. Self-help remedies belong to a primitive age where each man had to enforce the law as best he could. They are wholly inappropriate in a civilised society, and above all in relation to a person's home. For the first time the slogan "An Englishman's home is his castle" is given some legal reality. Moreover, something is at last being done to protect a tenant, not only from eviction without a court order but, almost more important, from being driven out during the currency of his tenancy as a result of a course of deliberate persecution. Not everything that comes from America these days is likely to earn your Lordships' approval, but I am sure we shall all applaud the wisdom of the Minister in adopting the provisions of the New York statute relating to the harassment of tenants as a permanent feature of our landlord and tenant law.
One thing we still have not got, as has been pointed out by several noble Lords this afternoon, is a code of rent control, and, even less, a codified law of landlord and tenant. This Bill, however, provides, I suggest, some of the basic philosophy which could, and one hopes will, lead to such a code presenting a reasonable balance between the rights of both landlords and tenants over the whole field. Perhaps, in concluding, I may express the hope that our new Law Commission may soon be able to give its urgent and highly expert attention to this vital task.
6.6 p.m.
LORD ST. HELENS: My Lords, I should like to say that my general
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approach to this Bill is that I do not for a moment deny the need for a considerable measure of rent control and security in London, and in the country as a whole, but particularly in the large conurbations. Indeed, this was brought out in the Milner Holland Report, and has been agreed by many of your Lordships and by many Members on both sides in another place. The question, however, that I think one needs to ask about this Bill is a question of degree: Does the Bill meet the needs of the country at the moment? I should like to look at the Bill from two aspects. First of all, I would look at it in isolation, and ask whether it is workable: is it possible to administer this Bill efficiently? And, secondly, I would look at it in general to see how it fits in and affects the general housing situation throughout the country as a whole.
Looking at the Bill in outline, I agree immediately with my noble friends, Lord Newton and Lord Molson, and others who have said that the scope of the Bill is far too wide. Basically, the Minister, in drawing up this Bill, has been in conflict with the Milner Holland Report; and basically, for London at any rate, he has set his target at twice the level which the Milner Holland Report recommended. That, I think, is a mistake, and for this reason. I can see no object at all in introducing controls unless there is a definite known scarcity. The Milner Holland Report, which on both sides of this House and in another place was given tremendous commendation, said quite frankly that it saw little scarcity in London (it dealt mainly with London) above the figure of £400 to £500 a year rent. This Bill imposes rent control up to a rent of between £800 and £900. I know that the noble Lord, Lord Mitchison, expressed it somewhat differently: he saw a lower figure. But, by and large, in the debate in another place the general figure which was accepted was about twice the rateable value, which came to about £800 or £900. This was not "slammed down" in another place when the point was made forcibly by Mr. Boyd-Carpenter and others, both during Second Reading and on Committee stage.
LORD MITCHISON: My Lords, I am sure the noble Lord does not wish to make a false point. In fact the rents in London and in the rest of the country are rather lower than the rateable value. I can

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give the percentages, but perhaps that is not necessary.
LORD ST. HELENS: My Lords, I will gladly come up against the noble Lord again on the Committee stage on this point, and I have no doubt that we shall hammer this point out at great length. All I can say is that it did not seem to me, in reading through the Hansards, that this point was effectively made in another place. So, my Lords, my first contention is that the blanket is much too wide and affects far too high a level of rents throughout the country.
There are other points which I think will be extremely difficult to administer. First of all, there is the question of the rent officers. A great many rent officers will be needed—I believe somewhere in the region of 170 or 180. Where are they coming from, and what sort of people will they be? We have not had any explanation of this. Again, how is the "fair rent" to be decided? My noble friend Lord Newton made this point very strongly, and it was made time and time again in another place in all the stages of the Bill. But no one has yet told us how the "fair rent" will be decided. I think that an extremely significant point arose the other day when the Minister was quoted as saying that a quarter of the existing rateable values were unfair. Those rateable
values were arrived at by professional valuers. So far as I can see, under the terms of this Bill the valuations will be made by people who are more or less amateurs, and certainly not as professional as the valuers who work to decide the rateable value.
Then, how is the locality distinction to be decided? The question of how one is to distinguish between one locality and another has already been raised this afternoon. I can quite see that it will be possible to distinguish between Park Lane and Pimlico but not, as my noble friend Lord Newton said, between one side of the park and the other. Unless uniformity is obtained under the terms of this Bill, it will make an immense amount of trouble throughout the country, and, indeed, in individual localities. Another point is that of the private landlords. The Minister has admitted a natural prejudice against private landlords, but the noble Lord, Lord Silkin, in his speech, said that the Bill did not mean to dis-
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courage private landlords. That is a pretty negative statement, if I may say so, when one compares it with what was said in the Milner Holland Report. That Report emphasised at great length the part that private landlords have to play; and it even went so far as to quote examples not only in this country but in Germany, Sweden and other countries.
LORD SILKIN: My Lords, I was dealing with the criticism of the Bill by the noble Lord, Lord Newton, who was saying that it would discourage private landlords and reduce the amount of accommodation. I was trying to answer that point: I was not attempting to make a positive case.
LORD ST. HELENS: I am grateful to the noble Lord for his explanation, because I thought it was very faint praise with which to damn the noble landlord—
SEVERAL NOBLE LORDS: "Noble"?
LORD ST. HELENS:—the private landlord in the country. Certainly, if they are not discouraged—one can say this for all classes of private landlord—they have no encouragement whatsoever in the Bill. Therefore, there is a real chance that this Bill will create a shortage in the private sector of housing.
With regard to the owner-occupier, I think it was the noble Lord, Lord Mitchison, who said the owner-occupier represented something like 45 per cent. of all the households in the country, but he has no security under this Bill in the short term. Of course, in the long term he has. If he is a member of the Diplomatic Service or in some other position where he has to travel abroad, it may be that he lets his house under a short, fixed contract and later returns to
this country, but the tenant does not get out. He then has to go to a court of law, and how long will that take? What guarantee has he that he will get priority in the court of law? Who will cover the expenses of himself and his family going into lodgings, or whatever it may be, while this court case is heard? Again, it seems to me that if the private landlord can possibly avoid letting his house while he is away, he will do so, thus again imposing an artificial scarcity on the market.
So on the question of whether this Bill is workable, it does not stand up

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extremely well. I think it will create something like a log jam in the courts; it will be difficult to get adequately trained staff; it is likely that there will be unco-ordinated assessments within an area even as relatively compact as London, and I believe the private landlord will be deterred from investing in rented property.
One final point. I notice that the Minister said—I think on Second Reading that the whole purpose of rent regulation was to protect the tenant from the market. It seems to me that if this is the whole purpose of the Bill it must result in an increasing bill for subsidies to be met by the unfortunate ratepayer, and I believe this is the basis of the dialectical clash which took
place between my noble friend Lord Newton and the noble Lord, Lord Silkin. I believe that the Socialist policy of subsidising things is the wrong policy.
The Socialist Party likes to subsidise things, and a very good example of that is London itself. The London County Council subsidised its housing estates irrespective of whether or not the people living in those houses could afford to pay the full economic rent. The Conservative Party believes in subsidising, not things, but people who are in need of help, and thereby one has a far less wide blanket to cover and there is more money to be spent where it is most needed. Obviously again, referring to the example I gave in London where the London County Council used to subsidise the whole of their estates, in other Socialist-controlled areas apart from the London County Council there was a system of rent rebate under which nobody who could not afford to pay the full economic rent was prevented from having a house and, on the other hand, those who could afford the full rent paid it and thereby saved the ratepayer an additional burden.
Briefly, to come to the wider concept, I ask myself: What contribution to the
housing shortage as a whole does this Bill make? The answer is, no contribution whatsoever. This of course is intended by the Government, because both the Minister and the Secretary of State for Scotland, who opened and wound up in the Second Reading debate in the other place, emphasised that the
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Bill did nothing whatever about the shortage of accommodation, and they went on to say that it was not intended to do so.
I believe this is an error. I believe this to be fundamentally wrong because by this very wide blanket we are simply storing up for ourselves great trouble in the future in the sphere of housing. Those of your Lordships who read, a year or so ago, the South-East Study will have gained a pretty fair idea of the increase in population which will come to the South-East of England, and indeed to London; and your Lordships will also remember that in the forecast of the increase of population the planners said that if the Channel Tunnel were in fact to be built in the fairly near future, with the influx of population into the South of England the total increase could hardly be foreseen. At any rate, the South-East Study envisaged something like an additional 3 million people in the South-East of England and London. I believe that every single measure in the field of housing must be taken in accordance with some long-term plan. I believe that every single housing measure must be designed to steer the population into predetermined channels.
I would make one or two broad assumptions—they are never popular assumptions to make. I believe our big cities and conurbations must be planned to house, first of all, the working population, the productive population, those people actually at work in the cities, and, secondly, those who do not cause a burden on the ratepayer. This, I believe, should be the long-term view—the productive population, and those who do not cause a burden on the ratepayer. And I believe that other people should be encouraged to move elsewhere. Retired people should be encouraged to retire outside the working part of the city. People will say this imposes great hardship on the old, but one is apt to overlook the hardship that already exists on the working population. As a Member of Parliament, I saw just as many working people who came to see me with housing problems as elderly people who were worried about being able to obtain accommodation on retirement, and the former cases were just as heartbreaking, too—the couple split up; they had not been together for a long

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time; the man was forced to live in a certain place because of his job, while the wife and two or three children were living with the mother-in-law, the wife threatening to divorce her husband.
Then there is the point to remember of under-population of accommodation by elderly people in the great cities such as London. People will say that this involves rationing by the purse and it is a very bad argument to pursue. I fundamentally believe that we shall be driven to adopt a policy like this in the next twenty years simply because of the vast increase of population in large cities, particularly London. I think we shall come to regret this Bill in the years that lie ahead mainly because of this unnecessarily large blanket cover which has been composed throughout the country as a whole. The noble Lord, Lord Mitchison, gave the figure of 800,000 houses. Under this Bill, in spite of the laws of supply and demand—and I wholly agree with protecting the weak—800,000 householders are going to be encouraged to stay put. I believe this will immensely complicate the future pattern of our housing problems.
6.24 p.m.
LORD COHEN OF BRIGHTON: My Lords, I suppose that I have had a fair amount of experience in housing, as a member of a housing committee and generally throughout many years. I am one of those who welcome this Bill as one of the most courageous and most valuable Bills that has been placed before Parliament. I have been in your Lordships' House a very short time. I have listened to a few debates, but I believe that the subject which we are debating today, and which we shall discuss in more detail when we come to the Committee stage of the Bill, may be one of the most important matters that we shall debate in this Session, I am encouraged to say that because of an experience which I will relate to your Lordships. I have been one of those curious political animals who have fought many Parliamentary elections, and one of the general ideas of Members of Parliament and their opponents is to run a surgery; and to these surgeries come a great many people with a great many problems. Any of your Lordships who has run a surgery will know that of the hundreds of people who come to you with domestic prob-
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lems, with every kind of problem, difficulties with the children, difficulties with husbands and wives, 80 per cent. come because of some problem of housing; and, as has been said, many of these problems are very sad indeed.
This Bill, in my opinion, in an imaginative way endeavours to deal with the problem of housing from two points of view. One point of view, obviously, is security of tenure—and can there be anyone here who does not agree that there should be security of tenure, so that families who live in their homes will know that they are not going to be turned out simply because the owner wants to sell? But the important part of this Bill is that not only is it imaginative in that connection, but it also gives the landlord the opportunity of increasing his rent. The rent officer will recommend what he considers a fair rent, and the tenant will pay an increase of 15 per cent. per annum, and no more, year by year, to bring the rent up to a fair amount. Thus the tenant will have, when the Bill becomes law, security of tenure and—what noble Lords on the other side have frequently asked for—the landlord will have a fair crack of the whip, in obtaining a bigger return for his money than was possible previously.
I have listened to the noble Lord, Lord St. Helens, and it has been said that we should subsidise people and not houses. Just consider for a moment what that means. Is it suggested that the State should subsidise people? Are you going to add the 3 million rented houses to be dealt with by means of subsidies from the State? Is it not much better to do it in the way this Bill does by giving security to the tenant, and a slight increase in rent so far as the landlord is concerned?
LORD ST. HELENS: If I may intervene, many local authorities are already subsidising people under rent rebate schemes.
LORD COHEN OF BRIGHTON: I know that very well, of course, being a member of a local authority, and having dealt with that problem for many years. But I am not suggesting that all the private rented houses—which apparently the noble Lord is suggesting—should come under the same direction. We, on this side, are not suggesting, and I do not

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think that it has been suggested on that side, that all those 3 million houses are going to come under local authorities; and if you are not suggesting it, the proposal does not seem to me particularly wise. If I may say so; it has no merit at all. You have, of course, to give these people security of tenure, and you have to see that the landlord has a reasonable crack of the whip.
May I deal with the matters dealt with by the noble Lord St. Helens, so far as the rent officers are concerned? I am not going to say that I am an expert on everything, but I do see some hundreds of valuations every week, and so far as valuation is concerned it is not necessarily only a question of professional training. The examinations of the Royal Institution of Chartered Surveyors and of the auctioneers' organisations, for instance, cover many more things than the technical side. The valuation of property needs good common sense; it needs common sense to realise what is the value of that property in the open market, disregarding scarcity value. Many of your Lordships will know that an Amendment was moved in another place suggesting that only those who had had five years experience should be rent officers, and it was pointed out that if that were insisted on, the Bill would not work. But I believe—and I say that the tribunals for furnished house rentals show—that if you get sensible people who know the neighbourhood, who know something of the value of properties, you get just as good valuation as would be obtained if you took up the impossible position of asking for experts who are not available because there is too much demand for them at the moment. I believe that the rent officer, by and large—because it has got to be rough justice; and this Bill must give rough justice—will give a fair rental, a rental that can be agreed.
The suggestion was made that, because of this Bill, the landlords would not let their houses but would sell them. That is a complete non sequitur, because the tenants are protected. Landlords are not going to be able to sell their houses with possession. That is what this Bill, when it becomes an Act, will prevent. It will mean that the landlords will have to sell their houses, if
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they do sell, as an investment. So the tenant will not be turned out by the landlord who wants to make additional profit, as happened in the past, particularly under the 1957 Act. The landlord will not be able to get a quick profit; he will have to allow the tenant to remain, and therefore he will not be so anxious to sell the property.
So far as the question of the free market is concerned, about which we have learnt so much, I should like to remind the House of what happened in 1957. We were told in another place that the market was open and that there were plenty of houses; and so there was de-control in regard to a large proportion of the rented houses of this country. And if any noble Lord knows anything about the position of housing, he will know that the landlords seized on that opportunity; they gave their tenants notice, and the houses were sold with possession. Some of the tenants could afford to buy the houses; but some of them could not, and these had to move out. They had the terrible problem of having to find somewhere to go. If I may refer to the surgery that I held in those days, if your Lordships had seen the people who came to me with notices from their landlords that they had to get out because their house was no longer protected (and it was no good their going to the county court, because the county court judge would not do anything) you would realise how vitally necessary it is to bring back into control those particular houses which were decontrolled by the 1957 Act.
I think we know that what is going to happen is that the Minister is going to deal with the first 800,000 houses which were decontrolled. That is his first duty under this Bill. The first 800,000 houses are coming under the Bill, and will be dealt with by the rent officers with security of tenure for the tenants. That is the important point, and it is one that I cannot stress too strongly. Thereafter—and this will take some time—the 2¼ million other houses in the country will be dealt with. The Minister is going to divide the country into sixteen areas and, area by area, particularly in the areas of greater scarcity, the country will be dealt with. But the Minister has taken powers under the Bill to vary, if he so wishes, the areas having regard to the variations that may

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take place. The point was frequently made in the earlier debate that there may be areas in this country where there is no shortage at all; that there is no need for the Bill when the matter can well be dealt with by the Minister, under his powers to exclude an area from the operation of the Bill, and that there is no reason why that cannot be done.
Another clause which I think is very important, and to which I particularly want to draw attention, is that concerning statutory tenants and other members of the family. Prior to this Bill it was possible to transfer the statutory tenancy to one member of the family, so that if the husband died the wife had the benefit of the statutory tenancy. Now it can be moved on to other members of the family. I am particularly impressed by that change because of a case which came to my notice a short time ago. Two nice old ladies came to see me. They had been living in a house for some forty years. Their father had died and the tenancy had been then transferred to the mother. The mother had died, and that was the end of the transfer of the tenancy; there was no longer any protection. So these
two women, who had lived there for so many years, were told by the landlord that they had to get out. They said, "What is going to happen to us? We are used to this house. We have no money." Now, thank Heaven! this situation is stopped, and it is possible to extend the protection over to other members of the family. I think that is a most valuable clause, and one which will make a great deal of difference to many people who would otherwise have been turned out.
I am also particularly pleased—I am afraid I am going to say something that may not give rise to any great enthusiasm in some people's hearts—to know that, once the Minister has appointed a day, local authorities are no longer to have the power to deal with tenants under the Small Tenements Recovery Act, 1838. I do not know whether noble Lords know this, but local authorities can go to the magistrates' court and, for any reason that they think right, can obtain possession. The majority of local authorities act in a judicious and proper manner, but sometimes a local authority does not act quite so wisely. Sometimes an ambitious chairman wants to show that there are
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no arrears at all on a particular estate, or has some other reason.
I have had experience of local authorities using this power to turn out tenants who get in arrear with the rent, but who could probably, given sympathetic consideration, be able to get over their difficulties. These tenants are evicted. They may have three or four children. These children have got to be taken into care, at great expense to the local authority, and the family is broken up. In order to do that the local authority had to go to the magistrates' court. Now, as soon as the Minister has decided on the day, they will have to go to the county court if they want possession. A county court judge is able to defer action for perhaps six months or nine months or to say that if the tenants pay their arrears they can stay on. But the magistrates had no option but to make an order for possession.
Having said that, I am a little sorry that this Bill does not deal with the whole of the rented properties in the country. I should wish, if we were dealing with the question of rents and properties, that we should deal with the whole of them, including local authority housing. I say that because, as I have said before in your Lordships' House, there is great need to deal with the question of the rents of local authorities. Only last week I was in Aberdeen where the local authority tenants pay 13s. 6d. a week for their houses. The local authority runs a deficit of £900,000 a year, and the rents have been increased by only 2s. in the last ten years. I should like the whole question of local authority housing as well brought into the purview of the Minister, so that that problem can be considered, because I believe that it is wrong that we should be giving help to one class of tenant and not to others. But that is purely my own individual point of view, and it is one that may or may not find sympathy in certain parts of this House.
Finally, housing can be divided into two parts. First, there are the new houses that can be built. So far as that matter is concerned, the noble Lord, Lord St. Helens, dealt with the South-East Study, but 99 per cent. of that plan is concerned with new houses, not houses coming within the ambit of this Bill. I disagree vehemently with his suggested

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idea of how one should plan a New Town. I consider that it has nothing to do with the Bill which we are discussing to-day. That matter will have to be dealt with partly by the provision of New Towns and the provision of houses by the New Towns authorities, partly by the local authorities providing more houses, and partly by additional land that will be available for the private developer. But it has nothing at all to do with this Bill and we should disregard it now.
So far as new houses are concerned, despite anything that Milner Holland has to say I do not think you can hope to get a great deal of help from the private developer in building new houses to let I do not think there is much hope of that. Many of your Lordships may know that the Ministry has said that the price of building new local authority houses to-day is an average of £2,350, and it is going up. The average price of the land is between £800 and £1,000. and if you work on those figures you find that, no matter whether the houses are built by the traditional method or the factory method, the ordinary private developer cannot build houses to let at less than £5 or £6 a week plus rates, and that is not going to help deal with this problem of housing.
So far as houses to let are concerned, that matter has to be dealt with by the State and by the local authority, and I hope it will be done in such a way that a fair rent is charged for local authority houses. So far as the creation of new houses is concerned, I foresee that those in the lower income group will be dealt with by the local authority or the New Towns authority, while those in the higher income group will be dealt with by private enterprise.
When this Bill becomes an Act it will give complete protection to 3 million people up and down the country, a number of whom have been very fearful about what is going to happen to them in the future. It will mean that the landlord will receive an increase in his rent. In regard to controlled houses it will not be a large increase. We have been told that the increase could be, at the most, six shillings a week in London and four shillings in the country, but it is an increase. Those houses will be
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controlled, and gradually, as the position gets easier, the Minister will have the power to reduce the areas in the country which come under control.
This Bill is a wise measure from that point of view. It will not be a strict piece of legislation, for it does not envelop the whole country as one particular entity but deals with the sixteen parts of the country. It gives a certain amount of room for manœuvre, and that is most important in an Act of Parliament which deals with a problem such as this. It does something which ought to have been done many years ago: it gives protection so that one will be able to say that an Englishman's home is his castle and not a place where he is scared that at any moment something may happen to turn him out.
There is the further, very important, point that the Bill makes so clear the right of the tenant that he will not be so frightened in the future as he has been in the past. The majority of tenants do not understand anything about the law. When they get a letter from a landlord, which is followed up by a letter from a solicitor, telling them that an order for possession is to be sought in the county court, the tenants get in a fearful "tizzy", if I may use that word. Not only does the man of the house get very worried, but his wife becomes most upset. Frequently people vacate their premises when they need not do so. The Bill makes quite clear the tenant's rights in the matter. I hope that knowledge of the Bill will be widespread throughout the country, so that tenants will understand their rights, will know that they cannot be evicted, and will realise that if the landlord endeavours in any way to use unlawful methods in order to evict them there are stern penalties in the Bill to meet the situation.
I was rather sorry that an Amendment was moved in another place to substitute for a term of imprisonment in relation to people who endeavour to harass their tenants a heavy fine. I wish that imprisonment had remained in the Bill as a deterrent. This is a valuable piece of legislation, which will do more for the happiness, health and welfare of our people than any other Bill which your Lordships will consider. I hope that when we reach the Committee stage we

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shall have no need to worry about wrecking Amendments, and I trust that the Bill will go through with the full approval of this House.
6.44 p.m.
THE EARL OF KINNOULL: My Lords, the noble Lord, Lord Cohen of Brighton, spoke vigorously and well, but even recognising his vast experience I must say that I cannot agree with a good deal of what he said. Anybody who has to grapple with the law of landlord and tenant would agree that this new Rent Bill beats all its predecessors both in its complexity and in its drafting.
LORD COHEN OF BRIGHTON: My Lords, may I beg your Lordships' pardon if I now leave the Chamber? I have taking place in my garden a party for the Spastics. I am chairman of the organisation, and must go along there to make an appeal. Therefore, I hope your Lordships will excuse my leaving at this moment.
THE EARL OF KINNOULL: My Lords, I was saying that I believe this Rent Bill will beat all its predecessors in its complexity and its drafting. I was most relieved to hear that the Ministry of Housing are to produce a translation of the Bill, clause by clause, into layman's English.
I do not believe that there is anybody in the House who does not support the main principle of the Bill, the principle of giving security of tenure to certain types of tenancies without fear of harassment and at a fair rent. Anybody who has read the Milner Holland Report cannot fail to recognise that there was an urgent social need for such protection. But there are other groups of tenants and tenancies, and in many ways for those people the pendulum swings, with each successive piece of legislation, one way or the other. I believe that this Bill goes too far in favour of the tenant. It has already been argued by earlier speakers that the Bill in its present form goes far too wide in regard to the range of property taken under its wing. This applies particularly to the country areas, where there is no particular social or practical need for rents to be controlled. It may come as a shock to many people to know that in Scotland alone this
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Bill will have the effect of virtually controlling all rented accommodation, from castles down to bachelor flats. This I believe, in the long run, will have an adverse effect on such accommodation, particularly in rural areas. I hope that the Government will take another look at the high rateable value limit which they have imposed on the Provinces. Would it not be better to separate parts of Scotland from the Provinces, and reduce the rateable limit from £200 to, say, £150, in view of the fact that properties in Scotland appear generally to have a much lower rateable value than elsewhere in the country?
Perhaps the most controversial part of the Bill comes under Clause 26—the determination of a fair rent. The term "fair rent" sounds, on first hearing, perfectly reasonable, until one asks oneself "What is the definition of a fair rent?" Perhaps the noble Lord, Lord Champion, will try to give such a definition when he comes to reply. Is a "fair rent" a rent that is in the interests of both landlord and tenant? I believe that there is no real definition of a "fair rent", and that rent officers and rent assessment committees will be entitled to judge or interpret a "fair rent" as they wish. Surely a more practical approach would be to decide what would be a "fair market rent", and then to deduct scarcity value and the other considerations. At least by this method the valuers would start off principally with the same figure, even if their final rental figure were at variance. I hope that the matter will be discussed further when we reach the Committee stage. There is also the question of scarcity value under the clause, and it is not at all clear how it will be measured, both as to degree and as to value.
It was stated in another place on Third Reading that although the Bill had been discussed in that House for over three months, and although it had been considerably amended and improved, there was still room for future improvement. One of these improvements, I hope, will be under Clause 15, which deals with recovery of possession by a minister of religion. The right of recovery under this clause is at present limited to Anglican parsons. I should like to quote from what was said by the Minister of Housing on Third Reading in the other place. The Minister, when

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replying to a query by the right honourable Member for Kingston-upon-Thames, said:
"I will not waste time on the small subject about which the right honourable Member for Kingston-upon-Thames is tickled—the problem of the manse and the Catholic Church—except to say that the slight advantage of the Church of England which has existed for several hundred years still exists in this Bill."—[OFFICIAL REPORT (Commons), Vol. 716 (No. 146), cols. 1197–98; July 5, 1965.]
If this is so, I do not feel that there are any real grounds for having any difference between the various denominations.
Another distinction to which I should like to draw your Lordships' attention is the case of the railwayman's cottage and the manager's flat. As I understand it, neither of these two tenants will be given the same protection as the occupier of an agricultural tied cottage. Once again, the reason given was that there was a long outstanding feud over agricultural tied cottages, and therefore they received preferential treatment. I do not believe that this reason is in itself enough to require us to treat such similar properties in a different way.
To summarise, my Lords, I believe that as the Bill now stands it will have the effect of considerably reducing the market of rented accommodation available from private landlords. More and more of these properties on becoming vacant will be offered for sale. At present, the number of private landlords owning accommodation totals over 3¾ million persons, which represents a considerable section of the housing market. The Milner Holland Report itself claimed that this section plays a very important rôle. It could well be that the level of maintenance, repairs and improvements to such properties will go down if the "fair rent" that is to be applied is not economic.
The long-term result of this Bill could be more and more pressure on the housing lists of local councils, and longer and longer delays. The time may well come when, in order to rent a house from the council, the motto will be, "Put people down on the list at birth." If one couples the future shortage of rented accommodation with the fact that fewer and fewer houses are being built at the moment, and the fact that the mortgage interest rates still stand out as the most embarrassing pledge of this Government, the general
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outlook for housing, I would suggest, appears most unsettled.
6.52 p.m.
LORD HILTON OF UPTON: My Lords, I am certain, as some of my colleagues from this side of the House have already said, that, generally speaking, this is a good Bill. I am sure it will give security of tenure to many more people and will, in many respects, benefit the best type of landlord in the country. I think sufficient has been made of those points, but I want briefly to address the House on the parts of the Bill which deal in particular with the tied cottage in agriculture.
I make no apology at all for referring to this because I have an interest,
though not a personal one, in that I am Acting President of the National Union of Agricultural Workers, and for over fifty years we have pledged ourselves to abolish the tied cottage in agriculture. As an infant, I was a victim of the tied cottage system, in that my mother and father, with seven youngsters—and I was the youngest—were evicted from a farm tied cottage. In recent years, as an officer in Norfolk of the National Union of Agricultural Workers, it has been my very unpleasant job to witness farm workers being turned out of farm tied cottages. This is a most unpleasant experience. So I feel very strongly on this particular point.
Earlier this week, in another place, on the Third Reading of this Bill, Mr. Boyd-Carpenter posed a question to my right honourable friend the Minister of Housing and Local Government. Mr. Boyd-Carpenter asked:
"Why treat the agricultural worker differently from other occupiers of tied cottages? Is it because of the foolish pledge which the First Secretary of State"—
Mr. Brown—
"gave at Swaffham, which the Minister himself said it would be impractical to carry out?".—[OFFICIAL REPORT. Commons, VO1. 715 (No. 146), col. 1151, July 5. 1965.]
I honestly do not regard that speech made at Swaffham, my home town, by my right honourable friend, as a foolish statement. I believe that what my right honourable friend was saying at that time—and I was chairman of the meeting—was that he intended to do his best to give justice to farm workers so far

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as the tied cottage was concerned. So I certainly do not regard that part of his speech as foolish.
But let me remind this House of what was the real promise of my own Party, the Labour Party, on the tied cottage before the last General Election. It promised that a Labour Government would introduce legislation to make it impossible for farm workers to be evicted from a tied cottage until suitable alternative accommodation was available. This is not foolish, in my opinion, but is a promise of justice which is long overdue for British farm workers. Unfortunately, the proposals in the Bill, as the Minister of Housing and Local Government made quite plain, do not honour the pledge given by my Party in this connection. So for this reason my own union cannot fully support my right honourable friend's proposals in this Bill regarding the tied cottage in agriculture.
However, we realise that the Bill is a great improvement on the past situation, so we do not at this stage intend to oppose it. But I should like to remind my noble friend who will wind up this debate that we intend to watch this situation very closely. I know the Minister is convinced that his proposals will go a long way to meet the pledge given to farm workers. I only hope that this will prove so, because, from personal experience since this Bill was introduced in another place, I can assure this House that farm workers all over the country have been very disappointed that the pledge given on the tied cottage is not being implemented in this Bill, and they feel very strongly about it.
There is just one other point I want to raise on the Bill. I do not support the part of the Bill which refers to a farmer's being able to let a tied cottage to a tenant other than a farm worker, and then to get the cottage back again if the farmer's circumstances change so that the house is again needed for a farm worker. I know it can truthfully be argued that many more houses which at
present stand empty in the countryside can be made available if this part of the Bill is agreed to. But although I cannot support such restrictive tendencies, I certainly would not oppose them, so long as the tenant has not previously been employed by the farmer who wants to let his cottage on a restricted tenancy, is not now employed
1510
by him, or is not going to be employed by him in the future.
If in winding up my noble friend can give an assurance on these points, I think it can be a very good Bill. As I said at the beginning, it will give greater security of tenure to very many more people in this country, and I believe it will be a good thing for the majority of the best landlords. So, with those reservations, I can join my noble friends in supporting the Bill.
7.0 p.m.
LORD HASTINGS: My Lords, if I were a Back Bencher at this moment I should withdraw my name, on the ground that there is nothing new to be said. But as I have the duty of representing the Opposition on the Front Bench on this subject, in conjunction with my noble friend Lord Newton, I am afraid that I cannot get out of it quite so easily as that. However, for the Record, and in anticipation of the Motion to be moved by the noble Lord, Lord Egremont, next week, "That speeches in this House should be shorter," I would inform your Lordships that, during this Session, my average has been between 18 and 19 minutes, and that on this occasion I intend to be substantially shorter.
Perhaps I should also follow the example of the noble Lord who has just resumed his seat, and declare my interest in the terms given to us so felicitously by my noble friend Lord St. Helens, for I am not only a noble Lord but a noble landlord as well, but in the sense that I am not a professional because I am an agricultural landlord—the sort that particularly interests the noble Lord, Lord Hilton of Upton. And, just as my noble friend Lord Newton claimed clean hands and a pure heart in the field of housing, I can also claim those attributes in the field of agricultural landlordship, if that is the correct term.
My noble friend Lord Newton did not introduce this debate, but, for the first time in such a debate as this, he spoke first for the Opposition, and I should like to add my welcome to him for his assistance in this field, and to congratulate him, following upon what was said by the noble Lord, Lord Silkin, on his speech. Whether his clean hands and pure heart lent themselves naturally to an increased power of intellect, I know not, but I am

1511
sure that nobody will deny that his intellectual approach to this whole subject was extremely interesting and infinitely refreshing. Even the noble Lord, Lord Silkin, who disagreed with every word, enjoyed the speech. The only comment I would make on that is that I think the noble Lord, Lord Silkin, misunderstood one of the main arguments put forward by my noble friend. Lord Silkin objected to his equating the provision of houses with the provision of food and clothing. On the other hand, my noble friend was really arguing that if housing had not been continuously subsidised for something like fifty years, there would have been a great deal more housing now than there is, and we should not be faced with this chronic shortage in the field of housing for rent. The equation was with the provision of food and clothing without subsidy; but I need not continue on that general argument.
My noble friend Lord Newton, and also my noble friend Lord Molson, described this as a courageous Bill for a Socialist Government, and I would thoroughly endorse that description. In the first place, of course, it is not the repeal of the 1957 Act which it was perhaps set out to be at the time of the last General Election. I need not rub that in—enough has been made of that point. But the Bill is courageous in that it has made it quite clear that controlled dwellings, presently known as statutory tenancies, will in due course come into the field of regulated dwellings at a fair rent—and, as the Minister himself pointed out recently, that means that, in the majority of cases, the rents will inevitably go up. That is certainly courageous and, in our opinion, the correct thing to do. We shall have more to say about that at Committee stage, because the time when this is to happen has, of course, been left very open. It is in the hands of the Minister to decide, when he thinks fit.
My Lords, I have mentioned two significant things about this Bill—that it is not the repeal of the Act of 1957, and that it brings in these controlled statutory tenancies—and the third great thing, of course, is the regulation of rents throughout the whole field of housing. Here, I have one or two small points to put to the noble Lord, Lord Champion, because I think that we were rather con-
1512
fused with figures by the noble Lord. Lord Mitchison. Now we understand that, as a result of this new, regulated rent control, some 800,000 or 900,000 houses, all told, which have been decontrolled since the Act of 1957, will come back under control.
LORD MOLSON: Under regulation.
LORD HASTINGS: I beg your Lordships' pardon; under regulation—a form of control, a regulated rent. But that is surely not the end of it, because this is a question of 2¼ million houses which now have statutory tenancies, on the one hand, and, on the other, 900,000 houses which have been decontrolled since 1957 coming back under regulation. But that still leaves several million houses. Perhaps the noble Lord, Lord Champion, will tell us how many houses there are in this country. I think the total is something like 15 million, and, if 45 per cent. of them are owner-occupied, the rest are presumably in the rentable field. Therefore we are not dealing just with 900,000 houses that are to come back under some form of regulation, but with a great many more which have never been regulated or controlled—and that is really the complaint we are making about this Bill.
Perhaps the noble Lord, Lord Champion, will be able to give us some figures to show how many houses can be affected. I cannot understand it when the noble Lord, Lord Mitchison, says that before 1957 only 160,000 houses lay outside the field of control, and that after this Bill becomes law the same number will still lie outside. That belies the figure of only 900,000 houses coming under regulation. There must be many more; and I would point out that since 1957 something like 2 million new houses must have been built. Therefore, a far larger number will come under regulation than have ever been under it before. I do not know whether the noble Lord would like to answer that point now.
LORD MITCHISON: My Lords, I think that perhaps we ought to deal with this point in Committee (it is rather complicated to be dealt with in a Second Reading debate), but the total of privately rented houses in England and Wales is about 4¼ million. Out of those, there were, by way of loss from the 1957 controlled sector (I hope I am making myself clear) about 2 million. Some of those

1513
were the 800,000, and the remainder are accounted for by owner-occupation, by purchases by local authorities, by demolitions and by "vacants" as they call them. These figures are very difficult to get right, and I hope that the noble Lord will take it from me that I can give them more fully at the Committee stage.
LORD HASTINGS: I am grateful to the noble Lord for clearing up that point, to a certain extent, immediately; but it does prove my point that we are not discussing just 900,000 houses, but a great many more.
LORD MITCHISON: No.
LORD HASTINGS: The number corning back under regulation must be a great deal more.
LORD MITCHISON: If I may take the simplest case, we are not discussing the house which has been demolished: it is no longer there. We are restoring control to a number of groups of houses which existed in 1957 and which have gone, as it were, in different directions. Some have been demolished; some have gone into owner-occupation; some have gone into the hands of local authorities, and about 800,000 are still privately rented houses—the direct loss, as I called it when speaking for the first time. I assure the noble Lord that I am not trying to lead him or anybody else "up the garden path" over this matter. But those are the figures.
LORD HASTINGS: We shall have to go into it more completely at the Committee stage. But owner-occupied houses will also come into the field of regulation if at any time they are rented; and so they will if anybody wants to put in a single lodger. That brings up the numbers very considerably, and that is where we come to the main argument, which we shall develop on Committee, about the necessity for covering the whole of the country, England, Wales and Scotland, at the same time, and for dealing also with the limit of rateable value. Here again, the noble Lord, Lord Mitchison, made some remarks that I will take up on Committee stage; but we shall have to argue those two points on Clause I thoroughly.
I now come to the question of fair rents. I do not want to go into that; we
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have had thorough discussions on it. I listened to the speech of the noble Lord, Lord Lloyd of Hampstead, opposite. I could give all the arguments against his discourse and will do so on the Committee stage. But really this question of fair rents is tied up with the rateable value and the limitations of £400 and £200. One of my great objections to these limits, arguing that they are much too high and because they cover the whole country at once, is that they are going to foul up the machinery. And it would be, in our estimation, an essential improvement to the Bill if we could bring about rather a more limited field within which fair rents shall operate. We base our objections upon the question of administration.
There are one or two individual points that I will mention briefly. The noble Lord, Lord Hilton of Upton, took up the question of tied cottages in detail. He was the only speaker to do so. He drew attention to the Minister's words on the Third Reading, which I shall quote:
"It is of the greatest importance that we should have inserted in another place a clause which enables a farmer to let a tied cottage to somebody other than an agricultural worker and to get it back."—[OFFICIAL RFPORT. Commons, Vol. 715 (No. 146), col. 1198, July 5, 1965.]
That is the thing we shall hope to do. I do not know whether the noble Lord, Lord Champion, can tell us whether the Government intend to introduce an Amendment to that effect; because, if not, I think we shall certainly wish to do so. There is a question of discrimination in respect of some tied cottages as compared with other tied cottages such as those mentioned by my noble friend Lord Kinnoull. I thought he had it the wrong way round. As I read the Bill, the discrimination is in favour of the tenants of those other tied houses—the railways, the Coal Board managers and so on, and the discrimination is against the owner of agricultural cottages because the court will have the power to give an indefinite suspension which it will not have in the case of the other tied cottages. I think I am right in that; but it is a matter that we shall wish to pursue on the Committee stage.
There was also the question mentioned by my noble friend Lord St. Helens about the recovery and possession of owner-occupied houses and the situation of the man who has served overseas, in

1515
the Services or in the Foreign Service, as the case may be, who cannot get possession of his house when he comes back without recourse to the courts. I realise that Clause 14 was a new clause which was put in at the Report stage by the Minister as the result of pressure from the Opposition during Committee stage. Therefore it is an improvement: but it is still, in our opinion, not enough. This, too, is a matter that we shall discuss further on the Committee stage.
There is yet another question, equally important, which so far has not found a place in the Bill at all: the question of people who wish to buy houses for their retirement, particularly people who have to live in tied houses during most of their career because their work enforces that upon them. Policemen are obvious examples of this. There is no provision for them to be enabled to buy a house prior to their retirement to safeguard their own position and that of their wives, in particular, should they die before they finish their career or are able to retire. That is a matter that the Minister himself had great sympathy towards. He even invited my right honourable friend Mr. Boyd Carpenter, in another place, to get his colleagues here to try to phrase some clause which would be acceptable to cover this situation. I hope that we shall be able between us to do just that.
Finally there is the point referred to by the Joint Parliamentary Secretary in another place, Mr. MacColl, as to the great importance of the courts functioning rapidly in the most urgent cases. He referred to the noble and learned Lord the Lord Chancellor and to the action that he was taking in that respect. We had a good many words during the Protection from Eviction Bill debates on this particular point, and the noble and learned Lord gave certain undertakings as to the things he would do. Whereas I invite no answer at the present moment, I think at Committee stage that we shall want to have further elucidation on these points to make sure of what has been done and that it is going to be effective. I understand from my colleagues in another place that there is some doubt upon this matter.
I do not think I need to refer to anything else except the drafting of the
1516
Bill. It is a horrible Bill. After reading all the proceedings in another place, I consider that even there the honourable Members on all sides did not fully understand it. I certainly do not claim to understand it myself. I hope we shall begin to comprehend it better as we go through the Committee stage. Certainly the Minister was right to say that he is going to produce a complete "Intelligent Man's Guide to the Rent Act" in layman's language.
My Lords, I shall conclude by saying that we agree with the principles of the Bill: namely, security of tenure where there is shortage—and the argument will rest in the fields of where there is a shortage. We agree with protection against eviction for all without recourse to the courts. I have no objection to that protection extending beyond the rateable limits in this Bill and bringing in everybody. I think that people at that level of income can look after themselves, whether they be landlords or tenants, and there cannot really be any great hurry to change a tenancy of that nature. Therefore, I see no reason why protection should not be extended and that court procedure function in that limited field as well as throughout the other field of rented houses. We agree with the principles of the penalty, including imprisonment, for harassment, which is really closing the gap which was left after we passed the Housing Act, 1964. Again, we agree to the principle of fair rents for all properties regulated. We shall have to argue what is a "fair rent" and how we can apply it.
I shall merely say as a final sentence that the objective of the Bill, in the words of my noble friend Lord Molson, appears to be eventual decontrol after regulation and after, admittedly, shortage is cleared up. Of course, in the big cities this will not be in the foreseeable future. But the objective—and we think this is the correct objective—is eventual decontrol. Therefore, we believe that the Bill is a courageous Bill; there is much good in it. We can nevertheless improve it out of all recognition, and we hope to assist noble Lords opposite to do just that.
7.20 p.m.
LORD CHAMPION: My Lords, I must confess that I feel as did the noble Lord, Lord Hastings, when he rose to speak.

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He said that there seemed nothing left to be said. After listening to the excellent speeches of my noble friends I feel that I have no case to answer; it has been answered by them. Like the noble Lord, however, I have a duty to perform, which is to get up and to say something, and it is my purpose to fulfil that duty.
I say straight away to the noble Lord, Lord Hastings, that if, by any chance, there still remains some confusion, after the explanation by my noble friend Lord Mitchison, I will write to the noble Lord, or clear it up during the Committee stage proceedings. In the course of clearing up these points the difficulties about figures often seem to result in confusion getting worse confounded. I am sure that my noble and learned friend the Lord Chancellor will at some time during the Committee stage proceedings make clear what he is proposing with reference to the hastening of court procedure, where that is necessary. The noble Lord will remember that my noble and learned friend made a specific statement about this and gave an undertaking which I am sure he will carry out.
I cannot complain about the tone of this debate; it has been reasonably friendly to the Bill. Most of the complaints have been about points which may be cleared up during the Committee stage rather than in discussion on the general principles of the Bill. This measure has received a general sort of welcome. Indeed, it has been described as a courageous Bill, and I think that the Government have been courageous in bringing it to the House. It contains something which was contained in no previous Rent Bill: it sets out to provide not only justice for the tenant, but justice for the landlord in the long run. We think this right, and I welcome the words which have been used in this connection. The noble Lord, Lord Newton, said that he took some pride in coming to this subject with clean hands and a pure heart.
LORD NEWTON: I did not say I took pride.
LORD CHAMPION: I thought the noble Lord took pride in that. Like him, I have not spoken in either House on matters relating to Bills which have become Rent Acts, and that is rather
1518
strange, because when I was a member of a local council I took great interest in the whole business of rents. Not having said anything in either House, I have the advantage that no one can quote my words against me, as often happens. The noble Lord, Lord Molson, quoted something against my noble friend Lord Mitchison.
The noble Lord, Lord Newton, spoke of the history and said something about the philosophy of this matter. I do not know what future historians may say about this period; I do know what I feel about the whole business of rent restriction. It is clear to me that since the passing of the first Rent Act the limited return on the capital employed in the building of houses for lower-paid workers has made the further provision of such capital quite out of the question. Once you embark on rent restriction you take out of this field that injection of private capital, and after nearly half-a-century of rent restriction I see no way back to the conditions which obtained prior to the passing of the first Rent Act. I do not think there is any way back. The only money which will find its way into building will be that employed in providing luxury building, not houses for people in the lower-paid groups.
LORD HASTINGS: My Lords, I think the Minister himself admitted that the middle-income group, which, after all, is substantial and very important, would come into the field of private housing. May I suggest to the noble Lord that if his Party follows out the recommendations of the Milner Holland Report, that will meet certainly part of the case, and would be a most valuable contribution?
LORD CHAMPION: My Lords, I cannot see any private developer coming back to this field except in respect of luxury groups. It will amaze me if it does happen.
LORD MOLSON: The noble Lord is quite wrong.
LORD CHAMPION: There has been some criticism of the Bill. The noble Lord, Lord St. Helens, and certainly the noble Lord, Lord Meston, criticised the Bill on the grounds that it will not provide a single additional house. We freely admit that. No Rent Act ever did provide a single additional house. I do not

1519
think anyone would claim that a Rent Bill could. I am sure that no one responsible for the 1957 Act would claim that it did anything at all to provide a single additional house for the people of this country. The noble Lord, Lord Meston, my noble friend Lord Silkin and the noble Earl, Lord Kinnoull, all complained about the drafting of the Bill and the difficulty of reading it. I agree with them absolutely. It is difficult for the expert, never mind the ordinary man who may attempt to read it. Noble Lords who have complained about the drafting of the Bill are in very good company, because, as noble Lords will remember, my noble and learned friend who sits on the Woolsack said this of the Bill:
"… the Rent Bill—which we are before long, I hope, to have the opportunity to consider—is itself one in which the first clause is as bad a piece of legislation by reference as I have seen, and we all know how appalling the Rent Restriction Acts have been."—[OFFICIAL REPORT, Vol. 264 (No. 57), col. 873, March 29, 1965.]
Of course, my noble and learned friend went on to explain the circumstances in which it was necessary to introduce a Bill. What was the problem facing us? It was an urgent problem. The Report of the Milner Holland Committee highlighted part of that problem, and the Government were determined to deal with that part of the matter and also to reverse what we regarded as the mistaken decision contained in the Act of 1957. That Act was forced through against the opposition of people who knew something about housing, including my noble friend Lord Silkin, who so strongly opposed it. The situation which the Parliamentary draftsmen were asked to face was one in which, between 1920 and 1961, there had been no fewer than 58 Acts dealing with rent restriction and about 40 Statutory Rules and Orders dealing with the same subject. In addition, there was a mass of case law during that period.
What is needed, and I agree with all the noble Lords who have said so, is a new and clear restatement of the whole law of landlord and tenant. Time did not permit of this. Such inquiries as I have been able to make lead me to believe that the Parliamentary draftsmen would need up to two years to consolidate the rent legislation, Statutory Rules and Orders and case law, and so on, into a single Act of Parliament.
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I am told by people best able to judge of these matters that Clause 1 of this Bill is something of a masterpiece of drafting. My right honourable friend, the
Minister of Housing and Local Government, rhapsodised about this clause. He said:
"I am told that this Bill is an absolutely brilliant piece of draftsmanship. … Those who have really a taste for this caviar assure me it is the highest grade of legal caviar and that there has never been a Clause like Clause one in the history of legal clauses, for those who can appreciate the finer points of legal draftSManShip:'—[OFFICIAL REPORT, Commons, Vol. 715 (No. 146), col. 1195–6, July 5, 1965.]
My Lords, this is not my sort of legal caviar. But I hope that he is correct in this: that it is legal drafting of the highest and finest class.
LORD NEWTON: My Lords, I was going to ask the noble Lord what comfort that is for those of us who do not like caviar at all.
LORD CHAMPION: My Lords, this Bill is part of the caviar about which my right honourable friend was talking. I am prepared to take my right honourable friend's word for this, but, for myself, I look forward keenly to the day when we pass through this House a completely new and clear restatement of the whole law of landlord and tenant, and not merely a consolidation of the Rent Acts. All I can say about this business of consolidation, if I am pressed too heavily, is that Tory Administrations had thirteen years in which to consolidate, but never did so, and it is hardly fair to accuse us of not consolidating during the short time we have been in Government. I sincerely hope that by the end of our thirteen years in Government, we shall have not only consolidated but introduced a Bill covering the whole landlord and tenant relationship.
My right honourable friend has promised an explanatory paper in simple language. I hope he will achieve this. I must admit that there are dangers in it. I remember that during the period when I was a member of a local council I often used to advise on rent and housing problems under the Rent Restriction Acts. On one occasion, I advised two old people that they were perfectly safe in their house, on words which appeared in a White Paper issued by the Government of the day and certain pamphlets on the question. Eventually, it appeared that

1521
there was a case somewhere which made it look as though my advice had been faulty, and the old couple were taken to court. I have never had so many steepness nights in my life as I had during that period, between the time I knew the case was going to court and the time it eventually appeared there. Fortunately, a solicitor friend of mine found another case exactly parallel, and for me the day was saved. I went home on the night that that county court came to a decision and slept. I am pointing to the difficulty of producing in simple language an explanation which will be safe for anyone to use.
Whilst on this topic of explanation, may I be permitted to call attention to the fact that this is the first Bill reaching your Lordships' House for something like a century, perhaps more, complete with a paragraph in the Explanatory Memorandum telling us what the financial provisions of the Bill are? Those noble Lords who sat through the Committee stage of the Airports Bill will remember that the noble Earl, Lord Selkirk, called attention to the nonsense of omitting the financial provisions from the Explanatory Memorandum when the Bill reached your Lordships' House. I am glad that they have been included in this Bill.
So far as I can see, the only difference between the Explanatory Memorandum for this House and that for another place is that the paragraph is not headed, "Financial Provisions". I can attribute this omission only to the unfathomable workings of an inscrutable Treasury, who thought that these words must be left out. But I am glad that at last a Government has recognised that your Lordships have at least reached the stage where you can reckon that twice one are two and that financial explanations are useful to us. That, of course, is by the way.
One of the main criticisms of this Bill has been about the fixing of the figure of rateable value at £400 in London and £200 outside. My noble friend Lord Mitchison and my noble friend Lord Silkin, out of his quite exceptional knowledge, devoted large parts of their speeches to a justification of the figures that had been selected, pointing, of course to the fact that these figures are roughly equivalent to the pre-1957 £100
1522
in London and £75 in England and Wales. As the noble Lord, Lord Newton, said, the Milner Holland Committee calculated that there were plenty of houses available at rents between £400 and £500 a year, but experts consulted by my right honourable friend doubt very much the accuracy of the assertion contained in the Milner Holland Report. In any case, it seemed to us to be wise to retain the same figures here as Parliament accepted in the Protection from Eviction Act.
It certainly seems to me, at any rate, to be right, if a mistake is to be made about this, to err on the side of a high margin of safety rather than of a too low one. I believe it is right that we should take a too high figure, rather than a too low figure and miss a number of tenants whom we ought to catch within the provisions of this Bill, always remembering, as has been pointed out, that the Minister is taking power under Clause 12 to take classes of dwelling-houses out of regulated tenancy groups if it is found that such regulation is no longer necessary.
It does not seem to me to be a good case to say that putting them in will clog the machinery. Noble Lords opposite have said that there are few of them, in any case. If there are so few who come within this clause, how are they going to clog the machinery? I cannot see that they will do so. Indeed, most of these, as the result of negotiations between landlord and tenant, have arrived at a rent which I believe they will regard as fair, and they will not be going to the rent assessment committees at all.
LORD NEWTON: My Lords, perhaps I did not make myself clear. What I said was that in any event, whether or not the upper limit is reached, it is anticipated that the machinery will clog. And the reason I gave was that tenants in London and the conurbations who might have agreed originally the rent which they are now paying will say, when the Bill is enacted, that, because the Bill removes the element of scarcity from the considerations to be taken into account when a fair rent is fixed, they must surely be paying too high a rent, and will apply for a reduction.
LORD CHAMPION: My Lords, only experience will tell us. It may prove that the noble Lord is right or that I am right. I think that we have selected the right figures.
So far as the rest of the country outside London is concerned, we are short of real information about the exact needs. Indeed, we should have known very little about London itself if it had not been for the Milner Holland Report. And I certainly do not accept what I have read about counties like Merionethshire, where they appear to have a 12 per cent. excess of dwellings over households. I do not believe that there do not exist parts of that county where it is right that a form of control should exist and continue to exist. You can get these pockets even in an area where you find, as in the case of Merionethshire, that there has been a large departure of people from the rural parts of the county, leaving houses or cottages vacant that nobody will live in: indeed, some of them get bought for a song to be used as weekend cottages. I am not asking noble Lords to rush down there and buy them, because I may have a little interest in one myself eventually.
The "fair rent" clause is one which we shall have to consider carefully in Committee. The noble Lord, Lord Molson, has told us that he may be putting down Amendments on this. It is a difficult clause. The Times has called it "flexible nonsense". The noble Lord, Lord Newton, criticised it. I have carefully read the proceedings in another place and have found nowhere there any suggestion for fixing a fair rent that could in any way approach the commonsense method contained in Clause 26. I have not heard a suggestion to-day. I may, as I am threatened with it, hear something about this when we reach the Committee stage. But it was amazing to me that the Opposition in the other place were unable to find a suitable clause that would stand up to examination. I believe it to be a lot of nonsense to suggest that rent officers—local men with a knowledge of the area in which they are to assist landlords and tenants—will not be competent to advise on a fair rent for the houses in the area of their operation. Here I agree with the noble Lord, Lord Cohen of Brighton. I believe that the rent assessment com-
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mittees, composed as they will be of a lawyer, a valuer and a layman, will, upon appeal from the rent officer, be able to consider the rent question from a wider angle than the rent officer, who naturally will be tremendously concerned with his own immediate locality.
I have some experience in the industrial field, and I like the idea of a rent officer acting in the same sort of capacity here as do the officers of the Ministry of Labour: acting as conciliators; getting the parties together; settling, if possible, and, if not, advising how to go to arbitration—in this case, of course, advising how to go to the rent assessment committees.
There has been a suggestion that we shall see wide disparities of rents over the country; and that is quite possible. But it will be the function of the presidents appointed by my right honourable friend, after recommendation by the Lord Chancellor, to get together from time to time and try to ensure that there is a reasonable degree of equality over the whole country for similar types of houses. The considerations which will apply here will, I think, be sensible ones. I believe, with my noble friend Lord Lloyd of Hampstead, that the Minister has done the best that human fallibility allows: and, with my noble friend, I see no reason here to share the gloomy forebodings about the outcome of the proposals.
The noble Lord, Lord Newton, challenged me and said: how would I act as a rent officer or a member of a committee. If I were appointed as a rent officer in my local town and district, I should start with a local knowledge of that town and district. I know the existing rents, both controlled and decontrolled, in the area; I know the town sufficiently well to know which part of the town I would rather live in and would be prepared to pay more rent to do so than I would pay to live in another part of the town. I would have the necessary local knowledge. I do not think that for one moment that I should have any tremendous difficulty about settling the rents for the town of Pontypridd in South Wales, with the knowledge that i at present possess; and I am sure that the people who will be appointed as rent officers will be at least as intelligent as I am, if not much more so. Therefore, I do not fear this at all.

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The noble Earl, Lord Kinnoull, asked: is this Bill fair for landlord and tenant? I can only claim that it is the fairest rent Bill to both landlord and tenant that has ever been introduced in this country; and this goes back for a very long time.
On the agricultural tenancies, the noble Lord, Lord Molson, criticised them from one side—rather from the side of the farmer—and my noble friend Lord Hilton of Upton criticised them from the other side, that of the farm worker. Frankly, this is a compromise clause. My association with the agricultural industry has made me aware of the longstanding feud in the countryside about this matter. The agricultural workers and their unions have for many years fought for the abolition of the tied cottage, and fought against the right of the farmer to evict an occupant of a tied cottage when he happens to leave his service. My noble friend Lord. Hilton of Upton told us of his personal experience as a young man. I must say, such is my knowledge of this industry, that I have a tremendous sympathy with both points of view, and, despite our Election promises to the agricultural worker, I feel that we have arrived at a fair compromise. It is a fair compromise, and one, I believe, which on examination will commend itself to both sides when they have had some experience of its working and have really tried to understand the other man's point of view.
I perhaps should insert here, in answer to the noble Lord, Lord Hastings, that we are hoping to do something—I cannot promise what form it will take—about the letting of a tied cottage to somebody who is not an agricultural worker for the period in between losing a worker who occupied a tied cottage and the eventual employment of another. It is our intention to try to ensure that this is cleared up. I understand that there is some slight ambiguity about the succession to tied cottages, and in this connection, too, we are looking at the matter.
There was also the question raised by the noble Lord, Lord Hastings, about the formula that we hope to include in the Bill to cover a man who buys a house for retirement.—There was a specific
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pledge given on this by the Attorney General, and this will be found in column 372 of the Hansard report of the Report stage in another place, on June 29. Certainly it is our intention to carry out that pledge.
We confidently believe that, within a few years, this Bill will bring about an entirely new and a fairer relationship between landlord and tenant. I think this Bill constitutes something of a breakthrough in the circumstances which for so long have bedevilled these relationships by control and decontrol, Rent Acts and all that sort of legislation with which we have been faced over such a long period. There are streets of houses which I know perfectly well, in which rents vary for the same type of dwellings; rents that are much too low in the case of the continuously controlled house, to rents charged on a scarcity level, because they have been overtaken by creeping decontrol. These variations apply to neighbours living next door to one another, and they are obviously unfair, on the one hand to the tenant and, on the other hand, to the landlord. I believe that in the process of time the rent-fixing clauses will bring about a situation in which landlords and tenants will confidently approach rent officers and, where necessary, seek a final decision from the rent assessment committees.
We are seeking to establish a reasonable degree of security for the tenant, with a reasonable rent for both landlord and tenant—a rent which will enable the landlord to get a sufficient return upon his money to enable him to keep his property in a good state of repair and to make the necessary improvements. And how badly this is needed in some of these houses! How badly they need bathrooms; how badly they need some of the modern amenities which could be provided by the landlord, provided that he really was assured of a reasonable rent! If it does all that, some good will have flowed from Rachmanism and some of the evils of the 1957 Act. I strongly commend this Bill to your Lordships.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

HUDDERSFIELD CORPORATION BILL
Reported, with Amendments.
BIRKENHEAD CORPORATION (MERSEY TUNNEL APPROACHES) BILL
The CHAIRMAN OF COMMITTEES informed the House that the opposition to the Bill was withdrawn. The Order made on the 7th instant discharged, and Bill committed to the Committee on Unopposed Bills.
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