Sitting of 24 May 1965

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  ROYAL, FOUR TOWNS FISHING ORDER CONFIRMATION
  Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to the Royal Four Towns Fishing, presented by Mr. Ross (under Section 8 of the Act); and ordered to be read a Second time upon Tuesday, 1st June and to be printed. [Bill 150.]
ORAL ANSWERS TO QUESTIONS
  PENSIONS AND NATIONAL INSURANCE

    Wage Stop
    Mr. Russell Johnstonasked the Minister of Pensions and National Insurance if she will abolish the wage stop.
    Mr. Curranasked the Minister of Pensions and National Insurance whether she has now reviewed the operation of
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    the wage stop in the payment of National Assistance; and what steps she will take.
    The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Norman Pentland): The problem of the wage stop is one of the matters that is being examined in the Government's review of social security schemes and I shall not be able to say what steps, if any, may be taken on it until the review is completed.
    Mr. Johnston: While I appreciate what the hon. Gentleman says, I trust that it does not in any way indicate that the views highly critical of the wage stop expressed by members of his party before the election will change. Secondly, may I express the hope that he will bear in mind closely that it is a highly unsatisfactory state of affairs that the wage stop brings the level of assistance below what is regarded by the National Assistance Board as the minimum?
    Mr. Pentland: My right hon. Friend and I are fully alive to all that is involved in the wage stop. But the wage stop and the difficulties created by it form only a small part of the general problem that the income of many low wage earners, with medium-sized or large-sized families, is already below the National Assistance level. This problem is currently under examination by an official inter-departmental committee.
    Mr. Curran: Can the hon. Gentleman tell us how many people have been hit

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    by the wage stop over the last six months? Will he give his opinion on the state of affairs under the Labour Government which permits so many workers to be earning wages lower than the sum which the National Assistance Board thinks necessary for subsistence?
    Mr. Pentland: The hon. Gentleman's Government allowed it to exist for 13 years. We are already doing something about it. This is the reason for the review and why the official inter-departmental committee is already actively working on it. On the other part of the hon. Gentleman's supplementary question, at the most recent count, at the end of March, 1965, the assistance grants in payment to approximately 19,000 unemployed men were affected by the wage stop out of a total of 121,000 unemployed people receiving National Assistance.
    Mr. Rhodes: I welcome the review, but is my hon. Friend aware that in recent years earnings on Tyneside have tended to drop behind those in other parts of the country, and, consequently, families living on National Assistance in that area tend to have, because of the wage stop, a lower standard of living than those in other parts of the country? Is there any evidence that the retention of the wage stop policy forces people to seek work? Would my hon. Friend bear in mind that there are relatively few unemployable layabouts in the Tyneside area anyway?
    Mr. Pentland: I entirely agree with my hon. Friend. As he is aware, I am fully alive to the problems facing people in the north-east of England. My constituency is there. We are fully conscious of all the problems involved in the wage stop, and we are looking at the matter very carefully.
    Mr. Derek Pageasked the Minister of Pensions and National Insurance how many applicants for National Assistance in the King's Lynn area are affected by the wage stop; what proportion this is of the total; and how these figures compare with the national average figures.
    Mr. Pentland: On 30th March, 1965, the latest date for which information is available, there were 89 unemployed people whose assistance allowances were affected by the wage stop in the area covered by the King's Lynn office of the
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    National Assistance Board. This was 1½ per cent. of the total number of people receiving assistance in that area. In Great Britain as a whole 19,310 unemployed persons were similarly affected, just under 1 per cent. of all persons receiving assistance allowances.
    Mr. Page: I am most grateful to my hon. Friend for those figures, which I am sure he will realise bear out the fact that this iniquitous rule bears most hardly on areas of low earnings, such as Norfolk. Will he kindly bear that in mind, and will he also bear in mind the fact that recent rent rises have brought many of the lower-paid workers, such as farm workers, below the National Assistance level? Will he urgently consult his right hon. Friend the Minister of Housing and Local Government so that these poor people are not penalised further for their poverty?
    Mr. Pentland: I share my hon. Friend's concern, and I assure him that, once again, we are fully alive to the problems involved in this question.
    Mr. Rhodesasked the Minister of Pensions and National Insurance whether she will take steps to see that the wage stop on assistance grants is based in future not on the basic wage, but on the average earnings of the individual when in employment.
    Mr. Pentland: The wage stop on a National Assistance grant is in fact based on earnings; it is calculated by reference to a man's probable gross earnings, including any overtime or bonus, in his normal occupation.
    Mr. Rhodes: Is my hon. Friend fully satisfied that all local officers of the National Assistance Board are aware of this? Is there any discretionary power left to local managers in this respect?
    Mr. Pentland: Not to my knowledge, but, here again, if my hon. Friend knows of any difficulty regarding the ascertainment of the wage stop level—I know that he is particularly interested in the matter—I should be glad if he would send me the details.
    Mr. Benceasked the Minister of Pensions and National Insurance what is the present wage stop level for non-skilled labour in Scotland.
    The Minister of Pensions and National Insurance (Miss Margaret Herbison): The figure that is taken by the National Assistance Board for wage stop purposes is based on the individual's normal occupation and the prevailing rate of earnings in that occupation in the district in which he lives. There is consequently no common figure for Scotland.
    Mr. Bence: Is my right hon. Friend aware that the figure which is now being used in Scotland—at least in the Clyde Valley—is the same as was used 12 months ago although, in the last six months, earnings of labourers in the Clyde Valley have been rising? Will she give a general direction that the wage stop level should also be raised?
    Miss Herbison: Certainly it is important that such information should be brought to my notice. I shall certainly bring it immediately to the notice of the National Assistance Board, since its officers throughout the country have to have regard to what could be earned by a man in his own area and not in the country as a whole. This point will certainly be brought to the notice of the National Assistance Board. It has been made clear today that we are seriously worried about the question of the wage stop, and pending the completion of the review I should not want it to be any more harsh than it need be.
    Mr. Rhodes: Will my hon. Friend mike it clear that the principles of the operation of the wage stop are not within the command or discretion of local managers? What efforts will she make to see that they are aware of this fact?
    Miss Herbison: Again, it has been made clear today by my hon. Friend that these principles are not within the jurisdiction of the managers. They have to work according to these principles and it is these principles—and especially the result of them upon the children of these people—that give us very great worry.
    Sir Knox Cunningham: Why has not the right hon. Lady got the information al out this subject—information which she now says that she will try to obtain?
    Miss Herbison: We have known all along about the occasional harshness of the operation of the wage stop. That was evident by the attention that we gave it
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    when in opposition. It is because we know of its harshness that, in the review, we are determined to find a remedy, especially one which will make things less hard for the children both of employed and unemployed low-wage earners.

    Income Guarantee
    Mr. Ridsdaleasked the Minister of Pensions and National Insurance what the cost will be of implementing the proposal to provide an income guarantee for those already retired and widowed.
    Mr. Deanasked the Minister of Pensions and National Insurance when a minimum income guarantee will be introduced.
    Mr. William Hamiltonasked the Minister of Pensions and National Insurance (1) whether she intends in the income guarantee scheme to impose a lower age limit; and what age she plans to insert;
    (2) to what extent the income guarantee scheme will cover all those old people who do not now enjoy a retirement pension.
    Lord Balnielasked the Minister of Pensions and National Insurance whether she will now make a statement on the level of income at which the minimum guaranteed income scheme will apply.
    Miss Herbison: As I have explained to the House, the Government are engaged in preparing a scheme, of income guarantee. At this stage, however, it is not possible to add to what has already been said about the scheme or to estimate either its cost or how many people will benefit from it.
    Mr. Ridsdale: It is not evident that the Labour Party made this proposal at the election without costing it? Could not a start be made at least by helping non-contributory pensioners to have a minimum income guaranteed? What would be the cost of this?
    Miss Herbison: The hon. Member certainly is not correct. The Labour Party costed it very carefully. The hon. Member will be aware of the great play made by his party at the election about how they had costed what they would do and how wildly inaccurate the Government have found that costing to be.
    Mr. Dean: Is the right hon. Lady aware that that is a very unsatisfactory Answer? Does she recall that the Prime Minister gave a definite pledge at the election that this proposal would be introduced without delay and that many people, including those to whom my hon. Friend has referred, took him at his word? When will the right hon. Lady have mercy on the Prime Minister and see that his pledges are redeemed?
    Miss Herbison: I assure the hon. Member that the pledges that were made at the election by my party will be redeemed. [HON. MEMBERS: "When?"] We have already made a good beginning by the National Insurance Act, which gave the highest increases ever to the old people. Many of the non-pensioners are on National Assistance and they also benefited from the highest-ever increase in National Assistance.
    Mr. Hamilton: Does my right hon. Friend recognise that the whole country is looking forward to this humanitarian piece of legislation by the Labour Government? Can she give an assurance that all those old people who for 13 years were denied pensions by the party opposite will be covered by the income guarantee and that in no circumstance she will accept the principle of the donation, which the Leader of the Opposition talked about, by which people over an unspecified age are given a kind of donation on a means test basis?
    Miss Herbison: Certainly, I can give that guarantee. It was because of our concern for many of those old people who had no pensions that we decided on a form of income guarantee so that all old people, whether pensioners or non-pensioners, would be covered by this guarantee. It will certainly not be a donation for the very, very old.
    Lord Balniel: Whilst we understand that the scheme advanced by the party opposite at the election has proved to be defective and has to be re-examined, surely at this late stage the right hon. Lady is able to give the elementary basic information about the level at which the guaranteed minimum income scheme will operate. Surely, she can give that elementary information.
    Miss Herbison: On the contrary, we have not found our scheme at all defective.
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    This is a completely new concept in social security. We had to start from scratch with our own scheme, having had no help from the 13 years' thought that the former Government had supposedly given to the needs of these old people. In due course, we will be able to give the income level and the number of people covered by it.
    Mr. Ridsdale: In view of the unsatisfactory nature of the Minister's reply, I beg to give notice that I shall raise the matter on the Adjournment.

    Widows
    Mr. Curranasked the Minister of Pensions and National Insurance what plans she now has to remedy the anomalies in the treatment of widows under the National Insurance scheme.
    Mr. Peter Millsasked the Minister of Pensions and National Insurance when the new plans will be introduced to help remedy the anomalies in the treatment of widows, particularly in the age group 40–50 years.
    Miss Herbison: These matters form part of the review of social security provisions on which the Government are engaged, and I cannot forecast the outcome.
    Mr. Curran: Does not the right hon. Lady agree that by increasing the payment to the pensioner widow to 30s., she has increased still further the sense of unfairness among the no-shilling widows? Will she not agree that the only way in which to get rid of all these anomalies in the treatment of widows is to say plainly that widowhood as such creates a benefit? Will she, further, do something to review the position of widows and to give justice to those widows who at present are not receiving justice without telling them to go on waiting for Lefty?
    Miss Herbison: That is exactly what we are doing. We are reviewing the position of widows. We know that there is a great deal of dissatisfaction, and there has been for a long time, particularly among those widows who have no pension at all, including those who just missed it, perhaps, almost by an hour. It is because we feel that many of those widows need help that we are giving their position the most serious consideration in the general review.
    Mrs. Thatcher: If the right hon. Lady cannot forecast the results of the review in any of its topics, will she say whether she intends to keep her proposals within the 4¼ per cent. annual increase laid down by the Chancellor of the Exchequer?
    Miss Herbison: If the hon. Lady will wait until our proposals are put forward, she can make the comparison for herself.
    Mrs. Thatcher: It is not I who shall wait. Is the right hon. Lady saying, therefore, that she disregards the 4¼ per cent. annual increase?

    Retirement Pensioners (Earnings Rule)
    Mr. Bessellasked the Minister of Pensions and National Insurance whether, In view of the increases given to retirement pensioners by Her Majesty's Government, she will now abolish the earnings rule in respect of these pensioners.
    Mr. Pentland: I would refer the hon. Member to the reply which my right hon. Friend gave to my hon. Friend the Member for Bury and Radcliffe (Mr. Ensor) on 22nd March.
    Mr. Bessell: Whilst recognising the problems which the hon. Gentleman and his right hon. Friend have in the present economic conditions, may I ask him to recognise that there is serious concern about this matter throughout the country, particularly as it penalises many old people from carrying out work which they could usefully undertake in the interests of the country as a whole? In view of this, will the hon. Gentleman reconsider the matter?
    Mr. Pentland: My right hon. Friend and I are aware of what the hon. Member has said. The Government have made it clear on more than one occasion that the earnings rule, which at present begins to operate at the level of £5, will be kept under constant review.
    Mr. Dean: Will the hon. Gentleman look at this matter again? Would he agree that, if we are to encourage people to continue at work, it is extremely important that we should find a way round this difficulty? Will he say whether it is possible to find a way of getting rid of this rule without incurring the substantial extra cost which would be
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    involved if it were done away with outright?
    Mr. Pentland: I am glad that the hon. Member has referred to the substantial cost, because there are already 400,000 people who have passed minimum pensionable age but who have not yet retired. To eliminate the earnings rule completely would mean an immediate additional expenditure of £120 million a year. Therefore, as I have said, the Government are keeping constantly under review the limit—at present £5—at which the earnings rule begins to apply.

    Unemployment Benefit (Trade Disputes)
    Mr. William Yatesasked the Minister of Pensions and National Insurance if she will appoint a Departmental Committee to examine the operation of the National Insurance law in relation to those who are disqualified from unemployment benefit by the official strikes by other unions of which they are not members.
    Mr. Chapmanasked the Minister of Pensions and National Insurance what consultations she has held about the effect of, and the complaints about, the trade dispute disqualification provisions of the National Insurance Act; what progress she has made; and what changes she proposes to suggest in order to prevent disqualification from unemployment benefit of people thrown out of work by, but not involved in, industrial disputes.
    Mr. Peter Walkerasked the Minister of Pensions and National Insurance what consideration has now been given to the payment of unemployment benefits to employees prevented from working as a result of a strike for which they are not responsible; and if she will make a statement.
    Miss Herbison: My examination of this complex and controversial subject has not so far brought to light any alternative to the present statutory provisions which would provide an acceptable basis for new legislation. But issues of great importance to both sides of industry are involved. I have therefore consulted my right hon. Friend, the Minister of Labour and am now able to say that this matter will be fully

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    examined by the Royal Commission on Trade Unions and Employers' Associations along with the other matters which are before it.
    Mr. Yates: I am glad to know that the Minister of Labour and the Royal Commission are to examine this problem. They have had 13 years in opposition to look into it and they might be able to think—[HON. MEMBERS: "Oh."]—it is all very well for the Minister and her hon. Friend to blame everybody else. They should blame themselves and their party. This is an important piece of law. Why should a trade unionist be deprived of his State rights because of the illegal actions of a third party? In view of this, I am glad that the matter is to go before the Royal Commission.
    Mr. Chapman: Why is this a matter for the Royal Commission on Trade Unions? Why is it not a matter for the Minister's Advisory Committee, which is well fitted to examine it and to give a quick report? How much longer are people who are not involved in strikes to be denied unemployment benefit? This will happen again and again while the Royal Commission is sitting.
    Miss Herbison: I well understand the feelings of my hon. Friend. This is a provision that has stood for 37 years. It has been examined on a number of occasions by the National Insurance Advisory Committee. It is a matter to which I have given the most serious consideration since it has been raised by my hon. Friends. I have been quite frank in saying that no solution has been found to it either by the National Insurance Advisory Committee or as a result of the examination that I have given it. It was because I regarded it as a matter of such moment to thousands of workers that I felt that it should be examined at the highest level and I hope that the Royal Commission will be able to find a solution.
    Mr. Heffer: I am sure that my hon. Friends will agree when I say that all of us here fully appreciate the efforts my right hon. Friend has been making. Recently in Liverpool I have had two cases of this sort, one at Ford's—[HON. MEMBERS: "Ask a question."]—and another in my own constituency, and therefore I would ask, would she again take this matter up with the Minister of
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    Labour and ask for a further consideration of this matter, because it is tremendously important to the workers, who regard 37 years as far too long?
    Miss Herbison: My hon. Friend has asked if I could take this up again with the Ministry of Labour. Before I came to the House today I had already discussed it with the Minister of Labour. We tried to see if some quick way could be found of dealing with it, and it was as a result of these discussions and of our inquiries that we had finally to decide to let it go to what is considered one of the most important bodies in the country, in the hope of finding a solution to the problem.
    Mr. Yates: In view of the unsatisfactory replies to many hon. Members on both sides, I give notice that I shall raise the matter on the Adjournment.

    Sickness Benefit (Payment)
    Mr. Kenneth Lewisasked the Minister of Pensions and National Insurance whether she will change the system of payments for sickness claims so that those who make claims can more easily arrange collection by relatives.
    Mr. Pentland: My right hon. Friend has no reason to think that the present arrangements are not generally acceptable, but if the hon. Member has a particular case in mind and will send me details I shall be pleased to look into it.
    Mr. Lewis: Is the hon. Gentleman aware I have a case in mind, and that I have the idea that his Ministry is inclined to expect people who are sick in bed to collect their own money—certainly, very soon after they get out of bed? When they are convalescing it is still not easy for them to go to pick up the money due to them, and it ought to be paid to a relative.
    Mr. Pentland: The hon. Member is quite wrong.
    Mr. Bence: Of course he is wrong.
    Mr. Pentland: If the hon. Member sends me details of a particular case I will, as I said, look into it, but if a claimant is in hospital he can ask the local office to pay the sickness benefit to his wife or other dependants. That is

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    the position. We have no widespread evidence that anything is wrong with the present method of payment.
    Mr. Bence: Is my hon. Friend aware that 95 per cent. of sickness benefits are paid by post?

    National Assistance (Mr. Michael Chaplin)
    Mr. Huntasked the Minister of Pensions and National Insurance if she is aware of the circumstances in which payments have recently been made to a Mr. Michael Chaplin; and if she will issue revised instructions to her National Assistance officers to prevent payment in cases of this kind.
    Miss Herbison: I would invite the hon. Member's attention to the answer which I gave to the hon. Member for Blackpool, South (Mr. Blaker) on this case on 12th April.
    Mr. Hunt: While accepting that this particular case is now past history, may I ask the right hon. Lady whether she acknowledges that it did highlight the widespread disquiet which exists in the country at the moment about the administration of National Assistance? Will she bear in mind that many of us feel that the existing regulations should be tightened up so that the young and able-bodied are not able to receive public money when there are plenty of jobs available for them to do?
    Miss Herbison: It is true that this case got a great deal of publicity in the papers. I am sure that hon. and right hon. Members on both sides of the House would like to see some of the excellent work which the National Assistance Board does for old people and sick people getting the same publicity as this Chaplin case got in the Press. But, of course, the National Assistance Board is very much alive to the need to ensure that young aid able-bodied men do work, and the Board has power to see that they do so. Indeed, every year there are many prosecutions of that very type of person who refuses to provide for his wife and family.

    Lung Cancer (Pneumoconiosis)
    Mr. Harold Walkerasked the Minister of Pensions and National
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    Insurance in how many cases the pneumoconiosis medical board has rejected the evidence of coroners' courts that pneumoconiosis has been a contributory factor where death has occurred from lung cancer.
    The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Harold Davies): Decisions on claims for industrial death benefits are made by the lay statutory authorities who take into account all the available evidence, including any evidence of the coroners' courts and the opinion of the pneumoconiosis medical panel, in deciding whether death was caused or materially accelerated by pneumoconiosis. No question of rejection of evidence by the pneumoconiosis medical board therefore arises.
    Mr. Walker: Would my hon. Friend care to look at the recent evidence provided by the executive committee of the Yorkshire miners, when he would find that such evidence provided for coroners' courts has been rejected? In industrial areas, particularly in Yorkshire, there are many embittered widows who feel themselves unjustly deprived of widows' pensions because of the rejection by the pneumoconiosis medical panel of such evidence provided by highly-qualified pathologists before coroners' courts?
    Mr. Davies: I am grateful to my hon. Friend for that supplementary question. [HON. MEMBERS: "Oh."] Certainly I am, because we are concerned with the problem of pneumoconiosis and lung cancer among miners. We are very much concerned with it. This Question deals with the incidence of cancer and its link with pneumoconiosis. The facts are that on the research we have had up to date—I think my hon. Friend has already had this answer—of 1,506 cases 67 had lung cancer but to establish a real link has not really been possible. I took my hon. Friend's Question to be immediately on that point. If he has any particular evidence he would like to bring before me or the House I will certainly consider it my duty, as most of us on both sides of the House would, to give it my attention, because of the importance of this question.
    Mr. Sharples: Will the hon. Gentleman ask his right hon. Friend to have a look at the whole of this part of the industrial

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    injuries scheme, because I think that many of us know that diagnosis of pneumoconiosis in these cases where it is related to other diseases causes a great deal of difficulty?
    Mr. Davies: Yes. I am grateful to the hon. Gentleman, because on both sides of the House there is real concern about this, and our predecessors were concerned about it, too. I will certainly draw my right hon. Friend's attention to what the hon. Gentleman has said; but she has heard his question herself. We are already considering this problem.
    Mr. Kelley: When considering this question of the incidence of lung cancer among pneumoconiotic miners will my right hon. Friend take into consideration that it is probably higher among them than it is in the rest of the industrial community and that it should not be related simply to miners, but to pneumoconiotic miners, and that probably some evidence to correlate the two conditions will then be found?
    Mr. Davies: Yes, certainly. I take the point clearly. I am aware of what my right hon. Friend has said, and I thank him.
    Mr. McGuire: Would my hon. Friend agree that the right way to approach this is to schedule emphysema as one which would qualify a man, because we in the mining community feel that though with cancer there could be an argument about whether a miner has pneumoconiosis; whether he has cancer or not he has emphysema? Every miner is aware of this. Surely that is the right way to tackle the question?
    Mr. Davies: I am inclined to suppose that I should be ruled out of order if I were to pursue that question now, but perhaps my hon. Friend would like to put down other Questions about it.

    Medical Appeal Tribunals
    Mr. McGuireasked the Minister of Pensions and National Insurance if she will seek to amend the regulations relating to the qualifications of the medical members of medical appeal tribunals so as to provide that, in every case before a medical appeal tribunal in which the subject matter of the appeal is a medical one, the medical members
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    of the tribunal must include at least one who is of consultant status and who specialises in the particular disease or disability which is the subject of the appeal.
    Miss Herbison: Members of medical appeal tribunals in the Industrial Injuries scheme are all of consultant status and are among the most eminent members of their profession. It would be impracticable to provide specialists for each medical condition, but tribunals have power to call for specialists' reports where necessary.
    Mr. McGuire: Would not my right hon. Friend agree that, as these tribunals are a form of civil court, the main thing to do is to ensure that justice is seen to be done? I am thinking particularly of a specialist report from a psychiatrist, because, with the greatest respect to the consultants who sit on the tribunals, very often they seem to follow the dictum of Samuel Goldwyn when a psychiatrist's report is presented, namely, that anybody who goes to see a psychiatrist should have his head examined. Would not my right hon. Friend agree that in many cases the obtaining of a specialist would not create undue delay? We think that it is a little odd that it is possible to present a report and find that the people adjudicating on it are not qualified to decide on the matter.
    Miss Herbison: My hon. Friend will be aware that with certain disabilities we wait until a number of cases have to be considered by the tribunal, and a specialist in that disability—say a skin disease, or orthopaedic trouble—is present as a member of the tribunal. In other cases there might be considerable delay if we had to ensure that a specialist in that subject was a member of the tribunal. The reports are called for. The man whose case is being considered can have a specialist's report presented to the tribunal. A psychiatrist's report is, however, a special matter, and I shall look into that.

    Unemployment Benefit and National Assistance
    Mr. Shepherdasked the Minister of Pensions and National Insurance to what extent there appears to be abuse of the provisions for unemployment

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    benefit and National Assistance; how many persons capable of employment are receiving unemployment benefit and/or National Assistance because they seek employment in a highly specialised field; and if she will estimate the number of persons in receipt of National Assistance who are employed irregularly in activities such as farming.
    Mr. Pentland: I cannot speculate about the extent to which people who apply for unemployment benefit and National Assistance may be prepared to make statements that do not reflect their true circumstances and intentions; but I can assure the hon. Member that measures are constantly being taken to check abuse so far as this can be done without penalising the great majority of honest people who are actively looking for work. I regret that no information is available about the number of people in the particular categories mentioned in the second part of the Question.
    Mr. Shepherd: Would not it be very desirable if the hon. Gentleman could make some estimate of these figures, as it might alleviate some of the concern felt by people all over the country about the extent of the abuse? Surely it is the hon. Gentleman's job to find out to what extent the public are being exploited? He does not seem to have made much effort to do so.
    Mr. Pentland: As I tried to point out, we make every effort to offset any abuse with regard to unemployment benefit or National Assistance. For instance, the National Assistance Board has a team of about 100 specially trained officers who are detached from normal duties to investigate cases in which there is a suspicion of fraud. I could give the number of cases that were taken to court in recent years in regard to this. I assure the hon. Gentleman that every possible step is taken to offset any abuse.
    Sir Knox Cunningham: Is the hon. Gentleman aware that certain classes of people who retire at 60 on pension, for example bank managers, then sign on, and for five years draw unemployment benefit? Is this in the spirit of the Act, and what is the hon. Gentleman going to do about it?
    Mr. Pentland: If the hon. and learned Gentleman can bring forward concrete
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    evidence of this, we would be prepared to look at it, but surely he is aware that one of the main conditions is that before a claimant can claim unemployment benefit he must sign a declaration that he is available for work? The people to whom the hon. and learned Gentleman is referring are in that category.
    Mrs. Thatcher: Will the hon. Gentleman make it quite clear that unemployment benefit cannot be drawn for as long a period as five years for an unbroken spell, and that it can be drawn for a maximum of 19 months only?
    Mr. Pentland: That is correct. I am obliged to the hon. Lady.

    Retirement Pensions (Payment)
    Commander Courtneyasked the Minister of Pensions and National Insurance if she will arrange for retirement pensioners to receive the cash to which they are entitled in respect of the odd days between the date of qualification and the date of first payment of their pension at the same time as this first payment is made.
    Mr. Pentland: My right hon. Friend sees no reason to change the present rule. Provided that title to pension has been determined before payment falls due, as it normally is, every pensioner should receive a full week's pension within a week of his retirement regardless of the day of the week on which he retires.
    Commander Courtney: That is not the point. Would not the hon. Gentleman agree that it is rather unfair that a pensioner qualifying on a certain date, namely, his or her birthday, should be deprived of a pension from that day until the first day comes for payment? Is not this a simple accounting measure, and will the hon. Gentleman do something about it?
    Mr. Pentland: The present policy of paying retirement pensions in advance on a fixed date goes back nearly 40 years, to the beginning of the contributory pension scheme, and the retirement pension is payable from the first pension pay day on or after the date on which a person has been accepted as retired from regular employment. For all those now retiring the pension day is on Monday.

    National Assistance (Handicapped Young People)
    Mr. Murrayasked the Minister of Pensions and National Insurance whether she will improve the arrangements for informing the parents of children who are not employable of the children's rights in relation to National Assistance benefits when they reach the statutory age.
    Miss Herbison: I have no reason to believe that parents are generally unaware of the fact that such children have a right to claim National Assistance allowances when they reach the age of 16. I am however considering, in consultation with the National Assistance Board, what more should be done to ensure that all parents of handicapped young children aged 16 or over are informed of this right and encouraged to apply on their behalf.
    Mr. Murray: Is my right hon. Friend aware that if she consulted the Minister of Health it might be possible to obtain a register of handicapped children, in consultation with some of the voluntary societies, such as the Spastics Society, so as to avoid the problem which arose in my constituency, where a family came to me only because the Income Tax allowance was being cut at the age of 16 and they were not aware of the statutory rights which exist for National Assistance on behalf of these children?
    Miss Herbison: I shall certainly be willing to give consideration to my hon. Friend's suggestion. At present, the National Society for Mentally Handicapped Children provides information services to its members, and the National Assistance Board from time to time has contributed to the news sheet of that association. Articles have also been reproduced in journals of voluntary organisations that cater for groups of disabled young people, especially spastics. Many efforts have been made to date by the National Assistance Board, but I shall also give consideration to my hon. Friend's suggestion.

    Pneumoconiosis
    Mr. Murrayasked the Minister of Pensions and National Insurance what recent discussions she has had with representatives
    20
    of the trade unions on the question of pneumoconiosis.
    Miss Herbison: I recently received a deputation from the T.U.C. and had a discussion with it about the work of pneumoconiosis medical panels and related matters. There was a frank exchange of views which both I and the T.U.C. found most helpful.

    Pensioners (Payment of Rates)
    Mr. Benceasked the Minister of Pensions and National Insurance if she will take steps to assist pensioners in meeting the increasing rate demands.
    Miss Herbison: National Insurance benefits were substantially increased at the end of March, but my hon. Friend will be aware that those pensioners who find it difficult to manage on their own resources can, and I hope will, apply for a supplement to the National Assistance Board. The assistance scale rates were also increased in March, and the Board allows for a pensioner's current rates in assessing the amount payable.
    Mr. Bence: Is my right hon. Friend aware that the likely rate demand for the ensuing year will be greater than it was for last year, as a result of 13 years of failure to examine the problem of the heavy rate burden on old people and pensioners of all classes? Will she try to repair the results of the lack of effort shown by the last Administration to relieve retirement pensioners of the heavy rate burden that they are now bearing?
    Miss Herbison: Yes. My Ministry is concerned about the matter. Rates can be met fully by the National Assistance Board. If old people are in receipt of a supplement, any increase in the rates will be met by the Board. My right hon. Friend the Minister of Housing and Local Government is now working very hard to try to rectify what has happened over the last 13 years, and will continue to do so.
    Mr. Frederic Harris: Will the right hon. Lady note that this Question highlights the fact that since October last costs have risen for goods and services—and this includes rates—from £1 to £1 0s. 10d. for every pensioner? That is a very considerable increase to be met.
    Miss Herbison: Hon. Members on this side of the House are very concerned at any increase in the cost of living, since it affects pensioners and others living on small fixed incomes more than anyone else. I wish that the same concern had been shown in 1955, when there was the same increase in the cost of living two months after an increase in pensions.
    Mr. Lubbock: Is the right hon. Lady aware that in some parts of Greater London rates have increased by as much as 47 per cent., which is twice the percentage increase that has been given to old people? Will she make inquiries and discover in what proportion of cases the whole increase in retirement pension has been swallowed up by the increase in rates?
    Miss Herbison: If the old people are on National Assistance the increases are met in full, and I would hope that other old people who are eligible for National Assistance would apply for it. As for rises in the cost of living, at least this Government are trying to take steps to steady the cost of living, and are asking the whole country to co-operate.
    Lord Balniel: The right hon. Lady refers to the efforts of the Minister of Housing and Local Government. Did she hear the speech of her right hon. Friend in which he said that rents and rates will be taken into account in the minimum guaranteed income scheme? Does this mean that the scheme will be based on a test of needs, like that of the Assistance Board, or a test of means, taking into account the income returns of individuals?
    Miss Herbison: If the hon. Member wishes to have a reply on that subject perhaps he will put down a Question or await the guaranteed income proposals.

    National Assistance (Immigrants)
    Mr. Gurdenasked the Minister of Pensions and National Insurance how many immigrants claim National Assistance immediately upon arrival.
    Mr. Pentland: I regret that the information is not available.
    Mr. Gurden: Does not the hon. Member feel that these figures ought to be given to the House, since the number of immigrants coming into the country has
    22
    risen this year as compared with last year?
    Mr. Pentland: No, Sir. It has always been our policy—and I understand it has been the policy of the previous Government—that the National Assistance Board should not make separate records or distinguish in any way between immigrants and others receiving National Assistance. The Board does not collect any information about the number of Commonwealth immigrants or aliens who are in receipt of National Assistance. We think that this is right.
    Mr. Orme: Will my hon. Friend recognise that hon. Members on this side of the House very much welcome that reply? Will he continue not to show any form of discrimination in any figures that his Department gives, and treat all citizens on an equal basis, as they are entitled to be treated?
    Mr. Pentland: I am obliged to my hon. Friend. That is our firm policy.
    Mr. Ogden: Will my hon. Friend consider obtaining these figures? Will he also consider obtaining figures showing how many immigrants do not claim National Assistance—either on their arrival or at any other time during their stay in this country?
    Mr. Pentland: This is most difficult—[HON. MEMBERS: "Oh."]—in view of our policy, of course it is difficult. The Ministry of Labour collects at intervals information about Commonwealth immigrants registered at the employment exchanges. This is analysed to show the numbers of those receiving unemployment benefit, those receiving supplementation and those receiving National Assistance, but these figures are for able-bodied Commonwealth immigrants coming into the country. On the second part of the supplementary question, I cannot see how we could make provision for seeking the figures asked for.
    Sir Rolf Dudley Williams: Does the hon. Gentleman realise that if he replied to the Question asked by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) the people of this country would be gravely shocked to hear of the burden they are carrying regarding immigrants coming in and immediately seeking National Assistance?
    Mr. Pentland: The hon. Member is basing his supplementary question on an assumption which is not true.—[HON. MEMBERS: "Then tell us the figures."]—The figures are not being brought forward because we are not prepared—and I understand the previous Government were not prepared—to discriminate in any way among people receiving National Assistance.

    Unemployment Benefit (Part-time Work)
    Mr. Lubbockasked the Minister of Pensions and National Insurance if she will seek to amend the rules governing the award of unemployment benefit so that any person working part of a week, who has obtained a certificate from the local office of the Ministry of Labour that no full-time job is available for him or her, shall qualify for the award of benefit on the idle days.
    Miss Herbison: No, Sir. Unemployment benefit is already payable in the type of case the hon. Member has in mind unless the part-time work is considered by the adjudicating authorities to have become the claimant's normal working week; in which case there would be no loss of employment for which compensation under an insurance scheme would be appropriate.
    Mr. Lubbock: Does the right hon. Lady realise that I am referring precisely to this kind of case and that I have had detailed correspondence with her on this example? Does she appreciate that even in the South-East, where so many jobs are supposed to be available, elderly people have to take part-time work because they cannot get any other work, and take it on a permanent basis? Is it not very unfair that they should be denied unemployment benefit on the test that they cannot get full-time employment?
    Miss Herbison: The Answer I have given applies in all details to the case which the hon. Member has brought to my notice. I have examined it very carefully, and it is evident that the work that this man is doing is the work he wants to do. The part-time work has become his normal type of work. It would be quite wrong to bring into an
    24
    insurance scheme compensation to raise earnings and not compensation for loss of work.
    Mr. Lubbock: Will the right hon. Lady take it from me that she is completely mistaken on this matter and that this person would be quite ready to take full-time employment if it were available, but he cannot obtain it locally?
    Miss Herbison: From my examination of the matter there would be little chance of altering the rules to suit such a case. The hon. Member will be aware that unemployment benefit does not go on for ever. The longest period in which anyone, if he has a very good record of contributions, can be paid benefit is about 19 months. If one were to accept a case like this, it would do away with the insurance principle altogether.
    Mr. Rose: Is my right hon. Friend aware that it is the policy of some employers to put their employees on part-time work seasonally so that they are employed whole-time during part of the year and only part-time during the winter? Is she aware that in one case in Manchester recently it would have been far more profitable for the person concerned to be unemployed and drawing benefit than to be part-time employed?
    Miss Herbison: I am sure that in some cases that does arise where a man is working full time for part of the year.

    War-Disabled Pensioners
    Mr. Delargyasked the Minister of Pensions and National Insurance whether she will use her power under the Royal Warrant to ensure that war-disabled pensioners, who are sent to prison, do not forfeit their pensions.
    Mr. Harold Davies: It is well understood that war pensions, like many other forms of public pension, are not paid during imprisonment. If a pensioner is married, however, payments are made to his family whilst he is in prison. In practice, the pension is nowadays always restored on release, except, for example, if treason was involved.
    Mr. Delargy: Does not my hon. Friend agree that a war pension is given for services in war and not for good conduct in peace? Is it right that a man should be punished twice for one offence? Is it

    25
    right that the Minister of Pensions and National Insurance should have these vary wide penal powers?
    Mr. Davies: On the question of being punished twice, the difference is that the pension comes directly out of public taxation and it is thought that in the case of a man's imprisonment it would be justified, without his wife and children suffering, to take that part of the pension which belongs only to him. During his imprisonment the allowances for his wife and children are paid. On the latter part of the question, about the Minister's discretion, it is now always used in favour of restoring the pension after the prisoner's release.
    Mr. Delargy: My point is that the Minister should not have any discretion in this matter.
    Sir J. Langford-Holt: Can the hon. Gentleman say what is the position about disability pensions?
    Mr. Davies: The position is exactly as it was under the Government supported by the hon. Member.
    Sir J. Langford-Holt: What was that?
    Mr. Lipton: Can my hon. Friend say what is the magnitude of this problem? There cannot be many involved; is it worth while pursuing this policy?
    Mr. Davies: The magnitude of the problem is that at present 160 pensioners are in prison. The magnitude concerning forfeiture is that since this Government have been in power the Minister has used her discretion and the pensions are no longer forfeited.

    Alderman, Liverpool
    Mr. Hefferasked the Minister of Pensions and National Insurance whether she has considered the case of a Liverpool alderman, details of which have been sent to her by the honourable Member for Liverpool, Walton; and what action is being taken to change her regulations in connection with this and other similar cases.
    Miss Herbison: I understand that the decision to disallow benefit in this case has been reviewed in the light of further evidence. I am writing to my hon. Friend.
    Mr. Heffer: I thank my right hon. Friend for that reply and await her further reply.
    Later—
    Sir C. Taylor: On a point of order. Many hon. Members on this side did not understand Question No. 34. Nor did we understand the Answer. As the Question and Answer may affect quite a number of aldermen of the Liverpool City Corporation, may I ask for the right hon. Lady's answer by letter to be published in the OFFICIAL REPORT?
    Mr. Speaker: No. There is no basis on which I could ask for that to be done.
    Sir C. Taylor: With the greatest respect, Mr. Speaker, if I asked you this question again tomorrow would you consider that the Minister's letter might be published in the OFFICIAL REPORT explaining what Question No. 34 is about and what the Answer is about, because I think that the House is entitled to know?
    Mr. Speaker: I have no machinery or power for doing anything of the kind. To avoid the mention of names, it is not unusual for a matter to be put anonymously or for hon. Members to ask Questions in a form something like this.
    Sir C. Taylor: I am sorry to press this point. This may affect a good many aldermen at Liverpool. There is something in this which may be an unpleasant implication—an innuendo. Surely the House is entitled to ask for an explanation of the Question and of the Answer?
    Mr. Speaker: My powers are not governed by the multiplicity of persons referred to; they are not altered by that fact.

    Local Authority Members (Unemployment Benefit)
    Mr. Hefferasked the Minister of Pensions and National Insurance what is the policy of Her Majesty's Government in relation to the difficulties met by members of local authorities in drawing unemployment benefit during periods of temporary unemployment.
    Miss Herbison: Our aim is to avoid any unnecessary difficulties for people

    27
    who claim National Insurance benefits. There is no reason why members of local authorities who are otherwise qualified for unemployment benefit should not receive it for days when they attend council meetings provided that they are ready to accept at once any offer of suitable employment.
    Mr. Heffer: Is my right hon. Friend aware that this will be most welcome among councillors and aldermen, because it refers to an issue where a very curious situation arose? On that basis I am certain that all working class local councillors will welcome the statement she has made.
    Miss Herbison: I am very glad indeed that my hon. Friend brought this case to my notice. I hope that such a decision will not again be taken.

    Arthritis, Rheumatism and Bronchitis
    Mr. Oakesasked the Minister of Pensions and National Insurance whether she will include arthritis, rheumatism and bronchitis in the list of prescribed industrial diseases.
    Miss Herbison: Establishment of a direct causal link between an injured person's employment and the conditions for which he claims compensation is basic to the Industrial Injuries scheme. Because of this, special tests have to be satisfied before a disease can be prescribed. These tests are set out in Section 55(2) of the Industrial Injuries Act, 1946, and they are not satisfied by any of the three diseases to which my hon. Friend refers.
    Mr. Oakes: Is my right hon. Friend aware that many hundreds and thousands of workers spend their lives in soaking wet conditions and that the incidence of rheumatism, arthritis and bronchitis, particularly among those in their 50s and 60s, is high? Is she further aware that a minority Report in 1955 was strongly in favour of the inclusion of these diseases in the list of industrial diseases?
    Miss Herbison: I am aware of that Report and of the concern which is being shown by the T.U.C. and other bodies on this matter. On the whole question of industrial diseases, including pneumoconiosis,
    28
    it seems that there is a need of them to be much more thoroughly examined, but at this stage it is impossible for me to go any further than the reply I have given.
    Mr. Snow: Is my right hon. Friend aware that her Answer would be received with a great deal more happiness if one felt convinced that the medical profession knew what the sources of origin and the possible treatments are for arthritis, bronchitis and rheumatism? In point of fact, with these three diseases the medical profession is all at sea.
    Miss Herbison: I am sure that a great deal more research needs to be done on these diseases. A survey has been carried out into the incidence of bronchitis. We are getting the results of that survey and from that we hope to do some further work. I have always been intensely interested in industrial diseases and I am now giving some attention to these matters.
    Mr. Wainwright: Would my right hon. Friend give special consideration to all three diseases, especially arthritis? Is she aware that many men in mining and other industries suffer knocks to their flesh and bones? Arthritis develops later. Medical specialists say that it is latent arthritis and that the disease has no connection with the former accident.
    Miss Herbison: It will be clear from the answers I have already given that I shall be ready to give consideration to the matter my hon. Friend has mentioned.

SOUTH ARABIA (CONSTITUTIONAL COMMISSION)
The Secretary of State for the Colonies (Mr. Anthony Greenwood): In reply to a Question by my hon. Friend the Member for Cleveland (Mr. Tinn) on 11th May, I said that I would make an Oral statement to the House as soon as practicable about the composition of the constitutional Commission for South Arabia. I am happy to say that we have secured the services as Chairman of Sir Evelyn Hone who, in the course of a distinguished overseas career, has served in South Arabia and was Governor of Northern Rhodesia in the period immediately before independence.

29
My consultations as regards membership of the Commission are proceeding. Honourable Members may have seen speculation in the Press about the possibility of our asking the Secretary General of the United Nations to suggest one or two names. I think it right to inform the House that we should have welcomed such an arrangement and have in fact discussed it with the Secretary General. He has told us, however, that while appreciating the suggestion, he has regretfully concluded, after giving it careful consideration, that it would not be feasible for him to adopt it. I am naturally sorry that he has not felt able to do so, but I still have it in mind to se cure in addition to United Kingdom membership one or two members from outside the United Kingdom. I will inform the House of the full composition of the Commission as soon as it is possible to do so.
Mr. Sandys: The right hon. Gentleman seems frantically to be trying to avoid taking a decision himself. Does he not recognise that the responsibility for the future of Britain's dependencies rests entirely with Her Majesty's Government and that it is no good the right hon. Gentleman trying to pass the buck to the United Nations or to anybody else? As the terms of reference of the Commission do not mention the need to maintain the British base in Aden, both for the discharge of Britain's worldwide responsibilities and also for the protection of the Federation, will the Secretary of State make it quite clear that Her Majesty's Government intend to retain the base so long as their responsibilities re quire it?
Mr. Greenwood: Far from seeking to avoid taking a decision, I am trying to ensure that the decision I take stands a good chance of success. Nobody should understand more than the right hon. Gentleman that the formation of a new Arab and Moslem State in the Middle East involves very special problems. It is for that reason that I want to make quite sure that the membership of the Commission will be as widely representative as possible, so that it can command the maximum confidence in the area, so that it can show that we have nothing to hide, and so that it can reflect the wide international interest in the problem. The right hon. Gentleman
30
talked about my shirking responsibility, but the Commission will be appointed by me and it will report to me. It will be for Her Majesty's Government to reach decisions on the report after consultation with the local governments and political parties.
The right hon. Gentleman also referred to the base and regretted that it was not included in the terms of reference. The Commission's prime concern will be with the constitutional steps which must be taken and the future of the base does not lie within its terms of reference, but the Commission will no doubt receive representations on this subject.
I remind the House of the statement on our policy with regard to the base which was made by my noble Friend, Lord Taylor, in another place a few days ago.
"The policy of Her Majesty's Government in regard to the base remains as stated by my right hon. Friend, the Secretary of State for Defence in another place on December 17 last, when he mentioned the extreme importance which Her Majesty's Government attach to creating the political conditions in South Arabia which will enable us to continue to fulfil a peace-keeping rôle from there with the consent of its people. The eventual arrangements for the base will be a matter for negotiation between Her Majesty's Government and the Government of the new State of the time when South Arabia becomes independent."—[OFFICIAL REPORT, House of Lords; 17th May; Vol. 266, c. 274.]
Mr. J. Amery: Can the Secretary of State confirm that, whatever recommendations the Commission, if it comes into being, may make, a final settlement must be a matter for agreement between Her Majesty's Government and the Federal Government? Further, can he confirm that, while the Federal Government have acquiesced with some reluctance in the proposal for the Commission, the Aden Government and the opposition parties are opposed to it? In the circumstances, might it not be better to accept the resolution proposed by the Federal Government and carried by the Federal Council to hold a conference of the interest parties locally first?
Mr. Greenwood: I have already made clear that the decision is one that Her Majesty's Government will have to take after consultation with the Governments and parties in South Arabia. It is quite likely, I think, that the proposed Commission will have a rather mixed reception to begin with, but I hope that the political

31
parties which are at present opposed to it will realise that this is a genuine effort to make progress in getting consultations going in South Arabia and that they will be prepared to negotiate.
The right hon. Gentleman mentioned the resolution of the Federal Council of 19th May and suggested that there should be an early meeting of representatives of all the South Arabian States and of the political parties. That is something that I should welcome very much. I believe that it would help the Commission in its work and I believe that the Commission, in its turn, could also help a general conference of the Governments and parties in South Arabia.
Mr. A. Henderson: Is my right hon. Friend aware that hon. Members on this side of the House would welcome any appointments he is able to make to the Commission of representatives from the Commonwealth?
Mr. Greenwood: I am much obliged to my right hon. and learned Friend. I would certainly like to see that that was done.
Mr. David Steel: Is the right hon. Gentleman aware that the refusal of the United Nations Secretary General to appoint representatives to this Commission will be received with regret in all quarters of the House? Could the right hon. Gentleman say to what extent this position is made inevitable by the refusal of the previous Government to co-operate with the United Nations Committee of Inquiry?
Mr. Greenwood: I much appreciate what the hon. Gentleman has said on behalf of the Liberal Party, and I think there is no doubt that many of the difficulties with which I am having to contend today stem from what happened in previous years both in New York and in South Arabia.
Mr. Robert Edwards: Is my right hon. Friend aware that we welcome his statement very much? It needs great patience to deal with this complex situation in South Arabia where two or more British Service men are losing their lives every week. I hope my right hon. Friend will continue to press for an early meeting of the Commission and also that he will
32
continue his efforts to get United Nations representation in that area.
Mr. Fisher: Could the right hon. Gentleman say whether the outside members of this Commission will be from within the Commonwealth or from outside the Commonwealth, for which, so far as I know, there is no precedent at all, in advising on the future of a British Colony or Protectorate?
Secondly, can the right hon. Gentleman say how it is possible to divorce the future of the Aden base from the future of Aden Colony?
Mr. Greenwood: The hon. Gentleman tions will be in the mind of the Commission. I hope that some members will come from inside the Commonwealth and some from outside for the reasons I gave in reply to the right hon. Member for Streatham (Mr. Sandys). As to the future of the base, I have always understood that it was the policy of the last Administration to negotiate the future of the base with the new Government whenever it was created. That remains the policy of the present Government.
Mr. Lipton: Will my right hon. Friend say whether it will be an instruction to the Commission, whatever form the Commission takes, that in setting up the future Government of the Federation, and in particular Aden, the national, religious and racial rights of all minorities will be protected under whatever constitution is ultimately devised?
Mr. Greenwood: It is not for me to give instructions to the members of the Commission, but I hope those considerations will be in the mind of the Commission.
Mr. Sandys: The right hon. Gentleman said that the previous Government had undertaken to negotiate the future of the base with some future State when it was formed. The only commitment that we had arose from the conference last summer when all the representatives of the Federation and of Aden asked that we should negotiate with them and make arrangements for the independence of the whole area and for the continuance of the base for the protection of the area.
Mr. Greenwood: I understood that it was the attitude of the right hon. Gentleman that facilities for a base should be

33
freely negotiated between the two Governments involved. If I was wrong I did the right hon. Gentleman more than justice.
Mr. Fell rose—
Mr. Speaker: Order. We cannot debate this matter without a Question before the House.

ORDERS OF THE DAY

  FINANCE (No. 2) BILL
  Considered in Committee [Progress, 20th May].
  [DR. HORACE KING in the Chair]
  3.44 p.m.
  Mr. Scholefield Allen: Dr. King, with your permission, I should like to make a personal statement. It relates to the debate in this Committee last Thursday, which is reported in column 1697 of the OFFICIAL REPORT of 20th May, when the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport) used these words:
  "… I say again today that, like the Paymaster-General, the Socialist Party hates the farmers. [Laughter.] All right. We had an example of their attitude yesterday; perhaps hon. Members opposite will soon be laughing on the other side of their faces." [Interruption.]
  The Chairman: Order. Personal statements should be heard in silence and should contain no argument.
  Mr. Scholefield Allen:
  "Our farmers in Cheshire came 200 miles to see their Conservative Members of Parliament and the Socialists."
  Hon. Members will notice the differentiation between "Conservative Members of Parliament" and "the Socialists".
  Mr. Anthony Fell: On a point of order. Naturally Dr. King, we accept your Ruling completely that a personal statement should be received in silence, but is it normal for a personal statement to be used simply for an attack on the other side of the House?
  The Chairman: It is not in order, and the hon. and learned Gentleman must not do it.
  Mr. Scholefield Allen: Dr. King, with respect, I am merely reading HANSARD and noticing the distinction drawn between the two. Instead of Members being given their proper title as "hon. Members", they were just—
  The Chairman: Order. The purpose of a personal statement is to enable an hon. Member to make his own personal position clear on a mere matter of fact. A personal statement should deal with nothing else whatever.
  Mr. Scholefield Allen: The quotation continues:
  "They were disgusted"—
  that is, the farmers—
  "because the Socialist Party Members"—
  which included the two hon. Members on my right, the hon. Members for Stockport, North (Mr. Gregory) and the hon. Member for Stockport, South (Mr. Orbach—
  "including the hon. and learned Member for Crewe (Mr. Scholefield Allen), would not wait 20 minutes to see them."
  The facts were as follows—
  Sir Rolf Dudley Williams: On a point of order, Dr. King. There is some confusion on these benches as to whether the hon. and learned Gentleman is reading from HANSARD or is giving an account of what he thought was in HANSARD. From time to time he starts to quote—I have a copy of the relevant HANSARD with me—and then he interpolates various remarks of his own. If he wants to draw the attention of the House to a complaint about something that is reported in HANSARD, surely he should read out the whole passage without embroidering it at all.
  The Chairman: The hon. Gentleman is quite right. The purpose of a personal statement is to call attention to some matter. The hon. and learned Gentleman must read out the passage he complains of and make his own statement on fact without comment whatsoever.
  Mr. Scholefield Allen: I will read the passage again without any comment.
  "They were disgusted because the Socialist Party Members, including the hon. and learned Member for Crewe (Mr. Scholefield Allen), would not wait 20 minutes to see them."—[OFFICIAL REPORT, 20th May, 1965; Vol. 712, c. 1697.]
  The facts are as follows. On 14th May my two hon. Friends and I received an invitation from the secretary of the National Farmers' Union to attend a meeting in Committee Room 14, which had been reserved for 3.30, in these terms:
  "If you could arrange to meet us at that time we should be grateful. I have written to Mr. Orbach and Mr. Gregory who have also promised to do their best to attend."
  We all three attended at 3.30. There were four other Members of the other party present—[HON. MEMBERS:
  36
  "Honourable Members".]—hon. Members, who did not include the hon. Member for Knutsford—the hon. and gallant Member for Knutsford. Eight minutes after the appointed time—
  The Chairman: In the midst of a person statement it is not in order for hon. Members to interrupt and question the word "honourable". If the hon. and learned Gentleman was suggesting that one of his Parliamentary colleagues was not honourable he must withdraw this suggestion.
  Mr. Scholefield Allen: I was adding the word "gallant" to the word "honourable" which I had already used. Eight minutes later, at the back of the large Committee Room, a large number of males, presumably farmers, entered. From the front of the Committee Room, which is a very long Committee Room, and on to the Chairman's platform, came the hon. and gallant Member for Knutsford. He used these words, with which my two hon. Friends agree, "What the hell are you doing here?"
  The Chairman: Order. This is transcending in every way the very serious purpose of a privilege which is given to every hon. Gentleman to correct a matter of fact. The hon. and learned Gentleman should point out in what way the first statement was wrong without going into all these details. We have a great deal of business to do.
  Mr. Scholefield Allen: And
  "I booked this Committee Room",
  I held up the letter which invited us to come. We were told, "You can stuff that and clear out".
  The Chairman: Order. I must ask the hon. and learned Gentleman now to end his personal statement.
  Mr. Scholefield Allen: Dr. King, we cleared out.
  Lieut.-Colonel Sir Walter Bromley-Davenport: I was warned of this about ten minutes ago. May I make a statement in response?
  Hon. MEMBERS: No.
  The Chairman: No. The hon. and learned Member for Crewe (Mr. Scholefield Allen) has made a personal statement. Personal statements are not debatable.
  Mr. Fell: On a point of order. I may be quite wrong, but I always understood that the procedure on a personal statement is that, by courtesy, one shows to Mr. Speaker the whole of the personal statement one intends and hopes to make to the House. Surely this personal statement was never cleared by Mr. Speaker?
  The Chairman: I imagine that that is true. It may have been wrong for it to have been made in Committee. I am advised that it should have been made in the whole House after seeking the permission of Mr. Speaker and after submitting the details of the personal statement to Mr. Speaker.
  Sir W. Bromley-Davenport: With great respect, we all have our differences and get hot under the collar in this place, but the hon. and gallant Member for Crewe (Mr. Scholefield Allen)—
  Sir Rolf Dudley Williams: Not gallant.
  Sir W. Bromley-Davenport: "Learned", but not so learned from what we hear. The hon. and learned Member has accused me of using disgusting language, which I never use. There was one word I did not hear properly—I am a little deaf—but I understood that the word which it is alleged I used starts with an "f". [Interruption.] Did it?
  Hon. MEMBERS: No.
  The Chairman: Order. I think that we had better get back to the business of the Committee.
  Sir Arthur Vere Harvey: Further to that point of order. As I personally have responsibility in this matter, because my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport) is a constituent of mine and it is up to me to help my hon. and gallant Friend—
  The Chairman: Order. I have ruled that a personal statement cannot be debated. We must leave it at that.
  Sir A. V. Harvey: I raised a point of order. In view of the difficulties in which the Committee is now finding itself and the statement which you, Dr. King, have just made, would it not be in order that you should direct that the recent exchanges should be expunged from the record and that the hon. and learned
  38
  Member for Crewe (Mr. Scholefield Allen) should adopt the normal procedure of raising the matter with Mr. Speaker and make his personal statement in the whole House, as indeed is the tradition of the House?
  Hon. MEMBERS: Hear, hear.
  The Chairman: Order. I have no power to expunge the record. I hope that the Committee will let us get on with the business.
  Sir A. V. Harvey: With great respect—
  The Chairman: Order. I hope that the Committee will let us get on.
  Sir A. V. Harvey: On a point of order. I was present right through the whole of these proceedings and I must make it abundantly clear that what the hon. and learned Member for Crewe said was not true.
  Hon. MEMBERS: Oh.
  The Chairman: Order. I was given to understand that the hon. and learned Member for Crewe wished to make a personal statement on a matter of fact. He had made a personal statement, apparently in the wrong place. He should have submitted it to Mr. Speaker and made it in the House rather than in Committee. In any case, it is still true that personal statements are not discussed or argued about. We must get on with the business.
  Several Hon. Members rose—
  The Chairman: Order. I must ask hon. Members to take some notice of the Chair. I have made a Ruling. I hope that we can get on with the business.
  Sir Charles Taylor: On a point of order. With great respect, Dr. King, we have been told by you that this statement should not have been made in Committee. I want to ask you how we can get that expunged from the proceedings of the House. Do we make representations to Mr. Speaker, or do we put down a Motion that this improper statement, which was made improperly at an improper time, should be expunged from the proceedings of the House?
  The Chairman: The hon. Gentleman has answered his own question. He can do it by Notice of Motion on the Order Paper.
  Sir Rolf Dudley Williams rose—
  The Chairman: Order. I hope that we can get on. I hope that hon. Gentlemen will show some respect to the Chair. I must get on with the business.
  Sir W. Bromley-Davenport: Could I ask for your guidance, Dr. King?
  The Chairman: If the hon. and gallant Gentleman wants my advice, perhaps he will come and see me afterwards and I will give it to him.
  I have an announcement to make. We are making an experiment to make sure that hon. and right hon. Gentlemen get their marshalled Order Paper on the Finance Bill earlier in the morning. Therefore, as from today all Amendments handed in by 10.30 at night will appear on the next day's Order Paper in marshalled form in their proper places on the Paper. Any Amendments handed in after 10.30 will, of course, appear on the Paper, but at the end of the Order Paper unmarshalled. This produces one curious point—that tomorrow morning, as marshalling will begin at 10.30 tonight and no doubt we shall not finish by 10.30, the Order Paper may contain some Amendments which were not disposed of when the marshalling took place. It will help all hon. Members now if hon. Members who have late thoughts about Amendments would get them in by 10.30 at night. This applies, of course, only to the Finance Bill.
  The first Amendment selected is Amendment No. 256, in Clause 16, page 11, line 12, leave out "twelve" and insert "six" and it will be convenient to the Committee to take with it Amendment No. 225, page 12, line 28, leave out paragraph (b).
  Mr. Edward Heath: Before we proceed, Dr. King, may I ask your advice on one point? We are very grateful for the arrangements which you are making for the Order Paper.
  I notice that, in the general selection which has been posted, in some cases Amendments which deal with the remainder
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  of Part II of the Bill have also been selected with Part III. Part II deals with short-term and Part III with long-term capital gains. This will put the Committee in some difficulty, because the arguments dealing with the short term are very often different from those dealing with the long term. Whereas I do not ask you to give a decision at the moment, perhaps I will raise this matter when the Amendments come before us, because we should like to reserve our position on this since it would involve in some cases having a main debate on an Amendment before we come to Clause 18 which is the substantive Clause on capital gains.
  The Chairman: I appreciate the right hon. Gentleman's difficulty, but what the Chair was anxious to avoid was two debates on exactly the same issues, on the same broad principles, at two different points in the Bill. What the grouping which the Chair has made has done is to group identical details under the short-term and the major capital gains. I think that it ought to be possible to debate them together, but if it should prove technically impossible I will certainly look at the matter again.

  FINANCE (No. 2) BILL

    Clause 16—(AMENDMENTS OF CASE VII OF SCHEDULE D.)
    4.0 p.m.
    Mr. Peter Walker: I beg to move Amendment No. 256, in page 11, line 12, to leave out "twelve" and to insert "six".
    This is the first of the Amendments dealing with the Capital Gains Tax. At this point it is appropriate to point out that, whereas hitherto we have been debating taxes which are well known to the Committee, we are now entering upon the general tax reforms proposed by the Chancellor, and, although capital gains taxes were introduced in 1962 and this is an adaptation of them, the radical changes are such that we must examine the Government's general attitude towards capital gains. Therefore, the Committee will expect to scrutinise the details of what is proposed in the light of the Government's new taxation approach.
    The purpose of this Amendment is, basically, to return to the position as it was under the 1962 Act and to have the six-month period. It is surprising that, until this moment, there has been no

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    explanation at all from the Chancellor or from any Treasury Minister of the reason for extending the period from six to twelve months. In the section of his Budget speech dealing with these matters, the Chancellor made no comment at all on why he was doing it. There was no explanation in the White Paper for extending the period from six to twelve months, and, as far as I know, there has been no explanation in any speech since by a Treasury or Government Minister.
    We shall, therefore, have a great number of questions to ask about the reason for extending the period from six to twelve months, and, in putting our questions, we must reflect upon the reason for the proposals in regard to short-term gains embodied in the 1962 Act. The prime reason, of course, was to try to bring into the ambit of taxation those persons who were more or less trading either in securities or in land, and it was considered that the best and most convenient way of doing it was to introduce this tax applied with reference to a period of twelve months.
    As regards land, the period under the 1962 Act was three years, but the party opposite is reducing that period now to twelve months. The basic reason for the three-year period was that such are the negotiations and legal aspects involved in the transfer of land that a longer period was necessary. On the other items covered by Clause 16, we must ask the Government to explain why they want the period to be twelve months. As regards Stock Exchange securities, all the main methods of obtaining short-term speculative gains are, of course, well covered by the six-months period. The element of staggering, which was one of the processes required to be caught by the 1962 Act, would be met by the six-month period. The use of the option market would be caught by the six-month period. The person trading in stocks and shares within the account would be caught by the six-month period.
    The Government must make perfectly clear the reason why they propose an extension to twelve months. Is there any particular type of Stock Exchange transaction of a short-term nature or a trading nature which they consider not to be caught by the six-month period but which would be caught by the twelvemonth period?
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    As regards the inclusion in the short-term gains tax of chattels—a matter which we on this side of the Committee very much deplore—it is surely true that, if there is any buying and selling of chattels within the six-month period, this would be treated as a trading matter and would be taxed normally as a trading situation. Therefore, there is no need to include chattels in the short-term tax.
    The further feature which we find surprising in connection with the extension of the period from six months to twelve months is that the Chancellor has now introduced a permanent Capital Gains Tax. All capital gains are to be caught by this permanent Capital Gains Tax. The Government side have to make out their case to show why a capital gain which takes place within twelve months should be taxed at a far higher penal rate than one which takes place in more than twelve months. This case has not been presented by the Government so far. It is a very vicious form of Capital Gains Tax in its range and rate. A person paying the standard rate of Income Tax will pay 41 per cent. Capital Gains Tax within the period, and a person paying the top rate of Surtax will be paying 91 per cent. Capital Gains Tax within the period.
    There are many disadvantages in extending the period to twelve months. First, the Government's decision will hit the small man more than the wealthy person, because it is the small investor who is most likely, perhaps for domestic or other reasons, to have to sell within the twelve months. It is the small investor who may have to decide whether to get out within the twelve months and pay the 41 per cent. tax instead of the 30 per cent. tax rather than the larger investor who can afford to stay on in the security or the chattel until the twelve months is ended. In the second place, this is a complete reversal of the Government's position on the long-term tax. Under the short-term tax, the individual will pay 41 per cent. whereas the company will pay slightly less than that—35 per cent. this year and, in future years, 40 per cent.—whereas under the long-term tax the individual will pay 30 per cent. and the company 40 per cent. So in the short term the person operating as an individual will pay more taxation than the company, whereas in the long

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    term the company will pay more than the individual. This is a contradiction in attitude which the Government side must explain fully.
    In our view, this sort of period will spoil the mobility of capital within the market. It is a penal rate. It will affect and pervert the investment position. It will mean that an investor has an outside consideration to take into account which has nothing to do with the quality of the investment or other factors affecting the investment position. It will deter a certain type of investment. A person with certain funds available which may cease to become available over a period of twelve months will be kept out of the capital market altogether.
    The next strong condemnation of the extension of the period arises from the poor international comparison. The United States of America has a different tax, short-term as opposed to long-term, but it is confined to six months. Other countries have no capital gains tax at all. As a result of this short-term tax lasting for twelve months, there will be various other factors having an adverse effect.
    The Government must comment particularly on the position under Section 209 of the Companies Act, 1948, the Section under which persons holding 90 per cent. of the equity of a company may force those holding the other 10 per cent. to realise and sell their shares. There was an objection on this ground in relation to the six-month tax, and the Government at the time said that, in the majority of cases, it would be known at the time of purchase that there was a 90 per cent. position and that this Section of the Companies Act could be applied. I did not consider this a particularly strong argument, and it certainly could not be said that it would apply under the twelve-month tax arrangement. There will be a large number of shareholders involving companies resulting, perhaps, from a takeover bid in respect of which Section 209 of the 1948 Act will be applied during the twelve months against their will and, as a result, they will have to pay the more penal level of taxation rather than the normal level of Capital Gains Tax to be introduced in respect of the long-term.
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    What is to be the position as regards compulsory purchase orders? What is to happen to some one possessing a chattel, plant, machinery or buildings which come under the Section in this respect? The person subject to a compulsory purchase order will tend to delay the effect of the compulsory purchase order until the twelve-month period is ended. This will mean a great deal of unnecessary haggling with local authorities, whereas if the Government decided to limit it to six months the position would be in some way reduced, or if they decided not to have a short-term tax at all and simply have the purely long-term tax in operation, the position would be eliminated.
    It is interesting to reflect on the debates in 1962 when various hon. Members opposite suggested that there was no justification for having a different short-term tax from the long-term tax. I thought that this was well put by the present Minister of Aviation who said:
    "In my view, the distinction between short-term and long-term capital gains is a rather artificial one. I do not really like the American system of taxation. It is much better than what is proposed here, but it is not ideal because, in my view, one cannot draw any true distinction between a gain which is realised within six months and a gain realised over a longer period. It is better to tax the longer-term gain at some rate than not to tax it at all, but, even if one does tax it at some rate, the distinction is essentially an artificial one. … I said in my speech in the Budget debate that I thought that the rates of tax are to some extent too high. I should prefer rather lower rates of tax but more effective rates, without this entirely artificial distinction between very short-term gains and real gains."—[OFFICIAL REPORT, 22nd May, 1962; Vol. 660, c. 259–60.]
    I shall be interested to hear the Government's view upon the Minister of Aviation's expressed doubts as to the high level of the short-term tax in 1962, and why they intend not only to introduce a very high level of long-term tax but to continue for an even longer period this penal level of the short-term tax.
    Then we have the further examination of the question in the Report of the Royal Commission on The Taxation of Profits and Income. This is particularly relevant and important to our discussion, because the Government's proposals for the Capital Gains Tax are almost identical to the Minority Report of the Royal Commission. The Minority Report, which

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    prepared by their present adviser in the Treasury upon these taxation matters. The proposals in the Minority Report, under the signature of Professor Kaldor, are very similar to what the Government have brought into operation, with one exception, and that is the continuing application of the short-term gains tax. It is important for the Committee to realise that not only did the Majority Report of the Royal Commission come out against the Capital Gains Tax altogether, but the Minority Report, which came out in favour of a Capital Gains Tax, came out very strongly against the continuing of a short-term tax.
    Paragraph 63 on page 375 of the Report of the Royal Commission makes the following very important comment upon a short-term gains tax:
    "Subject to the above recommendation—"
    That was the suggestion of a long-term Capital Gains Tax—
    "that capital gains should not be liable to surtax we recommend that no distinction should be made between short- and long-term gains. Any such distinction is bound to be arbitrary and an invitation to tax avoidance. The distinction in the United States tax system makes it worth while for the taxpayer to realise short-term losses in less than six months and short-term gains in more than six months and has in many cases the effect that the taxpayer's liability is less than it would have been if short-term gains had been taxed at the long-term rate. We do not share the view that long-term gains have any inherent claim to more favourable treatment than short-term gains. We agree with the view expressed in the memorandum of the Board (paragraph 17) that 'looking at the matter purely as one of taxable capacity there may seem little justification for distinguishing between two gains of equal amount simply because in one case the asset was held for a longer period than in the other'."
    So we have the position that not only does the Majority Report of the Royal Commission come out against the tax but so does the Minority Report. The Chancellor has such little pride in the proposal that he gave no justification whatsoever for it in his Budget speech, and the only possible explanation left—
    Mr. Harold Lever: The hon. Gentleman said earlier—I did not want to interrupt him until he had completed his argument—that the Royal Commission's Report, even the Minority Report, had come out against the continuation of the short-term tax. I speak from recollection, but surely the
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    Report came out against having such a tax, not against continuing it, and the crime charged against the Government is precisely the crime which can be charged against the previous Government, namely, that they brought in such an abomination at all as the short-term Capital Gains Tax.
    4.15 p.m.
    Mr. Walker: Seeing that the hon. Member agrees that it is an abomination, I am sure that he will be in favour of the period being reduced to six months from 12 months.
    The point of the Minority Report was that if one has a long-term tax there is no need for the short-term one and that it is wrong to have it. But the Government have decided not only to have the long-term one in accordance with the proposals of the Minority Report and not to get rid of the short-term one but to extend it for a longer period. So the Minority Report's proposals are completely violated by the Government in this provision.
    The only excuse which can be given is that the Chancellor decided that this was a method of obtaining a more penal level of taxation from people making capital gains for at least 12 months. He did not particularly worry about the perversions it would make in the market, nor did he worry that it would make a bad international comparison. This is an important factor which should come out during all our debates. What has to be remembered these days is that the young business executive, the entrepreneur, the man of free enterprise, is trading in a world of very international trading conditions, and if we create a taxation system where taxation on enterprise in this country is far more penal than that in free enterprise countries abroad we shall have a drift of our more enterprising people to those countries. I believe that by this tax alone the Chancellor is imposing a thoroughly penal tax for 12 months without any justification at all.
    The lack of justification for the tax is apparent. First of all, one has to justify, if one is to support it, that a person making a capital gain after 11 months is in some way different from one making a capital gain after 13 months. I know no one in this Committee who can justify that suggestion. One has to justify that one can tax a

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    person at his levels of Income Tax and Surtax on his gains but not allow his losses against his Income Tax and Surtax payments. In equity, if the Chancellor is to persist with this 12 months' tax at the rates of Income Tax plus Surtax, he should also agree that losses should be set against income for the purpose of Income Tax and surtax. There is no equity in a position where one decides for 12 months to treat a certain type of gain as income but only for gains and not for losses. This is what the Chancellor is doing.
    This proposal by the Chancellor, without any realistic justification, is yet another indication that the Government are not working upon the lines of trying to encourage the success of the free enterprise system but are showing their traditional dislike, disregard and general distrust of the whole free enterprise system.
    Mr. Ivor Richard: Can the hon. Gentleman explain one thing before he sits down? Why is it that the Conservative Party now feels that speculative deals in land—not only in assets—which take place over a period of six months and not three years, as in the previous Act, should be exempt from any kind of capital gains tax?
    Mr. Walker: We advocated the three-year period, but if the Government have come to the conclusion that such a period is no longer needed to catch these particular transactions we are willing to support that conclusion. But our view at the time of the introduction of this provision was that a much longer period was needed in the case of land transactions, hence the three-year period. If the experience of the Inland Revenue on this point is that the three-year period is justifiable, we would be quite willing to continue with that period.
    Mr. Harold Lever: Before the hon. Gentleman sits down, could he say whether the short-term Capital Gains Tax introduced by the last Government did or did not perpetuate the iniquity or inequity he complains about—namely, that losses could not be set off against Surtax and Income Tax whereas profits were?
    Mr. Walker: Of course, the last Government did so. But what is happening now is that, whereas the original proposal was designed administratively to catch certain types of trading in securities which were thought to be going on at the time, and a six months' period did catch them, the Government are now extending the period to 12 months, not just to deal with that situation, but to deal with chattels and a far wider scope altogether. That is a very different proposition from the more limited tax introduced by the Conservatives in 1962.
    Mr. Lever: Will the hon. Gentleman answer the question I put and not one I did not put? He made out the case that there was great inequity in charging certain profits to Income Tax and Surtax whereas losses incurred in the same activity could not be set off. He claimed that this evidenced a malicious, spiteful and class-conscious frame of mind by the Chancellor. In order that I may judge the fairness, justice and intelligence of that charge, I want to know whether, when the Conservative Government brought in a short-term Capital Gains Tax, they, too, charged certain profits but did not allow for any losses in the same activity to be set off for relief against Surtax and Income Tax.
    Mr. Walker: That proposal was confined to particular transactions—primarily securities and land—and was designed to catch certain elements. In this case, different considerations apply. The moment the Government extend the period to twelve months, they show that they intend to retain permanently differential rates of tax and widen the whole scope of the tax.
    Mr. Lever: Before the hon. Gentleman sits down—
    The Chairman: Order, I think that the hon. Member for Worcester (Mr. Peter Walker) has really sat down this time. Mr. Harold Lever.
    Mr. Harold Lever: I only intervene because of the interesting attack made on this tax. It is right to begin by saying that I am not in favour of any Capital Gains Tax, short or long. [HON. MEMBERS: "Hear, hear."] I was, in fact, very much in favour of the idea my right hon. Friend the Chancellor of the Exchequer put before the election and

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    which he openly stated—namely, a wealth tax. Perhaps that will not arouse so many cheers from hon. Members opposite.
    It seems, however, that the general opinion of the country is that the wealth tax would be a just but not practicable tax whereas the Capital Gains Tax is unjust but practicable. It seems, therefore, that we are to have a tax which is practicable but which no one thinks just in place of a tax which everyone thinks would be just but which—although I am not convinced of this—would be impracticable.
    However, rather than see this situation, which has been ignored for so long, continue any longer, I am prepared to support this proposal in the absence of an alternative which no one supports but which nevertheless one hopes to see being substituted one day for the unjust and illogical Capital Gains Tax. A tax on wealth would reflect the measure of the ability of the person to pay. It is utterly ludicrous—
    The Chairman: Order. These remarks must serve as the introduction. The hon. Gentleman must now come to the Amendment.
    Mr. Lever: I want now to come to the point that was made by the hon. Member for Worcester (Mr. Peter Walker), Dr. King. I want to push this home. We must, first, bear in mind that the concept of a short-term Capital Gains Tax did not, alas, originate with the Labour Party. It originated on the Conservative benches and in a Conservative Government. It is right hon. and hon. Gentlemen opposite who have accepted the principle that there is no more suitable way and no more practicable way of taxing capital gains than to introduce a Capital Gains Tax—in particular, a short-term Capital Gains Tax. It is hideous hypocrisy for any hon. Member opposite to attack my right hon. Friend so strongly on this issue when none of them spoke or quoted against the short term capital gains tax imposed by their own Government.
    Sir Tatton Brinton: Am I wrong in thinking that the tax introduced in 1962 was always referred to by the present Chancellor of the Exchequer as a "speculative gains tax"? Quite obviously, there is a difference.
    Mr. Lever: The difference is merely one of description. The difference of impact is nil. The cheque sent by the person paying up can be endorsed as either a capital gain or a speculative gain without objection. It is a matter of aesthetic choice rather than substantive difference. Hon. Members opposite may fairly hold the view that a short term capital gains tax is desirable or undesirable. It is not open to them to charge my right hon. Friend with some kind of class spite or anti-business position because he is doing precisely what was done by their own Government.
    In particular, the hon. Member for Worcester pressed upon the Committee the argument that it will be unjust, illogical and evidence of unfairness of mind if the Government charge short-term gains to Surtax and Income Tax in the case of the individual but will not allow those same individuals redemption in Surtax and Income Tax if they make losses in the same activity.
    Mr. Eric Lubbock: Case VII losses can be offset against Case VII gains but not against the rest of one's income.
    Mr. Lever: That is correct. It was the same under the old tax and the same will apply in this form, as I understand it, although I have not given the matter close study. I am open to correction. I understand that the previous tax applied to Income Tax and Surtax in the case of the individual any short-term gain that he made. The Opposition submits that it is unjust that one can be made liable for Surtax and Income Tax on capital gains whereas if one makes short-term capital losses one cannot get relief against Surtax and Income Tax. I agree that it is unjust and I wish that it were not done. If there were the slightest hope of it being accepted by anyone, I would urge on my right hon. Friend that he should in fairness make losses on such activity available to Surtax and Income Tax as well as the gains.
    I am very concerned here about the desirability of honest argument. It was a Conservative Government who brought in the previous Capital Gains Tax. Yet it is now hon. Members opposite who charge my right hon. Friend with spiteful motives for not giving this relief. Why

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    did not their Government do so? Presumably for the same reasons that my right hon. Friend does not do so. First, it would seriously injure the Revenue on the tax and, secondly, it would affect the practicability of collecting the tax in general. For those reasons, the Opposition's proposal was rejected by the Conservative Government and presumably will now be rejected by my right hon. Friend.
    I am anxious to say that we are hearing too much of this sort of talk from hon. Members opposite. It is damaging talk both inside and outside the country. They make unjust accusations of anti-business attitudes and spiteful class hatred—all that kind of demagogic tomfoolery which does damage to Britain both in this country and outside it. The fact is that the Chancellor is an extremely moderate and reasonable man. I am going to criticise many aspects of this, and I shall probably trespass greatly upon his moderation and patience in the course of this Finance Bill. I must confess that I am completely against those bogus arguments, bogus incitements against the Chancellor, and the general projection to the world of an atmosphere in which the Chancellor is supposed to be the innocent puppet dangled by a group of Bolsheviks for all sorts of spiteful class-hating fiscal nonsense. This is a dishonest argument and a typical example of the kind we can expect on the question of Surtax and Income Tax on short-term capital gains. The hon. Gentleman the Member for Worcester spoke about the Minority Report as opposing the continuing of short-term capital gains tax.
    4.30 p.m.
    Mr. Raymond Gower: If the hon. Gentleman sees imperfections in the short-term tax as introduced by the previous Government, would he deem it a good reason to continue those imperfections, while extending the term of the tax and also setting that tax in the context of a larger Capital Gains Tax based on a different system?
    Mr. Lever: I do not in the least criticise anyone raising the imperfections of this tax. I rather share their opinions in certain respects. What I do criticise is the dishonest pretence that these imperfections
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    are the result of some malice, some anti-business position, some supposed Marxist class-hating position, on the part of the Chancellor. I think it has done grave injury to this country in business circles throughout the world.
    The Chancellor of the Exchequer (Mr. James Callaghan): I am much obliged for my hon. Friend's defence. However, he does not need to take such arguments seriously. Where I go around the City and among business circles in this country I do not find anything like the atmosphere that is engendered from time to time from the benches opposite. I have just had the good fortune to open an international fair and I can assure my hon. Friend he should not take all this too seriously. People understand that it is not true.
    Mr. Lever: It is characteristic of my right hon. Friend's moderation and commonsense that he finds himself always in the most sensible areas of the City. Some of the foolish and exaggerated talk sometimes gets abroad in financial circles and gives a misguided impression of what is going on.
    Mr. Norman Cole: Is this quite in order?
    The Chairman: I think we are getting into a debate not merely on the Question, That the Clause stand part, but even that the middle third of the Bill stand part. I think this is going a bit too far away from the specific Amendment.
    Mr. Lever: I will come to the point. The hon. Gentleman the Member for Worcester spoke about the Royal Commission's Report in relation to these proposals and to this Amendment. He talked about the Royal Commission Minority Report as opposing this tax. I am sure it was not a deliberate deception, it can only be called a Freudian slip, because in order to maintain the arguments that the hon. Member has attempted to one has to believe that there was a short-term Capital Gains Tax in existence when the Royal Commission reported.
    Mr. Peter Walker: In fact, the Minority Report states that if, subject to the following recommendations being pursued—the recommendation being a long-term

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    Capital Gains Tax—there should not be a short-term Capital Gains Tax. It follows that if a long-term tax was introduced any short-term tax in existence should be done away with.
    Mr. Lever: The hon. Member must not run away from the fact that when he addressed the Committee he talked about the Royal Commission Minority Report opposing the continuation of the short-term capital gains tax provided it got a long-term one. The Royal Commission did not do anything of the kind, because at that point the Royal Commission had no short-term Capital Gains Tax in contemplation. That was an achievement, a kind of demagogic spoof of the Tory Party. Later when the Tory Party came into office they brought in the short-term Capital Gains Tax.
    It is quite clear that the hon. Member had a guilty slip of the tongue which is the most favourable construction I can put upon it. The point I am making is that if he takes account of the fact that there was no Capital Gains Tax in existence when the Royal Commission reported the rest of his argument becomes a little thin, because the Royal Commission reported unanimously against any such short-term Capital Gains Tax, such as the Conservative Government later brought in.
    It is no good trying to impress this side of the Committee with quotations from the Royal Commission Majority and Minority Reports when it is quite plain to anyone who has ever read those Reports that both would be opposed to a short-term Capital Gains Tax as brought in by the Conservative Government. I think rightly. I think that the short-term Capital Gains Tax is not readily to be justified. No one who has studied this with great care supported any kind of short-term Capital Gains Tax. The Conservative Government had this Report before them and presumably had studied it and, having been warned by the Majority against any kind of Capital Gains Tax, they defied the Majority Report and brought in a Capital Gains Tax.
    It is nice to see the Conservative Party in this defiant and fiscally innovatory mood. It is much to its credit and not very usual either. It proceeded to defy the Minority Report and was in advance even of the servant of the Government, at the present time, which led the Minority
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    Report. It was much to the left of him, because he said there was no justification for treating short-term gains differently from long-term gains. Even the Minority Left-wing Report warned against this but it had no impact upon the Conservative Party. Such wisdom fell upon deaf ears, or stony ground, and it brought in a short-term Capital Gains Tax which distinguished between short-term gains and long-term gains. It is too late now to expect the Committee and others to take serious notice and it must not come in this dogmatic way and seek to reverse that.
    I want to say something to deprive myself of any kudos for supporting the Government. I find it very difficult to understand why short-term gains in the hands of an individual are subject to Surtax and Income Tax. I suppose it is the idea that there is something immoral about it as compared with a long-term gain. It is speculative and, in some way, rather tainted with the desire to acquire "a quick buck" as they call it in the United States. I would have thought that was a case for making a lower rate of tax, because if it is simply a gambling gain, surely that is a case for lowering tax since gambling gains are treated very considerately by the Conservative Party and the Labour Party.
    Mr. Geoffrey Lloyd: I support the Amendment.
    Mr. Emrys Hughes: On a point of order. I wonder whether you could clear up this matter for me, Dr. King. Is it not the custom of the House, a rule of the House, that anyone who has a financial interest in any Amendment has to declare it? For example, if an hon. Member is likely to benefit in the Capital Gains Tax from the passing of an Amendment, ought he not to disclose it during the course of his speech?
    The Chairman: It is not a matter of order. It is the custom for an hon. Member to declare an interest if he has a financial interest to declare.
    Mr. Lloyd: No doubt we shall soon hear from the Treasury Ministers the justification for increasing the time limit from six months to 12 months. I want particularly to ask them whether they have considered the effect of the change

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    on the small investor. I do not want to comment on the disquisition of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) on the benevolence of the Chancellor of the Exchequer. While the right hon. Gentleman has a very genial personality to which we are all subject to some extent, he is the agent of a Socialist Government and a Socialist Party hostile to capital and hostile to investment. However, I will leave the broader question of whether this proposal is an old-fashioned Socialist swipe at the big speculator or the big investor and deal specifically with the small investor.
    This is a type of investor whom we on this side of the Committee want very much to encourage—I do not know so much about the attitude of hon. Members opposite. I want to examine the effect of the change on the small investor. In the Midlands there are already some hundreds of investment clubs. There is a great increase in investment among younger executives and people on the shop floor. If you look closely, Dr. King, you may often find a copy of the Financial Times on the assembly line, something which not everybody realises.
    I am the president of the Midlands branch of the Wider Share Ownership Association, and in these debates I wish to be the spokesman of this type of investor. Let us admit right away that in his case there is not the drama of the 91 per cent. of the high Surtax payer who is caught by these provisions, but there is something which is still very important. It is the standard rate of Income Tax paid by the prosperous car worker earning £20 or £25 a week, or even more, a man who in his own phrase is now topping up his investment, who probably has something in the Post Office Savings Bank or, if he is in Birmingham, in the Municipal Bank, and who feels that he would be better off with a type of industrial investment. This type of investor presents new problems, problems which the Socialist Party, in its backward-looking attitude, has not thought of, as it thinks largely of the old-fashioned type of speculator in the City. We ought to be doing everything possible to adjust our tax system so as to encourage the small democratic investor.
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    Under this Clause, if such an investor takes a capital profit in the 12 months' period, instead of paying 30 per cent. he will have to pay more than 40 per cent. This may not seem so dramatic as the difference for the Surtax payer who pays 30 per cent. after 12 months, but 91 per cent. if the period is less than 12 months, but it is as important and perhaps even more important for the kind of individual whom I am considering, even though he does not have the more penal taxation of the big man with the big income.
    4.45 p.m.
    The reason is fundamentally that this type of investor normally thinks of his income in terms of weeks. The difference between six months and 12 months seems a great deal bigger to him than it does to those who operate in the City of London. In addition, as we know, his income may be more subject to ups and downs within the period. There are many reasons why a working man, even in the prosperous areas of the Midlands, may suddenly need some money. I do not want to overpress this argument, and he might well decide, if he has them, first to use his Savings Certificates, or his money in the Municipal Bank, but circumstances could arise in which he might have to encash and sell his securities after six months, but before 12 months, and he would then be caught by the new provisions which we are seeking to change.
    Have the Treasury Ministers and the Inland Revenue considered the effects of their new proposal on this type of investor? To point it up sharply, in the Midlands there are anxieties about the car industry as a result of some of the measures which this Administration has taken. The new investor has to consider now whether within a period of after six months and before 12 months he may have to encash some of his savings and sell them, in which case he would be caught by this provision. That is why I support the Amendment. Have the Government in proposing this change fully taken into account the new type of investor whom we want to encourage?
    Mr. Richard: I rise briefly merely to ask one question and make one comment. The terms of the Amendment are sweeping and they apply to all the

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    words set out in line 12 of page 11, Clause 16. Clause 16 substitutes certain words for other words now appearing in Section 10(2) of the Finance Act, 1962. The words which the Amendment proposes to take out are:
    "where the disposal occurs more than three years after the acquisition in the case of a disposal of land, or where the disposal occurs more than six months after the acquisition in any other case".
    The Clause proposes that the relative periods for short-term gains on both land and the securities should be 12 months in both cases instead of three years and six months.
    On the face of it, at any rate, the Conservative Party is opposed to this sort of tax. It seems to be opposed to short-term Capital Gains Taxes, at least in the form which the Government now pro-rose them. In which case, is it the intention of hon. Members opposite to exclude from the operation of the Capital Gains Tax a speculative profit made on the sale and subsequent disposition of land if that subsequent disposition takes place not within the three-year period as in the 1962 Act, but within the six months' period which is now proposed by the Opposition.
    Let there be no mistake—the Amendment may not have been intended to set the speculative gains in land within that period, but in fact it does. Unless an Opposition spokesman is prepared to say, "We the Conservative Party are in favour of taxing speculative gains made on the sale and disposition of land", we are back in precisely the position before the General Election, namely, that from time immemorial the Tory Party has not been prepared to deal with land speculation and the Labour Party is.
    Mr. Peter Walker: Will the hon. Gentleman explain why his own Government have decided to reduce the period from three years to one year?
    Mr. Harold Lever: It shows how fair minded they are.
    Mr. Richard: In this Finance Bill we are considering a long-term tax and a short-term Capital Gains Tax. In order to rationalise the tax system, it may well be better to deal with short-term speculative gains in land in exactly the same way as one would try to deal with short-term speculative gains in securities. For
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    that purpose a 12-month period may well be appropriate. Is it the Conservative Party's view that a speculative gain in land, if it occurs within six months, should not be taxed? If it is, it has gone even further back than it did in 1962.
    Mr. Heath: We are discussing the Amendment in the context of the Bill, and the hon. Gentleman is putting a false question if he is trying to break off the second part of the Bill from the third part. I have already explained the difficulties of discussing these things, but he must accept that we are discussing the Bill as a whole in this context.
    Mr. Richard: What I put to the right hon. Gentleman as the spokesman for his party on this matter is simply this: Is the Tory Party in favour of taxing speculative gains in land? If so, what is the Amendment doing in this form?
    Mr. Heath: Because we introduced it in this form.
    Mr. Richard: Why put it in this way?
    The Chairman: Order. We cannot have just dialogue.
    Mr. Charles Fletcher-Cooke: I hope that when the Solicitor-General deals with the change in the 1962 tax he will explain not merely the virtues of a 12-month period over a six-month period, but also why, if there is a long-term Capital Gains Tax, we need a short-term Capital Gains Tax. It is not a sufficient defence to say that they have it in America or that we had a short-term capital gains tax for the last three years when we did not have a long-term capital gains tax. There is a need for justification, not only of the 12 months period, but also of the very existence of Clause 16 and others. If we have a long-term Capital Gains Tax, surely the effect of taxing a 12-months gain at a higher rate—certainly in the case of individuals, although not in the case of companies—is to freeze the exchanges. It must mean that for long periods the operation of the exchanges will be artificially frozen and many of the exchange facilities, which are in the nature of invisible exports, will be denied. Everybody will try to postpone his gain.
    If it be wrong to make a gain, why is it more wrong, as the hon. Member for

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    Manchester, Cheetham (Mr. H. Lever) put it, to make a quick gain? Surely if we have an exchange, if we have a market—and we pride ourselves on our markets—we do not want any more artificial impediments than we can avoid to a rapid turnover.
    I can understand that if we have no long-term Capital Gains Tax we must do something about what was once called the casino. But if we are to have a long-term Capital Gains Tax, we need a very big philosophic justification for attacking a gain made within 12 months more fiercely than we might attack a gain made, say, in 13 or 14 months because we are inhibiting our market and freezing the commerce and finance of this country to a certain extent. "Freezing" is perhaps too dramatic a word, but we are slowing it down. Why should we do that?
    While the Solicitor-General is on that point, I wonder whether he would take up the allied point made by my hon. Friend the Member for Worcester (Mr. Peter Walker), which was this. There may be involuntary disposals. There may be compulsory purchases. There may be the case under Section 208, I think, of the Companies Act. There may be other such methods and situations. It will be in the interest of the holder of the security of the land, or whatever the asset may be, to delay the proceedings in order to get over the crucial date. We all know the power which people have in delaying these matters if they put their minds to it. It is very much against the good of society that they should be in a position in which they have to procure this delay.
    I am not sure whether this is a good point because, in spite of reading this great book—the Bill—several times, I am not certain to what extent involuntary disposals are caught by either of these capital gains taxes. I would regard the case which my hon. Friend the Member for Worcester put under the Companies Act as an involuntary disposal if ever there was one. Is it, or is it not, caught, first, by the short-term Capital Gains Tax and, secondly, by the long-term Capital Gains Tax? Are matters of compulsory purchase caught? If so, are they caught by both taxes? We want
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    to know to what extent people will be made to pay either tax when they are forced to dispose of an asset and what degree of force is necessary before they escape, if they escape at all, because there are various degrees of force. One may come to an agreement to avoid compulsory purchase.
    The Chairman: There are later Amendments about compulsory purchase.
    Mr. Fletcher-Cooke: I am much obliged, Dr. King.
    The relevance of this to the point which I am making is this. This is another case where, if they are subject to tax, there will be a delay in the transacting of the necessary business of the country and often of the public business of the country, because compulsory purchase, whether of land, assets or anything else, should be done speedily. If it is in the interests of the holder of the asset to delay the process of acquisition in order to get over the 12 months period, it is another example of the slowing down effect, the freezing effect, which the short-term gains tax will have. It will be affected by the long-term tax but much more by the short-term tax because in that case one can have some lively hope of extending almost any period of the transaction over 12 months if one puts one's mind to it.
    The only people likely to pay this tax are those who are in poor and dire straits, as my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) said. The people who will be hardest hit by the short-term gains tax are those who have not the resources to hold on for 12 months. Anyone who has the resources to hold on for 12 months will be all right. The people who will be hit are those who need to realise either because they are forced to do so legally or because of an important moral obligation or commitment which they cannot in honour get out of. If they can get out of it, they can hang on for 12 months and pay the lower rate.
    I beg the Government to think again about the relationship between these two taxes. It is not enough to appeal to the past historically, as the hon. Member for Cheetham did, because we are legislating for the future. I will not make any attack on his party, and I do not think

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    that he should make any attack on mine in this matter. We wish to get this right. The fact that the Americans have a short-term gains tax wrings nobody's withers, and the fact that the Royal Commission took a different view does not impress me at this date of history. What we want is not an appeal to authority but a logical exposition of why we need both taxes, and I hope that we shall get it soon.
    Mr. Emrys Hughes: You ruled earlier in the debate, Dr. King, that it was the custom and not the rule of the Committee that those who might have a pecuniary interest in the Amendment should disclose it. I want to set an example to right hon. and hon. Members opposite. My interest As rather remote. It is a small investment in a small municipal bank of which I was the chairman and, for many years, a director. I hope that hon. Members Opposite will continue the custom of the Committee of disclosing interests during our discussions on the Bill.
    5.0 p.m.
    The right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) claims that he speaks on this occasion for the small investor. He gave the instance of some motor works in Birmingham where there was a considerable degree of small investment and the workers were particularly interested in the Financial Times. I quite agree that in these matters the Financial Times is now discussed among a large section of the population. I read the Financial Times. I have found it in some queer places. The last time I visited Wormwood Scrubs, I found that people there were reading the Financial Times. A special request had been put to the governor of the prison by a gentleman who had to serve a period in the prison because of some delinquencies in financial transactions.
    The right hon. Member gave us a picture of a large percentage of workers in industry reading HANSARD and the Financial Times to see what is likely to happen to their financial gains.
    Mr. Geoffrey Lloyd: The hon. Member would, I think, like to get it accurate. What I said was that if one looked sharply one could see in the assembly lines some copies of the Financial Times. I did not suggest that every worker was reading it. I gave it as an example
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    of the new interest in investment in the Midlands.
    Mr. Hughes: If on the assembly lines in Birmingham workers are allowed to read the Financial Times and calculate from its columns, I should say that there was something wrong with the management. I can only give my experience—
    Mr. Frederic Harris: Did the hon. Member read the Financial Times when he was chairman of the municipal bank?
    Mr. Hughes: I did not acquire the habit of reading the Financial Times until I had an opportunity of reading it in the aeroplane coming down from Scotland. I know that this is an attempt to draw me out of order, and I can resist anything except temptation, so "Get thee behind me, Satan".
    Is the right hon. Member really painting a picture of the working class being greatly concerned about the Amendment? There are no motor works, no conveyors and no eager speculators of the Financial Times or readers of the Economist among the working class of my constituency.
    Sir A. V. Harvey: The hon. Member has distilleries in South Ayrshire. I am sure that they are interested in all these matters.
    Mr. Hughes: There is one distillery in South Ayrshire, and I shall certainly make inquiries to see whether the workers in that distillery are interested in the Amendment. What they are interested in is not the Financial Times, but the Noon Record. My own observation does not lead me to the morbid conclusions of hon. Members opposite.
    I represent coal miners, and frequently I go down the mines and I spend a certain time among the miners, but I have never yet succeeded in finding a copy of the Financial Times down a coal mine. In giving us this idea of the small investors anxious about their shares and very anxious to back up the Opposition in their attempts to get the Bill amended, particularly by this Amendment, I rather suspect that the right hon. Member is conjuring up something from his imagination.
    Mr. Geoffrey Lloyd Mr. Geoffrey Lloyd indicated dissent.
    Sir William Robson Brown: Would the hon. Member deny that the operators of trade union funds wisely and shrewdly read the Financial Times?
    The Temporary Chairman (Sir Harry Legge-Bourke): Order. I am sure that all hon. Member's reading is of immense importance, but I ask them all to read the Amendment and keep to it.
    Mr. Hughes: I should never have dreamed of mentioning the Financial Times, Sir Harry, had it not been used as an illustration by the right hon. Member for Sutton Coldfield. It was his assertion and argument that gave me a great deal of interest. I wondered to what extent there was a large number of small investors holding up the assembly lines of the works in Birmingham calculating what effect the Amendment, if carried, will have on their investments.
    From my observation, although there is a quite large number of small investors, I do not think that the great bulk of people who work at these factories and are classified as small savers and small investors are likely to suffer from a sense of pain, indignation and outrage if this Opposition Amendment is not carried.
    Mr. Geoffrey Lloyd: The hon. Member has asked me whether workpeople in the Midlands are interested in the Finance Bill. I can tell him that they are, because in the rapid progress of the investment club movement in the Midlands in recent months, the officers of the Wider Share Ownership Association have found in the last week that there is hesitation by people in the factories, who are no longer prepared to go on with the formation of investment clubs because they are anxious about what is being put into this Finance Bill.
    Mr. Hughes: I do not suggest that the right hon. Member is entirely inaccurate. His imagination has, however, tended to overemphasise the importance of the case for the Amendment. If there are these gentlemen who, following the Financial Times, decide that this is something by which they are greatly to lose, I should say that they are just as entitled to pay their taxes as anybody else.
    What will happen if this series of Amendments is carried and the Chancellor of the Exchequer does not have
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    enough money to pay the farmers their annual subsidies? [HON. MEMBERS: "Oh."] There is a groan from hon. Members opposite, but they are perpetually calling for increased public expenditure. They want more expenditure on defence and on agricultural subsidies. Up to the present, the amount of money that they would take away from the Exchequer by the Amendments is considerable. If as the week goes on all these Amendments were to be carried, the Chancellor of the Exchequer would not have the money to pay out the necessary expenditure which has already been passed by the Committee.
    These people are entitled to pay their share of taxation. I cannot conceive of any patriotic investor working in a motor works in Birmingham who would grudge paying the sums demanded by the Chancellor of the Exchequer to pay for pensions and other social benefits. It is quite inconsistent for hon. Members opposite to call for big increases in national expenditure and then refuse to provide the money by which that expenditure can be met. I am quite sure that the honest working-man investor will be far more ready to cough up his taxation than some of the less patriotic gentlemen who manipulate shares on the Stock Exchange.
    Mr. Donald Box: I have great difficulty in following the arguments of the hon. Member for South Ayrshire (Mr. Emrys Hughes). I think he got a little way from the Amendment, but in case I upset him I think I ought to tell him that when not in the House of Commons I have a certain capacity as a financial adviser.
    I am very sorry that the Chancellor is not responding to this Amendment, which I support, because I should have thought that this was one sphere in which he really ought to have told us exactly why he wants to increase the period from six months to 12 months. If during his intervention just now he gave a true indication of what he thinks the City and financial circles think of some of the Clauses in his Bill he is very much out of touch, and it is hardly suprising that the country's finances are in a mess.
    The hon. Member for Manchester, Cheetham (Mr. Harold Lever) has reminded us on several occasions that a

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    speculative gains tax was first introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), but remember the circumstances in which that tax was introduced. It was a period of financial crisis in the country, and that tax was introduced as a gesture of equity, to offset the restrictions which were being placed on other people in other spheres at that time. It was a period of general deflation, and it was rather more successful and brought to a speedier conclusion than, I fear, the present period will be.
    The object of my right hon. and learned Friend's speculative gains tax was definitely to discourage speculation; certainly to discourage speculation rather than to raise revenue. It is a fact that the short-term speculative capital gains tax of 1962 raised only some £1 million to £1¼ million. On the principle that the grass is always greener in the garden next door I think a lot of people outside think that making money on the Stock Exchange in dealing in stocks and shares is very easy indeed. Bearing in mind that losses are allowed to offset profits I think the modest revenue which that speculative gains tax has realised so far is adequate proof that the buying of stocks and shares and making a profit is not just a matter of sticking a pin at random in the back of the Financial Times and then ringing up one's broker and picking up a profit a week or two later.
    Mr. Lubbock: The hon. Gentleman is saying that that tax was not designed to hit the legitimate investor but the person "stagging" new issues and making short-term gains. The very good rate of yield from that tax is an indication that it has been successful in discouraging people from short-term gambling operations.
    Mr. Box: The hon. Gentleman has taken one of my points ahead of time, because that is one of the points I wanted to make. I can say from personal experience that the most successful investor on the Stock Exchange is undoubtedly the man who invests for the longer period rather than the shorter period. Undoubtedly, people who have gambled in the market in the past have been usually those who could perhaps least afford it and who found themselves invariably, after trying to cash in on the market in such a short period, finishing up sending a cheque and paying the difference to their
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    broker rather than receiving one. There is no doubt, as the hon. Gentleman the Member for Orpington (Mr. Lubbock) has said, that the six months' tax we have known in the past two or three years has been eminently successful in curbing speculation, and certainly it has been successful in curbing the "stag", or "tizzy" snatcher, as people who snatch a very small profit are known as in the market.
    I think the question we must look at is what harm has the six months' period we have known in the past two or three years done, because we have had two or three years to look at it now, and whether the extension to 12 months will do further harm in the future. In my opinion the existing tax has already done a certain amount of harm to the flexibility of the market, and I am afraid it is a harm which may prove irreparable unless the situation is reversed before very long.
    5.15 p.m.
    I do not expect hon. Members opposite to agree with me or to sympathise with this point of view, or to realise that certainly the events in the past few months have built up a considerable scale of tax losses. What, I think, they are inclined to overlook—and, perhaps, many on this side as well are inclined to overlook—is the stabilising factor that this short-term investor had on the market. Quite often he may not have been a speculator; he may have been someone who invests in the normal way; but when sudden disaster hit the market and it fell very badly on what we know as a Black Monday or a Black Friday—and there have been plenty in the past and I expect there will be a good many more in the future—quite frequently he took the view that the market would improve later, rang up his broker and said, "Buy me 500 so-and-so. I think the fall has been overdone and I think there will be an improvement in a week or a fortnight's time". If he was right he sold and made his tax-free profit. What people are inclined to overlook is that that support, when the market was falling rapidly, was a stabilising factor in the market as a whole. Now that he has disappeared I think it is to the detriment of the marketability of shares on the Stock Exchange.
    The Chancellor of the Exchequer may, of course, think this is a good thing.

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    During Second Reading of the Bill he was talking about the retention of profits, and talking in the context of the disposal of profits of businesses. I would remind him that they have been somewhat successful in building up the capital market, because I see that tomorrow B.P., in which the Government are majority shareholders, is making a very big issue on the Berlin market in Deutschmarks. So it is evident that the actions he has taken in this and other spheres are having a detrimental effect on the new issue market in this country. I am afraid that by extending the period from six to 12 months we are helping to weaken rather than strengthen the position of our capital market in this country.
    I would agree on this with my hon. and right hon. Friends who have stated that this really hits the small investors. The hon. Member for South Ayrshire cast doubt on whether many working class people in this country have an interest in the stock market. Well, they may not have a direct interest, but perhaps few of them realise how many of their insurance policies, their pension funds and their union funds are invested in the market in one way or another.
    I therefore feel that this Amendment should be supported, because I am quite certain that this upset to the marketability of shares in the country and its effect on the smaller shareholders certainly will not help the capital market in future.
    Mr. Richard: Will the hon. Gentleman tell us, if he thinks the 1962 Act and the tax on short-term speculative gains on the Stock Exchange has operated well, why it should not apply to short-term speculative gains in land, and why it would not be justified there?
    Mr. Box: I was not dealing with land. I specified where my interest lay, and it was not in land. Moreover, there is, I believe, a later Amendment, on which it would, perhaps, be more appropriate to deal with the hon. Member's point.
    The Solicitor-General (Sir Dingle Foot): It may be for the convenience of the Committee if I intervene at this stage. A great deal of heat has been engendered in the support for these two Amendments, but nearly all the speeches
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    which have been addressed to the Committee from the other side have been made precisely three years too late. They would have been extremely relevant if they had been delivered in consideration of the Finance Bill of 1962. For example, the hon. Member for Worcester (Mr. Peter Walker) referred at some length—I am not complaining—to the recommendations of the Royal Commission on Taxation. Those recommendations were before the House in 1962. In both the Majority and Minority Reports the Royal Commission advised against any form of short-term Capital Gains Tax. [HON. MEMBERS: "Oh."] That advice was available to the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) when he introduced his Finance Bill three years ago. That advice was rejected by the party opposite.
    Then again we are told about the position of the small investor. If the arguments which have been addressed to the Committee today, especially by the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd), are relevant, they must have been equally relevant in 1962, because the whole picture that he painted was one of the small investor who wanted to be able to get his investment back at very short notice. That applies whether it is within six months, or 12 months. We are dealing here with short-term capital gains, and I suggest to the Committee that the principle with which we are concerned was accepted by the House in 1962. What we are concerned with now is the application of the principle, particularly in the context of this Finance Bill when we are also bringing in a Measure to deal with long-term capital gains.
    Mr. Box: Would not the right hon. and learned Gentleman agree that the circumstances have altered to the extent that we have now had two to two-and-a-half years to try out the short-term Capital Gains Tax? We know that it has curbed speculation, but it has been a poor revenue raiser. Is the Solicitor-General suggesting that the extension to 12 months will increase revenue, and materially help the Chancellor?
    The Solicitor-General: I am coming to the reason for increasing it to 12 months, if I might deal with the matter in order. I was referring to the 1962 Act. A feature of that Act was that it imposed two

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    different time limits in respect of short-term capital gains—a limit of three years in the case of land, and six months in the case of assets other than land. What we are doing in this Bill is to equate the two and to have the same period of 12 months for both sets of transactions. We can see no reason in principle why we should distinguish between a short-term capital gain in land, and a short-term capital gain which is realised from transactions in other forms of assets.
    The point that has not been made by any hon. Gentleman opposite, though it was made in an interjection by my hon. Friend the Member for Barons Court (Mr. Richard), is that so far as the alteration of the time limit relates to transactions in land, it is an alteration in favour of the taxpayer. We heard from he hon. Member for Worcester about the desire of the Chancellor of the Exchequer to inflict penal taxation. That was his phrase. He entirely overlooked, or if he did not overlook he failed to remark on, this aspect of the alteration, that at the present time, if one makes a capital gain at any time within three years, payment has to be made of Income Tax and Surtax, that is to say something at a rate which is higher than the rate proposed in the Bill for long-term capital gains. There are three years during which the taxpayer is penalised under the 1962 Act.
    We are proposing to reduce the period far land to 12 months. That means that if a speculator is engaged in a transaction in land, and the sale is made after 12 months but before 3 years have elapsed, he will be relieved from the rate of taxation imposed on him by the 1962 Act. This is not, therefore, a case of penal taxation. This goes to the point of the small investor. If a small investor engages in transactions in land, he will get the benefit of the relief if the sale is made between 12 months and three years.
    Mr. Frederic Harris: Will the right hon. and learned Gentleman explain why the Government have decided to be so generous to such a suggested land speculator by cutting the period from three years to one year? What is the reason for it? Why are the Government doing it?
    The Solicitor-General: I have been dealing with the effect of the alteration. Nobody can dispute that we are to give
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    the taxpayer a relief which he did not receive under the 1962 Act. [HON. MEMBERS: "Why?"] We are doing it because we want to be fair as between different classes of transaction. We see no reason why we should deal with one set of transactions differently from another.
    Mr. Gower: Will the right hon. and learned Gentleman explain his reference to the small investor being a purchaser of land? Can he describe how the small speculator goes in for land? Does he buy large lots, or does he buy tiny pieces of land? Or is it done by share ownership, or by purchasing the freehold?
    Mr. Geoffrey Hirst: Single sods.
    The Solicitor-General: There are all kinds of ways in which he may deal with it. He may buy a site for building. He may buy shares in a land holding company. That is one of the matters specifically dealt with in the 1962 Act. Section 14 of that Act deals precisely with the situation where the transaction is not in land, but in the shares of a land holding, or land purchasing, company, and one of the effects of the Clause is that we make it unnecessary to have complicated machinery to prevent tax avoidance when dealing in shares in a land holding company.
    Mr. Box: Surely the right hon. and learned Gentleman is joking when he suggests that the small man, in some devious way, rings up and buys small parcels of land? If he wants to buy shares, he can buy unit trusts, and he can go into the bank, but he cannot do that with land. Will the right hon. and learned Gentleman explain what he means when he talks about the small speculator buying small plots of land?
    The Solicitor-General: I say that this happens time and again. Small investors have invested in real property. They are not confined to shares and securities. I am pointing out that since it is said that it is the small investor who is particularly hit by this type of legislation, it follows that the small investor will derive some benefit from the reduction in the period which is proposed by this Clause.
    I come to the principal question which has been raised in this debate. It was

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    put by the hon. and learned Member for Darwen (Mr. Fletcher-Cooke). He asked why there should be this distinction. He asked why there should be long-term capital gains which are taxed at a certain rate—30 per cent.—and why there should be short term capital gains which attract both Income Tax, and, in the appropriate cases, Surtax.
    It would be logical to subject to Income Tax and to Surtax all capital gains of whatever description, whether short-term or long-term. Indeed, if we did so, we should avoid a vast amount of litigation in our courts, but I think the Committee will be agreed that where we are dealing with long-term capital gains, that is to say with gains which have accrued over a lengthy period of time, if those gains were subjected to tax at steeply graduated rates in the year when they were realised, we would be imposing a very heavy burden indeed on the persons concerned. But when we are dealing with short-term gains, the argument rests on this proposition, which I invite the Committee to accept, and indeed which was the basis of the legislation in 1962, that they are in substance indistinguishable from income. It does not make much difference whether, in the short term, one makes capital gains which one includes in one's annual income, or whether one earns the money in one's profession or trade as the case may be. That is the argument which the House accepted three years ago, and we invite the Committee to accept it now.
    5.30 p.m.
    The question then arises why we want to make the change from six months to 12 months. A six months' time limit is in itself unsatisfactory. The normal period over which we measure income for the purpose of taxation is one year. If the proposition that I have put before the Committee is correct—and it was accepted in 1962—there is no reason why we should have different periods for earned income and short-term capital gains. The hon. Member for Worcester referred to the American experience and said that they had a period of six months. That is true, but it has not been very satisfactory.
    It is material to tell the Committee that in his 1963 tax message to Congress the then President of the United States proposed that the short-term holding period
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    should be increased from six months to one year, so that gains realised within one year would be treated as ordinary income. Later the Secretary to the Treasury in the United States defended this proposal on the ground that the existing preferential treatment of assets disposed of in a period of less than one year was difficult to justify either on economic or equity grounds, and he went on to observe—and this is also material—that the six months' period frequently resulted in purely speculative profits qualifying for relief as long-term gains. That was the attitude taken by the Government of the United States.
    Mr. Peter Walker: Does the right hon. and learned Gentleman also agree that after a full examination of this message by several Congressional committees it was decided not to change the six months' period? Will he also confirm that the comments made by the Secretary to the Treasury were directed against the whole operation of a short-term tax, and not against the period?
    The Solicitor-General: No. I have just been quoting, and the Secretary to the Treasury was referring specifically to the six months' period. He was justifying the proposal put forward by the President for a 12 months' period, which is what we propose. I suggest that we should at any rate take notice of American experience.
    It is true that that proposal did not get through Congress. There are many proposals which do not get through Congress, and even some which do not get through the House, but which none the less deserve support. This, of course, will be more fortunate. I suggest that we are making a quite logical change, not only in equating the two forms of short-term capital transaction but also in imposing the same period for these transactions as we do for Income Tax and Surtax, namely, a period of 12 months. I therefore invite the Committee to reject the Amendment.
    Sir A. V. Harvey: The Solicitor-General is just about as ill-informed on the City and small investors as is the Chancellor of the Exchequer. Today the Chancellor said that he was not unduly worried about the City of London or industry. He said that he did

    73
    not get much criticism. All I can say is that he should read his Sunday newspapers. If he read half a dozen at random yesterday he would see that criticism is being directed at the Government from all sections of the electorate.
    The Solicitor-General said that he saw no difference between six months and 12 months. There is a vast difference. [HON. MEMBERS: "Six months."] I shall give the hon. and learned Gentleman reasons why as I continue. The Solicitor-General made use of what is happening in the United States, but he did not go on to say that the United States has a maximum tax of 25 per cent., which is graduated. Like the Prime Minister, he seems always ready to quote what America does, while never admitting that what happens in America is based upon a free enterprise system. Hon. Members opposite try to get the best of both worlds in their arguments. The Solicitor-General has not presented any argument.
    Right hon. Gentlemen opposite are not in touch with the electorate. The remarks of the hon. Member for South Ayrshire (Mr. Emrys Hughes) about small investors are remote from the facts. There are many public companies today in which 80 per cent. of the equity shares are held by small shareholders, with holdings of under £500 each. I know of a works pension fund which is invested in equity shares to the extent of 86 per cent. Shop stewards are trustees, and when they analyse the advice which is given to them on investments they are apt to say, "Are these industries likely to be taken over?" Workers today are well informed on these matters, and want to hedge against inflation like everybody else. They do not want to buy Daltons and see their investments depreciating by 60 per cent. They want to put their money into good blue chip shares which will offset inflation.
    Mr. Emrys Hughes: Has the hon. Gentleman received any representations at all from any working-class organisation or trade union against this proposal?
    Sir A. V. Harvey: I have discussed the matter with members of the pension fund, and I know that they are very concerned about it. I can assure the hon. Member of that. If a man invests £200 or £300 in equity shares and finds
    74
    that because Vickers have to dispense with workers on the TSR2 he has to move to Lancashire to get a job with Leylands, he must put up additional money to transfer his family and buy a new home, and he therefore has to liquidate his investments. It is the small man who has to liquidate quickly who gets a rough ride. The large investor can wait one, two or three years, until this lot are out of office.
    Mr. Harold Lever: Under the 1962 Act.
    Sir A. V. Harvey: I am trying to show the difference between six months and 12 months. My right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) made this point very forcibly. I.C.I. annually distributes a considerable number of bonus shares to its workers, who frequently have to realise those shares in order to meet mortgage rates or interest charges—probably more so today than they did under the previous Government. They also stand to lose a great deal.
    The Solicitor-General must give the Committee a better argument than he has done. The public will not understand the reason for this, and quite rightly so. One hon. Member opposite tried to confuse the issue by bringing in the question of land. That is quite a separate matter. Speculation in land can be anti-social, but a man who is trying to protect his hard-earned savings in equity shares is not acting in an anti-social manner. It is a good thing for the country that he should have invested in equity shares. The Chancellor should be encouraging small shareholders, but instead of that he is penalising them.
    These matters will be taken note of in the country, and as the weeks go by the Chancellor must not be surprised if public opinion polls go more and more against the Government. Right hon. Gentlemen opposite do not put first things first, even when it is in their own interest to do so. In my 20 years' experience in the House they have never done so. They will never learn.
    Mr. Harold Lever: I gather that the hon. Member is speaking in favour of the Amendment. He is therefore in favour of a short-term Capital Gains Tax, but one which would be rather less severe

    75
    in its effect upon shares than is at present proposed.
    Sir A. V. Harvey: The hon. Member cannot have been listening to what I have said. Perhaps he will read the OFFICIAL REPORT tomorrow. He may be able to understand the position then.
    Mr. Lubbock: What I do not think hon. Members opposite appreciate is that the periods appropriate to a short-term Capital Gains Tax are quite different from those appropriate for a long-term Capital Gains Tax. We cannot look back at the situation in 1962 and say that as the periods were appropriate then they must therefore be appropriate now. We should not be too rigid in our minds.
    The position now is that we are to have a long-term Capital Gains Tax at the rate of 30 per cent. Therefore, it is not necessary to extend the six months' period to tax those people who might still be speculating if they have access to short-term borrowing which enables them to hold on until the end of that period. At present it is impossible for anyone to borrow, certainly for stocks and shares. Every hon. Member, I expect, has had letters from his bank manager asking him to reduce his overdraft because of the conditions created by this Government. By extending the six months' period I do not think we should be encouraging people to speculate.
    I urge the Chancellor to reconsider this Amendment which has been so reasonably proposed. I must agree with much that has been said, especially by the right hon. Member for Sutton Cold-field (Mr. Geoffrey Lloyd) in the light of his experience in the Wider Share Ownership Association. I urge on the Chancellor that the position of small investors is of critical importance. I am not concerned with the large speculator, who I think is already being caught by the 1962 Act. I supported that at the time. The person who is making money by a stagging operation, that is, applying for a new issue when he has not got the money to pay for it and immediately selling the allotment later when he receives the money, is already caught by the 1962 legislation.
    Similarly, so is a person dealing in options. I do not suppose that many are
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    doing so, because everything is going down on the Stock Exchange. A six months' period was adequate to deal with those people. It is much less worthwhile to them to do so now when, if they hang on for a longer period, they will be subject to the long-term Capital Gains Tax. I urge that this six months' period is perfectly adequate and I ask the Chancellor to think again about the Amendment.
    Mr. Norman St. John-Stevas: I support the Amendment. I agree with the hon. Member for Manchester, Cheetham (Mr. Harold Lever) that it would be much preferable to have no kind of short-term gains tax at all, but, since we are evidently to have it foisted upon us by the Government, the term should be made as short as is reasonably possible. We are entitled to criticise this period sharply despite the animadversions made by the hon. Member for Cheetham on the speech of my hon. Friend the Member for Worcester (Mr. Peter Walker) because he is a member of a party which, in totally different circumstances, introduced a Capital Gains Tax.
    I should have thought he would have been better employed looking to his own position because, after his statement about the injustice and unsuitability of any form of Capital Gains Tax, he should not only be supporting this Amendment but proposing one himself to eliminate the short-term Capital Gains Tax entirely from the Finance Bill.
    Mr. Harold Lever: Perhaps the hon. Member has not been long enough in the House to know that there is often a chronic dilemma for hon. Members. They have a choice between two evils. I would have a choice between a Capital Gains Tax and a Conservative Government if I helped to put out the Labour Government. No one in his right mind would have much difficulty in deciding which is the greater evil.
    5.45 p.m.
    Mr. St. John-Stevas: The point I am making is that the hon. Member made great play of the fact that it was a Conservative Government which introduced a Capital Gains Tax in the first place, but the conditions prevailing then were so different that this sort of argument is quite irrelevant. This short-term Capital

    77
    Gains Tax is being brought in in the context of the existence, or proposed existence, of a long-term Capital Gains Tax, whereas the original tax was produced under conditions in which there was no Capital Gains Tax of any kind existing.
    Presumably, the rationale of a short-term tax is to catch speculators. That was the point made by my hon. Friend the Member for Kidderminster (Sir T. Brinton) in an interjection. The purpose of the tax introduced by the Conservative Government was precisely this, and that is why it was limited to six months. It was not a totally successful tax. It was not successful because, although it did match speculators, it also caught a number of people who were not speculators and it therefore caused injustice. It is surely quite evident that if we have a period for a short-term tax which is double that originally introduced, it will double the likely amount of injustice which will be caused. This is a point which the Solicitor-General ignored altogether.
    It will work injustice, as my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) said, particularly or the small investor and particularly on the wage earner who is investing money. I was astonished to hear the remarks of the hon. Member for South Ayrshire (Mr. Emrys Hughes) when he poured scorn on the picture of thousands of small investors watching with the greatest anxiety the progress of our discussions because they feared that their savings might be affected. That is precisely what they are doing. They are doing so with reason because, after 13 years of Conservative Government, they have something to lose and they are afraid that they will lose it after six months of a Labour Administration.
    This was supplemented by the extraordinary implication made by the Solicitor-General that the average small investor is some form of speculator who is speculating and lending in land allotments.
    The Solicitor-General: I never said that.
    Mr. St. John-Stevas: I do not say that the hon. and learned Gentleman said it, but he implied it. Taken together,
    78
    those statements show how totally out of touch the present Government are with the actual situation of investing in the country as a whole. The force of the argument put forward by my hon. Friend the Member for Worcester is recognised by the Government in that they are reducing, or proposing to reduce, in this Bill the term of operation for the short-term tax in so far as it concerns land from three years to one year.
    This was a point made by the hon. Member for Barons Court (Mr. Richard). He raised the question of what the Conservative attitude was to the taxing of land speculators and asked if this would not mean that land speculators would go scot free. Of course it does not because this Amendment is moved in the context of the Bill as a whole and subject to the knowledge that there is another Clause in the Bill which will impose a long-term Capital Gains Tax on land acquisition as a whole. Therefore, this Amendment has everything to be said for it, not only in equity but also in logic. We have not heard one logical argument from the other side of the Committee against this Amendment nor one in denial or rebuttal of the very great injustice which this short-term Capital Gains Tax is likely to work.
    Mr. Hirst: The remarkable thing about the debate so far has been the speeches made by hon. Members opposite. The hon. Member for Barons Court (Mr. Richard) obviously had not remembered the 1962 Act and did not even know what the Conservative Government had done. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) I will pass over. He is a very good debater, but on this occasion he seemed to get hold of a bad point, and, realising it half way through, with that fertility of mind for which he is noted he twisted round the Royal Commission's Report in aid. For once he did not succeed. I was surprised at the Solicitor-General, because I am certain—this is the measure of my respect for him—that in his ordinary professional calling he would never have accepted such a bad brief but would have returned it. The brief he holds this afternoon should have been returned to the Treasury.
    What is so astounding is the attitude of mind of right hon. and hon. Members

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    opposite. Several of my hon. Friends have stressed this fact. I rise particularly because, although a good deal has been said already, I feel keenly that small investors need their spokesmen in the House of Commons. Their spokesmen are not right hon. and hon. Members opposite, who are out to do them down. I am sorry to disappoint the hon. Member for Cheetham, but I must say that I believe that there is a certain element of Left-wing menace about this. What else can explain the old-fashioned idea that speculators and investors are all rich, big barons? That attitude is so stupid.
    There are millions of small investors in this country. I am amazed at the number of people who have an interest in stocks and shares. The Conservative Party believes that it is a very good thing that people should have a greater realisation than they were able to have in the past of what happens in industry and of how far their welfare is tied up in it. One of the reasons why the United States goes ahead in many ways better than us is that the profit motive and all that goes with it and a belief in free enterprise and private enterprise permeate that whole society. That is a state of affairs which the Conservative Government tried to bring about in the last few years. The success of this effort can be measured by the fact that tens if not hundreds of thousands of ordinary working people have gone into investing in the equities of companies, often of the companies in which they work, and through various trusts and arrangements.
    I cannot think what the Solicitor-General was even implying with regard to small land speculators, unless the Government have something up their sleeves such as an investment trust for unit sods. Otherwise, I cannot imagine what is in the Solicitor-General's head. It is so stupid that that sort of brief should be presented as a serious argument. It is a disrespect to the Committee. I hope that the Financial Secretary will come to the Solicitor-General's aid and give us some satisfactory answer before we come to a decision on the Amendment. At present it seems that the Amendment will have to be pressed. Perhaps the Chancellor of the Exchequer should be sent for.
    I have said before—I repeat it—that we shall not make progress on the Bill
    80
    if we continue to receive from the Treasury Bench in reply to our serious arguments the type of argument we had from the Solicitor-General today. Our case has not been answered in one particular. Not one point which worries me has been satisfactorily answered. All we have had is a sort of waffle which has convinced nobody. I have enough respect for the Solicitor-General to know that his argument did not impress him either.
    Mr. Gower: On some occasions members of the Opposition who tackle Amendments are disappointed. On some occasions they are uncertain about what the Minister who responds to a debate means. On other occasions they are confused. This afternoon the Solicitor-General, perhaps unintentionally, succeeded in leaving us with all three qualities. He certainly did not convince us. He left us in great doubt and he confused us. As my hon. Friend the Member for Shipley (Mr. Hirst) reminded us, the Solicitor-General suggested that there would be great pleasure in the minds of some small investors because they could now hold land for a different period without being charged with a short-term capital gain. I assure the hon. and learned Gentleman that for every small investor who is pleased about this concession there will be thousands of other small investors who will be deeply worried about the extension of the short-term tax from six months to a year in the case of securities.
    The hon. Member for Manchester, Cheetham (Mr. Harold Lever), in his usual fluent manner, implied that the Amendment had been moved in an extravagant way. That is not an accurate charge. The Amendment was put forward by my hon. Friend the Member for Worcester (Mr. Peter Walker) in a very moderate way—in far too moderate a way, I thought. The hon. Member for Cheetham went on to say that we on this side seem to think that the Chancellor was a Socialist instructed by some Bolsheviks. The only uneasiness we have about one or two of the Government's economic advisers is the unhappy history of certain countries which relied upon their advice in the past.
    The true picture here is that in the context of the long-term Capital Gains Tax which the Chancellor of the Exchequer has now introduced a distinction can be shown. The hon. Member

    81
    for Cheetham seemed to think that because the Conservative Government a few years ago brought in a speculative gains tax—as my hon. Friend the Member for Kidderminster (Sir T. Brinton) said, a tax against speculators—that is a good reason why the Labour Party can justify extending its effect. The very existence of a long-term tax which will deal with the major problem would lessen rather than increase the need for this short-term tax. I agree with my hon. Friends that the need for this tax has now largely disappeared. Therefore, the case for the present Amendment is much stronger.
    My right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) stressed the importance of this matter to small investors. I believe that he understated the extent of the extension of share ownership. My right hon. Friend explained how it has extended in the industrial Midlands. I know of several cases where large numbers of the staffs at municipal town halls have combined in savings investment clubs. I know of an industrial trading estate where large numbers of the employees are associated in a similar form of investment club. The party opposite underestimates the effect of this on the minds of so many potential and actual investors. It is very unfortunate that expression is now being given to this attitude and that this spirit is permeating legislation, because the Conservative Party succeeded in laying the seeds for a vast extension of investment and ownership by ordinary people. This was the first root of a new growth—a salutary, health development.
    It may be that this very development is being sadly threatened. It may be that the very people who need to be encouraged will be deterred. Some small investors who have newly entered into investment are anxious people; they are people with slender means and limited resources. A few blows like this could deter them for ever. I sincerely hope that right hon. and hon. Members opposite will pay some attention to the virtues of share ownership and investment by ordinary people. Or is it that there is still the old feeling of antipathy towards capital and investment? Is the "Old Nick" still alive? Is this a predominant factor lurking in the minds of right hon. and hon. Members
    82
    opposite which prevents them from taking our attitude towards wider investment?
    Mr. Harold Lever: Does the hon. Gentleman wish to persist in the charge that the Labour Government are anti-investment and anti-investor, in view of the fact that nearly every large trade union—trade unions are in very close touch with the Government—holds substantial quantities of ordinary shares?
    6.0 p.m.
    Mr. Gower: No, I said that I sincerely hoped that they will take the view that this is a flower to be nurtured and cultured, but I then suggested, alternatively, that they might not be capable of taking that point of view. I sincerely hope that the hon. Gentleman is correct and that hon. Members opposite will not adopt a partisan approach. I hope they will take every possible step to encourage wider investment by ordinary people with ordinary resources, and I hope their legislation will be adopted to encourage that process.
    For those reasons, I have no hesitation in supporting the Amendment and in hoping that my right hon. and hon. Friends will press it to a Division.
    Mr. Stratton Mills: I wish to make a brief comment on the speech of the Solicitor-General which was, I thought, a very poor speech indeed. He said that because the Conservative Party had introduced a short-term Capital Gains Tax for a period of six months we therefore accepted the principle of the tax, which is partly right, but then he went on to argue that if we accept a period of six months we must then accept a period of 12 months. One can extend that argument to 2, 3, 5 or 10 years. I hope that the hon. and learned Gentleman will think a little more carefully before submitting this kind of argument at later stages of the Bill.
    It is distressing to notice in the contributions from the benches opposite an attitude which was, I thought, well put forward by the hon. Member for South Ayrshire (Mr. Emrys Hughes), which does not seem to encourage the spread of share ownership. This is most distressing indeed. Certainly we on this side of the Committee wish to encourage the spread of wealth, and this is a good way of doing it. But in this new age in which

    83
    we see a wider spread of share ownership the Luddites on the benches opposite have nothing to contribute.
    Mr. Heath: The first debate in the Committee on the Capital Gains Tax sections of the Bill has given us a detailed and extraordinarily interesting view of these problems. The debate has covered quite a wide field and has brought a considerable number of interesting arguments, not least from the other side of the Committee.
    It was, therefore, all the more disappointing that we heard such a poor attempt by the Solicitor-General, if I may say so with respect to him, to answer these detailed points. In fact, I do not think the Solicitor-General really attempted to answer the points at all. I think the Committee felt that after beginning to despair of the Financial Secretary to the Treasury for three days last week, after hearing the Minister without Portfolio on Thursday night and Friday morning, and now having listened to the Solicitor-General, we would really rather return to the Treasury Ministers to see what they can do to help us.
    The Solicitor-General has this remarkable quality of great calmness and courtesy in making a good brief seem ineffective, and when he gets a really bad brief such as he has had this evening we have all seen what the results are. He has not even answered the few points that his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) put to him, some of which were also put by my hon. Friends.
    It was a very interesting discussion, as to whether in the case of a long-term Capital Gains Tax there ought to be any separate short-term Capital Gains Tax at all. The hon. Member for Cheetham and, I understand, the Solicitor-General tried to make the point that we ought not to have used the argument about the minority Report in saying that the Government should have reduced the period for securities to six months. I find this is baffling. As the Government have taken the minority Report and have followed it in every detail with this one exception, we are entitled to point out that they have not followed it completely and that in their approach to short-term capital gains they have made the situation worse.
    84
    What argument did the Solicitor-General use? First, he tried to develop the argument that the Government were doing what the United States President had recommended. He then hastily had to withdraw the argument when it was pointed out that the United States Congress had not accepted the argument and that the United States was not following this procedure in any case.
    The Solicitor-General: I went on to say that this had not been accepted by Congress. None the less the views expressed by the President were relevant to our present discussion.
    Mr. Heath: The views may have been relevant, but they do not seem to have been operative. We are not suggesting they should be operative either.
    I should like to comment on a few points expressed by the hon. Member for Cheetham when he was dealing with the nature of this tax. Of course, there is this difference, that even under this Bill, even with the short-term tax we are dealing with business assets and with chattels. This, therefore, is a much wider and much more penalising tax than the one introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) because this is, as we have said all along, an all-embracing tax. Many of my hon. Friends have emphasised its impact on the movement for wider share ownership and the small investor. Most of us found it difficult to be wholeheartedly convinced by the Solicitor-General's enthusiasm for the small investor in land. In the experience of most of us, this is not one of the things which occupy the attention of the small investor to any great extent.
    Mr. Harold Lever: It seems to me that it would be helpful if the right hon. Gentleman would answer the points I made rather than those which I did not make in relation to the previous tax. Perhaps he would give us his opinion about the point that I did make. Does he think it lies in the mouth of Conservative Front Benchers to complain that my right hon. Friend is being spiteful in not allowing against Income Tax and Surtax losses in respect of activities which, if they are profitable, cause Surtax and Income Tax to apply to them, having regard to the identical position having been taken up

    85
    in the 1962 Act by the Conservative Government?
    Mr. Heath: I appreciate the point. I was trying to indicate to the hon. Gentleman, with a subtlety which I thought he would have appreciated, that this is a more penalising tax because it includes business assets and chattels. That is what my right hon. and learned Friend meant when he said that it was a more penalising tax.
    There is also a lack of understanding amongst hon. Members opposite of the importance of this matter to small investors. Hon. Members opposite are always so scornful of these matters. One should consider the man earning £2,000 a year or £40 a week which, after all, is not an extravagant amount in these times, who decides to save for his holidays and for this purpose invests in a unit trust. He does that for 11 months of the year for his holiday and realises it before the year is out. Under this arrangement he has to pay Capital Gains Tax and he has to pay at the Surtax level because it ranks as unearned income. I hope the Financial Secretary is not going to fall into the pit which the Solicitor-General digs for himself with every sentence that he utters. This is an example of what happens in our society as a result of the improvement in incomes today.
    What answers did the Solicitor-General give us? He gave two answers which he delivered with great force, vigour and profundity.
    First of all, he said that what we are doing in this Bill is equalising the time in respect of land and securities. We recognise that from reading the Bill. He gave no reason why there should be this equalisation. He did not think there was any difference between land and securities, but we all know that, taken separately, there are considerable differences. But the hon. and learned Gentleman said "No, they are equalising." He has obviously been convinced of that fact. He said with equal force that it should be dealt with in the normal financial year and that this is convenient for administration.
    Does he expect us to be convinced by this, in the light of the arguments put forward by the hon. Member for Orpington (Mr. Lubbock)? The only arguments that the Solicitor-General has been able to produce are those two well-known administrative hobby-horses—"We are equalising the situation "and" "We are dealing with it a year at a time because it is administratively convenient." I must tell the hon. and learned Gentleman that we are not in the least convinced by this. He has given us no intellectual satisfaction and no practical reason of any kind for the measure taken in the Bill. Therefore I advise my hon. and right hon. Friends to divide the Committee.
    Question put, That "twelve" stand part of the Clause:—
    The Committee divided: Ayes 199, Noes 187.

    Division No. 124.]

    AYES

    [6.11 p.m.

    Allaun, Frank (Salford, E.)

    Crosland, Anthony

    Ford, Ben

    Allen, Scholefield (Crewe)

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

    Fraser, Rt. Hn. Tom (Hamilton)

    Atkinson, Norman

    Cullen, Mrs. Alice

    Freeson, Reginald

    Bacon, Miss Alice

    Dalyell, Tam

    Calpern, Sir Myer

    Beaney, Alan

    Darling, George

    Garrett, W. E.

    Benn, Rt. Hn. Anthony Wedgwood

    Davies, G. Elfed (Rhondda, E.)

    Garrow, A.

    Bennett, J. (Glasgow, Bridgeton)

    Davies, Harold (Leek)

    Gower, Raymond

    Binns, John

    Davies, Ifor (Gower)

    Gregory, Arnold

    Bishop, E. S.

    Davies, S. O. (Merthyr)

    Grey, Charles

    Blackburn, F.

    Dell, Edmund

    Griffiths, David (Rother Valley)

    Blenkinsop, Arthur

    Diamond, John

    Hamilton, William (West Fife)

    Boardman, H.

    Dodds, Norman

    Hannan, William

    Boston, T. G,

    Doig, Peter

    Harper, Joseph

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

    Driberg, Tom

    Hart, Mrs. Judith

    Braddock, Mrs. E. M.

    Duffy, Dr. A. E. P.

    Hattersley, Roy

    Bray, Dr. Jeremy

    Edelman, Maurice

    Hazell, Bert

    Broughton, Dr. A. D. D.

    Edwards, Robert (Bilston)

    Heffer, Eric S.

    Brown, Rt. Hn. George (Belper)

    English, Michael

    Henderson, Rt. Hn. Arthur

    Ennals, David

    Brown, Hugh D. (Glasgow, Provan)

    Ensor, David

    Herbison, Rt. Hn. Margaret

    Brown, R. W. (Shoreditch &amp; Fbury)

    Evans, Albert (Islington, S.W.)

    Holman, Percy

    Butler, Herbert (Hackney, C.)

    Evans, Ioan (Birmingham, Yardley)

    Houghton, Rt. Hn. Douglas

    Callaghan, Rt. Hn. James

    Finch, Harold (Bedwellty)

    Howarth, Robert L. (Bolton, E.)

    Castle, Rt. Hn. Barbara

    Fletcher, Sir Eric (Islington, E.)

    Hoy, James

    Chapman, Donald

    Fletcher, Ted (Darlington)

    Hughes, Cledwyn (Anglesey)

    Coleman, Donald

    Fletcher, Raymond (Ilkeston)

    Hughes, Emrys (S. Ayrshire)

    Craddock, George (Bradford, S.)

    Floud, Bernard

    Hunter, Adam (Dunfermline)

    Crawshaw, Richard

    Foley, Maurice

    Hunter, A. E. (Feltham)

    Cronin, John

    Foot, Sir Dingle (Ipswich)

    Hynd, H. (Accrington)

    Hynd, John (Attercliffe)

    Morris, John (Aberavon)

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

    Irving, Sydney (Dartford)

    Murray, Albert

    Silkin, S. C. (Camberwell, Dulwich)

    Janner, Sir Barnett

    Newens, Stan

    Silverman, Julius (Aston)

    Jeger, George (Goole)

    Noel-Baker, Francis (Swindon)

    Silverman, Sydney (Nelson)

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

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

    Slater, Mrs. Harriet (Stoke, N.)

    Jenkins, Hugh (Putney)

    Norwood, Christopher

    Slater, Joseph (Sedgefield)

    Jenkins, Rt. Hn. Boy (Stechford)

    Oakes, Gordon

    Small, William

    Jones, Dan (Burnley)

    Ogden, Eric

    Snow, Julian

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

    O'Malley, Brian

    Soskice, Rt. Hn. Sir Frank

    Kelley, Richard

    Orbach, Maurice

    Stewart, Rt. Hn. Michael

    Leadbitter, Ted

    Orme, Stanley

    Stones, William

    Lever, Harold (Cheetham)

    Oswald, Thomas

    Swain, Thomas

    Lever, L. M. (Ardwick)

    Owen, Will

    Swingler, Stephen

    Lewis, Arthur (West Ham, N.)

    Page, Derek (King's Lynn)

    Taylor, Bernard (Mansfield)

    Lipton, Marcus

    Pannell, Rt. Hn. Charles

    Thomas, George (Cardiff, W.)

    Lomas, Kenneth

    Pargiter, G. A.

    Thornton, Ernest

    Loughlin, Charles

    Parkin, B. T.

    Tinn, James

    McCann, J.

    Pavitt, Laurence

    Tuck, Raphael

    MacColl, James

    Pearson, Arthur (Pontypridd)

    Varley, Eric G.

    MacDermot, Niall

    Peart, Rt. Hn. Fred

    Wainwright, Edwin

    McGuire, Michael

    Pentland, Norman

    Walden, Brian (All Saints)

    McInnes, James

    Popplewell, Ernest

    Walker, Harold (Doncaster)

    Mackenzie, Gregor (Rutherglen)

    Price, J. T. (Westhoughton)

    Wallace, George

    Mackie, John (Enfield, E.)

    Pursey, Cmdr. Harry

    White, Mrs. Eirene

    McLeavy, Frank

    Randall, Harry

    Whitlock, William

    MacMillan, Malcolm

    Rankin, John

    Wilkins, W. A.

    MacPherson, Malcolm

    Redhead, Edward

    Willey, Rt. Hn. Frederick

    Mahon, Simon (Bootle)

    Rees, Merlyn

    Williams, Mrs. Shirley (Hitchin)

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

    Reynolds, G. W.

    Williams, W. T. (Warrington)

    Manuel, Archie

    Rhodes, Geoffrey

    Willis, George (Edinburgh,E.)

    Mayhew, Christopher

    Roberts, Albert (Normanton)

    Wilson, William (Coventry, S.)

    Mellish, Robert

    Robertson, John (Paisley)

    Winterbottom, R. E.

    Mendelson, J. J.

    Rogers, George (Kensington, N.)

    Woodburn, Rt. Hn. A.

    Mikardo, Ian

    Rose, Paul B.

    Woof, Robert

    Millan, Bruce

    Ross, Rt. Hn. William

    Yates, Victor (Ladywood)

    Milne, Edward (Blyth)

    Rowland, Christopher

    Zilliacus, K.

    Molloy, William

    Sheldon, Robert

    Monslow, Walter

    Shinwell, Rt. Hn. E.

    TELLERS FOR THE AYES:

    Morris, Charles (Openshaw)

    Shore, Peter (Stepney)

    Mr. George Lawson and

    Mr. William Howie.

    NOES

    Agnew, Commander Sir Peter

    Curran, Charles

    Hirst, Geoffrey

    Alison, Michael (Barkston Ash)

    Dalkeith, Earl of

    Hobson, Rt. Hn. Sir John

    Aliason, James (Hemel Hempstead)

    Davies, Dr. Wyndham (Perry Barr)

    Hogg, Rt. Hn. Quintin

    Anstruther-Gray, Rt. Hn. Sir W.

    d'Avigdor-Goldsmid, Sir Henry

    Hooson, H. E.

    Awdry, Daniel

    Deedes, Rt. Hn. W. F.

    Hordern, Peter

    Baker, w. H. K.

    Digby, Simon Wingfield

    Howe, Geoffrey (Bebington)

    Barber, Rt. Hn. Anthony

    Douglas-Home, Rt. Hn. Sir Alec

    Hunt, John (Bromley)

    Barlow, Sir John

    Elliot, Capt. Walter (Carshalton)

    Hutchison, Michael Clark

    Batsford, Brian

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

    Iremonger, T. L.

    Beamish, Col. Sir Tufton

    Eyre, Reginald

    Irvine, Bryant Godman (Rye)

    Bell, Ronald

    Fell, Anthony

    Jenkin, Patrick (Woodford)

    Bessell, Peter

    Fletcher-Cooke, Charles (Darwen)

    Jennings, J. C.

    Biggs-Davison, John

    Fletcher-Cooke, Sir John (S'pton)

    Johnson Smith, G. (East Grinstead)

    Birch, Rt. Hn. Nigel

    Foster, Sir John

    Kerby, Capt. Henry

    Black, Sir Cyril

    Galbraith, Hn. T. G. D.

    Kilfedder, James A.

    Boyd-Carpenter, Rt. Hn. J.

    Gammans, Lady

    King, Evelyn (Dorset, S.)

    Boyle, Rt. Hn. Sir Edward

    Giles, Rear-Admiral Morgan

    Kirk, Peter

    Brewis, John

    Gilmour, Ian (Norfolk, Central)

    Lagden, Godfrey

    Brinton, Sir Tatton

    Glover, Sir Douglas

    Lambton, Viscount

    Bromley-Davenport,Lt.-Col.Slr Walter

    Goodhew, Victor

    Lancaster, Col. C. G.

    Gower, Raymond

    Lewis, Kenneth (Rutland)

    Brooke, Rt. Hn. Henry

    Grant, Anthony

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

    Buck, Anthony

    Grant-Ferris, R.

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

    Bullus, Sir Eric

    Gresham-Cooke, R.

    Burden, F. A.

    Griffiths, Eldon (Bury St. Edmunds)

    Lloyd, Rt. Hn. Selwyn (Wirral)

    Buxton, R. C.

    Grimond, Rt. Hn. J.

    Longbottom, Charles

    Campbell, Gordon

    Gurden, Harold

    Longden, Gilbert

    Carr, Rt. Hn. Robert

    Hall, John (Wycombe)

    Lubbock, Eric

    Cary, Sir Robert

    Hall-Davis, A. G. F.

    McAdden, Sir Stephen

    Chichester-Clark, R.

    Harris, Frederic (Croydon, N.W.)

    MacArthur, Ian

    Clark, William (Nottingham, S.)

    Harris, Reader (Heston)

    Mackenzie, Alasdair (Ross&amp;Crom'ty)

    Cole, Norman

    Harrison, Brian (Maldon)

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

    Cooke, Robert

    Harrison, Col. Sir Harwood (Eye)

    Macleod, Rt. Hn. Iain

    Cooper, A. E.

    Harvey, Sir Arthur vere (Macclesf'd)

    McMaster, Stanley

    Cooper-Key, Sir Neill

    Harvey, John (Walthamstow, E.)

    McNair-Wilson, Patrick

    Cordle, John

    Harvie Anderson, Miss

    Maltland, Sir John

    Corfield, P. V.

    Hawkins, Paul

    Marten, Neil

    Costain, A. P.

    Hay, John

    Mathew, Robert

    Craddock, Sir Beresford (Spelthorne)

    Heath, Rt. Hn. Edward

    Maude, Angus

    Crawley, Aidan

    Higgins, Terence L.

    Maxwell-Hyslop, R. J.

    Cunningham, Sir Knox

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

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

    Meyer, Sir Anthony

    Pym, Francis

    Thomas, Sir Leslie (Canterbury)

    Mills, Peter (Torrington)

    Ramsden, Rt. Hn. James

    Thompson, Sir Richard (Croydon,S.)

    Mills, Stratton (Belfast, N.)

    Redmayne, Rt. Hn. Sir Martin

    Turton, Rt. Hn. R. H.

    Mitchell, David

    Rees-Davies, W. R.

    Tweedsmuir, Lady

    Monro, Hector

    Ridley, Hn. Nicholas

    van Straubenzee, W. R.

    Morrison, Charles (Devizes)

    Roberts, Sir Peter (Heeley)

    Walder, David (High Peak)

    Mott-Radclyffe, Sir Charles

    Robson Brown, Sir William

    Walker, Peter (Worcester)

    Munro-Lucas-Tooth, Sir Hugh

    Roots, William

    Walker-Smith, Rt. Hn. Derek

    Neave, Airey

    Russell, Sir Ronald

    Walters, Dennis

    Noble, Rt. Hn. Michael

    St. John-Stevas, Norman

    Ward, Dame Irene

    Onslow, Cranley

    Sandys, Rt. Hn. D.

    Webster, David

    Orr-Ewing, Sir Ian

    Shepherd, William

    Wells, John (Maidstone)

    Osborn, John (Hallam)

    Sinclair, Sir George

    Whitelaw, William

    Page, John (Harrow, W.)

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

    Williams, Sir Rolf Dudley (Exeter)

    Page, R. Graham (Crosby)

    Smyth, Rt. Hn. Brig. Sir John

    Wills, Sir Gerald (Bridgwater)

    Pearson, Sir Frank (Clitheroe)

    Spearman, Sir Alexander

    Wilson, Geoffrey (Truro)

    Percival, Ian

    Stainton, Keith

    Wise, A. R.

    Peyton, John

    Stanley, Hn. Richard

    Wolrige-Gordon, Patrick

    Pike, Miss Mervyn

    Steel, David (Roxburgh)

    Woodnutt, Mark

    Pitt, Dame Edith

    Stoddart-Scott, Col. Sir Malcolm

    Wylie, N. R.

    Pounder, Rafton

    Taylor, Sir Charles (Eastbourne)

    Powell, Rt. Hn. J. Enoch

    Taylor, Frank (Moss Side)

    TELLERS FOR THE NOES:

    Prior, J. M. L.

    Thatcher, Mrs. Margaret

    Mr. Martin McLaren and

    Mr. Jasper More.

    Mr. John Hall: I beg to move Amendment No. 191, in page 11, line 16, to leave out subsection (2) and to insert:
    (2) Tangible, moveable property shall not be a chargeable asset.
    The Temporary Chairman: I think that it would be for the convenience of the Committee to discuss at the same time the following two Amendments: Amendment No. 258, in page 11, line 24, at end insert:
    "but vehicles classified as vintage vehicles either used or on display shall not be a chargeable asset".
    Amendment No. 246, in page 11, line 24, at end insert:
    (4) Livestock shall not be a chargeable asset.
    Mr. Hall: I confess that I am a little sorry that it has been arranged to take these two further Amendments at the same time because they refer to separate and special points which ought not to be lost sight of in the general debate on the main subject arising under the Amendment which I have moved, that is, the exclusion of tangible, moveable property. I shall refer to Amendments Nos. 258 and 246 only in passing, because I am sure that several of my hon. Friends will have a good deal to say about them. I hope that my hon. Friend the Member for Twickenham (Mr. Gresham Cooke), who has specialised knowledge of mechanical horse-power, will have much to say about vintage and veteran cars, and I hope that my hon. Friend the Member for Worthing (Mr. Higgins) will have the opportunity to come in on Amendment No. 246, which relates to live horse-power, to livestock.
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    The Amendment to exclude vintage cars arose because our attention was drawn to the fact that the Clause as at present drafted might in fact—I am sure that it was quite unintentional—cover vintage and veteran cars which had been bought and accumulated for a museum. The Montagu Motor Museum drew attention to this matter, pointing out that the British motor industry had failed to establish its own motor museum and the Montagu Motor Museum, at the cost of considerable money and effort, had brought together a number of vintage and veteran cars. It would be most distressing if, as a result of these provisions, Capital Gains Tax were imposed on these cars and the museum had to be broken up in consequence. I am sure that the Committee will agree that this would be a disastrous consequence. In a sense, Amendment No. 258 is a probing Amendment. I am not sure that the Clause as drafted would have that effect, and it is important to be quite certain that it has not.
    The Financial Secretary to the Treasury (Mr. Niall MacDermot): In the hope of shortening the debate—we have many matters to attend to—it might be helpful if I made clear at once that it is certainly not the intention to impose this tax on sales of vintage cars. I give that assurance now. We can discuss the details later on the Amendment.
    Mr. Hall: The Committee will be delighted to hear that. I do not know whether that assurance covers both vintage and veteran cars.
    Mr. MacDermot Mr. MacDermot indicated assent.
    Mr. Hall: I understand that veteran cars may well be older than vintage cars. There is a distinction, although, not being a user of a vintage or veteran car, I find it a little difficult to understand. At one time, I had a veteran or vintage car with a very large horsepower, although most of the horses had died over the years.
    Before deploying my arguments on Amendment No. 191, I have two preliminary comments to make. At the beginning of the Committee stage today, my right hon. Friend the Member for Bexley (Mr. Heath) pointed out that the Committee was in some difficulty in having to consider the short-term Clauses under Part II before we had considered Part III. I realise that, according to the order of the Bill, we should consider Clauses 16 and 17 first, but this does produce certain problems. Clause 18, which I regard as the charter Clause, together with the Clauses which follow in Part III, establishes the principles on which the new Capital Gains Tax is to be based, and it is in relation to those principles that the Amendments relating to Clauses 16 and 17, which make amendments to the 1962 Act, arise. Therefore, there will be some difficulty in discussing the Amendments to Clauses 16 and 17 because they affect later Clauses governing long-term gains as well as short-term gains. The arguments are not necessarily the same although they must to some extent overlap.
    I mention this because we on this side must reserve our position here. During the debate on these Amendments, there is bound to be a considerable amount of overlapping between the arguments to be deployed on Clauses 16 and 17 and those to be deployed on later Clauses touching a similar point but relating to long-term rather than short-term gains. It would be distressing if, when we came to the later Clauses, we were not able to re-deploy many of the arguments which might have overlapped as well as additional arguments covering the long-term aspect of the same problem. That matter may crop up later, and that is why I make the point now.
    My second preliminary point arises out of an intervention by the hon. Member for South Ayrshire (Mr. Emrys Hughes) in our previous debate when he invited Members of the Committee to declare
    92
    their interest. It struck me that he was asking for a very wide declaration of interest, because a good many hon. Members on both sides are likely to be affected, directly or indirectly, by these tax provisions. It is rather like asking us to declare an interest when we are debating the Income Tax Clauses. I except for the moment Surtax Clauses. However, in deference to the hon. Gentleman's wish—I have a great respect for him and I wish he were here to listen—I declare my own interest.
    I have, among other things, some rather nice Georgian silver which was given to me at the time of my wedding and other times at a period when people used to give silver before other things caught up with them. Over many years, this silver has cost me a great deal in maintenance, having it cleaned, burnished and looked after. If I were to sell it—I have no intention of doing so—I think that, taking into account the cost of maintenance over the years in relation to the original value of the articles—I should probably sustain a capital loss, and I wonder whether I might be able to claim for it. To safeguard my own position, because I know that the modern criminal is a highly educated man who reads HANSARD, I hasten to say that such pieces of Georgian silver of any value which I have are safely in the bank. I do not want to be visited by any enterprising person who reads the report of this debate.
    Clause 16 extends the existing short-term Capital Gains Tax under Case VII of Schedule D of the 1962 Act, which was, in effect, a speculative gains tax. I emphasise that. When it was introduced, it was a speculative gains tax. It was not regarded by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) as a Capital Gains Tax. Clause 16 extends this tax to cover all assets except chattels of value under £1,000. Moreover, as we note with regret from our last Vote, it extends the time limit from six months to 12 months. It does something else which was not done under the 1962 Act: it makes short-term gains liable not only to Income Tax but to Surtax. This goes even further than the suggestion of the minority of the Royal Commission who specifically said in their Minority Report—I think that it is paragraph 61—that such gains should

    93
    be exempt from Surtax and should be liable only to Income Tax.
    As in other cases, the Government are now proposing fiscal measures which other countries have tried and found unworkable. Other nations are now beginning to depart from an attempt to tax chattels. To include chattels is to fly in the face of experience gained by other countries which have had a Capital Gains Tax in one form or another for some years. The experience of the United States has been referred to on several occasions, but hon. and right hon. Members opposite will know that the United States Treasury has long since abandoned the attempt to collect tax on chattels except in certain special cases.
    6.30 p.m.
    The yield from the personal—I stress that word—Capital Gains Tax even in the United States, where it is probably higher than in other countries which have such a tax, is small. As far as my information goes, the yield in the United States is about 2–5 per cent. of the total tax revenue. Within that figure the yield from the tax on chattels, the most important part presumably being works of art, is probably minute. It would be interesting to be told what yield the United States treasury has been able to obtain from the tax on chattels and particularly from the tax as it applies to works of art. I assume—indeed, I am sure—that the Treasury investigated these facts before deciding to impose the tax and must have thought it was worth while to do so and that the Revenue would be worth the trouble of getting it. It would be interesting to discover from the experience of the United States what tax revenue is obtained from the sources I have mentioned.
    One of the things which worry me about the proposal to include chattels is how it is proposed to administer it. The Committee should be told. If, as I suspect, the administration will be unworkable and unjust in its effects, we should not have it. We have had many experiences of taxation imposed by Governments of all parties which in the end were found to be unworkable, impinged harshly on certain sections of the community and produced situations which brought the tax law into disrepute. We
    94
    do not want to increase the number of examples of that kind.
    Am I not right in assuming that the proposals will impose an intolerable burden on the Inland Revenue? Apart from the requirements in Schedule 9 which call for returns from auctioneers and valuers in the case of transactions in excess of £1,000, it authorises in paragraph 13 an inspector or other officer of the Board to enter a private house and inspect property for valuation purposes. This is a departure from what we are accustomed to. Who is to be the "other officer"? Will an inspector of the Inland Revenue visit the house accompanied by a valuer? It will be difficult to get enough valuers to cover the whole range of personal chattels.
    Another point of great interest from Schedule 9—I have to mention the Schedule because it has some effect upon the Amendment—is that there is a right of access for these officers at such reasonable times as the Board may consider necessary. In other words, the Board of Inland Revenue will be able to decide when it shall send an inspector or other officer to any individual's house or place of business where the chattels may be situated to look at those chattels in the person's possession with a view to valuing them or to see whether he still has them or has disposed of them. It would be interesting to know what would be regarded as a reasonable time. If an inspector visited me in the middle of my lunch, he would get a very dusty reception, and so he would if he visited me without previous notice. We ought to know exactly how this will work.
    It appears that the Inland Revenue will be asked to undertake a very distasteful and embarrassing task. It will be used in a way which will arouse considerable enmity and dislike on the part of taxpayers. No one appreciates more than I do the tremendous burden so often placed on Inland Revenue officers and the conscientious way in which they attempt to carry out their duties and, despite the impression sometimes conveyed to the contrary, try to be of assistance to the taxpayer in unravelling his taxation problems. It is not easy for tax inspectors to have really good, warm relations with the public despite the great efforts they make to be helpful, but this will destroy any

    95
    relations that they have with the public. If power is to be given to them to go into people's private homes, to demand to be given access at times which seem reasonable to the Board, to inspect people's property, to see whether they have still got it or have disposed of it, or even to value property which might be there, it will make life very difficult indeed for the Inland Revenue. I am sure that this is not a burden that the Inland Revenue wishes particularly to carry, and that if we asked it whether it wished to be included in these provisions, it would say "No".
    It will be impossible to carry out inspection and investigation into the whole range of chattels. Therefore, what will probably happen will be that the Inland Revenue will concentrate upon what are loosely described as works of art. Here we can perceive the hidden hand of the master. There was a book, which I am sure that hon. Gentlemen on both sides and particularly hon. Gentlemen opposite have read, entitled "An Expenditure Tax", which was published in 1955. I do not need to quote the author, I am sure that he is well known. In one paragraph where he is referring to possible taxation on works of art, he says:
    "Meanwhile wealthy individuals are artificially encouraged to buy valuables—from stamps and diamonds to old masters—and to enjoy them in private, rather than to invest their savings in productive channels."
    This, apparently, is the attitude of mind of hon. Gentlemen opposite—that one should not invest money in beautiful things, whether stamps, diamonds, paintings, old books, silver or glass, and that one should divert one's savings to more productive channels.
    Mr. Harold Lever: It does not say that.
    Mr. Hall: It refers to people investing their savings in productive channels.
    Mr. Lever: What the author is complaining about is the artificial inducement so to do. He is not complaining about innocent enjoyment of diamonds, works of art, and so on. He is complaining about a tax system which artificially encourages people to buy those things rather than invest their money in more productive channels.
    Mr. Hall: The hon. Gentleman can place whatever construction he likes on the article. He has already placed certain constructions on parts of the Royal Commission Report which do not find general acceptance. I have merely quoted what seems to be the attitude of mind of hon. Members opposite.
    I do not intend to deploy all the arguments against applying the Capital Gains Tax to works of art, certainly not in any detail. I shall leave that to colleagues of mine who are better versed in the world of art than I am and know far more about it than I do. I am collector in a very modest and restricted way and would not say that my experience of art collecting entitled me to make any profound observations about this problem, but I think that I can summarise some of the problems which the Inland Revenue will meet. These must be apparent to anybody who uses common sense in looking at the problems without necessarily having any special experience of the operations of the art world.
    First, it seems to me that if there is to be a swingeing Capital Gains Tax upon the sale of works of art which can fetch any price in the market today—we have had examples of very high prices paid for certain paintings and other works of art over recent years—their possessors will be very reluctant to declare them. Surely this will mean reluctance to have loan exhibitions and to allow visitors to look at the pictures in the galleries at large houses.
    I see that hon. Members smile, but in many houses there are valuable paintings that have been in the family for many years, perhaps for centuries, and the existence of which may not be generally known. They may be listed only in an art lover's catalogue or known in a very limited circle. If that is so, the owner will be very reluctant to bring them to the notice of the authorities by encouraging visitors to go and see them.
    Mr. J. Grimond: Are we not discussing short-term gains? If a picture has been in the possession of a family for many generations, will it come under this Clause?
    Mr. Hall: This is one of the problems we are discussing, concerning short-term capital gains. It also covers, as I said

    97
    earlier, the problems of the long-term as well as those of the short-term. There is bound to be overlapping which must be taken into account, because chattels can be long-term as well as short-term.
    Mr. J. J. Mendelson: The hon. Gentleman says that some of these priceless paintings have not been seen by anyone for a long time. Would the situation therefore be much worse than it is now, if what the hon. Gentleman claims proved to be correct? Is it his suggestion that pictures on view now will be shut off and no one allowed to see them? Can we not come now to the point of the Clause?
    Mr. Hall: Perhaps I have not made myself sufficiently clear to the hon. Gentleman. Let us consider a short-term example. A painting is acquired abroad by an art lover. It might increase in value even within 12 months. Indeed, since there seem to be curious movements in the art world, even within a few weeks there might be a direct capital appreciation. Certainly there will be a substantial appreciation some years later. That is a possible and feasible example.
    Such a collector will be very reluctant to put that work of art on show—that is all I am saying. [HON. MEMBERS: "Why?"] Because if he does it becomes known that he owns a certain painting and it will also become known that he is selling it, when he will become liable to Capital Gains Tax. It may be that in all equity he should disclose it, under this Clause, but I say that this Clause will encourage that kind of evasion and make it much more difficult for people to show works of art collected from now onwards.
    Then there is the serious effect that the Clause may have upon London as a great centre for works of art. If works of art bought and sold in the markets of London are to become subject to this tax then those who wish to buy will go outside the country to do so. The Clause will also produce an appallingly difficult problem of valuation. How does one value these things? I will give an example because it explains the difficulty that a Government valuer has at times in assessing the true value of a work of art.
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    The Government were offered a Louis XVI commode in December, 1960, in settlement of death duties totalling £22,000. The Government valuer decided that this was too high a valuation and the offer was refused. It was sold by auction in May, 1962, for £33,000. What will be the position in a transaction of that kind under this Clause? The Government valuer in that case said that the commode was not worth £22,000, yet it was disposed of later for £33,000, producing a substantial capital appreciation on which, under this proposal, the Capital Gains Tax would now be payable. Presumably valuation will be applicable at the time of acquisition.
    6.45 p.m.
    If the Government valuer was correct in the case of the commode, there was a most remarkable increase in its value in a short period. If the original value was wrong, as it would appear to have been, then, under this Clause, the seller of the work would be charged Capital Gains Tax quite wrongly because the Government valuer had under-valued the commode in the first place.
    The Government will be placing a very considerable burden on the valuers they are able to obtain. In many cases they will have to visit homes in order to he able to value works of art. In the case of paintings they may have to take them away for X-ray and other tests to see whether they are genuine Old Masters or not. All this seems to be an invitation to concealment. The Government will be inviting people in a sense to try to evade the law by concealing the acquisition of works which might be of value. They will invite these people to conceal disposal of works of art and chattels and there are many ways in which this can be done.
    For instance, they can be sold to a foreign nominee or disposed of abroad in various ways. The Government are inviting people to conceal acquisition of works of art, despite their attempt to get auctioneers and others to give information to the Government—it will be interesting to know in what form. It will be difficult to insist on a dealer who sells a work of art to a customer for auction demanding proof of identity of the purchasers so that he can give information to the Inland Revenue.

    99
    There are a number of ways which one can think of, without straining one's intelligence too much, by which the Bill's provisions can be evaded. It is fundamentally wrong to insert a Clause in any Bill which can easily be evaded or is an invitation to evasion. If one does so, it brings the law into disrepute. If it becomes increasingly clear that there are 101 ways of getting round the law in this respect, then a great deal of damage will be done to the fiscal law. There are many ways of getting round the £1,000 gift provision, but I will not suggest them to the Committee, for I want to keep one or two up my own sleeve. But no doubt there are hon. Members on both sides who can suggest ways themselves. Then again, if one wants to establish a value for a work of art in one's possession one can often do it by a false auction which establishes a false value. There are various tricks of this kind.
    Would not the Chancellor agree that to introduce for the first time capital gains legislation on tangible movable property—in other words, chattels—is really an encouragement of spivs and snoopers, will bring the law into contempt and will produce for the Inland Revenue an impossible and embarrassing task? Would not the right hon. Gentleman further agree that this is a thoroughly bad proposal, that it has been tested by other countries and found wanting as inadequate and unworkable and that, in view of the experience of those other countries, he should, even at this late stage, accept our Amendment and withdraw tangible, movable property from this provision?
    Mr. Harold Lever: I am in general in favour of the tax on chattels owned by people, otherwise than in the course of their trade and capital gains. I am aware that there are two sins one can commit as a member of the Government party; one is to talk at length and the other is to oppose the Government's action. I will try to be brief. I am of the opinion that this is not a party political question. It is a party political question to decide how much tax should be exacted from different classes of society, but it is not a party political question to decide the means by which this money should be raised from people. I think there are much better and wiser ways of taxing the
    100
    well-to-do than by seeking to tax their personal chattels and possessions.
    The first point I would make is that a trifling income is to be expected from this tax. It will bring in a trifling income except where the income it brings in is produced harshly, namely by death. People may be reluctant to pay this tax and, as has been alleged it may cause them to be reluctant to die, but die they must and when they do their possessions come into charge for Estate Duty.
    Our Estate Duty, by any reckoning, is severe and stiff enough—where it is not avoided—without adding anything to it. I have heard no one on the Left or Right-wing in politics who knows anything about Estate Duty deny this. Estate Duty is high and powerful enough as it stands. To add Capital Gains Tax on personal possessions, or any possessions, seems to be misguided. It is unwise to initiate this new tax upon personal possessions.
    May I invite the Committee to a self-denying ordinance which I will impose upon myself, namely that we cease to bring in, as argument, what is happening in Europe, the United States, France and Sweden? The effect of doing this has two consequences apart from lengthening the debate unnecessarily. One is that gradually, by quoting from what is being done abroad, we can finally justify the accumulation in our own tax system of every particular suppression of every country in the world. Equally foolishly we can, as I see some hon. Members intend to from the drafting of later Amendments, demand every concession made from every tax system in the world so that we gradually collect every concession from every different country and destroy the fiscal intent of the Finance Bill.
    Mr. John Hall: It seems to me helpful to gain from the experience of other nations. When an experiment has shown that what they have done was thoroughly bad it seems we could profit from such a lesson.
    Mr. Lever: This is a theoretical counsel of perfection—that we should all possess the useful and encyclopaedic knowledge of everyone else's tax system so that we can by process of reasoning and deduction finally arrive at perfection and wisdom in the arrangement of our fiscal

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    affairs. All that happens when we get this sort of thing are partially out-of-context assurances and counter-assurances which most hon. Members of the Committee are in no position to verify or even follow. It would be better if we gained some knowledge of our own taxation system instead of being bedevilled by these constant incursions into what is said to be done or not to be done in other parts of the world.
    I do not base my argument on the fact that this tax has fallen or succeeded in Timbuctoo or Uruguay or the United States or anywhere else. I am simply assessing as sensibly as I can what the likely result will be of a tax of this kind. The likely result is a maximum inconvenience to the citizen and the minimum of revenue to the Chancellor of the Exchequer. It is quite possible to bring about taxes which are exceedingly painful and do not bring in any revenue. For example if I were fortunate enough to buy a Renoir during a period when these works were selling for a couple of hundred pounds before the war and if I moved at the present time into another house which for one reason or another invites a different type of picture, not a Renoir but a Corot, I find my Renoir can be realised for £30,000.
    The Deputy Chairman (Sir Samuel Storey): I think the hon. Gentleman is getting on to capital gains, not short-term capital gains.
    Mr. Lever: It is worse in the short-term case, because I have to give away as much as 90 per cent. of my gain.
    Mr. Emrys Hughes: Is not my hon. Friend giving a direct invitation to burglars?
    Mr. Lever: I am quoting a theoretical case. If the possession of any valuables is a direct invitation to burglars I dare say a great many hon. Members are constantly, offering that invitation. As far as the possessor of these art works is concerned, if he is threatened with the tax he cannot switch from one art work into another. I know there is some case for switching in gilt, but there is an even greater case for switching in personal possessions. If I realise an armchair in order to buy a sofa, both having gone up in the meantime in the antique market, or if I sell a Renoir to buy a Corot, both
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    having gone up, I am not being taxed on capital appreciation at all; I am being taxed on realisation, or change over, of one particular article.
    There may be a case in regard to more important matters when a switch is made in saying that a person must pay the tax. The object of this taxation is not to add to the fund of human wisdom or logic. It is to add to the revenue and it applies to a particular section of the community—those who make capital gains. There is a case for it perhaps in commercial matters, but there is surely not much of a case for it in relation to personal possessions. The Chancellor will lose only minute sums if he abandons the tax on personal possessions. I will readily support other means of taxing the same class of people in society. Let him raise the modest sum he can expect from this taxation by other means, from the same class of society, but do not raise it in this unfortunate manner where the making of revenue produces the maximum discomfort—[HON. MEMBERS: "Hear, hear."]—For some reason or another hon. Members opposite cheer this. They do not realise that my promise to support the Chancellor in making good revenue is as firm as my opposition to this particular provision.
    7.0 p.m.
    Mr. James Ramsden: I intervene only briefly because I wish to make my main argument in connection with the taxation of works of art on later Clauses which deal with long-term capital gains. I want to take this opportunity to endorse one argument so cogently made by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) in a speech which must have very much coincided with the point of view of almost every hon. Member on this side of the Committee and which could not have been a more eloquent plea to his hon. and learned Friend the Financial Secretary to drop the idea of a tax of this kind on chattels.
    I took note of his words when he said that the yield from the tax would be trifling—this was one argument on which he based his plea—except, he said, in its impact in the case of death. He hit on a very important factor. There will be very few short as opposed to the long-term gains on works of art. There will not

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    be many people, except dealers, who will be caught under a different form of tax, who will buy a work of art and then sell it within the space of a year. If this is done, there will not be many people who will make a gain. The most likely instance of the tax biting will be on the widow or orphan in the case of a death.
    Mr. MacDermot: It will save time if I point out that on no occasion will the short-term gains tax be levied on death. On the occasion of death, the charge will always be to the long-term tax.
    Mr. Ramsden: The hon. and learned Gentleman has missed the point. There may well be cases when a collector dies, leaving a widow and some children who are obliged to realise his collection, or part of it, for cash in order to pay death duties, or to meet some other need. This realisation may have to take place within the space of a year or six months. If that is the case, the rate of tax will bite hardest in an instance which every hon. Member would agree to be most regrettable. The only instance which I have been able to bring to mind of a short-term tax biting on a work of art or something of that kind is this one instance, and it seems to be the most regrettable.
    We understand that there is to be an opportunity for a debate on the long-term aspect and it would be fitter if I deployed my arguments about the considerable effects on private collections and the art market of the long-term tax then, and I propose to attempt to do so. I will conclude now simply by asking the Chancellor whether he will explain why the Government have taken this step of including chattels and works of art for the first time within the ambit of the capital gains tax. When the short-term tax was originally instituted by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), it was quite clear that he had given some thought to the matter. He said:
    "I propose to exclude from this general charge certain types of property. First, I exclude moveable property like pictures … because I do not think that to bring these in would be worth the complications involved."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 980.]
    It has been the general view from both sides of the Committee so far that the
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    yield from this tax will simply not be worth the complications involved, to put it at its lowest. This was the conclusion of my right hon. and learned Friend and I am sure that the Committee would like to hear what it is that has changed the Treasury's thinking on this subject. How do the Government justify bringing works of art within the ambit of the short-term tax for the first time?
    Mr. Stanley Orme: I want briefly to intervene to say how much I support the proposal of my right hon. Friend the Chancellor of the Exchequer. Despite what was so cogently argued by my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), works of art have become a form of hard investment. If they are used as a form of hard investment, why can they not be taxed under the Capital Gains Tax in the ordinary way? This would show the country that the Government were prepared to tax this form of investment. It is regrettable that works of art have become a pawn in the financial game, as they have.
    Mr. Harold Lever: Perhaps I did not make it clear. Would my hon. Friend sympathise with my argument more if the taxpayer proved to the satisfaction of the Inland Revenue that the chattels were used solely for the adornment of his own house in good faith and not in the nature of an investment? Would he still say that these chattels should be taxed?
    Mr. Orme: There is a difference between chattels and works of art. Surely this proposal deals with works of art. Anyway, "chattels" would cover works of art and at the sort of value which hon. Members have in mind, they would mostly be works of art. The sale of works of art has become a disgrace in this country and in the Western world as a whole. Works of art are now regarded as a form of investment and are often hidden away in bank vaults.
    The Deputy-Chairman: Order. The hon. Member is dealing rather with long-term capital gains and not with short-term capital gains.
    Mr. Orme: I appreciate that, but as it has been said that both sides of the Committee disagree with the Government on this issue, I wanted to emphasise that the Government have my support.
    Sir Hamilton Kerr: My right hon. Friend the Member for Harrogate (Mr. Ramsden) asked why the Government had chosen this moment to introduce a new form of tax. Perhaps I can give the answer. It becomes more and more obvious as consideration of the Finance Bill proceeds that it owes its inspiration to one of those new and mysterious figures who glide down the corridors of power. I refer to none other than my distinguished constituent, Dr. Nicholas Kaldor. On this Finance Bill, while the voice may be that of Callaghan, the hand is that of Kaldor.
    I know that it is not—and very rightly—the tradition of the Committee to refer to civil servants, however eminent, but I am surprised that the Chancellor of the Exchequer has drawn his inspiration from doctrines which, when tried elsewhere, have failed so disastrously. We found in Ghana, in India and Ceylon that the whole economy tottered until these things were repealed, while, I believe, in the streets of Georgetown, British Guiana, the red flag of revolution was raised.
    The Deputy-Chairman: I do not think that Dr. Kaldor is a short-term capital gain.
    Sir H. Kerr: I am sure that he will be far from a short-term gain to the Labour Party when these measures are discovered.
    I come back to the point about the Chancellor of the Exchequer. I am surprised that he has introduced this Clause. I think that it offends against his central thesis and the principle of his Budget. He has claimed that he wishes to expand exports and to reduce unnecessary expenditure at home. My hon. Friend the Member for Wycombe (Mr. John Hall) referred to the fact that London is perhaps the greatest art sales centre in the world, and our exports on this account, owing to the facilities offered here, rose from some £5 million in 1955 to £24 million this year. This is, therefore, a source of most valuable foreign exchange of which, I thought, the Chancellor was desperately in need.
    Secondly, it imposes immense extra expenditure at home because of these inspectors who will have to be utilised. The amount to be raised will be very small in comparison with the number of inspectors who will have to enter our houses. It seems to me a veritable
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    snoopers' charter, something which has never happened since the days when Cromwell and his Redcoats broke into our houses.
    As a personal confession, when I retire at the end of this Parliament, I had dreamed of passing my dotage in a charming mill and manor house by the River Cam, perhaps dead-heading a few roses. If these inspectors enter my house, I will risk a year in Wormwood Scrubs, picking oakum, cleaning latrines, and eating a constipatory starch diet. Englishmen are entitled to resist these snoopers coming into their homes.
    I am therefore surprised by this proposal, because it goes against the main principle of the Budget, which is to expand exports and to reduce expenditure at home. I hope that the Committee will vote against it.
    Miss Harvie Anderson: In supporting the Amendment, I should like to draw attention to the point made by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) about the question of double taxation. This was emphasised most clearly by my right hon. Friend the Member for Harrogate (Mr. Ramsden). I hope that the Financial Secretary will realise that my fears in this connection arise from the fact that when a chattel, not necessarily a work of art, passes from one generation to the next, it is subject, in the normal course of events, to Estate Duty. As my right hon. Friend said, it is precisely in those circumstances that it may become necessary for the next generation to sell, and all too frequently within the period of a year. These chattels—some of them may be essentials in terms of their use—are subject to double taxation which I hope, judging from the intervention of the Financial Secretary, may not have been fully appreciated when this somewhat incomprehensive document—the Bill—was drawn up.
    May I give an example of what I have in mind? In recent weeks I chanced to be in a remote village in the country far from any art centre or any great art collector. There came into an antique shop a village resident with part of a china tea set in her hand which was priceless. Her husband had just died and she wished to sell this chattel. It seems to be a monstrous imposition on someone

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    of this order—and there are tens of thousands of people of this order—that they should have to get a valuation, maybe from a reputable person and maybe not, in order to realise a sum of money quickly to sustain their way of life when they are left in need. That is what that kind of sale amounts to, and it is always inevitably a short-term sale. The ownership having changed involuntarily within a specified time.
    My second point is this. There may well prove to be very many transactions of the short-term kind which we are discussing. I cannot see that it will be possible to check all these transactions or to have available people qualified to check them. It seems that these transactions will promote widespread evasion. But we are not dealing in this Clause with a speculative tax. The Chancellor of the Exchequer differentiated between what he termed in one of his Budget speeches "very short-term gains" and "real gains". We are dealing in this Amendment with very short-term gains where, I should have thought, the question of speculative gain was unlikely to enter and where gain at all was a very remote consideration.
    The object of this tax is to raise a sum of money for the Revenue. I believe that the sum realised will be very small indeed. Far from being a form of investment which is speculative in nature and liable to bring considerable profit either to the individual who buys or to the nation which is alleged to benefit, I think that this will only prove to be a very considerable imposition on the private affairs of the citizens of this country. It is bound to be enacted in a most unfair and unjust manner, whatever the intention. I hope therefore that the Amendment will be accepted.
    7.15 p.m.
    Mr. Terence L. Higgins: I rise to support what my hon. Friend the Member for Wycombe (Mr. John Hall) said. May I begin by saying what a pleasure it is to follow in debate my hon. Friend the Member for Renfrew, East (Miss Harvie Anderson), who is a constituent of mine.
    The principle involved in this short-term capital gains tax is quite clear. The intention is to tax the short run appreciation
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    of assets which are realised. This was appreciated by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). We on this side would quarrel, however, with the extension of this tax to tangible assets, and that is why we have tabled the main Amendment.
    I think that it would be true to say that we detect perhaps a change in policy from that of the grey eminence of the late Sir Stafford Cripps, who influenced policy during the period of office of the last Labour Government, to policies of two blue eminences—one light blue and one dark blue—who influence economic policy at present. Despite the colour of these two gentlemen's universities, we on this side believe that we should scrutinise with great care the kinds of proposals put before us this evening.
    I should like to say a few words on the question of veteran cars. I think that I would be right in saying that veteran cars are those built before 1914 and that those manufactured between 1914 and 1936 are vintage cars. It is probably the first category and, perhaps, both categories which should be covered by the Amendment which the Financial Secretary has agreed to consider favourably.
    I turn to discuss Amendment No. 246, which is concerned with livestock. It is not, as far as I know, concerned with the question of "bulls" and "bears". It is certainly not concerned with the question of bears only. Possibly is it concerned with the question of bulls. Almost certainly it is concerned with the question of horses. [An HON. MEMBER: "What about stags?"] I am not sure about stags. The broad scope of the Amendment is fairly clear to hon. Members on both sides. If my understanding of the matter is correct, this Clause will affect not people who are engaged in livestock business or in racing as a business but only those who happen to participate in racing as a hobby or for some other reason. It would appear that the people who so engage in racing are not subject to taxation. The reason for this appears to be that on balance the gain to the Exchequer would be a negative one—that is to say, they are not taxed because overall the people concerned do not make a profit.

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    It is also true to say that they are normally excluded because there is some advantage to the country in exporting livestock. I think that the Peppiat Committee concluded that some £2 million in export earnings were to be gained in a year. The reasons why people engaged in racing are normally excluded from taxation are fairly clear. I should have thought that this would also be a reason for excluding them from the operation of the short run capital gains tax. Perhaps the Financial Secretary will tell us whether if this tax imposed in connection with livestock is expected to yield a net gain to the Revenue, since it is perfectly true, as the hon. Member for Manchester, Cheetham (Mr. Harold Lever) said, that it would be a mistake to impose a tax which would be difficult to collect if it did not yield a net gain to the Revenue. The question of importing livestock is still relevant in this connection.
    My next point is that livestock are unlike the other kind of chattels mentioned, such as paintings and articles of artistic value. First because livestock is subject to sudden fluctuations in value. The value of a horse, for example, fluctuates according to whether it wins or loses a race and this might affect the discounted value of its future earnings, either as a racehorse or if subsequently it is put to stud. Its value is also likely to fluctuate according to whether it is well or ill or has an accident. It is clear that over a quite short period, the value of such an asset tends to come down to zero. This is not the case with an art treasure, the value of which is perhaps maintained over hundreds of years.
    I have two queries on page 128 of the Bill concerning the costs that are allowable in determining a capital gain. Paragraph (4) of the Sixth Schedule states:
    "Subject to the following provisions of this Schedule, the sums allowable as a deduction from the consideration in the computation under this Schedule of the gain accruing to a person on the disposal of an asset shall be restricted to"
    two items. The first item effectively includes the cost of maintenance. It is relevant to ask the Financial Secretary whether, in computing the capital gain, allowance will be made for the cost of maintaining the asset. Again, unlike an art treasure, which requires very little
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    maintenance, in the case of livestock a considerable amount of money is normally involved in maintaining an asset.
    My second point concerns paragraph 4 (1,b) and the cost of enhancing the value of an asset. It is fairly clear that it would be wrong to impose a capital gains tax if what has happened is that the asset has been acquired and its value has been added to by the expenditure of additional money to enhance its value. This might include the cost of training fees. I hope that in replying to the debate the Financial Secretary will indicate what costs will be allowed when computing the capital gain which is charged, or it is proposed to charge, in the case of livestock.
    The final point which needs to be made in this connection is whether individual animals are to be covered by the computation or whether one is to deal with collections of animals. It would probably be the feeling of the Committee that it would be wrong to deal with individual animals as such. If I understand the situation correctly, it would be possible for people with more than one horse, if they make a gain on one and a loss on another, to offset the gain against the loss and to reach a net figure. The question again arises whether expenditure on the whole group of horses, both for maintaining them and for enhancing their value, is allowable when taking the whole group of horses together. There would seem to be a case for doing this with livestock.
    There are certain provisions on page 131 of the Bill concerning wasting assets. The phrase is used that
    "animals shall not be regarded as wasting assets so long as"—
    The Deputy-Chairman: Order. The hon. Member is getting on to long-term capital gains.
    Mr. Higgins: With respect, Sir Samuel, I do not think I would be doing that. My point is that the definition of "wasting assets"—no, you are probably right, Sir Samuel. I apologise. I am grateful for your help.
    Mr. John Hall: I am sure that the Committee would not want to Miss the interesting point that my hon. Friend was making. When you were not present, Sir Samuel, it was pointed out that we were in great difficulty in dealing with this matter

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    because of overlap between arguments on the short-term and on the long-term gains and that it is difficult to confine one's arguments entirely to the one Clause.
    The Deputy-Chairman: I am well aware of that and I have allowed a good deal of latitude, but the less we stray into capital gains, the better.
    Mr. Higgins: I am entirely happy with your ruling, Sir Samuel, and I hope that if I am fortunate enough to catch your eye when we discuss long-term capital gains, I may be able to make the point.
    We will be appreciative if the Financial Secretary will cover the matters which I have raised and tell us precisely what he has in mind. Whatever one feels about the underlying principle—and there is division in the Committee about whether we think that the present capital gain provision is right or should be extended—it would be quite wrong to push it forward on a blanket basis without taking account of the individual peculiarities of certain assets, some of which have been dealt with by my hon. Friends, such as art treasures and also the question of livestock.
    Mr. Nicholas Ridley: The hon. Member for Manchester, Cheetham (Mr. Harold Lever) made a courageous and interesting speech on this tax. I only hope that he will not be beguiled into the Government Lobby by a promise from the Financial Secretary that he will listen to what the hon. Member said. After that devastating attack by the hon. Member as well as the attack by my hon. Friends on this side, it is hard to see how the Government can proceed with this short-term tax. I am reminded of the Government's proposals for the arts, when they said in their White Paper that
    "There is ample evidence of the need for a more coherent, generous and imaginative approach to the whole problem."
    If the Clause is coherent, generous and imaginative, I am very surprised. Even the man who stole the Goya has been so disillusioned by the Finance Bill that he has decided to give it back.
    Sir Douglas Glover: That is the first argument I have heard in favour of the Bill.
    Mr. Ridley: People own works of art for different reasons than speculation. They own them because they want to enjoy them. They want to enjoy having them on their walls or showing them to people who visit their houses. Perhaps they want to preserve them because they do not want them to be destroyed and lost to civilisation. They even buy them to encourage up-and-coming artists. For all these reasons, there are very few speculators in the art world. It is a nasty mind that imagines a speculator under every bush. There are no speculators here. There are no dividends on works of art. Many hon. Members have pointed out the need for expenditure on them for maintenance, cleaning, looking after them and insuring them.
    Mr. J. T. Price: I hope that the hon. Member will not spoil a rational argument by exaggerating it. To my knowledge, there are a great number of clever people who are always on the look-out for spotting a winner in the art world. In my lifetime, for example, one could buy anything painted by L. S. Lowry for two guineas. Now, one could not buy it for £600. Many clever people are looking for winners in things of this kind. It is a form of acquisition of property.
    Mr. Ridley: I am surprised that the hon. Member should think that it is something to be taxed. Here is an example of private enterprise supporting and encouraging a young painter and enhancing the name of Britain as a country and of our artistic school. Is the hon. Member such a Philistine as to want to cut this back or to destroy that initiative?
    The Deputy-Chairman: The hon. Member should not pursue this theme. It was obviously a long-term capital gain which was referred to.
    7.30 p.m.
    Mr. Ridley: I wish that you had intervened earlier, Sir Samuel, to point out to the hon. Member for Westhoughton (Mr. J. T. Price) the unwisdom of his interjection. That is simply the short-term gain on which one gets no revenue. Nobody is going to realise a short-term gain with the law as it is proposed under this Bill. In my opinion, we shall get no profits at all except possibly from the

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    odd bankrupt who, I suppose, will be sold up, and he might have to pay a long-term gain. Now we are even told by the Financial Secretary that he does not think people who die will be aggregated under the short-term gains. So far as I can see, therefore, there is no chance of revenue being earned as a result of this Clause.
    However, it will have one very odd effect, because in the first year we are going to charge Income Tax and Surtax on any gain which is realised, and after the year is up the rate suddenly drops to 30 per cent. For the better-off, those in the higher bracket of Surtax, what starts at an 88 per cent. or slightly less rate of tax drops suddenly to 30 per cent. So, of course, there will be no sales by people in this position, and that will completely distort the market. I am against the tax as a whole, and when we reach the Clause about the long-term gains tax I shall hope to elaborate my argument if I am fortunate enough to catch your eye, Sir Samuel, but in the short-term, if we must have a tax at all on chattels, why do not we have the same rate throughout, and then we shall not get distortion of the market which will slop people selling within one year?
    Many a collector likes to sell something in order to take advantage of a better piece which appears suddenly on the market and which will fit better into his collection. If it is a question of his paying a Capital Gains Tax because he has sold a piece, it will preclude that sort of switching which enables people to improve their collections. So I think there is a very great deal to be said against this Clause.
    Finally, I see no evidence at all that by leaving works of art or chattels out of the present existing short-term gains tax we have attracted the speculators, the sharks, into this class of goods.
    Mr. Mendelson: Oh, there are plenty of them.
    Mr. Ridley: I know of no cases—
    Mr. Mendelson: Plenty of them.
    Sir Kenneth Pickthorn: Then let the hon. Member stand up and give them.
    Mr. Ridley: I know of a case where a man has entered into the art market
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    and realised a gain in one year—this is about the worst form of speculation I can think of, and I am not talking of the long-term Capital Gains Tax—I am talking of the short-term Capital Gains Tax. But there is no chance of that taking place on any sizeable scale at all within one year—unless it so happens that one buys a picture which one thought to be worthless but which turns out to be a very valuable one, as in the case of the man who paid £80 for a picture which turned out to be a Stubbs and fetched £24,000, I think, at auction.
    But this is not deliberate speculation. This is a windfall, like winning the football pools or winning on Premium Bonds. This is something which we have not as a country included in our tax laws. We do not charge Income Tax and Surtax on football pools winnings, nor do we charge them on Premium Bond winnings or any other form of windfall of that sort, and it seems to me grossly unfair to include that sort of windfall in this Capital Gains tax. The person selling the picture would probably not know he had got a Stubbs. He might buy it and sell it a couple of months later and be surprised to find that what he paid £80 for fetches £24,000. But having done it he has no option: he has sold it, and he has made a capital gain, and he has to pay this enormous sum of tax on it.
    My hon. Friends have, I think, put so many strong and valid arguments against this tax that I hope the Financial Secretary really will drop it. We cannot develop the argument in full now, and the best half, the bigger half of it, relates to the long-term tax, but even on the short-term tax there is a very large-sized argument which has not been pressed, and that is the argument of the evil effect it will have on the art market and on art collectors in the foremost artistic centre in the world.
    Mr. MacDermot: I observed that a number of hon. Members still wish to speak and I am not trying to shut anybody out; but I have been asked an awful lot of questions and it will help to avoid confusion in my mind if I try to answer some of them now. It may also be—I do not know—that hon. Members will agree that the scope of this debate really is a very narrow one and that it might be better if we were to defer

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    some the broader questions till we come to discuss the long-term tax. Indeed, I have got to be careful to keep within the rules of order, because we are not discussing the wider question whether it is right to make chattels a charge to the long-term Capital Gains Tax but merely whether short-term gains should be subject to charge.
    Let me say at once that my whole argument proceeds on the assumption that the Committee, when later it considers long-term tax. Obviously, if the Com- we should make chattels subject to the long-term tax. Obviously, if the Committee came to a different conclusion, that they should not be subject to long-term tax, it would then be quite wrong to make them subject to the short-term tax. Obviously, if that, as I hope, unlikely situation were to arise, this would be a matter which we should have to correct at a later stage of the Bill. So I hope that we can have common ground here that the sensible thing to do is to argue this very narrow question on the assumption that there is to be a Capital Gains Tax for the long term, although I appreciate that hon. Members opposite will hope to achieve a different object.
    If we are going to do that, then, of course, I do not need, perhaps to answer in detail the questions put to me on why we have come to a different conclusion from that which the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) came to when he found that he did not think it was desirable or necessary, or worth the trouble indeed, to tax short-term gains on chattels; because he, of course, was not introducing a long-term tax at all.
    I think that if I can come straight to the heart of the matter, putting it quite shortly, assuming we are going to have a long-term Capital Gains Tax applying to chattels, then the case for the taxation of short-term gains accruing through the disposal of chattels is simply that if an individual should buy a chattel which is worth £1,000 and then dispose of it within the short term, within the year, in order to make a quick profit and should prefer to do that rather than retain the chattel, then there is no reason why he should not pay tax on that quick profit, just as much as anybody would on any other form of short-term gain.
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    For example, suppose a man buys a picture for £2,000. He buys a picture for £2,000 from a dealer, presumably intending to keep it—I would accept that. But suppose somebody comes along the next day, as does sometimes happen when somebody buys a picture not to sell it; the next day somebody comes along and hears that the other man has bought the picture for £2,000 and offers him £2,500. Then he is tempted to take his quick profit, which is what it is, instead of keeping and enjoying his picture. So he makes £500. Well, what reason is there, really, to distinguish between that, which is nothing other than a pure short-term capital gain, from any other kind of short-term gain he may make?
    Mr. Ramsden: Perhaps I have misunderstood the Bill or perhaps I am misunderstanding the Financial Secretary's argument, but surely, if he had not included works of art under this Clause on the assumption that the Committee is going to accept the long-term Clause, this man he is talking about would still be caught under the long-term Clause? Would he not?
    Mr. MacDermot: No. If we do not apply the short-term provisions to a sale within 12 months, I think that they will escape, but I shall look further into that. In any event, this is irrelevant to my argument.
    Mr. Ramsden: This is a rather important point. The hon. and learned Gentleman has told us that he need not answer the question: why should we accept the introduction of a short-term Capital Gains Tax on chattels for the first time when it was not introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd)? He said that he need not answer that because, unlike my right hon. and learned Friend, he was speaking from a position where he thought there would be the institution of a long-term Capital Gains Tax. Surely the other point which is in dispute is of some importance in that context and the Committee ought to be clear about it.
    Mr. MacDermot: The hon. Gentleman is putting a new point to me. Up to now the whole argument has proceeded on the basis that chattels sold on short term should not be subject to tax at all. That is what I have understood hon. Gentlemen opposite to be arguing. What is now being put is that, instead of short-term

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    gains in relation to chattels being taxed at the short-term rate, in other words being added to a person's income, they should be taxed instead at the flat rate of 30 per cent. This is what is being suggested. I come back to the same point. If a person, instead of retaining the picture, decides to sell it and make a quick profit on it, why should that not be taxed on the same basis as any other quick profit that he may make.
    It is an arbitrary decision where one draws the line between a short-term and a long-term gain—and we discussed this on the last Amendment—but assuming that one draws the line at one year, which is what the Committee has decided to do, there is an essential distinction between a short-term gain and a long-term one. That distinction applies equally well when dealing with chattels as with land, or stocks and shares, or whatever it may be. There is no reason to give a special and different treatment to a short-term gain on a chattel, compared with that given to a short-term gain on anything else.
    Perhaps I could address myself briefly to the more general argument about which I was asked, namely, why should chattels be subject to Capital Gains Tax? I cannot go into this in any detail, because I would be out of order, but we will be coming to this later.
    The Amendment which is proposed goes considerably wider than the exclusion which the right hon. and learned Member for Wirral included in his Bill in 1962. I do not know whether it was intentional or not, but not all chattels were excluded from that Act. Section 11 provides that commodities dealt with on a futures market, foreign currency of any description, unless acquired for personal expenditure, and tangible movable property of any description acquired for use in a business, but disposed of without being so used, were subject to charge under that Act. No doubt that difference was accidental.
    I would remind the Committee that there are already substantial exemptions for chattels. To start with, all chattels which have a disposable value of less than £1,000 will not be subject to charge. The example given by my hon. Friend, that of a Lowry bought for two guineas and sold for £600 would not be subject to charge at all. All private road vehicles are excluded, and while I am on that
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    subject let me make it clear that we do not intend to attempt to charge any kind of ancient motor car, to use a neutral word, whether it qualifies in the technical language of the experts as being vintage or veteran.
    Mr. Grimond: Why should not these tangible assets be charged at this short-term rate of tax in the same way as any other windfall gain? Why exclude vintage motor cars? Of all the peculiar things to exclude, this seems the most peculiar. If we can exclude vintage cars, why not pictures and why not anything else? Why this extraordinary group of exemptions?
    7.45 p.m.
    Mr. MacDermot: I agree that it is illogical and fortuitous; but as, for other good reasons, we have decided to exclude motor cars, we thought that it might look vindictive if we brought veteran and vintage motor cars back into charge. They have the good fortune to escape, but I agree that it is illogical.
    Mr. R. Gresham-Cooke: If vintage and veteran cars, and vintage and veteran buses, are to be excluded, what about historic commercial vehicles? Should not they also be excluded?
    Mr. MacDermot: I have said nothing about buses or commercial vehicles. I have referred to veteran and vintage cars. They are the ones which, fortuitously and accidentally, get the benefit of the exemption.
    Mr. Robert Cooke: Would vintage railway engines be included? They could be worth the sort of money about which the hon. and learned Gentleman is talking. What about an eighteenth century funeral car?
    Mr. MacDermot: I doubt whether the eighteenth century funeral car would come in, and I am certain that the railway engine would not.
    Mr. Hector Monro: Enthusiasts reckon that veteran cars are those which were built before 1907, Edwardian cars those built between 1907 and 1918, and vintage cars are those built between 1918 and 1931. Is that what we are talking about?
    Mr. MacDermot: I thought that by using the overall word "ancient" I was including all categories.

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    In addition, there is the important exemption under Clause 30 for works of art and other comparable objects disposed of by gift, or on death, or as a result of sale, to national, or university, or other local authority collections. One side effect of making chattels subject to charge is that it will give a considerably added inducement to people either to make gifts of important works of art to these public collections, or to sell them. It will go further than the inducements which they have at present under our Estate Duty law.
    The result is that the tax will apply only to the relatively small class of chattels which are individually worth over £1,000, but, as is well known, and is public knowledge, there are cases where chattels of this kind result in very substantial gains indeed. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) gave the example of a Stubbs bought for £80 and sold for £24,000. This is a substantial capital gain, and a pure capital gain. If one accepts the principle that capital gains should be subject to tax, there seems to be no reason why those gains should be any less subject to charge than any other. I am looking at it for the moment from the point of view of equity as between different taxpayers. I know that there is an argument about the effect upon the art market, and I shall come to that.
    Mr. W. R. Rees-Davies: There is a complete difference. In the one case the person is a collector, not a trader. The taxing laws of this country are built up to cover the position of income and trade—to cover the trading of a stockbroker, the trading in stock-broking. It is quite a different thing if one happens to be a collector of an individual article. That is the fundamental difference in principle between hon. Members on this side of the Committee and hon. Members opposite. Individual collector's items are the same as the items of a stamp collector. It is the same with the person who owns a horse, and the same with the person who has an individual bet. It is quite different from trading.
    Mr. MacDermot: The hon. Member is quite wrong. There is no connection with the position of the trader, who is charged
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    to Income Tax but not to Capital Gains Tax. Capital Gains Tax is concerned with capital gains made, in this case, by an individual collector. On the net result of his transactions a collector may make a loss, in which case that loss can be set off against other capital gains. But if he does not make a loss; if he makes substantial gains—and generally only substantial gains will be subject to tax, in respect of articles which are of substantial value—and realises those gains, there is no reason in equity, as between him and another taxpayer, why he should be exempt from paying tax on his gains whereas the other taxpayer, who may have put his money into unit trusts or investment trusts, should be subject to charge.
    The collector has had many other additional advantages. He has had the pleasure of being a collector. He has had the pleasure of looking at his collection, and showing it to his friends, and so on. Looked at from the point of view of equity among taxpayers, if he has made substantial gains there is no reason why he should be exempted from the tax.
    Mr. Heath: Has not the hon. and learned Gentleman missed the point about the Stubbs? It was bought for £80 and sold for £24,000. The owner who put it up for sale placed a reserve on it of £80. The dealer estimated that it might fetch £3,000, whereas in fact it was sold for £24,000—and did not all these things happen at the same time? The only question is, what valuation would the hon. and learned Gentleman put on that picture at 6th April, 1965?
    Mr. MacDermot: I will come to the question of valuation in a moment.
    These substantial gains are being made, and if they were allowed to go tax-free one of the main objects of the tax would be lost. The tax is designed to produce a sense of equity, because it is well known that there are privileged people who are able to make substantial increases in their income and also to escape all tax in the process. The number of people subject in this way to the charge, in respect of short-term gains, will be very small, I agree. But this is not in itself a reason for not making these people subject to a

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    short-term gains tax. If all the administrative work has to be undergone in relation to them—which will be the case if they are to be subject to charge—there is no reason to differentiate and make them subject only to the long-term rate and not the short-term rate.
    Mr. Ramsden: Was I right in thinking that this aspect of the matter will relate to the dependants of deceased persons, and that among the few cases concerned will be widows and orphans and others who have to sell because they are in need of ready money?
    Mr. MacDermot: The position is that where, on a death, the executors sell a picture, even if the deceased person bought the picture within a period of 12 months before he died, it will not be subject to the short-term gains tax; it will be caught only by the long-term tax. If, after the picture has passed from the hands of the executors into the hands of the widow, she decides to sell, she will have to pay tax only on any gain that has arisen since the death, because the estate will be responsible for the duty on any gains made up to the time of death.
    In practice, if a widow decides that she wants to sell a picture at that stage it is unlikely that the estate will finally have been wound up. It would be a very unusual circumstance if the figure at which she sold the picture was not accepted for both estate duty and capital gains purposes as being the value at the time of death, because unless the picture had been bought virtually the day before her husband died, it would be extremely difficult to establish that there had been any gain between the time of death and the time of sale.
    That brings me back to the point I made several times earlier. The rare occasions on which this short-term gains tax will be levied in respect of chattels will arise where there has been both a purchase and a resale within a period of 12 months and one has two hard and fast figures to go by. Otherwise, because of the obvious valuation difficulties referred to by the right hon. Member for Bexley (Mr. Heath) it would be virtually impossible for the Revenue to establish a short-term gain over the relative period.
    Mr. J. T. Price: I am not concerned about the merits of the tax. I am concerned 122
    with the question who will keep a record of all the casual transactions which take place by private treaty. Who will initiate the levying of the tax?
    Mr. MacDermot: It will be a matter for normal tax returns. If anybody sells a chattel for over £1,000 he will be required to make a return of it for tax purposes. The person who purchases that picture will also have to make a return, and the difference between that figure and the original purchase price will represent the gain.
    Mr. Fell: The hon. and learned Gentleman has been talking about the widow who sells a picture not very long after the death of her husband. In such a case the hon. and learned Gentleman has said that his people would accept the valuation at the time of death. He has said that they would accept what the picture was sold for as the valuation. Is this so? It is important to know this. If it were not so—if a physical valuation were asked for—we might have the most enormous difference between the realised price and the valuation.
    Mr. MacDermot: Perhaps the hon. Member will read what I have said. If he has a specific point to take up with me, I shall be glad to try and deal with it, but I think that I have dealt with the point, and I must ask him to accept my answer for the moment.
    I now turn to the question of valuation and the alleged administrative difficulty. First, there is the problem of the valuation of works of art, where even experts differ considerably. If there has not been a recent sale there must be some give and take in this matter. This is not a new problem, arising out of this tax; it has arisen already in respect of Estate Duty. Those who are responsible for administering this tax are satisfied that these problems are not insurmountable, and they feel that the tax is workable.
    In relation to the short-term tax we must bear in mind that from a practical point of view there will nearly always be two hard figures—the purchasing price and the disposal price. The greater problem will arise in connection with the long-term tax. Perhaps for that reason I should not go into too much detail about it at the moment—but hon. Members will remember that there is provision for time apportionment.

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    In the ordinary way this probably will operate to the benefit of the taxpayer and he will be content to have the valuation on Budget day arrived at by means of time apportionment. If he does not want that, it is always open to him to elect for an actual valuation. Then it would become a matter for expert valuation by professional valuers.
    8.0 p.m.
    I was asked by the hon. Member for Wycombe (Mr. John Hall) what was meant by the words "inspector of other officer" in the Schedule. There a valuer is envisaged. The reason for this provision is that if we are to have a provision of this kind there must be power for the Revenue to be able to inspect a picture to make a valuation. I do not anticipate that in practice any difficulties of the kind the hon. Member imagined would arise. Naturally, the Revenue are as anxious as anyone to preserve good relations with the public and observe normal courtesies in that respect.
    Turning to some of the other specific questions I was asked, I shall not at the moment seek to deal with the alleged effect on the art market which was referred to by the hon. Member for Cambridge (Sir H. Kerr); but he also referred to the large increase in exports of works of art in recent years. He did not refer to the large increase in imports. The net increase in the value of exports, averaged over the last five years, was just over £4 million. This is a very valuable trade and we are most anxious to preserve it. We are satisfied that this tax will not impede it.
    The hon. Member for Worthing (Mr. Higgins) also asked a number of specific questions which I shall try to answer. First, he asked me to confirm that the livestock provisions will not affect those in business in horse racing. Anyone carrying on a trade in racing would be taxed if he is liable to tax under the normal trading provisions and this tax would not affect him.
    The hon. Member asked what the net yield would be in relation to livestock. I am afraid that no estimate is possible and I cannot assist the hon. Member on that. He asked if I thought the value of race horses would fluctuate violently and create difficulties for that reason. I
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    accept that the valuation fluctuates violently and that this may affect the amount of gain or loss quite substantially, but that is something which is not due to the nature of the tax but to the nature of the chattel.
    The hon. Member asked what costs would be allowed. Costs of maintenance will not be allowed in relation to a race horse any more than in relation to any other chattel. He then asked a very nice question, by which I mean a difficult one to answer, about training fees and whether they would come within the words:
    "cost of enhancing the value of an asset."
    I do not think it was the intention of the draftsmen that they should, but obviously, looking at the matter as a lawyer, it is a point well open to argument and a matter on which possibly the Special Commissioners would find in favour of the taxpayer. I do not think I am in a position to give especially valuable advice on that subject.
    Mr. Higgins: The hon. and learned Gentleman is infinitely better qualified than I am to give a legal interpretation, but may I refer him to page 128 of the Bill? In Schedule 6(4–1) it seems clear that the maintenance charges should be allowed. He said that they are not allowed as in the case of any other asset, but as I read paragraph (a) they would be because they are:
    "expenditure wholly and exclusively incurred by him in providing the asset,"
    The drafting should be cleared up. Is the cost of providing the asset on the day it is sold or on the day that it is acquired? I should think that clearly it would be the latter.
    Mr. MacDermot: I do not know how much we are in order to discuss this now, but we shall come to the Schedule later and can discuss these provisions in detail then. I think the cost of maintenance is different from the cost of providing the asset.
    Mr. Peter Walker: May I ask the hon. and learned Gentleman to look most carefully into the question about the yield which the tax would produce, which is fundamental to the argument? In the past owners of race horses in training have been excluded from taxation by the Inland Revenue for the simple reason

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    that the majority of race horse owners lose and do not win. In fact the revenue would provide more losses than gains. Over the years this has been the position and on 99 per cent. of British race horses, even if the person concerned owns 50 or 100 of them, there has been no tax for this reason.
    I gather that 10 out of 11 never win a race and it is likely that the number of losses under the tax would be more than the amount of gains. Those loses in the case of a rich owner would be available to be set off against money made on shares. Will the hon. and learned Gentleman look at that and give us a reply at a later stage?
    Mr. MacDermot: Certainly I shall look at it. I daresay the hon. Member looked at a very interesting article in a Sunday newspaper yesterday which made the point that it would cost the Revenue more than it would gain and would provide useful support to the breeding of race horses. That was not the view of the deputation which came to the Inland Revenue on behalf of bloodstock breeders. I shall look into the matter further, but probably the answer is that at the end of the day it is impossible to make a firm and useful decision on the matter because views differ so much about the data.
    Mr. Joel Barnett: Taking the argument as presented, it would be ideal to keep this provision in the Bill in order to encourage this sort of loss. This is a magnificent opportunity. The hon. Member for Worthing (Mr. Higgins) was arguing for this provision to remain.
    Mr. MacDermot: That certainly was the argument in the article in the newspaper.
    I was also asked whether this would apply to individual animals or to collections of animals. The important point which has not been altogether appreciated—certainly outside the Committee—is that the £1,000 limit exemption for chattels would apply to each individual animal. When, as will happen sometimes, a productive herd which is taxed on a herd basis as a capital asset some people have been frightened that on disposal of the herd capital gains tax might be attracted. The answer is that it would
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    not be unless each individual animal in the herd was worth £1,000 or more.
    Mr. Robert Cooke: How does the hon. and learned Gentleman manage to differentiate between a set of four-legged animals and a set of four-legged chairs?
    Mr. MacDermot: I thought the hon. Member was about to make a serious intervention. We must get on and I had better not give way any more. I think I have dealt with the specific points about which I was asked.
    Mr. John Hall: One point which the hon. and learned Gentleman has not touched on, perhaps because he is keeping it for the debate on the long-term problem, is the amount of revenue which has been raised from such a tax in the United States.
    Mr. MacDermot: There is no available information on that. The hon. Member made point at the outset of his remarks that we were moving towards a tax from which other countries were moving away. He may be right but I have no knowledge of that. I know of no country which had such a tax on chattels and has withdrawn it.
    Mr. John Hall: The point I made was that although it was not withdrawn by the United States nevertheless the United States have partly drawn away from it because they have not been pursuing this tax on chattels except in specific cases. Otherwise, they are drawing away from the tax.
    Mr. MacDermot: I certainly have no knowledge of that. I would hope that the Committee, as it is a very narrow point that we are discussing, will find it convenient to let us reach a conclusion on this point now and defer the very important and wider considerations until we reach the long-term tax.
    Mr. Fell: The Financial Secretary quickly brushed aside the point raised by my hon. Friend the Member for Bristol, West (Mr. Robert Cooke). One can understand the position about a set of chairs. One can perhaps understand the position with other sets. What happens in the case of a set of paintings? If each painting could be sold for £900, what would happen? Would there be an encouragement to split the set of paintings

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    and sell each one at a different sale for £900? Would the vendor get away with it then?
    Mr. MacDermot: If a series of pictures was held to be a set within the meaning of the Bill, if each picture had a value of £900, and if the pictures were sold separately and to different final owners, they would not attract the tax. If they were sold as one set, they would. If an attempt were made to avoid the provisions of the tax by selling them to one person but selling them through an intermediary, the attempt to avoid the tax would be unsuccessful.
    Mr. Fell: Does not that mean that this is a deliberate incentive to people holding sets of various objets d'art to split them? In other words, we are getting back to the question of litting works of art so that, for exa one picture is held in one co and another picture of a set is held in some other country.
    Mr. Rees-Davies: I am very pleased to follow the Financial Secretary. I have great sympathy with him in the task which he has been given. It is an almost impossible task to put upon any man of taste and culture. I hope that the hon. and learned Gentleman will not take it too hard if I do my best to hit for a six almost every point he has made. It is a long time since I played cricket. Since I gave up cricket, I have spent almost my entire spare time in one connection or another in the world of art. I ask the indulgence of the Committee if I go into one or two aspects which have not yet been touched upon but are yet sufficiently relevant to a short-term Capital Gains Tax.
    Because I think that the hon. and learned Gentleman's mind was more on the paper than on what I said in my intervention, I will first tell him why I think that there is no real case for a short-term or for a long-term Capital Gains Tax in relation to works of art. A trader or a dealer or anyone earning his livelihood in this sphere pays his Income Tax. I have for a long time favoured a Capital Gains Tax because I have always taken the view that the professional man suffers where there is no Capital Gains Tax in modem society
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    and that the businessman gains. I have always felt that there was a case for a Capital Gains Tax across the board in other fields. However, I will not go into that now, because it would take up too much time.
    I want to say something about the individual who is a pure collector. I do not mean a pure collector in the sense of being a person engaging in trade, because if he is a collector who engages in trade there is no reason why the gentlemen in the Inland Revenue should not tax him on capital gains in that respect as being part of the capital gains in his trade. To my mind, there is an inherent difference on the question of principle between the individual collector and the person who engages in trade. If I have a bet on a horse which wins the Derby, I do not expect to pay tax. If I buy some stamps which turn out to be valuable, I do not expect to pay tax.
    The debate has missed a major question throughout. Hon. Members have spoken about works of art as if they are only pictures. I am much more interested in silver, in antiquities, in porcelain, in furniture, and in old works of art. Today I had the pleasure of seeing the great Churchill collection sold at Christie's. I warn the Committee to be realistic. Two pieces were bought by the same dealer. The same value had been placed on each. One piece went for £28. The other piece went for £128. There was absolutely no difference between the two pieces. It so happened that there were not two of the people bidding at the time the first piece was sold who were bidding when the second piece was sold.
    8.15 p.m.
    There will be no yield from this tax, because it will be resisted by everybody. The tax will have a serious and a bad effect on public morality. It will also have a serious and bad effect on efficiency and on the trust in which Inland Revenue inspectors are held. I entirely disagree with the Financial Secretary's view that there will not be an insurmountable problem of valuation in the Inland Revenue. Before I came here today, I spoke to six Income Tax inspectors, some of whom I have known personally for some years. I have spoken also to those whose task it is to value.

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    I can honestly say that in most of these fields to which I have adverted today I know those who are the principal valuers. I know them personally and well in many cases. No tax inspector has had the temerity to say that he could even begin to value in any one of these fields. There is a certain field in which it is well known that no tax inspector could value. I am prepared to stake a substantial bet that there are not more than two men in the whole country who could give any true or proper idea of the value of the Spencer Churchill collection in the realm of certain antiquities. There is one firm which could do so. There is one individual could do so. I refer now to actual value. To find whether the work of art is first-class one must go to certain fields—to the keepers of the Victoria and Albert Museum, to the keepers of other museums, and to certain individuals.
    Over a period of six months the rise in the value of silver is considerable. The antique silver market has risen by well over 50 per cent. in the last nine months. Two months ago certain Georgian silver plate pasing through Christie's was valued at £780 to £800. In fact a set of Falstaff fetched £1,650, over double the valuation the trade had placed upon it. This shows how absurd it is for anyone to say that he could value these things.
    The problems of valuation are insurmountable. I say that as a fact, not as an opinion. I say it culled from the expert facts of 15 years' knowledge, and from having spoken to those who are concerned in the trade. If the Financial Secretary wants to meet the persons concerned, I will lead a deputation to him of 12 to 14 of the leading valuers in six different fields. They will confirm everything I have said. If the hon. and learned Gentleman wants to talk to them, I can give him their full names and addresses.
    I repeat that there will be no yield. It will disrupt public morality, because fiddling will start and we shall go back to the old days of the snoopers and the black market. Further, people will take two or three valuations. I suppose that the way the Inland Revenue will try to operate is to see how people deal with their insurance policies. I suppose that one way of trying to get a valuation is to call up one's insurance broker now
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    and put a very high valuation upon various articles. Then if one gets rid of them one has the valuation and the fact that one has been paying insurance for that period on them. No one will be able to deny it. It is impossible to assess with accuracy what is really a true valuation, more particularly when the price is in excess of £1,000.
    The Inland Revenue inspectors do not want this provision. They detest it, and they are very worried about it. They do not want to have this task thereby losing the great respect that they have managed to achieve over the years, and I am sure we all have a profound respect for the way in which they go about their tasks.
    The worst aspect of the snooping side of the matter is that those very men are the people who have got to go into the houses. I accept what the Financial Secretary said, that this will be done discreetly, quietly and in accordance with their normal duties, but we are breaching one of the great liberties of this country. We have not before given the Inland Revenue the power to go into our homes. One has got to be proved to be fraudulent first, before the Inland Revenue can ask one to go back 10 or 12 years and produce one's Income Tax assessments. But here we are giving a right to men who do not want it to go into a house in order to have the opportunity to inspect works of art in it, and of course this is very difficult. When these men go in to inspect a work of art they have to determine whether it is worth, say, £1,000 at this year's valuation. But how are they to know whether next year what is taxed at £1,000 this year will not be taxed at only £500? Not only are we entering into the field of public morality but we are endangering something that is very important.
    In the art world it is rather like being a barrister or a solicitor or a banker. The same game goes on. That is to say, the most important things are confidence and trust, and there is a great deal of secrecy because it is very important not to let the other person know what is the really good thing that one is after. If a person is after some really nice piece he does not want anybody else to know about it.

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    Consequently Sotheby's and Christie's, who both dislike this idea intensely, do so for two main reasons, as do the rest. The first reason is this. It is the work of art which is worth more than £1,000 upon which they depend for their success and livelihood. The commission which they take, which is 10 per cent. on the article sold, is substantial when the amount for which the article is sold exceeds £1,000. Therefore, if we want to retain the predominance of our auctioneers, we should see that they get the opportunity to sell works of art of high value. The success of the art market in this country has not resulted from the sale of articles worth £20, £50 or £100. It has arisen because the big sales come to this country from all over the world. It is the ones which the public read about, such as the little Rembrandt that sold the other day fetching an enormous sum of money—quite an unrealistic figure—which attract the public. They also attract Messrs. Christie's, Sotheby's and the others, because that is where their commission lies, and a very substantial one.
    Therefore, if we apply a tax which bites in respect of a short-term capital gain of over £1,000, we are running into this real difficulty, that we are placing these people in a position which is not as good as it is at the moment. We are harming their position. We are preventing the flexibility of the market. Instead of people in future selling works of art for over £1,000 in the open auction, they will sell their works of art privately. I have no doubt that there are some well-known collectors in the House of Commons. What is to stop me going to one of my hon. Friends and offering to sell him a valuable work of art direct, or indeed, to swap it and merely pay the difference? I see that my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) is nodding vigorously. There are many who will do this and it will never be regarded as criminal. The interesting thing is that it would be rather like getting a bit through the Customs. It will never be regarded as being morally wrong to try to evade tax so much as defending culture against the Philistines. That is the factual way in which the public will regard it. I hope my party will say of this, short-term and long-term, that we
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    will throw it out altogether if and when we are returned to power.
    There is another matter which is very important. About three weeks ago I received a letter asking me whether I would allow two or three small things of mine to go into an exhibition—first some antiquities, and then some silver for an exhibition later in the year. So far as I am concerned, the answer will still be "Yes", but I am not at all sure that others will agree. People who own certain works of art which they know are valuable may say to themselves, "I am not going to exhibit these works of art for fear that the snoopers get to know where they are, and if I want to sell them privately I shall find myself taxed to the limit." I know that hon. Members opposite, and indeed some hon. Members on this side of the Committee as well, may say that that is quite wrong. But there it is. That is the sort of disadvantage which will arise.
    With regard to the unworkability of these provisions, at the moment there is a complete flexibility in sale. There is nothing to stop a person selling one work of art and buying in another in a sale next week. Under this short-term capital gain arrangement, we are putting an effective stop for 12 months on the buying, selling, and exchange of those works of art. A considerable number of these types of change takes place, and I believe they ought to continue to take place, because it is the mobility and flexibility of this market which has created the greatness of the art centre. It has been quite a tug-of-war in order to get away from France, Germany and America the absolute dominance in the intellectual field.
    We have fallen into the American trap. Hon. Gentlemen have taken over an American system of taxation of capital gains. They have then said—and I can understand the argument; I am not criticising it—that it would be socially inequitable to have a Capital Gains Tax which covers stocks and shares and these other fields, but leaves out tangible and moveable properties. The argument has been addressed—and I am interested in that too but will not say anything about it until later—to bloodstock and breeding racehorses. It has been pointed out that there should be an exception there

    133
    because there is no yield and there may be losses.
    In this field I am prepared to concede that there are gains, particularly to those who understand art and the art market. But the fact is that, even if there are gains, the amount which will enure to the benefit of the Revenue in the forthcoming year will be nothing. In about five years' time, assuming that the art market has gone up by a further 200 per cent. on what it is today in modern paintings, ancient paintings, silver, Chinese porcelain and European porcelain, which perhaps will not be an unreasonable assumption if trade in the world generally rises, it might be possible that the Government will see a couple of million £s in respect of art objects of over £1,000 in value as their yield.
    8.30 p.m.
    The right hon. Gentlemen opposite and those who advise them should be good enough to accept some real advice from those who understand this subject. They should discuss this with the gentlemen who run the leading auctions and with some of the keepers in museums whom they can approach and see whether they feel that the initiation of the short-term Capital Gains Tax is working purely on the ground of the rather curious idea that one is keeping social equity balanced precariously in a matter of this kind.
    The Financial Secretary has already said that he will make a distinction on vintage cars. He did not do so for me last week on vintage port, but I hope that he will do so on really great works of art, right across the board, on values of over £1,000. If he does not, it will lead to a lowering of standards of morality and a lowering of respect for the Inland Revenue without giving an iota of assistance in the financial aims which he wishes to achieve.
    Mr. Ian Gilmour: The Financial Secretary said that this was a very narrow point, an odd description for the imposition of a tax which is capricious, Philistine and has a large number of very damaging side effects which my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) has so ably enumerated. I am very disappointed that the Financial Secretary should have followed the advice of his
    134
    hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) about foreign countries. He is making a great mistake in being so cavalier about the experience of foreign countries—another example of little Englandism at its worst. There is surely something to learn here and it would be interesting to hear from the Financial Secretary in what countries, if any, this tax has been successful and in what countries it has failed.
    The authors of the Minority Report of the Royal Commission on the Taxation of Profits and Income, and the authors of much of this Budget, certainly had a different attitude towards experience in other countries. They took the trouble to reprint in the Minority Report two appendices relating to foreign countries. It would have become the Financial Secretary to have found out what happened in the United States and elsewhere.
    It has been virtually admitted that the yield of this tax will be more or less negligible and will damage the art market and create a large bureaucracy. The authors of the Minority Report were not unduly worried about the creation of a bureaucracy, but they expressed a view and this is one of the few occasions where the Chancellor in his Budget departed from them. He first departed from the Minority Report in having a short-term Capital Gains Tax at all. Secondly, he departed from the view expressed in paragraph 70 that
    "We are in accord with the view that for an initial period the tax should he limited to gains arising from the sale of businesses, securities of all kinds and real property.…"
    The Chancellor has ignored that advice and also advice which he could have obtained from the Minister of Education who took the same view in his book, which is rather optimistically entitled "The Future of Socialism", when he said:
    "To reduce the administrative difficulties the tax should be limited, at least initially, to gains arising out of the sale of businesses, stocks and shares and real property."
    Therefore, people knowing full well what they are talking about, and not unduly tender to the claims of private property or worried about the encroaches of bureacracy, thought that this tax should not be imposed at the time when a general Capital Gains Tax was imposed. Presumably, the authors of the Minority

    135
    Report would have been even more strongly against this tax being put on chattels if they had known that a short-term gains tax would have been there as well.
    The Financial Secretary may have thought that the point was narrow, but he gave no real defence of this tax, which is imposed in defiance of the experience of other countries, which is an invitation to corruption, and which is a bureaucratic nonsense.
    Mr. Robert Cooke: The fact that a Member could sit in the Chamber for nearly two and a half hours waiting to speak on this subject is proof enough of the great importance which hon. Members attach to it. I had many things in mind to say, but a good deal of the ground has already been covered by my hon. Friends, although not all the questions have been answered by the Financial Secretary. I remind the hon. and learned Gentleman that scorn does not answer questions, and several of the points which he made will tomorrow read pretty badly in HANSARD from his point of view. At least, this debate on the short-term Capital Gains Tax will serve as a curtain-raiser to the much more wide-ranging debate on the subject tomorrow. Certainly, as regards works of art, about which we have been mainly concerned today, tomorrow's debate will show that the long-term tax will have very far-reaching and damaging effects.
    There are one or two questions which have not been asked and on which I must press the hon. and learned Gentleman for an answer. He tried to give the impression that everything would be all right in the case of a death. As I understood him, however, he said that if the executors paid the death duties and then the widow who inherited the work of art sold it within a year, she would be caught for the capital gains, the estate also having paid the death duties. This would seem most iniquitous. I hope that I have misunderstood, but, obviously, we cannot have too much assurance from the Government, although, of course, assurances from the Dispatch Box do not have the force of law and the courts may well interpret these things differently. This applies all along the line. We may well find, in spite of the explanations given from the Dispatch
    136
    Box, that some of these very complicated provisions work out differently in practice.
    There has been no reference yet to the case of the valuable chattel worth more than £1,000 which is destroyed by fire during the twelve-month period. It would apply in the long term, too, but in the case of the short-term tax, if the collector had bought the work of art in good faith and it was then destroyed by fire, he would have to pay Capital Gains Tax if he got more back from the insurance.
    Mr. Rees-Davies: My hon. Friend is right on that point. Has he considered the question of thefts and burglaries, too?
    Mr. Cooke: I am much obliged to my hon. Friend. That merely strengthens the point. The money got back could be subject to tax, but the collector, surely, should have the option to reinvest the money tax-free in another similar object.
    The hon. Member for Manchester Cheetham (Mr. Harold Lever) said that we ought not to be draw aside into considering what happens in other countries. My hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) has already dealt with the situation in America. I hope that the Government will not call in aid the American Capital Gains Tax. From the studies which I have made, I gather that that works out as a tax relief in many cases because an article can be taxed under capital gains and escape quite a lot of tax which it would not escape if it were sold and taxed under income. In other words the American capital gains tax is a way out of paying taxes, which it certainly would not be under this Government's proposal.
    The yield in America can be quite considerable compared with what it will be here. I echo the sentiments expressed by my hon. Friend the Member for the Isle of Thanet. I am sure that the yield will be absolutely nil in the short term, and there will have to be a good deal of interference with the liberty of the subject in getting nothing back.
    I cannot allow the Financial Secretary to escape from the consequences of two things he said which will have a serious effect on our cultural heritage. I go so far as to say that. He admitted that the

    137
    effect of this tax, in both the short term and the long term, was to break up pairs or sets of articles, sets of chairs, sets of mirrors, even a series of paintings. There will be a special inducement to people to try to sell items separately in order to avoid the tax.
    On the question of pairs and sets, it would appear that if one tries to sell the articles as a group to a particular person they will be caught, but that if one sells them singly they will be exempt. The Financial Secretary said that if one tried to sell them through a third party one would be caught. As I see the Bill, there is nothing illegal about selling to a third party who then can sell the articles back to the first party whom one wanted to have them. What about letting them out on hire purchase or some sort of contract hire? Would that not be a way round the problem? There are all sorts of ways round these provisions which the spivs will be working out. An entirely new group of people will grow up trying to get round these provisions, which in any case will provide no revenue.
    The Financial Secretary said that the exemptions from tax would have a splendid effect, and that it would be easy to sell the items to museums and galleries. We are fairly well provided with museums and we envisage a great expansion of them in London and the provinces, but surely there will not be room for all the chattels which will be affected by the tax. Surely some of them should remain where they are—in the historic houses of individuals. The Financial Secretary talked about exemption. That will apply to some things but not everything. Plenty of things will be caught by the Clause. Surely it is better that the articles should stay in the historic houses, a thousand of which are open to the public now and enjoyed by thousands of people every year. That is the sort of thing that we want to maintain. We do not want provisions in the Act which will lead to dispersal.
    It was said that some of the valuable articles will disappear and go underground. That will happen even under the short-term provisions. The articles will be hidden away for a year. There will be positive inducements not to show or lend them to anybody. Certainly there
    138
    is an inducement not to sell them. If a collector who buys an article wants to sell it and it should be taxed at the same rate in the short-term as in the long-term, then the art market will not be distorted and if the articles are for sale anybody can own them. But under these provisions there will be an inducement to hang on to the articles for 12 months and be caught only by the long-term provision, and so the articles will not be available for the market.
    The Government must give more thought to the question of who is to list the transactions and the ways in which the Inland Revenue will be able to ensure that it collects what it is entitled to. We have heard about snoopers. It would appear that the Government will make auctioneers and antique dealers their agents for the collection of the tax. This applies to the short-term as well as the long-term. It seems that the dealers will have to supply lists. I presume they will be weekly lists rather like the ones the police send round about stolen property, saying that a certain picture is wanted by the Inland Revenue.
    Also, if the Inland Revenue is suspicious about the whereabouts of a painting, it is enabled by the Clause to go to people's homes. How far is it to be allowed to search? The Inland Revenue may be wrong, but nevertheless it has power to make a search. Will it tear a historic house to pieces trying to find one miserable painting that it cannot track down? Surely that sort of thing could happen. No doubt the priesthole of former days will again come into its own.
    The Financial Secretary made the case that only articles of substantial value will be affected. The figure of £1,000 is an extraordinary arbitrary one. With the sort of inflation that one envisages under the present Administration, £1,000 is likely to have a very different value a year or two from now. Once we have £1,000 in the Bill, what is to prevent a future Socialist Government from altering the figure? One cannot place any reliance on an arbitrary figure in the Bill.
    I could go on for longer, but as there are other Clauses on which it would be better to say some of the things I want to say and ask some questions, I shall

    139
    content myself with saying that the long-term tax is iniquitous and the short-term tax is utterly fatuous.
    8.45 p.m.
    Mr. John Hall: In the long debate we have had on this Amendment the Clause has received almost universal condemnation. The exception was the hon. Member for Salford, West (Mr. Orme), who tried to support the Government, very loyally, in their intention but made it clear that he had not really understood that the term "chattels" covered such a very wide variety of articles.
    I suppose one rare gleam of light has penetrated the gloom of the debate—and I do not mean by that that the speeches made by my hon. Friends were not brilliant. By "gloom" I mean the way in which they have been received by hon. Members opposite. That gleam of light was the assurance by the Financial Secretary that vintage and veteran cars are exempted from the penal Clauses of the Bill. I was sorry, the hon. and learned Gentleman having given this concession in respect of mechanical horsepower, that he was not prepared to do the same for live horsepower. We did not have the same good fortune with livestock.
    The hon. and learned Gentleman brushed aside many objections rather lightly. He touched only briefly on the administrative and policing difficulties. He indicated airily that he thought that the Inland Revenue would be quite capable of coping with the many problems of valuation, despite the difficulties to which attention has been drawn, especially by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) who has specialised experience.
    I myself mentioned an example in which the Government Valuer grossly under-valued a chattel which was sold a short time later for very much more. For the first time, an inspector of taxes will have the right to enter a private house and he can be accompanied by an official to value an article in that house. If the valuer fixes the value and then the owner sells the article within a matter of months, even if the valuer's figure proves grossly wrong and the owner get far more for it he can be penalised by a very considerable capital gains tax arising from a false valuation. That is only in
    140
    the short term. In the long term it may be even worse.
    One of the problems here is that of separating the argument as between the short term and the long term effects because of the introduction of chattels into the clause. One is forced to strike at it in the long term because if that were to fall then the short term would fall as well, as the hon. and learned Gentleman pointed out. No doubt when we reach Clause 18 and successive Clauses this point will be returned to again and again.
    In effect, the Financial Secretary made only one point. He asked why, when someone makes a substantial gain by selling a work of art or a chattel in excess of £1,000, it should not be treated as another short term gain. Quite apart from the fact that anyone buying a work of art or chattel gets no income from it—indeed, he may have to pay a good deal in maintenance and improvements—the hon. and learned Gentleman has not directed his attention to the unworkability of this provision. It is no use introducing a principle of taxation if it is not going to work. If it is going to be constantly evaded it will, as has been pointed out time and again on this side of the Committee, bring the whole of law into disrepute.
    Mr. A. P. Costain: Does my hon. Friend recall, when we were sitting on the Public Accounts Committee together, the difficulties we had over the Purchase Tax on second-hand diamonds, even amongst a small number of dealers. Would it not be much worse here?
    Mr. Hall: I recall that very clearly. This is going to be much greater than the problem there. Hon. Members on this side of the Committee have given a number of examples of the ways in which this kind of taxation can be avoided and the encouragement to avoidance which this particular Clause invites. The number of examples quoted so far are only a fraction of the number of ways in which this particular tax can be avoided. We are inviting tax avoidance on a large scale and unless the staff of the Inland Revenue, their advisers and valuers, is increased to an extent which is not really possible or feasible,

    141
    then it will be quite impossible to gain any worthwhile revenue from this. Reasonable collectors of works of art will be turned into tax avoiders on a large scale and a crime is being made where no crime previously existed.
    Why has no party seriously tried to introduce this form of tax on tangible removable chattels? The reason is that it has been realised it was impossible to enforce and would create tax problems which were not wanted. I cannot believe that the Minister has directed his attention to the real problems facing the Inland Revenue in administering this part of the capital gains legislation. What is contemplated is a serious invasion of privacy.
    I have some pieces of silver which might, if they were put up for auction, fetch a sum rendering me liable for taxation under this Clause. Am I now, having disclosed this fact in this Chamber, likely to get a telephone call from my local inspector of taxes saying "I am coming along to see you, with another officer, in order to see what you have and to find the value of it so that if at some time in the future you dispose of it we shall know if you have made a capital gains profit"? Is that sort of thing going to happen?
    Mr. Callaghan: They are not worth £1,000.
    Mr. Hall: The Chancellor does not know the value of them.
    Mr. Robert Cooke: The hon. Member for the Isle of Thanet (Mr. Rees-Davies) will produce a fair valuation and I will exchange for any other article he cares to name.
    Mr. Hall: I shall bear these offers in mind if I ever come to the point of disposing of them, but I have no intention of doing so as I made clear earlier. The silver is in safe custody so that it will not attract the attention of any nocturnal visitors.
    The Minister's replies have been very disappointing and I do not think his heart was in the debate. I do not believe if it was left to him to decide, he would wish to see this tax imposed on chattels. He gave the Committee the impression that he was speaking reluctantly to a brief which had been given to him and he had no conviction that what he was saying was really accurate. I believe that in his heart of hearts the Minister probably agrees with us on this side of the Committee and I hope he will welcome an expression of opinion on this which might encourage the Government, perhaps at Report stage, to do something about this. I would invite my right hon. and hon. Friends to divide on this Amendment.
    Question put, That the words proposed to be left out stand part of the Clause:—
    The Committee divided: Ayes 189, Noes 182.

    Division No. 125.]

    AYES

    [8.55 p.m.

    Allaun, Frank (Salford, E.)

    Craddock, George (Bradford,

    Ford, Ben

    Allen, Scholefield (Crewe)

    Cronin, John

    Freeson, Reginald

    Atkinson Norman

    Grossman, Bt. Hn. B. H. S.

    Galpern, Sir Myer

    Bacon, Miss Alice

    Cullen, Mrs. Alice

    Garrett, W. E.

    Barnett Joel

    Dalyell, Tam

    Garrow, A.

    Beaney Alan

    Darling, George

    Gregory, Arnold

    Bence, Cyril

    Davies, G. Elfed (Rhondda, E.)

    Grey, Charles

    Benn, Bt Hn Anthony Wedgwood

    Davies, Harold (Leek)

    Griffiths, David (Rother Valley)

    Bennett, J. (Glasgow, Bridgeton)

    Davies S. O. (Merthyr)

    Griffiths, Rt. Hn. James (Llanelly)

    Binns, John

    Dell, Edmund

    Hamilton, William (West Fife)

    Bishop, E. S.

    Diamond, John

    Hannan, William

    Blackburn, F.

    Dodds, Norman

    Harper, Joseph

    Blenkinsop, Arthur

    Doig, Peter

    Hart, Mrs. Judith

    Boardman, H.

    Driberg, Tom

    Hattersley, Roy

    Boston, T. G.

    Duffy, Dr. A. E. P.

    Hazell, Bert

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

    Edelman, Maurice

    Heffer, Eric S.

    Edwards, Robert (Bilston)

    Henderson, Rt. Hn. Arthur

    Braddock, Mrs. E. M.

    English, Michael

    Herbison, Rt. Hn. Margaret

    Bray, Dr. Jeremy

    Ensor, David

    Hill, J. (Midlothian)

    Broughton, Dr. A. D. D.

    Evans, Albert (Islington, S.W.)

    Hobden, Dennis (Brighton, K'town.)

    Brown, Rt, Hn. George (Belper)

    Evans, Ioan (Birmingham, Yardley)

    Holman, Percy

    Brown, Hugh D. (Glasgow, Provan)

    Finch, Harold (Bedwellty)

    Houghton, Rt. Hn. Douglas

    Brown, R. W. (Shoreditch &amp; Fbury)

    Fletcher, Sir Eric (Islington, E.)

    Howarth, Robert L. (Bolton, E.)

    Butter, Herbert (Hackney, C.)

    Fletcher, Ted (Darlington)

    Hoy, James

    Callaghan, Rt. Hn. James

    Fletcher, Raymond (Ilkeston)

    Hughes, Cledwyn (Anglesey)

    Castle, Rt. Hn. Barbara

    Floud, Bernard

    Hunter, Adam (Dunfermline)

    Chapman, Donald

    Foley, Maurice

    Hunter, A. E. (Feltham)

    Coleman, Donald

    Foot, Sir Dingle (Ipswich)

    Hynd, H. (Accrington)

    Hynd, John (Attercliffe)

    Murray, Albert

    Slater, Joseph (Sedgefield)

    Irvine, A. J. (Edge Hill)

    Newens, Stan

    Snow, Julian

    Irving, Sydney (Dartford)

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

    Soskice, Rt. Hn. Sir Frank

    Janner, Sir Barnett

    Norwood, Christopher

    Stewart, Rt. Hn. Michael

    Jeger, George (Goole)

    Oakes, Gordon

    Stones, William

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

    Ogden, Eric

    Swain, Thomas

    Jenkins, Hugh (Putney)

    O'Malley, Brian

    Swingler, Stephen

    Jones, Dan (Burnley)

    Orme, Stanley

    Taylor, Bernard (Mansfield)

    Jones,Rt.Hn.SirElwyn(W.Ham,S.)

    Oswald, Thomas

    Thomas, George (Cardiff, W.)

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

    Owen, Will

    Thomas, Iorwerth (Rhondda, W.)

    Lawson, George

    Page, Derek (King's Lynn)

    Thornton, Ernest

    Leadbitter, Ted

    Pannell, Rt. Hn. Charles

    Tuck, Raphael

    Lever, L. M. (Ardwick)

    Parker, John

    Varley, Eric G.

    Lewis, Arthur (West Ham, N.)

    Parkin, B. T.

    Wainwright, Edwin

    Lomas, Kenneth

    Pearson, Arthur (Pontypridd)

    Walden, Brian (All Saints)

    Loughlin, Charles

    Pentland, Norman

    Walker, Harold (Doncaster)

    McCann, J.

    Popplewell, Ernest

    Wallace, George

    MacColl, James

    Price J. T. (Westhoughton)

    Weitzman, David

    MacDermot, Niall

    Pursey, Cmdr. Harry

    Wells, William (Walsall, N.)

    McGuire, Michael

    Randall, Harry

    White, Mrs. Eirene

    Mackenzie, Gregor (Rutherglen)

    Rankin, John

    Whitlock, William

    MeLeavy, Frank

    Redhead, Edward

    Wigg, Rt. Hn. George

    MacMillan, Malcolm

    Rees, Merlyn

    Wilkins, W. A.

    Mahon, Simon (Bootle)

    Rhodes, Geoffrey

    Willey, Rt. Hn. Frederick

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

    Richard, Ivor

    Williams, Mrs. Shirley (Hitchin)

    Manuel, Archie

    Robertson, John (Paisley)

    Williams, W. T. (Warrington)

    Mayhew, Christopher

    Rogers, George (Kensington, N.)

    Willis, George (Edinburgh, E.)

    Mendelson, J. J.

    Rose, Paul B.

    Wilson, William (Coventry, S.)

    Mikardo, Ian

    Ross, Rt. Hn. William

    Winterbottom, R. E.

    Millan, Bruce

    Rowland, Christopher

    Woodburn, Rt. Hn. A.

    Miller, Dr. M. S.

    Sheldon, Robert

    Yates, Victor (Ladywood)

    Milne, Edward (Blyth)

    Shore, Peter (Stepney)

    Zilliacus, K.

    Molloy, William

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

    Monslow, Walter

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

    TELLERS FOR THE AYES:

    Morris, Charles (Openshaw)

    Silkin, S. C. (Camberwell, Dulwich)

    Mr. Ifor Davies and

    Morris, John (Aberavon)

    Silverman, Julius (Aston)

    Mr. William Howie.

    Mulley,Rt.Hn.Frederick(SheffieldPk)

    Slater, Mrs. Harriet (Stoke, N.)

    NOES

    Agnew, Commander Sir Peter

    Dean, Paul

    Hornby, Richard

    Alison, Michael (Barkston Ash)

    Deedes, Rt. Hn. w. F.

    Howe, Geoffrey (Bebington)

    Allan, Robert (Paddington, S.)

    Doughty, Charles

    Hunt, John (Bromley)

    Allason, James (Hemel Hempstead)

    Douglas-Home, Rt. Hn. Sir Alec

    Hutchison, Michael Clark

    Anstruther-Gray, Rt. Hn. Sir W.

    Elliot, Capt. Walter (Carshalton)

    Iremonger, T. L.

    Awdry, Daniel

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

    Johnson Smith, G. (East Grinstead)

    Baker, W. H. K.

    Emery, Peter

    Johnston, Russell (Inverness)

    Barber, Rt. Hn. Anthony

    Eyre, Reginald

    Jopling, Michael

    Barlow, Sir John

    Fell, Anthony

    Kaberry, Sir Donald

    Batsford, Brian

    Fletcher-Cooke, Charles (Darwen)

    Kerby, Capt. Henry

    Beamish, Col. Sir Tufton

    Fletcher-Cooke, Sir John (S'pton)

    Kilfedder, James A.

    Bessell, Peter

    Galbraith, Hn. T. G. D.

    King, Evelyn (Dorset, S.)

    Birch, Rt. Hn. Nigel

    Gammans, Lady

    Kirk, Peter

    Black, Sir Cyril

    Gardner, Edward

    Kitson, Timothy

    Box, Donald

    Gibson-Watt, David

    Lambton, Viscount

    Boyd-Carpenter, Rt. Hn. J.

    Giles, Rear-Admiral Morgan

    Lancaster, Col. C. G.

    Boyle, Rt. Hn. Sir Edward

    Gilmour, Ian (Norfolk, Central)

    Brewis, John

    Glover, Sir Douglas

    Langford-Holt, Sir John

    Brinton, Sir Tatton

    Godber, Rt. Hn. J. B.

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

    Brooke, Rt. Hn. Henry

    Goodhew, Victor

    Longbottom, Charles

    Buck, Antony

    Grant, Anthony

    Longden, Gilbert

    Bullus, Sir Eric

    Grant-Ferris, R.

    Lubbock, Eric

    Burden, F. A.

    Gresham-Cooke, R.

    McAdden, Sir Stephen

    Buxton, Ronald

    Grimond, Rt. Hn. J.

    Mac Arthur, Ian

    Campbell, Gordon

    Gurden Harold

    Mackenzie, Alasdair (Ross&amp;Crom'ty)

    Carlisle, Mark

    Hall, John (Wycombe)

    Mackie, George V. (C'ness &amp; S'land)

    Carr, Rt. Hn. Robert

    Hall-Davis, A. G. F.

    McLaren, Martin

    Cary, Sir Robert

    Harris, Frederic (Croydon, N.W.)

    Macleod, Rt. Hn. Iain

    Chichester-Clark, R.

    Harris, Reader (Heston)

    McNair-Wilson, Patrick

    Clark, William (Nottingham, S.)

    Harrison, Brian (Maldon)

    Marten, Neil

    Harrison, Col. Sir Harwood (Eye)

    Mathew, Robert

    Cole, Norman

    Harvey, Sir Arthur Vere (Macclesf'd)

    Maude, Angus

    Cooke, Robert

    Harvey, John (Walthamstow, E.)

    Maxwell-Hyslop, R. J.

    Cooper, A. E.

    Harvie Anderson, Miss

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

    Cooper-Key, Sir Neill

    Hawkins, Paul

    Meyer, Sir Anthony

    Corfield, F. V.

    Heald, Rt. Hn. Sir Lionel

    Mills, Peter (Torrington)

    Costain, A. P.

    Heath, Rt. Hn. Edward

    Mills, Stratton (Belfast, N.)

    Craddock, Sir Beresford (Spelthorne)

    Higgins, Terence L.

    Mitchell, David

    Crawley, Aidan

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

    Monro, Hector

    Crowder, F. P.

    Hirst, Geoffrey

    More, Jasper

    Curran, Charles

    Hobson, Rt. Hn. Sir John

    Morrison, Charles (Devizes)

    Dalkeith, Earl of

    Hogg, Rt. Hn. Quintin

    Mott-Radclyffe, Sir Charles

    Dance, James

    Hooson, H. E.

    Munro-Lucas-Tooth, Sir Hugh

    Davies, Dr. Wyndham (Perry Barr)

    Hordern, Peter

    Neave, Airey

    144

    145

    Onslow, Cranley

    Robson Brown, Sir William

    van Straubenzee, W. R.

    Orr-Ewing, Sir Ian

    Russell, Sir Ronald

    Walder, David (High Peak)

    Osborn, John (Hallam)

    Sandys, Rt. Hn. D.

    Walker, Peter (Worcester)

    Page, John (Harrow, W.)

    Shepherd, William

    Walker-Smith, Rt. Hn. Sir Derek

    Page, R. Graham (Crosby)

    Sinclair, Sir George

    Walters, Dennis

    Pearson, Sir Frank (Clitheroe)

    Smyth, Rt. Hn. Brig. Sir John

    Ward, Dame Irene

    Percival, Ian

    Spearman, Sir Alexander

    Webster, David

    Peyton, John

    Stainton, Keith

    Whitelaw, William

    Pickthorn, Rt. Hn. Sir Kenneth

    Stanley, Hn. Richard

    Williams, Sir Rolf Dudley (Exeter)

    Pike, Miss Mervyn

    Steel, David (Roxburgh)

    Wills, Sir Gerald (Bridgwater)

    Pitt, Dame Edith

    Talbot, John E.

    Wilson, Geoffrey (Truro)

    Pounder, Rafton

    Taylor, Sir Charles (Eastbourne)

    Wise, A. R.

    Price, David (Eastleigh)

    Taylor, Frank (Moss Side)

    Wolrige-Gordon, Patrick

    Ramsden, Rt. Hn. James

    Teeling, Sir William

    Woodnutt, Mark

    Rawlinson, Rt. Hn. Sir Peter

    Thatcher, Mrs. Margaret

    Redmayne, Rt. Hn. Sir Martin

    Thomas, Sir Leslie (Canterbury)

    TELLERS FOR THE NOES:

    Rees-Davies, W. R.

    Thompson, Sir Richard (Croydon,S.)

    Mr. Francis Pym and

    Ridley, Hn. Nicholas

    Turton, Rt. Hn. R. H.

    Mr. Dudley Smith.

    Roberts, Sir Peter (Heeley)

    Tweedsmuir, Lady

    Mr. Peter Walker: I beg to move Amendment No. 346, in page 11, line 25, to leave out subsection (4).
    The purpose of the Amendment is primarily exploratory, to discover exactly what the Government have in mind. I believe that a similar provision appeared in the 1962 Act with the difference that on that occasion there was no mention of the phrase "other than sterling". Perhaps the Minister without Portfolio will kindly give the reason for the insertion of this phrase.
    One wonders what type of concern or person the Government have in mind in the Clause. Presumably, for banks which are entitled to hold foreign currency, any changes in the value of currency will come into the normal trading position and be taxed in the normal way of trading. I wonder what will be the position concerning a change in the general value of the currency. I do not suggest the possibility of any devaluation of our currency—I agree with the Prime Minister when he said in New York that any currency which had £11,000 million of overseas backing was unlikely to be devalued—but what will be the position in the event of a change up or down in the value of the currency? People might, for example, have been given permission to hold a certain amount of foreign currency for the purpose of purchasing an asset overseas. At the time when they spend the money for that asset overseas, will they be forced to pay some form of Capital Gains Tax as a result of the Clause?
    As foreign currency can be held only either by people who have the authority to hold it or by licensed dealers in foreign currency, the Clause seems slightly unnecessary. I shall be grateful to have an explanation from the Minister.
    The Minister without Portfolio (Sir Eric Fletcher): The hon. Member for Worcester (Mr. Peter Walker) has raised three points on his exploratory Amendment. He inquired, first, why the words "other than sterling" were used. I confirm that all that we are doing in subsection (4) is to reproduce both the substance and the effect of the similar provision which was contained in the Finance Act, 1962, introduced by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). Sterling is excluded because cash is not a chargeable asset for the purposes of capital gains and, therefore, it is unnecessary to deal with sterling.
    The object of the subsection is to bring into the short-term gains tax category gains—and, of course, losses—realised on the disposal of currency. There are excluded from the operation of the subsection both those concerns like banks whose business is to deal in foreign exchange and individuals who have permission to obtain currency for their personal expenditure outside the United Kingdom.
    The third question which the hon. Member put was a more difficult question. He inquired what would happen if some currency were devalued. I welcome his assurance, which has been repeated now over and over again from both sides of the Committee, that there is no prospect of sterling being devalued, but he put forward a hypothetical question that somebody might obtain permission to acquire some other currency and then, before that currency was realised, the value of that currency might change. This is a rather abstruse question, but my interpretation, subject to verification, is that the individual in question would have to stand either the gain he made, if it were a gain, or get the benefit of the loss incurred as a result of the change

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    in the value of that currency, just as he would if the foreign currency appreciated or depreciated without any sudden devaluation. I hope that answers the hon. Member's point.
    Mr. Cole: I wonder if the Minister will address his mind to this point, to get it on the record? What happens about legally tendered currency in this country, in the case of rarity, or a special occasion of issue? I am thinking of the coin-
    age issued at the Coronation. Would that attract tax? Or would it be legal tender and not attract tax?
    Sir Eric Fletcher: I think it is reasonably clear that anything which is legal tender in this country comes within the definition of currency and is therefore excluded from the operation of the Capital Gains Tax.
    Mr. Peter Walker: I am most grateful to the Minister, and I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Peter Hordern: I beg to move Amendment No. 310, in page 11, line 34, to leave out "hundred" and to insert "thousand".
    Under the Bill as it stands a gift of over £100 in value is subject to both the short-term and the long-term Capital Gains Tax, and the purpose of this and the next following Amendment, in page 11, line 36, to leave out from "disposal" to the end of the subsection, is, first, to increase the sum chargeable from £100 to £1,000, and second, to make the sum assessable for short-term gains only.
    I think the Committee will recognise that this is a pretty shabby Clause as it stands. I do not think it requires much imagination by hon. Members on either side of the Committee to think what the value of £100 will be in a few years' time if the present marked depreciation continues at its present rate.
    It seems unfortunate that the hon. Member for Manchester, Cheetham (Mr. Harold Lever) is not in his place just at this moment. We have had from him so far this evening an objection to the Capital Gains Tax in principle and as a whole, in which, I may say, I am in entire agreement with him, and an objection also to the Capital Gains Tax
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    on chattels, and also an objection to making a comparison with other countries. I well see his point of view on this. If we are to make any comparisons with other countries we shall find that in the United States gifts are exempt, and even in Sweden, a country whose praises are so often sung by hon. Members on the other side of the Committee, gifts are specifically exempt.
    It is a mean little Clause this, because it represents what I would take to be the very opposite of what the Chancellor intended in his Budget speech. The Chancellor during that speech said he was hoping to make some kind of fiscal history. I think he has done just this by this Clause. For years Members on both sides of the Committee, and indeed the country as a whole, have been accustomed to a tax on incomes, a tax on earnings, a tax on company profits, a tax on consumption, a tax on enterprise and even, reluctantly, a tax on the settlement of property for death, but a common feature of all these taxes is that they are necessary for the revenue. It has never been said that the capital Gains Tax is necessary for the revenue. It has never been claimed that it will bring in a sizeable slice of revenue for the Inland Revenue, and it cannot be claimed for this little tax on gifts of over £100.
    9.15 p.m.
    For the first time—and this is where the Bill makes fiscal history—we are to have a tax on human generosity. As a result of this Clause, if someone gives away securities valued at over £100, that is his lot. No matter how many people he distributes them between, that is it. I should like to give the Committee an example to bear out my statement that this is a tax on generosity.
    Suppose that one was a holder, and had been for some years, of £1,000 worth of stock in an industrial company. Suppose that company were to declare a one for one scrip issue. This would mean no increase in the value of the holding. It would double the number of shares, but there would be no increase in value, and I take it that no tax is proposed on that scrip issue. But if the holder of that stock were to transfer, say, £300 worth of these shares to his favourite nephew, he would be taxable under the Clause. Therefore, this is nothing but a straight tax on generosity. It cannot

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    be described as anything else. The fact is that the virtue in the act of a gift in itself becomes taxable.
    I am not saying that we should argue against the Clause only as a matter of principle., but it is a shabby little Clause in every detail, and I hope that that will be appreciated by everyone. There are, however, some questions on fact which I should like the Government to answer. Suppose the holder of a gilt-edged security found it running to its redemption date and accepted the conversion offer made by the Government. I take it that the position is that if a conversion stock is offered in exchange for an existing gilt-edged security, no tax is payable. But what if, under the Clause, sufficient of that conversion stock were transferred to somebody else? What would happen if stock valued at more than £100 was transferred? Would that sum in excess of £100 be liable to Capital Gains Tax?
    Secondly, Premium Bonds are specifically exempt by the provisions of the Bill. What is the position of somebody giving away his gains received from the fruition of his Premium Bonds? What happens if he wins £1,000 and gives it away? Will that be liable to short-term gains tax? Are winnings on football pools and lotteries, which are specifically exempt under the Capital Gains Tax, to be taxed if assigned away?
    Another point which will come up later in our discussions concerns the 4 per cent. Victory Bonds. What is the position of the holder of these bonds who is lucky enough to get his stock drawn at par? Is that to be taxed under the Capital Gains Tax? If not, what is the position if more than £100 worth is transferred? Let us suppose that a company is taken over by another and the existing shares are made over to that company. If the new shares are transferred as a gift to somebody else, are they liable to Capital Gains Tax, although they would not be in the first place?
    All these questions need accurate answers. There is more scope for misunderstanding in this miserable little Clause than in the whole of this enormous hand-out called a Finance Bill. The result of the Clause will be to stratify capital in the hands of holders. It means to say that not only is generosity taxed at every stage but that there is no incentive to
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    pass on securities to another person, whether or not he is a member of the family.
    Mr. Barnett: The hon. Member has made a great point about taxing generosity. He will surely agree that if a gift is made in cash this is not a tax on the gift as such but a tax on the gain.
    Mr. Hordern: The hon. Member has not got the point. It is a question how that cash is derived. If it is derived from a sale of securities the element of over £100 is taxable. The whole object of the Government seems to be to encourage that old Gladstonian adage, "Let the money fructify in the pockets of the people." This miserable little Clause is not a concession to the Left wing; it is a concession to Mr. Scrooge, and will be so regarded.
    The whole concept of the Clause is illustrative of what the Government are. This is a banana Government. All their Measures—and this one in particular—will lead to financial constipation. For that reason, among many others, I hope that the Clause will be rejected.
    Sir A. V. Harvey: I wish to put only one point to the hon. Member. If anybody gives a covenant for a total amount of £1,000 to a relative or friend the receiver of that covenant will not pay a gains tax, but the giver of the covenant does not get it allowed for Surtax. Let us suppose that instead of making the straight gift the owner says, "I will do this in the form of a covenant. I do not get Surtax relief, but the receiver will not pay a gains tax." This must be clarified, because there is a difference of opinion among hon. Members on both sides of the Committee as to what will happen in those circumstances.
    Mr. Cole: I endorse what my hon. Friends have said about this being a tax on generosity. It is either a tax on generosity or an indication of fear, because there is some significance between the two figures of £100 and £1,000. Why are we able to deal with £1,000 under another subsection and only with £100 in the case of a gift? I suspect that some economic pundit has worked the matter out and has said, "If we do not watch this it will undermine the whole of our short-term capital gains structure. We shall have these people giving gifts all

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    over the place, and the provision in respect of the £1,000 will be undermined."
    If that is so—leaving aside any emotive action—why cannot we have the £100 increased to £1,000? If the Government think that their measures are quite good enough to cover the £1,000, why should it be only £100 in this case? One would think that any kind of logic—if that is the right word to apply to the Bill—would lead one to proceed the other way round, and to say that a person can give something away up to the value of £1,000 and pay tax on up to £100. A person may want to be generous and give something to a member of his family when he is getting married, or when there is some other celebration, or he may want to make a gift as a reward of some kind. If it is over £100 it gathers tax, whereas in the other case a person can dispose of up to £1,000 without the Revenue worrying. I cannot understand the logic of the matter. I suspect that there was no logic but that the Government said, "If we do not put something in like this we shall find our £1,000 ideas all destroyed and undermined". That may have been a very proper course, but they have chosen the wrong figure.
    Mr. Fletcher-Cooke: Before he replies, may I ask the Minister without Portfolio two questions? I appreciate that this is not a gift tax, although it is getting very near to it. Does this apply to settlements made, not for valuable consideration, but in natural love and affection in the case of marriage or things of that sort? If it does, may I urge him that it should not, because it would introduce a very considerable innovation into the liberties of settlors under those circumstances making such settlements in what used to be called good equitable consideration, although they were not valuable considerations.
    Mr. Higgins: I wish to raise a few points. The first arises from a letter I received from a constituent who was contemplating making gifts of assets slightly above the figure stipulated in the Bill and who is worried about what responsibilities he might incur as a result. As my hon. Friend the Member for Horsham (Mr. Hordern) pointed out, this is a singularly mean sort of Clause to include
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    in the Finance Bill because it strikes at generosity and means that people contemplating making gifts will have this additional problem to worry about. If it should deter them from making such gifts, that is something we should deplore.
    The second point on which I should appreciate clarification by the Minister refers to the final part of Clause 16(5). That subsection says that with Clause 26(2) Clause 16:
    "shall not apply to gifts made by the same individual in the same year of assessment the total market value of which exceeds one hundred pounds,"
    Does this effectively mean that a person is limited to making a gift of under £100 to one person and if he makes another gift to someone else that will also be caught?
    The final point is, does it mean that if no allowance is made, as we hope it will be to allow for inflation—that is to say, if no Clause is included to enable the effects of inflation to be taken into account—when people make gifts in this way and the asset is disposed of in future, they have to pay an appreciable amount of tax because the monetary value of the asset concerned has increased? Is it seriously supposed that on small gifts of this kind the rate of appreciation may be 5 per cent. per annum and the money value in five years may be £105? Does the Revenue seriously propose to collect that sort of sum and that anyone who makes a gift of just £100 should include it in his Income Tax return? What amount of labour would be involved in that exercise? It would surely be more equitable and more economical if the limit were raised above the extremely low limit stipulated in the Bill.
    9.30 p.m.
    Mr. Costain: According to the Bill, as I read it, husband and wife are one person. If a husband and wife decided to give to their son and daughter-in-law a gift at Christmas and on the anniversaries of their birthdays, would the Clause bite? It would appear that there could be a build-up several times over. The father and mother are one person. The son and daughter-in-law are one person, according to the Bill.
    Mr. Stratton Mills: Treasury Ministers have leaned heavily on the experience in

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    the United States. I hope that the Government in replying on this Amendment can tell the Committee authoritatively the position under American legislation. I have not had the opportunity to check the point recently, but my memory is that each donor in the United States can make a gift of up to 1,000 dollars per annum to each individual within a certain area of relationship. This is very much wider than the Clause as drafted.
    Sir Eric Fletcher: I have been asked many questions. I will do my best to answer most of them, particularly those dealing with the position under English law. I am sure that the hon. Member for Belfast, North (Mr. Stratton Mills) will forgive me if I am not in a position to answer off the cuff his question about American law.
    I think I can dispel much of the misunderstanding which underlies some of the speeches we have heard in support of the Amendment. The Clause has been referred to by the hon. Member for Horsham (Mr. Hordern) as a shabby Clause. He and other hon. Members have referred to it as a tax on human generosity. It is nothing of the kind. It has been suggested that the Clause will fetter the natural desire for human generosity. The subsection is an exempting provision. It creates an exemption. It provides that in these circumstances there shall be exempted from tax gifts of assets of a certain amount. The subsection will not prevent any gifts from being made. It applies only to gifts of a certain kind.
    Hon. Members have spoken as if this operates on all kinds of gifts. It applies only to gifts of chargeable assets. For example, it does not apply to any gift of a chattel of under £1,000. It does not apply to any gifts of cash. It is inconceivable that it could have any operation or gifts of land. Its operation is practically confined, therefore, to gifts of securities.
    It is inherent in the whole principle of the Capital Gains Tax that a liability to the tax should accrue on the disposal of an asset. A gift must be treated as the disposal of an asset, just as disposal by way of sale or death, for this reason. Unless there were such a provision, the door would be wide open to tax avoidance. [Interruption.] I do not know
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    whether hon. Members opposite are suggesting that the Committee should, not legislate against tax avoidance. If there were not some such provision, it would be open to anybody to avoid the liability to the Capital Gains Tax by making gifts one after another and passing securities on and thereby escaping the liability for the tax.
    Hon. Members in terms are suggesting that the exemption of £100 should be increased to £1,000. My own reaction when I first saw the subsection was to wonder why there was any exemption limit at all. [HON. MEMBERS: "Oh."] Yes; it is only intended to apply to gifts that are de minimis in character. It is not intended to relieve from liability gifts of any substance at all in so far as they are gifts of securities that have appreciated in value.
    I have been asked certain specific questions—
    Mr. Stratton Mills rose—
    Sir Eric Fletcher: I will give way in a moment. I have been asked so many questions that I think it would be fairer to those who have asked them if I were to do my best to answer them before I forget what they are. Then I will give way.
    The hon. Member for Macclesfield (Sir A. V. Harvey) asked me whether this provision applies to covenants. This subject has nothing whatever to do with covenants, as has been made clear in the debate on the Budget and in an earlier debate on this Bill. As the hon. Member knows, in future sums payable under a covenant will not be deductible for either Surtax as in the past or Income Tax.
    Sir A. V. Harvey: The hon. Gentleman said that these sums are not deductible for Surtax or Income Tax. Would he clarify that point, because it is important that the Committee should know?
    Sir Eric Fletcher: May I come back to that point? I was just about to reply to a question put to me by the hon. Member for Horsham. He asked me a number of questions. One question was whether gains on the drawing of a Premium Bond would be subject to Capital Gains Tax. The answer is, no. Premium Bonds are exempt under the Bill as it stands.

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    The hon. Gentleman also asked me what would be the position of the holder of some 4 per cent. Victory Bonds that were drawn. There I am told that the capital gain that arises on such a holding would be liable to Capital Gains Tax. I was also asked by the same hon. Member what would be the position if a gilt-edged security were converted into some other stock—
    Mr. Hordern: I asked what would be the position if it were held to redemption and the conversion offer accepted. As I understand, under the Bill it is exempt from Capital Gains Tax. If over £100 in value were distributed, would the excess over £100 be liable to Capital Gains Tax?
    Sir Eric Fletcher: Yes, if it were over £100 the whole of the gain would be subject to Capital Gains Tax. In other words, I think in this context the Committee should appreciate that the general intention of this Capital Gains Tax is to tax capital gains.
    Mr. Hordern: As the hon. Gentleman confirms that shares issued in exchange for others which are not ordinarily liable to Capital Gains Tax are liable to Capital Gains Tax on their distribution over a value of £100, if this is not a tax on generosity we do not know what is. Will the hon. Gentleman not admit that?
    Sir Eric Fletcher: I think the hon. Member is confused. The liability to tax on capital gains arises on a disposal and that may be by transfer, it may be by sale or it may be by gift. It may be by a variety of ways. Whatever the event which creates the liability, the tax becomes due.
    May I now refer to the hon. Member for Macclesfield who put a totally different question about covenants? The answer is that Clause 12 which deals with this matter applies to Surtax and not to Income Tax.
    Sir A. V. Harvey: I thank the hon. Gentleman very much.
    Sir Eric Fletcher: The hon. Member for Belfast, North asked a question, but I see that he has now gone away. I am very happy to think that he and other hon. Members are now satisfied.
    Mr. Fletcher-Cooke: Will the hon. Gentleman say whether a settlement made by way of a gift to a daughter in consideration of her marriage or something of that sort is considered a gift for this purpose or not?
    Sir Eric Fletcher: That will obviously fall to be decided under the general law of the land. The hon. and learned Member knows perfectly well that a settlement is a gift for all purposes.
    Mr. Fletcher-Cooke: Then the answer is that it is. It is disgraceful if when a parent in consideration of a daughter's marriage settles upon his daughter £2,000 of securities that is considered to be a disposal and is taxed.
    Sir Eric Fletcher: A settlement is just as much a disposal as a gift. If on settlement on a daughter securities are settled which at the time of the settlement are worth £2,000 and from the date of acquisition they show a capital gain, there is no reason why that capital gain should not be taxed in the same way as any other disposal.
    Mr. Fletcher-Cooke: This shows the very unsatisfactory nature of the reply. This shows that every gift made out of pure bounty and out of natural love and affection will attract the same rate of tax on profit as if a man had made a profit on the Stock Exchange for his own selfish purposes. I was horrified when the Minister without Portfolio made this remark. This shows that this tax is much nearer a gift tax than anybody suspected. The hon. Gentleman said that it would have been open to the taxpayer to avoid paying a Capital Gains Tax by making a gift. If one does not make a profit but one chooses to give something away, why should one be taxed on a profit which one has not made? There is no obligation to make or to release a profit or to do any of these things to satisfy the Treasury.
    If one chooses to give one's money to one's children or anybody else, why should not one be allowed to do so without paying tax at the same rate as if one had realised a profit and spent it in a way which everybody would disapprove of? This is a monstrous suggestion. I suppose that in future we shall be taxed as if we had made a large income when we have made a small income, and we

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    shall be deemed to have made a large income when we have not made an income at all.
    Sir Eric Fletcher rose—
    Mr. Fletcher-Cooke: No, I will not give way. I feel strongly about this. We shall be taxed for not making a sufficient income in future as we are now taxed for not making a sufficient profit. A parent will have to sell to his daughter at a loss and then presumably he will not have to pay this miserable tax.
    Sir Eric Fletcher: The hon. and learned Member says that this is monstrous, but there is no change in this respect from the position under the 1962 Act. Precisely the same principle applies in respect of gifts or settlements under the 1962 Act—[Interruption.]—which were treated as disposals.
    The Chairman: Order. I hope that the Government side will allow its spokesman to argue the case without the support of too much noise.
    9.45 p.m.
    Mr. A. R. Wise: I have two questions to put to the Minister without Portfolio purely for the purpose of clarification. I understood him to say—I shall not tangle with him on questions of law, about which he knows more than I do—that a gift of cash would not attract this tax, and gifts of chattels would attract this tax. May we take that as official? Is that really the Government's view?
    Sir Eric Fletcher: The answer is that a gift of cash, obviously, does not attract Capital Gains Tax, because there is no capital gain. If one gives away £1,000 which one has held in the bank for no matter how long, it is still £1,000. There is no capital gain. As regards chattels, what the hon. Gentleman said is right, subject to this. There is no Capital Gains Tax attached to any gift of a chattel under £1,000 in value.
    Mr. Stratton Mills: The Minister without Portfolio will recognise from the arguments which have been put from this side of the Committee the complications which this tax will create. His answers this evening show that he ought to feel a lot of sympathy for the Inland Revenue officers who have to administer the tax.
    I asked the hon. Gentleman a question about experience in the United States of
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    America. That question should have had an answer, particularly in view of the tremendous weight which the Government Front Bench have put on the American experience. I suspect that one Treasury Minister at least must know what the position is. The Committee should be given the facts.
    We have all been greatly struck by the generosity with which the Minister without Portfolio greeted the fact that people were to be allowed to give away £100. He paid tribute to those who prepared the Bill for their kindness and generosity, and we should pay tribute to him for endorsing that. The hon. Gentleman hinted that, if he had had his way, he would not have allowed it himself. Had he had his way, a taxable profit would have been created if a man gave his child some pocket money.
    Why was the figure of £100 picked? We have had no explanation. Was it picked, as most of the Government's planning decisions are, with a pin? How was it arranged? My impression is this. Hon. Members will recall that one is entitled to give £500 as a gift inter vivos to any one individual within five years prior to death and, in the event of death within that period, it will escape Estate Duty. I think that the Government have divided £500 by 5 and said that in this provision they would take the figure of £100. That may be scientific tax management—I do not know—but the Minister should recall that, under our gifts inter vivos provisions, that amount could be given to a number of people. A man with three or four children could give up to £500 within five years to each and those sums would be exempt from Estate Duty. So the comparison does not really carry weight.
    I hope that we shall have a much better reply before we divide this evening if we are to make progress in the Committee.
    Mr. Ian Gilmour: The Minister without Portfolio made a remarkable speech, and one of his astonishing observations was, "I am not in a position to answer about America". Why not? What was he doing at the weekend? It is highly relevant to know what happens in America. The Treasury ought to tell us. Perhaps the hon. Gentleman was too busy being told about the position in England. Surely it is relevant for the Committee to know what happens elsewhere. Why

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    does the hon. Gentleman have to be so insular? Is it because he knows that experience elsewhere tells against the provision? We must assume either that or that the Treasury has been thoroughly negligent in not bothering to find out what happens elsewhere.
    Mr. Hordern: The minority Report of the Royal Commission made the point that in the United States gifts are exempt.
    Mr. Gilmour: I do not think that the Minister without Portfolio has had time to read the Royal Commission's Report. I think, therefore, we ought to keep this debate fairly simple.
    An even odder remark by the hon. Gentleman was that hon. Members seem to be saying that we should not legislate for tax avoidance. Whatever else is he doing? The whole provision of short-term Capital Gains Tax is legislating for tax avoidance. The hon. Gentleman can hardly imagine that people will go out of their way to value their assets to see whether they are worth less than or more than £100. This Clause, like so much else in the Bill, is legislating for tax avoidance. It is thoroughly reprehensible that the Government should so ignore the danger of encouraging people to avoid taxation. They are bringing in a series of provisions which the mass of the people will not think reasonable and which they will think it perfectly normal and right to do all they can to avoid.
    The hon. Gentleman says that in their great generosity the Government are going to tax the gift of a father to his daughter. Will he say whether a similar act of generosity will apply in the case of a gift from husband to wife or wife to husband?
    Sir T. Brinton: My hon. Friend the Member for Horsham (Mr. Hordern) referred to the meanness of the Clause. It seems to me that one of the things we have to remember is the value of money. We are talking about £100 as the maximum gift to escape possible capital gains assessment. This is rather less than the price of a motorised pedal cycle and considerably less than the price of a new double bed, as I discovered recently. [Laughter.] They break in the middle occasionally. It is something less than the price of four cases of whisky, or, as
    160
    I gather from a reply given to a Question by the hon. Lady the Member for Liverpool, Exchange (Mrs. Braddock), two cases of gin in this House.
    These are very small sums, and they are shrinking all the time. What could be bought for £100 last October would now cost £104, as those who have been watching the Retail Price Index will know. [HON. MEMBERS: "What about stamps?"] Stamps are included in the Index. We are, indeed, talking about a very small sum. It seems that the strongest point which has been made is that if the Government have found it administratively impracticable in good common sense to try to apply the Capital Gains Tax to chattels of a value less than £1,000 why in the case of securities of gift do they attempt to go for transactions as small as this?
    The Government are imposing an administrative burden not only on the tax authorities but on the wretched taxpayers, which is not worth while. The question of valuation will crop up. Not all securities have a market value. They have to be valued. How many people will be caught in future for some wretched little transaction of slightly over £100? Their names will be in the papers and they will be pilloried for doing something that they will regard as a small transaction—which, indeed, is what it will be.
    I appeal to the Government to have a little sense about this. It was originally argued that the tax was imposed—and many of my hon. Friends will accept this reasoning though not necessarily all the applications—in order to equalise the position as between the capitalist who was able to make profits by his possession of capital and those who had no capital and had to pay heavy taxes on their incomes. Surely the reasoning behind that means that, in logic, this tax should be on individuals and should not be carried further back. The Government have elected to make it a tax designed to extract money at every conceivable point. Later we shall discuss the repercussions on business. But, in private affairs, any time that any transaction of any kind takes place, the Government want their pound of flesh.
    If the Government had been sincere in their argument that the Capital Gains Tax was to assure justice between one form of taxpayer and another form of

    161
    potential taxpayer, they would not have carried it to the length that if, for instance, I want to give my daughter £120 and do so in some form which might incur a capital gain, I must pay tax on the gift. Surely that is going too far.
    Sir Eric Fletcher: Perhaps I can deal with the point the hon. Gentleman has just made, for it may save time. The hon. Gentleman, let us suppose, wishes to make a gift of £500 or £1,000 or £5,000 or any other sum in cash to his daughter or to someone else. He can do one of two things. If he sells securities in order to make the gift in cash, then, if those securities have appreciated in value, this should properly attract Capital Gains Tax. If, instead, he wished to make the gift in securities then it is equally just and proper that he should pay tax on the Capital Gain that has accrued. Unless we had a provision in the Bill to prevent that kind of avoidance, it would be opening the door to considerable tax avoidance.
    The hon. Member for Norfolk, Central (Mr. Ian Gilmour) I think completely misunderstood the position.
    The Chairman: Order. The hon. Gentleman should remember that he is intervening in a speech.
    Sir T. Brinton: The Minister's intervention merely indicates the obsession of the Government with the question of whether these people avoid paying the Tax. They are horrified at the idea that anyone might arrange his affairs in such a way as not to pay the maximum tax. One of the basic differences between these benches and those opposite is that we still believe that the money a man possesses and the goods and chattels he possesses are his own. We believe that the money he owns belongs to him, that the Government have a right to ask certain taxes of him but we do not believe that the money he earns and the goods he owns belong to the Government and the public, and that when they allow him to retain some part of them they are doing him a favour. That is what your philosophy is. That is what it amounts to.
    10.0 p.m.
    The Chairman: It is not my philosophy. I have no philosophy.
    Sir T. Brinton: I beg your pardon, Dr. King. I realise that in your present position you are neutral. That is what the Government's philosophy is. In order to extract a small amount of tax, because that is all it means, the Minister and his friends are haggling about the difference between an exemption of £100 and £1,000. The Minister himself said that he saw no reason for any exemption at all and I must admit that there is a lot to be said for his point of view, I have no doubt that people have heard frequently of taxi-drivers refusing a 3d. tip because it is not worth having. Neither is £100. It is so small that it really is not worth having at all. What I am suggesting is that for administrative convenience and in order to make sure that there are not a lot of people contravening the law, very often unconsciously, it would be far better to make a realistic exemption which at least would accord with the exemption which has had to be made for practical reasons in respect of chattels in Clause 17.
    It is very difficult indeed to discuss this matter because it is tied up with Clause 26 Section 2, which deals with the same matter in respect of long-term capital gains and as has been pointed out it is rather difficult to discuss them in isolation. If the Government have really made up their mind they are going to extract the maximum in tax at every single point they had better say so, and the country had better realise that this tax, which is a tax on inflation, is going to be exacted at every conceivable point throughout the whole of the economy, on every conceivable economic operation, and throughout every transfer of goods within a family. In other words it is to be part of the sand in the economic machinery from now on.
    The Minister and his friends are producing today a tax which will be bitterly resented, which will not work and which will inevitably produce either enormous administrative difficulties for the tax inspectors and the public or a great many contraventions, many of them unconscious. Is this what is wanted? If it is then the Government are going the right way about it. The tax is going to lead to this situation in many other spheres as well as this one and I ask that the hon. Gentleman will think again

    163
    as to whether this niggling exemption is not making administrative nonsense of what he intends to do.
    Mr. Costain: When I intervened earlier, I asked the Minister without Portfolio a specific question. It has been the custom on this side of the Committee to give a Minister sufficient time for the necessary consultations. However, I point out that I have had no answer at all to what was a most pertinent question. The question was whether a husband and wife, son and daughter-in-law, are accepted as one and the same for tax purposes. As we have had no answer, I take it that they are. If that is correct, the Committee and the country should know what that means.
    Sir Eric Fletcher: I apologise to the hon. Gentleman for omitting to answer that question. The answer is that there is no tax on a gift from husband to wife, or vice versa.
    Mr. Costain: That was not the question. I am suggesting that if a father and mother wish to give their children £12 10s. on a birthday or at Christmas and they happen to be lucky enough during the course of the year to make a profit on a share transaction, that £12 10s gift will be subject to tax. Does the hon. Gentleman consider that to be a concession?
    Let me make it quite clear so that the Minister cannot duck the question. I am saying that under taxation law husband and wife are the same so that son and daughter-in-law, being husband and wife, are also the same. If any family wishes to give—[Laughter]—the Minister laughs, but this is a serious mattter. If the Government consider that £12 10s. as a birthday present is something which ought to be taxed, then the country ought to know. Will the Minister deny it?
    Mr. Box: I have one query for the Minister without Portfolio. In reply to my hon. Friend the Member for Horsham (Mr. Hordern) he asserted that 4 per cent. Victory Bonds, if successfully drawn for repayment at par, were subject to capital gains. I point out to him a quotation from the Stock Exchange Year Book which says:
    164
    "Bonds held for at least six months before death are acceptable at par (plus accrued interest) in payment of death duties."
    Would he tell me whether Victory Bonds which are surrendered for the purposes of death duties at par are subject to Capital Gains Tax, assuming, of course, that the total exceeds £5,000?
    Sir Eric Fletcher: I am afraid that I cannot answer that, but I will undertake to write to the hon. Gentleman and let him know.
    Mr. Peter Walker: I am sorry that this Government, poised for instant action, on the one occasion when they can give instant action should decide to send it by post, and, to judge by the present state of the postal services, that will take a long time.
    I want, first, to object strongly to the manner in which the Minister suggested that this was a wonderful concession which the Government were giving. When he spoke, there were no more of my hon. Friends who wanted to speak, but after he had sat down almost all of my hon. Friends wanted to speak. That was indicative of the manner in which he upset them by the suggestion that a Socialist Government who allow people to give gifts to their friends and relatives of up to £100 in a year are being very generous to the taxpayers.
    This is a remarkable conception that the hon. Gentleman has put forward. We are disappointed that he had no idea of the comparable position in the United States. We are disappointed that he made no mention of the administrative difficulties and he must recognise that they are considerable.
    Let us take the situation of a person who, in the course of a year, gives twelve gifts of securities of £10 apiece. This frequently happens as, for example, with unit trusts where gift schemes are available. If during the course of the year the total number of such gifts reaches £100 or more, the individual concerned has to recall the gifts he made during the year, although he may have made the first in January, then having no idea that he was to be invited to be a godfather in November, and therefore had no intention in January of giving more than £100. However, at the end of the year he must quickly calculate what gifts he has given in the year and then see whether he can

    165
    obtain valuation at the time he gave the gift to the person concerned so that an appropriate return on the subject can be made to the Revenue. This is an administrative nonsense. I recognise that if we are to have a Capital Gains Tax there must be some limit on gifts. What we on this side suggest is that the Government have been thoroughly mean and thoroughly incompetent in drafting this Clause to meet the need.
    Let me deal with the alternatives available. The limit which we suggest is £1,000. It may be argued that this is too much or too little, but what the Committee must remember is that we are not talking about £1,000 worth of gain; we are talking about £1,000 worth of gift. The amount of gain from that may be nil, it may be negligible, or it may be £1. Nevertheless, what you are doing by this Clause is that you are making every such gift—
    The Chairman: Order. The hon. Gentleman must observe the rules of debate. I am not doing anything.
    Mr. Walker: I am sorry, Dr. King.
    What the Government are doing by this Clause is creating tremendous administrative
    problems, many of which are not necessary. They could have drafted a Clause which was related to the amount of gain concerned in any gift. This would probably have been a better way of dealing with the matter. They could have lifted the limit to a larger sum. What they certainly should have done was to relate the size of the gift to the individual and not the size in total during the course of one year to any number of individuals. This is a very incompetent way of handling the situation.
    Much to our surprise, the Government are not willing reasonably to amend the Clause. They propose to continue what is a complete administrative nonsense. They are to continue a scheme under which many people will have to make complicated returns at the end of the year, having gone back over all their transactions by way of gift in the past year. I hope that my hon. Friends will divide the Committee on the Amendment.
    Question put, That "hundred" stand part of the Clause:—
    The Committee divided: Ayes 182, Noes 169.

    Division No. 126.]

    AYES

    [10.13 p.m.

    Allaun, Frank (Salford, E.)

    Doig, Peter

    Hunter, Adam (Dunfermline)

    Atkinson, Norman

    Driberg, Tom

    Hynd, H. (Accrington)

    Barnett, Joel

    Duffy, Dr. A. E. P.

    Hynd, John (Attercliffe)

    Beaney, Alan

    Edelman, Maurice

    Irvine, A. J. (Edge Hill)

    Bence, Cyril

    Edwards, Robert (Bilston)

    Irving, Sydney (Dartford)

    Benn, Rt. Hn. Anthony Wedgwood

    English, Michael

    Jackson, Colin

    Bennett, J. (Glasgow, Bridgeton)

    Ennals, David

    Janner, Sir Barnett

    Binns, John

    Ensor, David

    Jeger, George (Goole)

    Bishop, E. S.

    Evans, Albert (Islington, S.W.)

    Jeger,Mrs.Lena(H'b'n&amp;st.P'nras,S.)

    Blenkinsop, Arthur

    Evans, Ioan (Birmingham, Yardley)

    Jenkins, Hugh (Putney)

    Boardman, H.

    Finch, Harold (Bedwellty)

    Jones, Dan (Burnley)

    Boston, T. G.

    Fletcher, Sir Eric (Islington, E.)

    Jones, Rt.Hn.SirE1wyn(w.Ham,S.)

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

    Fletcher, Ted (Darlington)

    Lawson, George

    Braddock, Mrs. E. M.

    Fletcher, Raymond (Ilkeston)

    Leadbitter, Ted

    Bray, Dr. Jeremy

    Floud, Bernard

    Lever, L. M. (Ardwick)

    Broughton, Dr. A. D. D.

    Foley, Maurice

    Lewis, Arthur (West Ham, N.)

    Brown, Rt. Hn. George (Belper)

    Foot, Sir Dingle (Ipswich)

    Brown, Hugh D. (Glasgow, Provan)

    Freeson, Reginald

    Lipton, Marcus

    Brown, R. W. (Shoreditch &amp; Fbury)

    Galpern, Sir Myer

    Lomas, Kenneth

    Garrett, W. E.

    Loughlin, Charles

    Butler, Herbert (Hackney, C.)

    Garrow, A.

    McCann, J.

    Butler, Mrs. Joyce (Wood Green)

    Gregory, Arnold

    MacColl, James

    Callaghan, Rt. Hn. James

    Griffiths, Rt. Hn. James (Llanelly)

    MacDermot, Niall

    Chapman, Donald

    Hannan, William

    McGuire, Michael

    Coleman, Donald

    Harper, Joseph

    Mackenzie, Gregor (Rutherglen)

    craddock, George (Bradford, S.)

    Hart, Mrs. Judith

    MacMillan, Malcolm

    Cronin, John

    Hattersley, Roy

    Mahon, Simon (Bootle)

    Grossman, Rt. Hn. R. H. S.

    Hazell, Bert

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

    Cullen, Mrs. Alice

    Healey, Rt. Hn. Denis

    Manuel, Archie

    Dalyell, Tam

    Heffer, Eric S.

    Mayhew, Christopher

    Darling, George

    Herbison, Rt. Hn. Margaret

    Mendelson, J. J.

    Davies, G. Elfed (Rhondda, E.)

    Hill, J. (Midlothian)

    Mikardo, Ian

    Davies, Harold (Leek)

    Hobden, Dennis (Brighton, K'town)

    Millan, Bruce

    Davies, Ifor (Gower)

    Holman, Percy

    Miller, Dr. M. S.

    Davies, S. O. (Merthyr)

    Houghton, Rt. Hn. Douglas

    Milne, Edward (Blyth)

    Dell, Edmund

    Howarth, Robert L. (Bolton, E.)

    Molloy, William

    Diamond, John

    Hoy, James

    Monslow, Walter

    Dodds, Norman

    Hughes, Cledwyn (Anglesey)

    Morris, Charles (Openshaw)

    Morris, John (Aberavon)

    Rees, Merlyn

    Thornton, Ernest

    Mulley,Rt.Hn.Frederick(SheffieldPk)

    Rhodes, Geoffrey

    Tuck, Raphael

    Murray, Albert

    Richard, Ivor

    Varley, Eric G.

    Newens, Stan

    Robertson, John (Paisley)

    Walden, Brian (All Saints)

    Noel-Baker, Francis (Swindon)

    Rogers, George (Kensington, N.)

    Walker, Harold (Doncaster)

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

    Rose, Paul B.

    Weitzman, David

    Norwood, Christopher

    Ross, Rt. Hn. William

    Wells, William (Walsall, N.)

    Oakes, Gordon

    Rowland, Christopher

    White, Mrs. Eirene

    Ogden, Eric

    Sheldon, Robert

    Whitlock, William

    O'Malley, Brian

    Shore, Peter (Stepney)

    Wigg, Rt. Hn. George

    Orme, Stanley

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

    Wilkins, W. A.

    Oswald, Thomas

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

    Willey, Rt. Hn. Frederick

    Owen, Will

    Silkin, S. C. (Camberwell, Dulwich)

    Williams, Mrs. Shirley (Hitchin)

    Page, Derek (King's Lynn)

    Silverman, Julius (Aston)

    Williams, W. T. (Warrington)

    Pannell, Rt. Hn. Charles

    Slater, Mrs. Harriet (Stoke, N.)

    Willis, George (Edinburgh, E.)

    Parker, John

    Slater, Joseph (Sedgefield)

    Wilson, William (Coventry, S.)

    Parkin, B. T.

    Snow, Julian

    Winterbottom, R. E.

    Pavitt, Laurence

    Soskice, Rt. Hn. Sir Frank

    Woodburn, Rt. Hn. A.

    Pearson, Arthur (Pontypridd)

    Stewart, Rt. Hn. Michael

    Yates, Victor (Ladywood)

    Pentland, Norman

    Strauss, Rt. Hn. G. R. (Vau<ob/>hall)

    Zilliacus, K.

    Popplewell, Ernest

    Swain, Thomas

    Price, J. T. (Westhoughton)

    Swingler, Stephen

    TELLERS FOR THE AYES:

    Pursey, Cmdr. Harry

    Taylor, Bernard (Mansfield)

    Mr. Charles Grey and

    Rankin, John

    Thomas, George (Cardiff, W.)

    Mr. William Howie

    Redhead, Edward

    Thomas, Iorwerth (Rhondda, W.)

    NOES

    Agnew, Commander Sir Peter

    Grant-Ferris, R.

    Mott-Radclyffe, Sir Charles

    Alison, Michael (Barkston Ash)

    Gresham-Cooke, R.

    Munro-Lucas-Tooth, Sir Hugh

    Allan, Robert (Paddington, S.)

    Grimond, Rt. Hn, J.

    Neave, Airey

    Allason, James (Hemel Hempstead)

    Gurden, Harold

    Onslow, Cranley

    Anstruther-Gray, Rt. Hn. Sir W.

    Hall, John (Wycombe)

    Orr-Ewing, Sir Ian

    Awdry, Daniel

    Hall-Davies, A. G. F.

    Osborn, John (Hallam)

    Baker, W. H. K.

    Harris, Frederic (Croydon, N.W.)

    Page, John (Harrow, W.)

    Barber, Rt. Hn. Anthony

    Harris, Reader (Heston)

    Page, R. Graham (Crosby)

    Barlow, Sir John

    Harrison, Brian (Maldon)

    Pearson, Sir Frank (Clitheroe)

    Batsford, Brian

    Harvey, Sir Arthur Vere (Maccles'd)

    Percival, Ian

    Beamish, Col. Sir Tufton

    Harvey, John (Walthamstow, E.)

    Peyton, John

    Bessell, Peter

    Harvie Anderson, Miss

    Pickthorn, Rt. Hn. Sir Kenneth

    Birch, Rt. Hn. Nigel

    Hawkins, Paul

    Pike, Miss Mervyn

    Black, Sir Gyrll

    Heald, Rt. Hn. Sir Lionel

    Pitt, Dame Edith

    Box, Donald

    Heath, Rt. Hn. Edward

    Pounder, Rafton

    Boyd-Carpenter, Rt. Hn. J.

    Higgins, Terence L.

    Price, David (Eastleigh)

    Boyle, Rt. Hn. Sir Edward

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

    Pym, Francis

    Brewis, John

    Hirst, Geoffrey

    Ramsden, Rt. Hn. James

    Brinton, Sir Tatton

    Hobson, Rt. Hn. Sir John

    Redmayne, Rt. Hn. Sir Martin

    Brooke, Rt. Hn. Henry

    Hooson, H. E.

    Rees-Davies, W. R.

    Buck, Antony

    Hordern, Peter

    Ridley, Hn. Nicholas

    Bullus, Sir Eric

    Hornby, Richard

    Roberts, Sir Peter (Heeley)

    Robson Brown, Sir William

    Buxton, Ronald

    Howe, Geoffrey (Bebington)

    Russell, Sir Ronald

    Campbell, Gordon

    Hunt, John (Bromley)

    St. John-Stevas, Norman

    Carlisle, Mark

    Hutchison, Michael Clark

    Sandys, Rt. Hn. D.

    Carr, Rt. Hn. Robert

    Iremonger, T. L.

    Shepherd, William

    Cary, Sir Robert

    Jenkin, Patrick (Woodford)

    Sinclair, Sir George

    Chichester-Clark, R.

    Johnston, Russell (Inverness)

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

    Clark, William (Nottingham, S.)

    Jopling, Michael

    Spearman, Sir Alexander

    Cole, Norman

    Kerby, Capt. Henry

    Stainton, Keith

    Cooke, Robert

    Kilfedder, James A.

    Steel, David (Roxburgh)

    Cooper-Key, Sir Neill

    King, Dr. Horace (S'pton, Itchen)

    Talbot, John E.

    Corfield, F. V.

    Kirk, Peter

    Taylor, Sir Charles (Eastbourne)

    Costain, A. P.

    Kitson, Timothy

    Taylor, Frank (Moss Side)

    Crawley, Aidan

    Lancaster, Col. C. G.

    Teeling, Sir William

    Crowder, F. P.

    Langford-Holt, Sir John

    Thatcher, Mrs. Margaret

    Curran, Charles

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

    Thomas, Sir Leslie (Canterbury)

    Dalkeith, Earl of

    Longbottom, Charles

    Thompson, Sir Richard (Croydon,S)

    Davies, Dr. Wyndham (Perry Barr)

    Dean, Paul

    Longden, Gilbert

    Turton, Rt. Hn. R. H.

    Deedes, Rt. Hn. W. F.

    Lubbock, Eric

    Tweedsmuir, Lady

    Doughty, Charles

    McAdden, Sir Stephen

    van Straubenzee, W. R.

    Douglas-Home, Rt. Hn. Sir Alec

    MacArthur, Ian

    Walder, David (High Peak)

    Elliot, Capt. Walter (Carshalton)

    Mackenzie, Alasdair(Ross&amp;Crom'ty)

    Walker, Peter (Worcester)

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

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

    Walker-Smith, Rt. Hn. Sir Derek

    Emery, Peter

    Maclead, Rt. Hn. Iain

    Walters, Dennis

    Eyre, Reginald

    McNair-Wilson, Patrick

    Ward, Dame Irene

    Fell, Anthony

    Mathew, Robert

    Weatherill, Bernard

    Fletcher-Cooke, Charles (Darwen)

    Maude, Angus

    Webster, David

    Fletcher-Cooke, Sir John (S'pton)

    Maxwell-Hyslop, R. J.

    Whitelaw, William

    Gammans, Lady

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

    Wills, Sir Gerald (Bridgwater)

    Gibson-Watt, David

    Meyer, Sir Anthony

    Wilson, Geoffrey (Truro)

    Giles, Rear-Admiral Morgan

    Mills, Peter (Torrington)

    Wise, A. R.

    Gilmour, Ian (Norfolk, Central)

    Mills, Stratton (Belfast, N.)

    Wolrige-Gordon, Patrick

    Glover, Sir Douglas

    Mitchell, David

    TELLERS FOR THE NOES:

    Godber, Rt. Hn. J. B.

    Monro, Hector

    Mr. Martin McLaren and

    Goodhew, Victor

    More, Jasper

    Mr. Geoffrey Johnson Smith.

    Grant, Anthony

    Morrison, Charles (Devizes)

    Mr. Michael Alison: I beg to move, in page 13, line 5, after "1965" to insert:
    "except that, in the case of any acquisition before that date, no tax shall be chargeable by virtue of this section where the qualifying period enacted in section 10(2) of the Finance Act 1962 exceeds that provided for in subsection (1) of this section".
    The purpose of this Amendment is a simple one in spite of the rather complicated and roundabout way in which, in keeping with the rest of the Bill, it has to be expressed. The object of the Amendment is, I believe, just, and I hope it will prove, after I have expounded it, to be acceptable to the Committee as a whole. I hope, Dr. King, that you will allow me to recapitulate a little of the familiar ground of the Finance Bill in trying to make my point. It is a technical and niggling point, but it is of considerable consequence to a large number of our fellow citizens.
    The Bill provides for a continuation, albeit in an altered form, of the tax in respect of short-term gains which was introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in 1962. One of the changes with which I am concerned is the time limit within which the disposal of an asset is susceptible to the short-term gains tax. Under the 1962 Act, the speculative short-term gains tax was applied if the disposal took place within six months in the case of stocks and shares, and three years in the case of land. Any acquisitions or disposals which took place within the appropriate time limits therein imposed attracted, and were susceptible to, the short-term gains tax.
    Under the Bill the time limits are altered. There is now a uniform time limit of 12 months in respect of both land and other securities, but the rub of the argument is that this new qualifying period operates only from 6th April of this year. Subsection (11) of this Clause provides that for assets acquired before that date the time limits appropriate to the 1962 Act continue into the post-Finance Bill period. This means that if somebody had the misfortune to acquire a parcel of land a day before Budget day he would have to hold on to it for three years if he was to escape the penal rate of taxation by way of Income Tax and Surtax. After that he would qualify
    170
    for the 30 per cent. Capital Gains Tax. But if he had acquired that parcel of land a day after Budget day he would be subject to a time limit of only 12 months.
    This is an unnecessary and unfair anomaly. Why should somebody who had the misfortune to acquire a parcel of land just before Budget day have to hold on to it for three years? I ask that particularly in the light of the arguments which have been put forward by the Government in respect of amending the time periods for the short-term tax. This afternoon the Solicitor-General was at pains to point out that the alteration of the time limit in respect of the short-term gains tax was in the interests, and in favour, of the taxpayer. We appreciate that. The shortening of a qualifying period means that one has a better chance of escaping the 40 per cent. plus Income Tax and possibly Surtax rate, and coming into the 30 per cent. Capital Gains Tax rate. Of course it is an improvement from the taxpayer's point of view, but it is a discriminating improvement in favour of a certain section of taxpayers. Some will be left out on a limb, and will have to abstain from realising a parcel of land for very much longer.
    The Solicitor-General justified the new time limit by saying that it was fair to different kinds of transactions. This is true, but we find ourselves faced with this curious anomaly, that whereas stocks and shares realised within 12 months attract the same sort of penalty in terms of the short term tax as land, land itself, simply because of perhaps a 24-hour difference in the date of acquisition, is differentiated against to the extent of three years as opposed to 12 months. This is very far from being fair in terms of different kinds of transaction. It is quite anomalous.
    10.30 p.m.
    I would like to point out some snags which will arise in the case of different types of purchase of land. The point about the compulsory purchase of land is still an obscure one. If a compulsory purchase order is placed on a parcel of land and that land has to be realised within three years of the time of purchase, and the seller happens to have acquired it before Budget day, the sum realised on compulsory purchase will be susceptible to Income Tax and, possibly,

    171
    Surtax, whereas a compulsory purchase order in relation to a plot of land bought after Budget day, and therefore held for only one year, will have to pay only the lower rate of 30 per cent. if the compulsory purchase happens to fall after nearly twelve months of tenure. In such a case this proposal is clearly likely to impose an unfair burden simply by virtue of the fortuitous time at which one happened to acquire a parcel of land—before or after Budget day.
    The question of gifts also arises. Let us take the case of a farmer who wants to make a gift of a parcel of land—
    The Chairman: Order. The hon. Member is arguing a complex case. I would be grateful if hon. Members who must talk would talk a little more quietly. I find it difficult to hear.
    Mr. Alison: As long as you do not mind my talking, Dr. King, I am not too concerned about the comments of other hon. Members.
    If a farmer wishes to make a gift of a parcel of land to a son or daughter, if he has a parcel of land which he acquired after Budget day he can make a gift within or just after 12 months and incur only the 30 per cent. Capital Gains Tax which is imposed on the gift, whereas if the land was acquired before Budget day he will have to hold it for three years before he can escape the heavy penalty of Income Tax or Surtax. It will continue to impose anomalous and discriminatory penalties on different types of people simply according to an accidental event, namely, the time when the land was originally acquired.
    I submit that there will be yet a further unsatisfactory result, in that this proposal will tend to cause a distortion in values of land. The would-be purchaser of land will know for certain that in looking round at the possible parcels of land he can acquire for development from possible sellers that seller A will be prepared to dispose of a parcel of land in a shorter period of time because he acquired it after Budget day and will therefore have to hold on to it for only 12 months to escape Income Tax or Surtax. That parcel will therefore come on to the market
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    three times as quickly as an equivalent parcel which was acquired by a would-be seller just before Budget day, because he will have to hold on to it for three years in order to escape this penal taxation. Great anomalies in relation to land values will be created by the freezing element imposed by this discrimination. That is a further unsatisfactory result.
    It will cost the Treasury nothing to accept the Amendment, which will bring all transactions in respect of land under the same qualifying period of 12 months, whenever acquired, from 6th April, 1965. It will cost the Treasury nothing, because the tax is a voluntary tax—that is to say, people can avoid it entirely by refraining from disposing of land. There will be an extra degree of voluntariness required on the part of some people, to hold on longer-24 months in the case of those who acquired land just before Budget day.
    Some people will argue that the imposition must fall on a purchaser of land before Budget day, because he purchased the land in full cognisance of the fact that he would have to hold it for three years, as the law stood at that moment, in order to escape the penalty of Income Tax or Surtax which the 1962 Act imposed. That is true. But anybody who purchased land before Budget day under the 1962 proposals would expect that at the end of the necessary period of time he would be able to dispose of the land without any further taxation charge. Of course, the difference introduced in the new Bill is that, however long the land has been held, it will now come in for a capital gains charge. The situation is totally different.
    If the Government are not prepared to accept the Amendment, the only fair thing to do in reference to a purchaser of land prior to Budget day will be to say that he will be able to dispose of it without having to pay a Capital Gains Tax. I ask the Government to consider that as an alternative.
    Mr. MacDermot: The hon. Member for Barkston Ash (Mr. Alison) moved this slightly technical and complicated Amendment very clearly and put his case very persuasively. The question at issue, which I do not think raises any major question of principle, is important,

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    although it is within a fairly narrow compass.
    The issue which confronted us was whether, in changing the period of time for the short-term tax, we should make the new rates apply to acquisitions which were made before Budget day or to leave pre-Budget acquisitions to run out on their old timing. First, when one takes assets previously subject to the six months tax, the question is whether it would be fair to say that they should be subject to the short-term tax if they were disposed of within the new period of one year. We thought it would not be fair to someone who had bought what I call a short-term asset and who contemplated that he would be able to dispose of it within six months and escape tax. We thought it would be unduly harsh then to impose tax on him when maybe he would never have entered the transaction if he had known that he could not dispose of it after the six months' period without being subject to tax. We thought that it was fair and right.
    On applying the same judgment and the same principles to land, we thought it right to let the period run out, because the parties to the transaction of the sale of land within three years before Budget day would have negotiated and agreed their price in the belief that if there were a resale within three years this would attract a high rate of tax. I say a high rate because one is assuming for this purpose that a person of substance is doing the transaction. In the case of land I suggest he usually would he such a person. Sometimes, of course, it would operate at a lower rate. Considerations of the likely incidence of tax, of course, enter into negotiations as a factor which goes to determine the price.
    For that reason we thought that it is right to leave the position as it is in the Bill: that any resale within the contemplated three-year period, that is to say, which was in contemplation by the parties at the time of the transaction, should be taxed at the higher rate.
    The hon. Member raised three specific points. He said, first, that the effect of a compulsory purchase order might be different. I do not think so. As I understand the position, I do not think there would be any difference. The law would be the same in respect of the compulsory
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    purchase order. I think the same applies in relation to a gift if he were to dispose of property by gift. The hon. Member says that it would distort land values. Of course, if we accede to his Amendment it will distort land values in a different sense. It means that it would give a quite uncovenanted gain to the man who purchased within three years before Budget day, and it would mean that he would be able to dispose of the property more advantageously to himself within the period during which he contemplated that he would have to hold the land.
    For these reasons, I suggest that, in what I agree is a matter of nice distinction and fine balance, our conclusion is the better one.
    Mr. Heath: This is a most disappointing reply from the Financial Secretary. He said that this Amendment does not raise a matter of great principle, and he has paid a tribute to the way in which my hon. Friend the Member for Barkston Ash (Mr. Alison) argued his case so persuasively and with logic.
    This really is an anomaly which has arisen in the Bill as a result of the different periods taken for the tax. We understand that the Financial Secretary, the Chancellor and all the Treasury Ministers have been very hard pressed in trying to get this enormous Bill ready, and they cannot have given the fullest consideration to all the points. Is this not a case where the Financial Secretary could say that he accents that there is this anomaly and that he is prepared to make an adjustment? Nevertheless, he comes along at the end of a day's hard debate, which has been of a very high level, and presents a completely rigid front on something which will not cost the Treasury much, which will remove a feeling of inequity between individual citizens and which he could easily grant. At this stage of the Bill this is not good enough, and I hope the Chancellor will give him a gentle nudge and say, "Look, this is a case where you could meet the Committee." If the Financial Secretary is going to make real progress with the Bill he must come some way towards us on something which he says does not raise a point of great principle.
    The case argued on the question of securities is not exactly comparable, because it does not mean that the persons

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    who originally undertook the contract are getting a worse deal than those who come under the Bill now, whereas in the case argued by my hon. Friend they are going to get into a worse position. As was explained, this means an overlapping situation in which they will feel a sense of grievance and inequity.
    I hope that in a case like this, which will cost so little, which does not raise a point of great principle and which can be fitted into the Bill, the Financial Secretary will come some way to meet us. I hope the Chancellor will urge him to do so. If the Financial Secretary cannot meet us on this point I must again urge my hon. Friends to divide the Committee.
    Mr. George Y. Mackie: I urge the Financial Secretary to accept the Amendment. I followed the argument of my hon. Friend the Member for Barkston Ash (Mr. Alison) with care and I thought he put his points very clearly.
    I could not follow the Financial Secretary's argument that anyone who bought land and intended to keep it for three years, bought it with financial considerations in mind because he had intended to keep it for three years. The Government have altered the situation at the end of the three years, and I thought my hon. Friend put this point very clearly. A man in that position would then have to pay a tax which he did not expect to pay.
    In all equity, the Government should say that such a man should be put on an equal footing with people who bought after the Budget, and I urge the Financial Secretary to reconsider his decision.
    Mr. MacDermot: If it is the wish of the Committee, I will certainly undertake to look further into the point.
    Sir D. Glover: Seriously?
    Mr. MacDermot: Seriously. Of course, I would not make such an offer if I did not intend it seriously.
    This is a point which I considered and I was responsible for the decision. There have been some arguments adduced on matters to which perhaps I did not give sufficient weight. I do not want to commit myself, but I will gladly reconsider the whole question if it will meet with the wishes of the Committee.
    Mr. Alison: In those circumstances, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Question proposed, That the Clause stand part of the Bill.
    10.45 p.m.
    Sir D. Glover: We have had a very good debate all day on various Amendments to the Clause. I want to make my position quite clear to the Chancellor of the Exchequer and the Financial Secretary. I had grave doubts even in 1962 about the bringing in of a Capital Gains Tax, or a speculative gains tax which was the term used at that time. But I accepted that there was a strong case for covering the spculative gain element in stagging, in the buying of options, both call and put, and other ramifications which my right hon. Friends then hoped to cover. I have listened all day to the arguments.
    Mr. A. E. P. Duffy: The hon. Member has not been here.
    The Chairman: Order. If the hon. Member for Colne Valley (Mr. Duffy) wishes to intervene, I hope that he will do so in the conventional way.
    Mr. Duffy: With permission, when the hon. Member for Ormskirk (Sir D. Glover) says he has listened to the arguments all day, I feel moved to say that I have sat here all day and I have not seen the hon. Member in his place.
    Sir D. Glover: It is not for me to draw attention to the hon. Member's eyesight. I have been here for at least five hours and I have listened to nearly all the major speeches. I do not know whether the hon. Member for Colne Valley (Mr. Duff) has contributed. If he has and I have missed what I am sure was an earth-shaking pronouncement, I am sorry. I have certainly listened to all the speeches from the other side of the Committee, which as usual in this debate have been very few indeed.
    To return to the major argument, I was critical, but I accepted at the time that there was a case for closing he loopholes on speculative gains. I am not criticising their right to do so, but when the Government bring in a long-term Capital Gains Tax I do not see why they need to extend

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    its provisions, as they do in the Clause, from six months to twelve months. I cannot see where the logic of their argument leads them. The hon. Member for Manchester, Cheetham (Mr. Harold Lever), who is no longer in his place, argued with great cogency in two very able speeches, both of which were critical of the Government. In one case he went as far as to say that if the enormity which would be created by producing a Conservative Government had not been in his mind he would have voted against his own party on an Amendment which we were discussing at that time, which shows that he felt very strongly that the Amendment should have been accepted.
    The Chairman: Order. We cannot go over that Amendment now.
    Sir D. Glover: I am speaking, with great respect, on the Question, That the Clause stand part of the Bill. I think I am right in saying why I disagree with the Motion which is before the Committee and in drawing attention to the fact that hon. Members opposite adduced arguments against accepting this Motion.
    Mr. Mendelson: One hon. Member.
    Sir D. Glover: I went on to refer to the hon. Member for Cheetham.
    Mr. Duffy: Who are the others?
    The Chairman: Order.
    Sir D. Glover: I do not need your protection, Dr. King. I am prepared to deal with hon. Members opposite. It makes it very difficult to say "more than one", because there have not been more than one.
    This is another example of the fact that the Labour Party does not believe in democracy. One of the fundamental things that we are up against on this question is that, as on the other Clauses of the Finance Bill, we are discussing matter; of great moment and great complexity, but it is obvious that even those on the Government Front Bench have not been able to absorb all the implications of what they are doing under the Bill, and certainly not those of what they are doing under the Clause. In any democracy it is not sufficient to be doing good. In a democracy one has not only to be doing good but to give the public
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    the opportunity of realising what one is doing. When hon. Gentlemen opposite find it very difficult to justify their own case, it means that they are not taking the public along with them in their legislation.
    What is the argument for extending the period? We have not had any argument from the other side which has been convincing. We have had speech after speech on various Amendments from this side of the Committee which were overwhelming in their logic. [Laughter.] I am afraid that hon. Gentlemen opposite are not treating the Clause with the seriousness with which the public will. We have heard speech after speech, some from the other side of the Committee, criticising what is being done under the Clause. We have had no speeches from the Government back benches using any coherent argument why the Clause should be accepted in its present shape. [Interruption.] If the hon. Member for Penistone (Mr. Mendelson) feels so strongly that the arguments from this side of the Committee were not cogent, why did he not intervene in the debate and say so? Why does he think that his arguments should be given from a comatose position on the Question, "That the Clause stand part of the Bill"? If he felt that the Amendments were not relative to the problems of the nation, he should have intervened and made, as I am sure he could have done, a cogent speech, to which we would all have listened with great attention, setting out his arguments why our arguments were not as valid as we thought they were.
    At the moment we think that our arguments are overwhelming in their logic and commonsense approach to the problem. We have accepted—we have not repudiated or criticised—the speculative gains tax which my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) brought in in 1962 when he was Chancellor of the Exchequer. We have accepted that there were arguments in the Report of the Royal Commission. We have accepted that in the Bill the Chancellor has accepted in part the Minority Report of the Royal Commission. That Report said that we did not need a short-term Capital Gains Tax but could have a long-term one. What is the argument for extending from six

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    months to twelve months the short-term excessive burden on anyone who gets a capital gain? What is the logic if the right hon. Gentleman is bringing in at the same time a Capital Gains Tax which is all-embracing and lasting over a period of years with no diminution? He is explicitly saying that he thinks that all capital gains, whenever achieved, shall have a penalty applied to them of 30 per cent.
    Therefore, in these conditions, accepting that the short-term speculative gains tax might be necessary to stop stags, calls and puts on the Stock Exchange—we accept that—what is the virtue in the extra six months? Whatever is the logic of the extra six months? What is the purpose for this if it is not simply to be ideologically stupid in trying to put a burden on some people who should not have that burden put upon them?
    This Clause, passed without Amendment, is making it certain that there will be some very serious repercussions on what I should have thought all sides of the Committee would have wanted to encourage. My right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd), who is not for the moment in the Committee, made a most cogent speech this afternoon about the small investor. The small investor will be very seriously hit. I should like to put a point which I have not heard made today.
    I do not know what is the Chancellor's own experience, but I know my own. When I was a younger man, with very little money, and invested my first £100 on the Stock Exchange, I was very nervous and almost drew it out again the same day because I thought that I would lose it. What I needed was some encouragement to believe that there was going to be some gain for my investment. It so happened that in my case I found it, because I invested when this country was prosperous; and so I have more money to invest because I thought it a good thing to do. Yet what the Chancellor is doing here is to make certain that the person who has, let us say, quarrelled with his wife—[Interruption]—oh yes, this is very true—has saved £100 and has had this quarrel because his wife has said, "Let's have a jolly good holiday" and he has said, "No, we will
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    invest our money and bring prosperity to ourselves over the years". Then something happens and he has to sell the investment. He then finds that when he sells he will have the amount grossed up with his income. What an encouragement for a man to put away a pound or two pounds of his wages—[Interruption.] There is nothing funny about this. It is a most serious matter, because this is virtually how every original investor started.
    What is the encouragement to a man to put away a small amount, when his wife says she wants a refrigerator and he argues that it would be better to invest the money and get more money next year, and so on? Of course she will say, "Yes, as you did last year, when you had to sell and gross it up with your income. We will have the refrigerator".
    What I have read of Labour Party propaganda tells me that hon. Members opposite want a wider distribution of prosperity; but what is the Chancellor doing under this short-term Capital Gains Tax? It is the small investor who, because of illness, change of job, for family reasons, or otherwise, having made this investment, is all the more likely to sell as a forced seller within the twelve months. If he does, then he will have to gross any profit with his ordinary income. Whatever is the encouragement? Where is the encouragement for a man to invest again the following year? Where is the encouragement to his mates when they slowly realise what is happening? Where is the encouragement towards a climate of making it a good thing to invest in British equity?
    The Chancellor is making it far more difficult to create the right kind of opinion whereby people will have their money for investment in the growth of British industry; the Chancellor whose supporters are always talking about expansion, and so on. The Chancellor knows very well that the First Secretary is building up a picture of a growth target of 25 per cent. for the next five years.
    11.0 p.m.
    Of course, the Chancellor says that the investment that will bring about that increase will come from the great tycoons, from the investment trusts and from the institutions, and he is right as to a great percentage of the amount involved. But,

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    at the same time, if that growth is to take place, if we are to build a more just society, if we are to spread share ownership, surely we ought to be giving the greatest encouragement to the small man in persuading him to take part in this expanding equity that is British industry.
    Under this Clause, the Chancellor will make it more difficult for these individuals. He is removing the encouragement. He is making it less likely that they will be able to persuade their friends that what they did was a good investment. He is therefore making it more likely that the ordinary chap who has not got into the habit of investing will be frozen off and decide that it is not worth the candle.
    The Chancellor does not need this extension to the long-term Capital Gains Tax to clamp down on the stags and other manipulators on the Stock Exchange. That was all covered under the six-month speculative gains tax. This additional six months is just an ideological stupid nonsense. It does not create any advantage in logic. It only makes it more difficult for the little chap to take his chance in building up British democracy.
    Sir Alexander Spearman: This tax has two general disadvantages which it would be difficult for Treasury Ministers to deny. First, it will be very expensive to collect, and on that we had an intervention from the hon. Member for Westhoughton (Mr. J. T. Price) who took just that line. Secondly, it will make a great deal of unproductive work for lawyers, accountants and dealers. The only tax that has these disadvantages should, to justify it, have compensating advantages to offset them.
    The main object of taxation, as I see it, is to regulate spending and to see that it is in equilibrium with production, but this tax will largely come out of savings and therefore will not affect consumption. I would guess, too, that the revenue will be very small. It is a tax that will be paid by only those with relatively small incomes. Let us take an extreme case. No one paying tax at 18s. 3d. in the £ will pay this tax. Obviously, anyone who has to pay 91¼ per cent. of his profits in taxation will not sell.
    The two particular disadvantages I would bring to the attention of the Chancellor are, first, that this will lead
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    to narrower markets and widening prices in the gilt-edged market. At present, if a very big line of stock comes on offer, a jobber will absorb it even though he has not a buyer because, by putting forward switching propostions, he is sure that he can find something that will take. Equally, if a very big buyer comes along he will sell stock even if he has not got it, because he knows where he can get it through a switching operation. This tax will affect switching operations so that there may well be much more violent fluctuations in price.
    Secondly, there is a retrospective element in this. Supposing institution A had applied for a stock when it was issued and kept it all the time, it would pay no tax; but if institution B had acquired the stock by switching, then it would pay perhaps very heavy tax.
    I accept that institutions do not switch for the benefit of the Treasury; they switch for their own benefit, but that switching makes a powerful contribution to making London the freest market in the world. The Chancellor would not deny the value to the whole country of the supremacy of London as a financial centre. This switching has very much helped the Treasury in the past when it has had issues on sale. I hope that the Chancellor will listen to the representations which will be made about this tax as it affects switching. I know he said that he would listen to any views put forward, and I know him to be a reasonable man.
    I seem to remember that, during a debate last week, he felt a little uncomfortable about the word "listen" and it may be it is very difficult for him to give way in this matter. It reminds me of an account of a conversation between Mr. Churchill and General de Gaulle during the war, which I read in The Times recently. Mr. Churchill said, "But will you make no concessions, mon General?" and de Gaulle said, "No, none. I am much too weak". I am afraid that is the position of the Chancellor today.
    Sir Charles Mott-Radclyffe: We have followed the Financial Secretary during the debate through rather tortuous paths, weaving our way through different arguments. We have had vintage cars, I think they are excluded; vintage locomotives, I think they are included. I

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    do not know about vintage port. That is probably included.
    Mr. Rees-Davies: We lost that one last week.
    Sir C. Mott-Radclyffe: What we have not had from any right hon. Gentleman on the Front Bench is any lucid explanation or logical argument as to why it is necessary to impose a short-term Capital Gains Tax on this kind of chattel and other movable objects at all. I do not believe that the right hon. Gentleman, the Financial Secretary and his colleagues quite understand the kind of difficulty they will get into when they apply this tax. My own view is that it is technically unworkable. All that is achieved by putting a short-term Capital Gains Tax on works of art is the distortion of the genuine respectable market.
    Who is going to sell a chattel worth more than £1,000 in a period under 12 months unless he is forced to do so by reason of some misfortune that has befallen him? No one will. They will simply hold it over for 13 months and if they want to realise it then, they do not pay the high short-term Capital Gains Tax; they pay the long-term tax of 30 per cent.
    There is no revenue for the Treasury at all. The market will simply freeze up on the short term, and if the respectable market freezes up then the hon. Gentleman is going to create a very undesirable black market. He is bound to. There are hundreds of thousands of ways of evasion, practised on the Continent and not in this country, which I would be very sorry to see practised here. It would be very undesirable but it will happen. He is creating a spivs' market by the short-term Capital Gains Tax.
    Some cogent remarks have been made from these benches concerning the problem of evaluation. The Government Front Bench have, I think, misunderstood the point about the sale, which was referred to, of the Stubbs. This is almost a test case and I should like to recapitulate for the benefit of the Chancellor. An unknown, unidentified picture of a horse was put into an auction on 6th May. I do not know the owner. I have no idea how long he had the picture. Whether he had it 10 years or 20 days, I do not know. He put a
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    reserve of £80 on it, and this unidentified picture was subsequently identified by the art dealers as a Stubbs and was sold for £24,000.
    Either way round, either short term or long term, I should have thought that Capital Gains Tax would become payable on the difference between £24,000, which is what the picture fetched on 6th May, and what the picture was worth on Budget day.
    Sir D. Glover: What was it worth?
    Sir C. Mott-Radclyffe: That is what I want to ask. What was it worth on Budget day? When is a Stubbs a Stubbs—when it is painted, or when it is identified? [Interruption.] This is not a frivolous argument. It was worth £24,000 a month after Budget day. A reputable dealer valued it just after Budget day for about £3,000. I do not know how one arrives at a value. Two or three dealers of the highest repute could vary enormously, with the best will in the world, in valuing a picture; or silver or anything else. The only way to arrive at the value of any work of art is to test the market. This is an extremely chancey business, as we all know. Experts do not know what these things will fetch.
    I do not think that the Government Front Bench have dealt seriously with this problem of valuation. I do not know how any work of art that is sold, perhaps, many years subsequent to Budget day can be valued at what it was worth in an unknown set of circumstances on 6th April, 1965. Unless the Chancellor can give a more cogent explanation of how he proposes to approach this extremely difficult problem, which I believe to be insoluble—I do not think that he has the faintest idea of the sort of difficulty that he is getting into—we have every right to oppose the Clause on the basis of the explanations which the right hon. Gentleman has put up so far.
    Mr. Anthony Fell: My hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) has been kind towards the Government Front Bench. What worries me about the Clause is that during the debate this evening we have had a series of messages being passed between the advisers and the Front Bench and it has become more and more clear that

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    Ministers simply did not know the answers to all the various questions that were asked by my hon. Friends. [Interruption.] All the hon. Members who are on the benches opposite were here throughout most of the debate and they were quite aware of what was going on.
    If the homework of Treasury Ministers has been done so badly that they do not know from day to day any of the answers on the Clauses and Amendments which they know are coming forward, I am very much worried about whether they have any idea of the long-term effects of the legislation which they are trying to put through in the Bill.
    11.15 p.m.
    Mr. A. Henderson: The hon. Gentleman and I have sat through many Finance Bills and I know him to be a factually truthful person. Would he not agree that when the party opposite occupied the Treasury Bench messages passed backwards and forwards?
    Mr. Fell: I am grateful for that intervention. Of course it is true that Front Benches have a habit of communicating. But it is one thing to have a Conservative Front Bench getting advice on the rather stupid questions put to it by the Labour Opposition and another thing to have a Socialist Government Front Bench getting advice of the obviously highly intelligent questions put to it on its own Bill. The Government feel that the questions are so important that they give a reply to each.
    My hon. Friend the Member for Windsor drew attention to the case of the Stubbs. What worries me is how the Chancellor is going to organise this tax. The Stubbs was one of thousands of miscalculations which have been made by top valuers. Not many years ago an E1 Greco painting which the too valuer at Christie's suggested should have a reserve price of £36 went for £36,000. It is almost impossible to get an exact valuation. Will the Chancellor get valuers to go round with his officials valuing works of art?
    The Chancellor appears to disagree but we have not had an answer to this. I realise that we have been told that we are to get answers on a later Clause dealing with long-term gains, but why should we let this Clause go by default on a promise that we are to learn certain things on a later Clause?
    Dame Irene Ward: When they have done their homework.
    Mr. Fell: Meanwhile, we will have passed what may turn out to be a disastrous Clause because the Chancellor, and more particularly his advisers, did not realise what would accrue from their actions.
    I hope that my hon. and right hon. Friends on the Front Bench will not put us off from voting against this Clause simply because my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced a short-term Capital Gains Tax in 1962.
    My right hon. and hon. Friends have been arguing strongly against various parts of this Clause and it would be wrong if we were put off from voting against it.
    Mr. Hirst: I am encouraged to rise now because the Chancellor himself is present. It is typical that, time after time, we get inadequate answers. This is holding up the Bill, and that cannot be in the interests of the Government or anybody else. Some hours ago, my hon. Friend the Member for Worcester (Mr. Peter Walker) made an exceedingly good speech. I noted it down. He put about eight questions—I cannot remember them all—and I am certain that not one of them was answered. I drew attention to that fact at the time. That was very largely the fault of the Solicitor-General. I have no doubt that he is very able in his own field, but tonight he had a brief which no junior at the Bar would ever have accepted. The result was absolute chaos. In due course he was followed by the Minister without Portfolio who does a lot of work on Finance Bills. If ever a man worked for his portfolio tonight, it was the hon. Gentleman on that Amendment, but we had no answer. The Financial Secretary has been trying the hardest of all and is getting worn out because he is working so hard.
    The Chancellor should do something about this. It is not fair that a mass of terribly important questions should not be answered, especially when one is of fundamental importance, as was the case with the Amendment in page 11, line 12, which dealt with the period. Right, left and centre my hon. Friends have been

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    pointing to the many ramifications of these proposals. The reason for the change has not been made at all clear. Nobody in his right senses would accept the arguments of the Solicitor-General—he should be locked up if he did. We ought to have something better than that.
    I assume that the Chancellor has spent some time considering the Bill and he must know what the reason for these proposals is. He and I know each other well. We have debated together many times and once or twice we have been on the same side of the argument, but that is not so tonight. He must have some idea and we ought to know what the reason is. We are being forced one by one to make an array of speeches searching for the truth which remains hidden, or, when not hidden, is revealed bare-faced, and we return to our view that this is being done from some element of malice, or whatever it may be—certainly lack of understanding—and complete disregard for what has been happening in the economy over the years, particularly under Conservative rule.
    One of the greatest things the Conservative Government did—deliberately because it was our policy—was to help to create a small property-owning nation with many people owning shares, something never known before in this country. A Government seeking to make the nation "go" and seeking to get growth at the points in the economy where it is required should be seeking to foster this development. Instead, right hon. Gentleman opposite are doing exactly the opposite.
    As it is fundamental, I make no apologies for repeating that it is the smaller investor who will be caught by the network of the Clause. The big investor may be caught occasionally for some family reason, but by and large he will be able to wait to sell; or he may have building society assets of which he can dispose. He will also have better borrowing facilities, when we do not have a 7 per cent. Bank Rate. But the small man who may have to realise in order to meet his obligations will be caught and one can think of all sorts of things which can happen in a family and which cause trouble. This provision
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    will not encourage such a person to make investments.
    We have been given no reason for this sort of double event. It is bad enough that the Government's economic policy should be decided and directed, as we understand, by all sorts of evidence which Dr. Kaldor gave to the Royal Commission, but when we are also guided by the sort of evidence which he did not give to the Royal Commission, then God help our country. The Minority Report of the Royal Commission was clearly not in favour of a short-term Capital Gains Tax. It wanted a longer term and certainly not a mixture of the two, which is utterly illogical and bound to cause damage to the economy in many respects.
    My hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) pointed out very well the reflex this has right away across the board in other countries and upon the picture they have of Britain. Hon. Members opposite often talk about "running down your own side" and about our making comments which can be quoted abroad and all the rest of it, but it is much worse that by their actions they should so appear to damp down initiative and the efforts of the small individual upon whom the national reputation must depend. The time has long gone when what mattered was what a few wealthy people did. Growth, investment, development of the country today depend, as they do in other highly developed and civilised countries, on the efforts of small individuals and the sum of all their efforts. They are the motive power in the United States, for instance, and we have got to have that power here, too. Instead of encouraging that, we have the folly of this Capital Gains Tax, and all this fiddling and footling, in malice or spite, to make sure that unless everybody can have something nobody shall have it. Really, hon. and right hon. Members opposite have got to grow up.
    I have quite a lot of regard for the Chancellor, although politically we are miles apart, and I beg him to get the Committee out of this atmosphere in which we must go on, as I am now, trying to get answers to quite simple questions, apart from the technical questions which I am not now attempting to deal

    189
    with, and we have to go on simply because there is nobody on the Treasury Bench competent to reply. I hope they will be removed.
    Mr. Grimond: I have no objection in principle to a Capital Gains Tax, though I would have hoped that it could have been coupled with some reduction in direct taxation on incomes which is one of the most powerful arguments for it and to my mind one of the most serious drawbacks to the present proposals. The real reason for a Capital Gains Tax surely is that someone who makes a gain out of capital asset is as liable to contribute to the revenue of the country as someone who makes money in any other way. I would quite accept that. But why should it not apply then to a person who makes a capital gain on the pools? I reject the academic argument that there is no asset. There is no reason in equity why betting wins should not be taxed.
    I would ask the Chancellor to make clear to the Committee what revenue he expects the tax to yield by extending it in the short term from six months to 12 months, and what evidence he has that this revenue, whatever it may be, can be obtained without a very great increase in administrative expenditure. I think that the Committee is entitled to know that. I should have thought there was a case at least for leaving the short-term tax at six months. The same question arises on the extension of the tax whether it will really bring in so much, and I should have thought there was a case for the rate to be 30 per cent. even beyond the six months' period.
    The last point is that of the gain on a picture—such as a Stubbs picture—bought and sold within 12 months even though bought otherwise than for speculation. If it was bought for £80 and then is sold for £24,000, quite clearly—
    Sir C. Mott-Radclyffe: I thought the point was put clearly. There was a reserve of £80 put on the picture by the vendor. When he bought it I have no idea.
    Mr. Grimond: This seems to be an esoteric argument. It is irrelevant that there was a reserve on it. The question is, what did he pay for it? If I understand the Clause aright the only questions which are relevant are, what he paid for it, how he acquired it, what he sold it for, and was it within 12
    190
    months. If I have misunderstood the Clause, and these are not vital questions, I hope that the Chancellor will explain it.
    11.30 p.m.
    Mr. J. E. B. Hill: I wish to support all the very powerful criticisms which have been made of the Clause from this side of the Committee. It seems that if we bring in a Capital Gains Tax there is a great argument in principle in favour of having a fixed rate so that people will know their tax liability at the time of completing their transactions. One of the criticisms of our short-term Capital Gains Tax was that people operating in markets simply did not know their liability until the end of the year.
    I wish to reinforce the criticism of the short-term tax on chattels, because it seems that administratively it is nonsense, and that it is indefensible from the point of view of social justice. What is going to be the cause for a sudden rise in the value of a chattel within 12 months? The probability is that it will be the recognition of its true value, hitherto unrecognised.
    It seems to me that the only people who will be caught by this are the less fortunate and simpler people who, for one reason or another, have to sell. We have all had in mind the case of the widow who has to sell. What we perhaps have not had in mind is the fact that a valuation at death will, presumably, be probate valuation, usually at a modest figure, because probate is not conducted on the basis that the largest possible market valuation should be made at the time. If it were, estates would be subject to very heavy penalties.
    On the other hand, it may be that in a comparatively short time—within 12 months—one of the legatees, one of the family, may be forced to sell for reasons beyond his control—sickness, poverty, or just sheer shortage of money. It may follow that some family possession put into the market will, like the Stubbs, fetch an unexpectedly high value. If the Stubbs is sold by the widow, believing it to be of some value, but not of great value, which seems to have been the case here, is it really desirable that merely because she did not have the luck to sell outside the period of 12 months she should be subjected to this penal taxation?

    191
    Taking the Stubbs at £24,000, and assuming that a similar picture was owned by a needy widow who had paid a modest probate valuation because it was not known to be a Stubbs, is it desirable that the tax should be at the Income Tax plus Surtax rate on £24,000? Even if we regard it as earned income, the tax will be about £17,000 to £18,000, whereas if by chance the same transaction took place outside 12 months, the 30 per cent. tax would amount to £7,200. It seems to be a travesty of social justice to suggest that that is a desirable result, as the penalty will depend on luck. Anyone with good advice, anyone knowing the possibilities, will obviously avoid that.
    Another criticism is the astonishing burden which will be laid on the Inland Revenue by having two totally different systems of taxation for identical transactions. How can a valuation be satisfactorily arrived at in the art world when there is not necessarily a sale transaction at the beginning? The disposition may be by way of a gift, or even by winning at gambling.
    It seems to me that a totally unnecessary burden is being laid upon the Inland Revenue, which will be grossly overworked by the rest of the Bill. Hungarian Rhapsody No. 13, I would call it, and the sooner it is trimmed down and brought on to a workable basis by rejecting the unworkable and impracticable parts of it, so much the better.
    The Solicitor-General: I think that I can answer this debate in a few words, because most of the speeches to which we have listened have merely been repetitions of speeches made on Amendments. First, I want to reply to the right hon. Member for Orkney and Shetland (Mr. Grimond), who put the specific question what the Revenue expected to gain from the change in the length of the short-term Capital Gains Tax. At a rough estimate it will be about £6 million a year, when the tax comes fully into effect.
    In referring to the particular case of the Stubbs picture—and I find myself in agreement with the right hon. Gentleman—I would say that if a picture was purchased for £80 and sold for a very much larger sum within 12 months it would attract tax under this proposal. But I
    192
    cannot imagine that anyone dealing in a chattel of such value would not be advised as to the appropriate time to make the sale.
    I now come to the repetitious arguments used by hon. Members opposite. Many of them referred again to the small investor. Again and again during the debates on various Amendments hon. Members opposite have stood up as champions of the small investor. But we have not had any answer why the small investor has not been adversely affected by the 1962 legislation. That mystery remains unresolved. Apparently, if a person makes a short-term capital gain within six months he is a speculator. Apparently that is something rather discreditable. But if he makes a short-term gain within 12 months he comes into the class of small investors. That is the whole argument underlying the speeches of hon. Members opposite.
    If, as we have been told, the small investor is to he deterred and frustrated under the 12 months' tax provision, how is it that he has not been affected in the slightest degree by the six months' tax provision—because no evidence has been advanced that the 1962 legislation has had any effect on his position in the market.
    Sir D. Glover: The hon. and learned Gentleman has completely missed the point. The point has been made time and time again that we accept that under short-term speculative gains there was stagging and contango-ing, and so on, and that a loophole had to be closed. We accepted that that had an adverse effect on the small investor, but that it had to be done. But there is no need to extend the provision to 12 months.
    The Solicitor-General: I am talking about the quite legitimate small investor. If he is frustrated and deterred by a Capital Gains Tax which applies over a period of 12 months, the same result must have followed, to some extent, in the case of a period of six months. No evidence has been put forward as to the effect of that period.
    I have been asked about the purposes of the Clause. Its two main purposes are clear enough. We discussed the first in the debate on the first Amendment this afternoon. In the first place, the

    193
    Clause alters the time limits within which short-term gains are to be treated as income. We make a perfectly logical change and we get rid of the discrimination between gains on land transactions and gains in relation to other assets. We give the taxpayer relief in one case and we achieve a slightly different result in the other. But we achieve the perfectly logical result that when we are treating, as we have done since 1962, capital gains as income, we should deal with them in precisely the same way as with all other income and make the year the basis of taxation.
    The second major difference is that we come to the question of the assets which are to be taxed. Criticism has been largely directed at the fact that we bring in tangible moveable property and that is a change from the Act of 1962. Here it is necessary to look at the whole scheme of this part of the Bill. What the Bill sets out to do is to remedy a glaring fiscal injustice, the injustice which results from the present system under which earnings of whatever sort are heavily taxed whereas capital gains are entirely free. That is what we are seeking to cure by this Measure.
    We have to look not merely at this Clause; we have to look at the later Clauses, which deal with long-term Capital Gains tax. It would be entirely inequitable in dealing with long-term tax if we were to distinguish between ore kind of asset and another. Therefore, it is essential that we should bring in tangible moveable property, but if we bring it in in relation to long-term tax, it follows that we must necessarily bring it in in relation to the short-term tax as well. These are two salutary changes in our tax law. I therefore recommend them to the Committee.
    Mr. John Hall: We have been debating Clause 16 for nearly eight hours and I do not propose to detain the Committee for long, because we have nearly arrived at a time when we should come to a conclusion. I am sorry that we have not had a greater contribution from back benchers opposite. We have had interventions from two of them, I believe. It is true that we had interventions from the Front Bench opposite, but we could have done without most of those.
    The Solicitor-General said that there were two main purposes in introducing
    194
    this Clause and amending the 1962 Act. One was to alter the time limit. We had noticed that. The second was to include tangible movable property in order to cure the inequity which arises because gains on capital have been exempt from tax, certainly before 1962, whereas incomes have been taxed. To do that we had to be sure that all gains on assets are taxed whatever they may be, even though it means bringing into the Bill assets which will be practically impossible to tax and will encourage the maximum amount of evasion.
    I can only assume that Clause 16 has been introduced because of reluctance on the part of the Government to abandon Conservative legislation. They have an instinctive realisation that anything introduced by the previous Administration must be sound. Therefore, they are very reluctant to let go the 1962 Act, introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), which was introduced, of course, for a quite different reason.
    In hanging on to Conservative legislation on the very good ground that ipso facto it must be good legislation, the Government failed to realise two things. The first is that it was designed to deal with short-term speculative gains over a smaller field, and the second that it was not associated with a long-term tax. To deal with a long-term tax a short-term tax is not necessary. I do not want to annoy the hon. Member for Manchester, Cheetham (Mr. Harold Lever) by quoting again the minority Report which was quoted by my hon. Friend the Member for Shipley (Mr. Hirst).
    11.45 p.m.
    We have attempted to improve this Clause by introducing Amendments designed to shorten the time. We have introduced Amendments designed to delete the references to tangible and moveable property, the inclusion of which makes absolute nonsense of the short-term gain provision. If this is included in the short-term and, indeed, in the long-term provisions, the Government will have a grave responsibility for introducing something which will put such a strain on the Inland Revenue that it may bring about a breakdown of the service. This is a tax which will create widespread attempts to evade it.

    195
    The Government have rejected our attempts to bring some realism into the section of the Bill affecting gifts. I might say in passing that my right hon. Friend the Member for Bexley (Mr. Heath) will have to refuse any further invitations to be a godfather, in view of what we have heard this afternoon. The Government have rejected Amendments which were designed to bring some sense into the treatment of gains arising from the sale of land. Nevertheless, the hon. and learned Gentleman had eventually to yield to the logic of the case presented to him and we are delighted to know that the Government will look at that point again.
    I do not wish to go over all the arguments which have been deployed so eloquently by my right hon. and hon. Friends. All I can say, in conclusion, is that the answers that we have had from the benches opposite have beeen completely and utterly unsatisfactory. They have completely failed to understand—whether deliberately or because they have not been able to appreciate them—arguments which have been deployed so eloquently and forcefully. They
    have failed to realise that the short-term gains tax is quite unnecessary if we have a long-term one. They have failed to realise that in many respects it is unworkable. They have failed to realise that it adds many unnecessary complications and will produce artificial conditions in many markets, and that the Clause as it stands is unnecessary and should never have been tabled.
    The Government have had representations on this subject from a number of bodies, including the Association of Certified and Incorporated Accountants, which takes a similar view and points to the problems which will arise and the burdens which will fall on professional advisers in trying to administer this complicated legislation.
    For all the reasons which have been deployed throughout the whole of the eight hours' debate, I can do no other than advise my right hon. and hon. Friends to divide.
    Question put, That the Clause stand part of the Bill:—
    The Committee divided: Ayes 169, Noes 159.

    Division No. 127.]

    AYES

    [11.48 p.m.

    Allaun, Frank (Salford, E.)

    Ensor, David

    Jenkins, Rt. Hn. Roy (Stechford)

    Barnett, Joel

    Evans, Albert (Islington, S.W.)

    Jones, Dan (Burnley)

    Bence, Cyril

    Evans Ioan (Birmingham, Yardley)

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

    Benn, Rt. Hn. Anthony Wedgwood

    Finch, Harold (Bedwellty)

    Lawson, George

    Bennett, J. (Glasgow, Bridgeton)

    Fletcher, Sir Eric (Islington, E.)

    Leadbitter, Ted

    Binns, John

    Fletcher, Ted (Darlington)

    Lever, L. M. (Ardwick)

    Bishop, E. S.

    Fletcher, Raymond (Ilkeston)

    Lewis, Arthur (West Ham, N.)

    Blenkinsop, Arthur

    Floud, Bernard

    Lipton, Marcus

    Boardman, H.

    Foley, Maurice

    Lomas, Kenneth

    Botton, T. G.

    Foot, Sir Dingle (Ipswich)

    Loughlin, Charles

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

    Freeson, Reginald

    McCann, J.

    Braddock, Mrs. E. M.

    Galpern, Sir Myer

    MacColl, James

    Bray, Dr. Jeremy

    Garrett, W. E.

    MacDermot, Niall

    Brown, Rt. Hn. George (Belper)

    Garrow, A.

    McGuire, Michael

    Brown, Hugh D. (Glasgow, Provan)

    Gregory, Arnold

    Mackenzie, Gregor (Rutherglen)

    Brown, R. W. (Shoreditch &amp; Fbury)

    Grey, Charles

    MacMillan, Malcolm

    Butler, Herbert (Hackney, C.)

    Griffiths, Rt. Hn. James (Llanelly)

    Mahon, Simon (Bootle)

    Butler, Mrs. Joyce (Wood Green)

    Hannan, William

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

    Callaghan, Rt. Hn. James

    Harper, Joseph

    Manuel, Archie

    Chapman, Donald

    Hattersley, Roy

    Mayhew, Christopher

    Coleman, Donald

    Hazell, Bert

    Mendelson, J. J.

    Craddock, George (Bradford, S.)

    Healey, Rt. Hn. Denis

    Mikardo, Ian

    Cronin, John

    Heffer, Eric S.

    Miller, Dr. M. S.

    Crosland, Anthony

    Hill, J. (Midlothian)

    Milne, Edward (Blyth)

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

    Hobden, Dennis (Brighton, K'town.)

    Molloy, William

    Cullen, Mrs. Alice

    Houghton, Rt, Hn. Douglas

    Monslow, Walter

    Dalyell, Tam

    Howarth, Robert L. (Bolton, E.)

    Morris, Charles (Openshaw)

    Darling, George

    Hoy, James

    Morris, John (Aberavon)

    Davies, G. Elfed (Rhondda, E.)

    Hughes, Cledwyn (Anglesey)

    Mulley,Rt.Hn.Frederick(SheffieldPk)

    Davies, Harold (Leek)

    Hunter, Adam (Dunfermline)

    Murray, Albert

    Dell, Edmund

    Hynd, H. (Accrington)

    Newens, Stan

    Diamond, John

    Irvine, A. J. (Edge Hill)

    Noel-Baker, Francis (Swindon)

    Dodds, Norman

    Irving, Sydney (Dartford)

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

    Doig, Peter

    Jackson, Colin

    Norwood, Christopher

    Edelman, Maurice

    Janner, Sir Barnett

    Oakes, Gordon

    Edwards, Robert (Bilston)

    Jeger, George (Goole)

    Ogden, Eric

    English, Michael

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

    O'Malley, Brian

    Ennals, David

    Jenkins, Hugh (Putney)

    Orme, Stanley

    Oswald, Thomas

    Sheldon, Robert

    Walden, Brian (All Saints)

    Owen, Will

    Shore, Peter (Stepney)

    Walker, Harold (Doncaster)

    Pannell, Rt. Hn. Charles

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

    Weitzman, David

    Parker, John

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

    Wells, William (Walsall, N.)

    Parkin, B. T.

    Silkin, S. C. (Camberwell, Dulwich)

    White, Mrs. Eirene

    Pavitt, Laurence

    Silverman, Julius (Aston)

    Whitlock, William

    Pearson, Arthur (Pontypridd)

    Slater, Mrs. Harriet (Stoke, N.)

    Wigg, Rt. Hn, George

    Pentland, Norman

    Slater, Joseph (Sedgefield)

    Wilkins, W. A.

    Popplewell, Ernest

    Snow, Julian

    Willey, Rt. Hn. Frederick

    Price, J. T. (Westhoughton)

    Soskice, Rt. Hn. Sir Frank

    Williams, Mrs. Shirley (Hitchin)

    Pursey, Cmdr. Harry

    Stewart, Rt. Hn. Michael

    Willis, George (Edinburgh,E.)

    Rankin, John

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

    Wilson, William (Coventry, S.)

    Rees, Merlyn

    Swain, Thomas

    Woodburn, Rt. Hn. A.

    Rhodes, Geoffrey

    Swingler, Stephen

    Yates, Victor (Ladywood)

    Richard, Ivor

    Taylor, Bernard (Mansfield)

    Zilliacus, K.

    Robertson, John (Paisley)

    Thomas, George (Cardiff, W.)

    Rogers, George (Kensington, N.)

    Thomas, Iorwerth (Rhondda, W.)

    TELLERS FOR THE AYES:

    Rose, Paul B.

    Thornton, Ernest

    Mr. Ifor Davies and

    Ross, Rt. Hn. William

    Tuck, Raphael

    Mr. William Howie.

    Rowland, Christopher

    Varley, Eric G.

    NOES

    Agnew, Commander Sir Peter

    Goodhew, Victor

    Morrison, Charles (Devizes)

    Alison, Michael (Barkston Ash)

    Grant, Anthony

    Mott-Radclyffe, Sir Charles

    Allan, Robert (Paddington, S.)

    Grant-Ferris, R.

    Munro-Lucas-Tooth, Sir Hugh

    Allason, James (Hemel Hempstead)

    Gresham-Cooke, R.

    Neave, Airey

    Anstruther-Gray, Rt. Hn. Sir W.

    Grimond, Rt. Hn. J.

    Noble, Rt. Hn. Michael

    Awdry, Daniel

    Gurden, Harold

    Onslow, Cranley

    Baker, W. H. K.

    Hall, John (Wycombe)

    Osborn, John (Hallam)

    Barber, Rt. Hn. Anthony

    Hall-Davis, A. G. F.

    Page, John (Harrow, W.)

    Barlow, Sir John

    Harris, Reader (Heston)

    Page, R. Graham (Crosby)

    Batsford, Brian

    Harrison, Brian (Maldon)

    Pearson, Sir Frank (Clitheroe)

    Beamish, Col. Sir Tufton

    Harvey, Sir Arthur Vere (Macclesf'd)

    Percival, Ian

    Bessell, Peter

    Harvie Anderson, Miss

    Peyton, John

    Birch, Rt. Hn. Nigel

    Hawkins, Paul

    Pickthorn, Rt. Hn. Sir Kenneth

    Box, Donald

    Heald, Rt. Hn. Sir Lionel

    Pike, Miss Mervyn

    Boyd-Carpenter, Rt. Hn. J.

    Heath, Rt. Hn. Edward

    Pitt, Dame Edith

    Boyle, Rt. Hn. Sir Edward

    Higgins, Terence L.

    Pounder, Rafton

    Brinton, Sir Tatton

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

    Price, David (Eastleigh)

    Bromley-Davenport,Lt.-Col.Sir Walter

    Hirst, Geoffrey

    Ramsden, Rt. Hn. James

    Brooke, Rt. Hn. Henry

    Hobson, Rt. Hn. Sir John

    Redmayne, Rt. Hn. Sir Martin

    Buck, Antony

    Hogg, Rt. Hn. Quintin

    Rees-Davies, W. R.

    Buxton, Ronald

    Hordern, Peter

    Ridley, Hn. Nicholas

    Campbell, Gordon

    Hornby, Richard

    Roberts, Sir Peter (Heeley)

    Carlisle, Mark

    Howe, Geoffrey (Bebington)

    Russell, Sir Ronald

    Carr, Rt. Hn. Robert

    Hunt, John (Bromley)

    St. John-Stevas, Norman

    Cary, Sir Robert

    Hutchison, Michael Clark

    Sandys, Rt. Hn. D.

    Chichester-Clark, R,

    Iremonger, T. L.

    Scott-Hopkins, James

    Clark, William (Nottingham, S.)

    Jenkin, Patrick (Woodford)

    Shepherd, William

    Cole, Norman

    Johnson Smith, G. (East Grinstead)

    Sinclair, Sir George

    Cooke, Robert

    Johnston, Russell (Inverness)

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

    Cooper-Key, Sir Neill

    Jopling, Michael

    Soames, Rt. Hn. Christopher

    Cortield, F. V.

    Kerby, Capt. Henry

    Spearman, Sir Alexander

    Costain, A. P.

    Kilfedder, James A.

    Stainton, Keith

    Crawley, Aidan

    King, Evelyn (Dorset, S.)

    Steel, David (Roxburgh)

    Crowder, F. P.

    Kirk, Peter

    Talbot, John E.

    Curran, Charles

    Kitson, Timothy

    Taylor, Sir Charles (Eastbourne)

    Dalkeith, Earl of

    Langford-Holt, Sir John

    Teeling, Sir William

    Davies, Dr. Wyndham (Perry Barr)

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

    Thatcher, Mrs. Margaret

    Dean, Paul

    Longbottom, Charles

    Thomas, Sir Leslie (Canterbury)

    Deedes, Rt. Hn. W. F.

    Lubbock, Eric

    Thompson, Sir Richard (Croydon,S.)

    Doughty, Charles

    MacArthur, Ian

    Turton, Rt. Hn. R. H.

    Douglas-Home, Rt. Hn. Sir Alec

    Mackenzie, Alasdair (Ross&amp;Crom'ty)

    Tweedsmuir, Lady

    Elliot, Capt. Walter (Carshalton)

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

    van Straubenzee, W. R.

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

    Macleod, Rt. Hn. Iain

    Walder, David (High Peak)

    Emery, Peter

    McNair-Wilson, Patrick

    Walker, Peter (Worcester)

    Eyre, Reginald

    Mathew, Robert

    Ward, Dame Irene

    Fell, Anthony

    Maude, Angus

    Weatherill, Bernard

    Fletcher-Cooke, Charles (Darwen)

    Maxwell-Hyslop, R. J.

    Webster, David

    Fletcher-Cooke, Sir John (S'pton)

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

    Whitelaw, William

    Gammans, Lady

    Meyer, Sir Anthony

    Wills, Sir Gerald (Bridgwater)

    Gibson-Watt, David

    Mills, Peter (Torrington)

    Wilson, Geoffrey (Truro)

    Giles, Rear-Admiral Morgan

    Mills, Stratton (Belfast, N.)

    Wise, A. R.

    Gilmour, Ian (Norfolk, Central)

    Mitchell, David

    Glover, Sir Douglas

    Monro, Hector

    TELLERS FOR THE NOES:

    Godber, Rt. Hn. J. B.

    More, Jasper

    Mr. Martin McLaren and

    Mr. Francis Pym.

    Mr. Callaghan: I beg to move,
    That the Chairman do report Progress and ask leave to sit again.
    We have been here since 3.30 and have disposed of five Amendments and one Clause. Although you have no view in the Chair, you may think, Sir Samuel, that progress is a relative term, but at least in Parliamentary language we have made progress. Whether we shall be able to make faster progress tomorrow will depend, I suppose, upon the length of the speeches and the nature of the replies. [Interruption.] I have, I trust, a number of concessions that ought to be made in the Bill, if we are ever allowed to get to them. As I say, the progress that we make will depend upon the speeches that hon. Gentlemen make and upon the assiduity with which they devote themselves to their scrutiny of the Bill. However, we have completed one Clause today, so I move the Motion.
    Mr. Heath: After those last extraordinarily encouraging words of the Chancellor we are all agog for the concessions which are about to shower upon us. Indeed, I feel some reluctance in acceding to the Motion. Here we are after a long day's argument, fresh and full of vigour. The Government's majority is rapidly falling; it has fallen by 25 per cent. since the last Division. So we can well understand why the Chancellor has now moved to report Progress.
    We have had a hard day's work. We have made considerable progress. This is, after all, the Chancellor's entire reconstruction of the short-term capital gains. He will recall that, with his hon. Friends, he discussed for two and a half days the original proposal by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). So the right hon. Gentleman is right. We have made good, solid progress today, and, therefore, I think that we should accede to the Motion. We eagerly look forward to the concessions which will shower upon us tomorrow.
    Question put and agreed to.
    Committee report Progress; to sit again Tomorrow.

  EMPLOYMENT, SKELMERSDALE
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ifor Davies.]
  12 m.
  Mr. Michael McGuire: In raising the question of the employment prospects for the people of the new town of Skelmersdale, I would remind the House that I briefly referred to the matter on 18th February last, recorded in columns 1484 to 1487 of HANSARD for that date. I raised it then for the same reason that I raise it now, namely, the feeling of resentment by what I would call the indigenous working population of the old town and the apparent unfairness of the system of the allocation of jobs in the new industry which is coming into Skelmersdale.
  Skelmersdale new town is not a development district as such, but industry coming into it can obtain the benefit of the grants and loans available under the Local Employment Acts, 1960 and 1963, provided that it employs the bulk of its labour from the North Merseyside development district. Indeed, this is the reason for the plan; to have some of the overspill from the North Merseyside area. Work which is coming in will mean new jobs and a demand for new houses.
  Workers who have lived in Skelmersdale for years have had to travel out to seek work and many have been employed in the mines as, for example, at Sutton Manor Colliery, where I was for seven years the branch secretary. I would say at once that I do not make any constituency point as when an hon. Member tends to eulogise about the people in his constituency; but I know that these men have sterling qualities and that if they are successful in getting work in the new factories the National Coal Board will mourn its loss.
  The Coal Board does not want to see them go. Those working in the pits and in other jobs in the neighbouring town, where they have worked for many years also think that they should have a better share of the jobs. At last, they think that they can see an end to many hours of unproductive, tedious, and costly travelling time which they spend every week in travelling to and from their work. They see jobs in modern factories, with

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  all the advantages which go with such conditions, and there is small wonder that the residents of old Skelmersdale welcomed the prospect of the new town of Skelmersdale.
  The new town is planned for modern, gracious living, designed for the twentieth and, indeed, the twenty-first century. Its completion cannot come soon enough for the residents. They are looking forward with supreme optimism to the day when the population reaches the planned 80,000 or 90,000 and, again as supreme optimists, are even now making plans for celebrating the elevation of Skelmersdale United Football Club to the First Division. Who knows! We might even have a combination of the Mersey-sound and the Skelmersdale sound, though whether that will be so pleasant I do not know. I hope that it will. I am looking forward to Skelmersdale Town being a member of the Rugby League and making its name as one of the best teams playing the best game.
  But the question of employment is causing deep resentment. The position ha, improved since I first received many letters from my constituents about employment in the new factories. A good proportion of those then asking for jobs have been fitted up, but I am led to believe that there is still some resentment because industrialists just cannot afford to take on all the local labour they would like—and it is not a very considerable amount in a town with a total population of about 6,000. The people feel that they could be "mopped up," as it were, with the incoming labour force from the North Merseyside overspill area and that it would not upset the plans at all.
  The industrialists just cannot afford it, in many cases, particularly when it comes to retraining labour. Men coming from the pits have to be retrained for modern factory work, for instance, and industrialists find it difficult to afford all this because, I understand, it costs about £9 a week for each man for a certain period. They cannot afford to take these people on in the numbers they would like and this is causing some of the resentment.
  The idea of having a successful integration of the old town and the new is that the people of the old will welcome the people coming into the new and that eventually they will all be simply the
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  people of Skelmersdale. But if there is a situation in which those living in the old town still have to travel and spend weary, unproductive and costly hours of travel when they feel that they should be able to get jobs on their own doorstep, then feeling of the old against the new will still exist.
  The people of Skelmersdale welcomed, and still welcome, the concept of a new modern town. But I believe success will be enhanced and quickened if we can find some way of dealing with this problem of a small town and of giving employment to those who feel that they could have it on their doorstep. When one develops a new town one demolishes much of the old—the houses in which local people were born and bred and in turn raised their own families. These houses were little palaces and many had had modern facilities put in.
  These places are having to be demolished to make way for the new and the rents of the people who lived in them have accordingly jumped by three and four times. Unless they can get jobs in the new factories they have to face extra expense in travelling as well as the extra rent.
  I ask my hon. Friend to look at this problem. I know that I will be told, as I have been told by my right hon. Friend the Minister of Labour, that if a new town had not been planned in Skelmersdale, factories would not have come in and the local labour force that has already been employed would not have had the opportunity to take employment there. Therefore, the argument goes, the position would have been as it was before the new town was developed.
  I suggest, however, that that is not a very satisfactory answer. The people do not accept it. They say that the jobs are there now and ask why they cannot have at least a better proportion of them. I know that another answer will be that in the fullness of time, with the wastage that will take place in the factories, everyone in Skelmersdale will be on parity and will all be able to get jobs.
  I hope that my hon. Friend will be able to give some comfort to the people of Skelmersdale who have asked me to raise this problem. I have had quite a few letters on the subject, including an

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  advertisement from the Evening Express, which talks of good jobs for people. These people have inquired and been told they were not for them because of the reasons I have given, mainly that the grant for retraining cannot apply to them and that it can only be given when the employer takes on people from the North Merseyside area.
  12.17 p.m.
  The Minister of State, Board of Trade (Mr. George Darling): My hon. Friend the Member for Ince (Mr. McGuire) has been very reasonable in the issues that he has put forward. While these are complicated matters, I can understand the resentment of the local people who see the local issues and, perhaps, do not understand the rules and regulations under which we have to work. My hon. Friend has talked of the unfairness of the allocation of jobs in Skelmersdale new town and has put the issue clearly and simply. Here is a new town which is obtaining industrial development because it is designated a new town, but the local people, who are out of work, say that they cannot find employment in these industrial developments.
  This is the situation which my hon. Friend would like me to rectify. But, as he has pointed out, the situation is improving from the point of view of the local people and will continue to do so. Of the jobs provided by the factories established in Skelmersdale new town, more than half have been taken by local people. The real starting point for a proper review of the employment policy in this regard is that Skelmersdale new town is being developed as an overspill town for Liverpool.
  My hon. Friend did not, perhaps, emphasise the fact that if it were not for the fact that the new town is designed primarily to find jobs for people living in the North Merseyside development district, there would be no Government assistance for industrial projects in Skelmersdale. Skelmersdale is not itself a development district. Its unemployment rate, partly as my hon. Friend said, because people travel out to work, is, fortunately, too low to have it designated as a development district.
  As my hon. Friend says, the development of the new town will provide additional
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  work with the increasing local services, in addition to work being provided by the new factories. I do not know how long this will take to get going on a really big scale. I hope that it will not be too long. Certainly, this is the kind of development that could be well speeded up.
  Because the purpose of the new town is to help to ease Liverpool's serious problems, the assistance given by the Government towards financing industrial projects must be governed to some degree by the amount of employment that is likely to be provided for the benefit of the people in the development district. The Board of Trade does not say that all the jobs arising from the assisted projects must be earmarked for people coming from Liverpool or the Liverpool development district. What we do say—and the Local Employment Act enforces this obligation upon the Board of Trade—is that to qualify for assistance, a project must provide the bulk of its jobs for Liverpool people in order to justify the expenditure of public money on the project.
  There is a rough and ready guide to all this, which I should be willing at any time to explain to my hon. Friend, about how we work out the cost per job and all the rest of the calculations to bring us within the terms of the Local Employment Act.
  Briefly, the Board of Trade finds out from a firm desiring to start a factory in Skelmersdale, and wishing to take advantage of the grants and loans available, how many people it intends to employ and how many of these are likely to be recruited from the development district. The estimates for this employment must, of course, be realistic. There needs to be a fair degree of assurance that the jobs will materialise and that they will be maintained for some years at least. We do not want any fly-by-night arrangements. I am sure that in the selection of applicants and the help that is given to them, all these realistic estimates are taken into account.
  The estimates are then checked with the Ministry of Labour and the local housing authorities, but the Board of Trade does not expect that all the jobs should be filled from Liverpool. Indeed, any firm starting up in Skelmersdale would get

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  the benefit of free depreciation wherever the workers might come from.
  My hon. Friend raised another point about the training or retraining of employees to go into the new factories. He said that resentment is caused by the fact that the new industrialists coming in cannot afford to provide for training for the people who live in Skelmersdale old town. This is really a question for the Ministry of Labour, but I have looked into it with the help of the Ministry. I must point out that the Ministry of Labour scheme for labour training grants is one of the forms of help offered by the Government as an inducement to firms to set up in development districts or, where they are already in such districts, to expand their businesses there. The object is to create additional jobs for people living in the development districts.
  The scheme has really been designed for the benefit of firms operating inside development districts, but as a concession it has been extended to firms which are within a reasonable travel-to-work distance of a development district or to firms in those areas such as Skelmersdale new town which have overspill agreements with a development district, to the extent that they give additional work to people living in those districts.
  That, I am afraid, is as far as my right hon. Friend the Minister of Labour feels that he can go. To extend the scheme to the training of workers not living in the development districts could not be done without defeating the whole object of the scheme and would be out of line with what the Board of Trade is empowered to do under the Local Employment Acts.
  I can best sum up the position by repeating that the Board of Trade does not exercise its powers under the Local Employment Acts in such a way as to compel firms, in this instance, to recruit all their labour for Skelmersdale projects in Liverpool. No doubt firms, knowing that the amount of assistance they are likely to receive will depend on the number of workers they recruit in Liverpool, will tend to put their estimates of recruitment at the highest figure that they reasonably can.
  I can assure my hon. Friend that if the Ministry of Labour or the Board of Trade consider that an applicant is adopting special measures to distort what might be considered the natural pattern
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  of recruitment from the Skelmersdale point of view, they will scale down a firm's estimate accordingly and make sure that employment is found for people living in Skelmersdale itself.
  Like my hon. Friend, we want to see the new town grow at a reasonable rate and to be a successful development in that part of Lancashire. This is something which could contribute a great deal to the social environment of that part of what has been to some extent, because of the closing of collieries, a rather difficult district to deal with. The figures for recruitment bear out the statement I have made that recruitment is not confined to the Liverpool development district because more than half of the the jobs so far provided have been taken by local people. I am sure that that kind of ratio will continue.
  I can assure my hon. Friend that the criticisms which he has levelled against the working of the overspill arrangements and the views which he has put forward will be considered by the Board of Trade and the Ministry of Labour to see whether we can do anything to put aside the resentment that the local people feel. Some of the resentment may be due to misunderstandings.
  Mr. McGuire rose—
  Mr. Deputy Speaker (Dr. Horace King): The hon. Gentleman has exhausted his right to speak to the House. He can put a further question to the Minister if he wishes.
  Mr. McGuire: My hon. Friend mentioned the Ministry of Labour. All my correspondence has been with the Ministry of Labour. Would not my hon. Friend agree that the position in Skelmersdale is special to it and does not apply to other new towns? In view of the smallness of the numbers, could not further consideration be given to this special problem?
  Mr. Darling: It is not peculiar to Skelmersdale new town. We have similar situations in other places. It may be that we can consider the smallness of the numbers. We will consider that aspect.
  Question put and agreed to.
  Adjourned accordingly at twenty-three minutes past Twelve o'clock.

PENSIONS AND NATIONAL INSURANCE
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Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Ripon
The Viscount Norwich—Took the Oath.

PROPOSED PERMANENT INTER NATIONAL FORCE
2.35 p.m.
LORD OGMORE: 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 any progress has been made with the creation of the Command Structure and Staff for a permanent International Force on the lines of that advocated in a debate in this House on February 20, 1963.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD WALSTON): My Lords, we support the creation of a permanent International Force as our ultimate goal, and as a step towards this we have recently made a notable contribution by offering to provide logistic backing for up to six battalions in future peace-keeping operations. However, we must recognise that the creation of a permanent force is impracticable at the moment, in present circumstances. This view is shared by the Secretary-General himself.
LORD OGMORE: My Lords, may I ask the noble Lord whether he realises that he has not answered the Question? The Question is:
"whether any progress has been made with the creation of the Command Structure and Staff "—
not with the international force itself. May I also ask the noble Lord whether his attention has been drawn to the statement by U Thant over the weekend, when he said that the United Nations
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was in danger of degenerating into a mere debating society?
LORD WALSTON: My Lords, I am sorry if I did not give an answer to the noble Lord's specific Question. The short answer, which might have sounded discourteous if I had given it, is simply, No. Not only would it have been discourteous; it would also have been somewhat misleading, because it would have implied that we were unsympathetic towards the objectives which I believe the noble Lord has at heart, and which Her Majesty's Government also share. It was the reason why I phrased my Answer in the way I did. As to the second part of the noble Lord's supplementary question, I have recently noticed the Secretary-General's remarks, and I read them not only with sympathy but also with sadness. One cannot controvert what he has said, but merely adding to any existing form of organisation is not going to alter the spirit which is behind the United Nations. It would be deceiving ourselves and other people if we thought that simply by strengthening one particular organisation or adding to it we should overcome the very real difficulties which at the present time stand in the way of the particular organisations to which the noble Lord refers.
LORD BROCKWAY: My Lords, is my noble friend aware how much all those who support the United Nations welcome the offer which Her Majesty's Government have made of a contribution to an International Force? Also, is it not the case that present happenings in both Vietnam and Santo Domingo emphasise the necessity for such an international force?
LORD WALSTON: My Lords, I am grateful to the noble Lord for his interjection. I would certainly agree with him that this underlines the need of an International Force to settle national disputes.
LORD WADE: My Lords, would the noble Lord not agree that, if we are able to have a permanent International Force it is essential that there should be a Command Structure and Staff? Would he not also agree that we must start in that way, and that Britain should give wholehearted support to this proposal?
LORD WALSTON: My Lords, we certainly give wholehearted support to this proposal. But I think, as I implied earlier on, that it would be highly unrealistic simply to create a Command Structure and Staff, when the will to have an International Force did not already exist; it would be merely dangerous self-deception.

BUSINESS OF THE HOUSE
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 p.m. my noble friend Lord Taylor will be making a statement on the Aden Commission. The House might like to know that, in view of the large number of speakers for this afternoon's debate, there will be light refreshments in the Guest Room later this evening.

SEXUAL OFFENCES BILL [H.L.]
2.39 p.m.
Order of the Day for the Second Reading read.
THE EARL OF ARRAN: My Lords, I beg to move that this Bill be read a second time. It is this Motion for Second Reading and this Motion only that I am presuming to place before your Lordships this afternoon, and which I hope we shall discuss this afternoon. We had a long and, I thought, outstanding debate on this subject twelve days ago, and because of the measure of support then given from all sides of the House for reforming the law on the lines of the Wolfenden Report, I felt encouraged to introduce a Bill straight away, and thus to crystallise the views already expressed. Moreover, as your Lordships may remember, I was urged to introduce a short, simple Bill by the noble Earl, Lord Swinton, who cannot be here to-day but who authorises me to say that he gives his full support to the Bill and would vote for it if he were here.
Well, my Lords, here it is—a Bill for a change in the law on homosexual practices; a Bill in its earliest and most unvarnished form; a Bill which, to judge by the number of speakers, has stimulated interest, some of it far from favourable. Because of this opposition, I fear that I must weary your Lordships once again, although I promise to speak as briefly as I possibly can. Perhaps I should
632
apologise to your Lordships if I appear to be over-hasty in thus, as it were, rushing into print. I have done so entirely because there is to be a debate on the same subject in another place on Wednesday, and it seemed right that we, the Upper House, should give formal expression to our views first. Though it may sometimes affect not to, I believe that the other place pays considerable attention to what your Lordships say.
What is this Bill? It is an attempt to concentrate in one simple clause the essence of the recommendations of the Wolfenden Committee for homosexual reform. It is an expression of opinion—if you like, an expression of faith. I repeat that it is a simple Bill. It is, and I gladly admit it, an over-simple Bill. I am sure that it can, and indeed will, be shot full of holes. I made it simple deliberately, because I wanted to put the main point before your Lordships and to get a formal expression of the view of the House. After all, what would be the point, at this stage, of drafting a complete Bill unless one knew that your Lordships were generally in favour of reform? To do so would surely be to prejudge the opinion of the House. My Lords, have no anxieties. I know that, in its present form, the Bill could not become law; nor am I asking that it should do so. After all, what Bill ever ends up in the form in which it was originally drafted? What are the Committee and the Report stages for? And will not noble Lords, including myself, have the fullest opportunities for removing at the appropriate moment those things which they do not like and adding those things which they do?
If, on Second Reading, we must discuss things which I should have thought more properly belonged to the Committee stage, where lie the difficulties? What are the things that are likely, in particular, to irk and disturb your Lordships? There is, first of all, the question of youth, of young people. It may be suggested, that the Bill disregards young people, inasmuch as it makes no mention of them. My Lords, it makes no mention of them because it in no way weakens or alters the present law in regard to their protection. For an older man sexually to interfere with a youth under the age of 21 would remain a criminal offence. The Bill does not say this because it

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does not need to be said: because the law remains as before, because it is implicit—and I am going to ask the noble Lord, Lord Stonham, to confirm that what I am saying is correct.
But some of your Lordships may still feel that this is not enough: that there should be some strengthening; that the penalties for homosexual acts with the under 21's should be made direr still, as indeed the Wolfenden Committee itself suggested; that it should be stated positively and forthrightly that nothing in the proposed changes would in any way imperil the present safeguards for youth. I would welcome—I think all of us would—such additions or Amendments to the Bill, and I think it would be quite splendid if these Amendments came from one of the Lords Spiritual; and best of all, from the most reverend Primate himself—because for the Churches it must be a special concern that, in our desire for reform, we do not go too far and involuntarily undermine those moral standards which are permanent and absolute.
Next, my Lords, I come to the possible legal objections. I note that two former Lord Chancellors and a former Lord Chief Justice are to address us this afternoon. Arrayed before us, indeed, are the might and majesty of the Law, and I, with no legal knowledge whatever, stand in awe; but I take comfort in the fact that the noble and learned Lord, Lord Devlin, signed a letter to The Times in favour of reform. Moreover, I fear that these great men may not speak in favour of the Bill. I cannot say, of course, what arguments will be adduced. No doubt they will be cogent and well-reasoned. We may be told that the Bill as it now stands would make permissible what is known as the ultimate offence—buggery; or what I think is known in Scotland as sodomy. We may be told that this offence has been a crime for 600 years or more—although, why a law which has been in existence for 600 years should necessarily be a good law, I do not know. The law which made sheep-stealing a
hanging offence was not a good law, and was repealed. I hope that the noble Lord, Lord Stonham, will tell us of the position which would be created if the Bill went through in its present form.
We may be told that the Bill as it now stands is not in accordance with the main recommendation of the Wolfenden Com-
634
mittee—although, frankly, in my simple mind, I cannot see where the difference lies, and Sir John Wolfenden himself has written to me to say—and I am quoting:
"It must be clear to everyone that the Bill lays down the basic principle which is recommended in our Report".
I shall be impressed by the arguments, and I am sure your Lordships will be, too. But if noble and learned Lords have these objections, as also in the case of the Lords Spiritual, will they not come forward and tell us where we have gone wrong? Would they not themselves like to draft the Amendments that would put the matter right? I should like to put the ball into their court. I ask for their help, as I ask for the help of the right reverend Prelates. If we are on the right lines, then let us go through this thing together.
Last of all, my Lords, I think that there may be some objections in relation to the Armed Services. I note that the noble and gallant Viscount, Lord Montgomery of Alamein, is to speak to us this afternoon, and no doubt he will "hit me for six". I recognise that there are special problems in this field. The Wolfenden Committee recognised this, too: it is the major question of discipline. But the Committee pointed to Section 66 of the Army Act, 1955, which provides for the punishment of disgraceful conduct, or conduct of an unnatural kind. I understand that this section is still effective. Quite relevantly, I think, I might ask the noble Lord, Lord Shackleton, who looks after Service matters in this House, this question: Lesbianism not beng a criminal offence, has discipline in the Women's Services suffered because of it? And would Her Majesty's Government advocate a change in the law making Lesbianism a crime, so that order may be maintained? And, to the noble Viscount, Lord Montgomery of Alamein, may I put this question? Will he tell us, from his NATO experience, whether he found that discipline in the contingents from the other European NATO countries (which, with the exception of West Germany, do not treat homosexual offences as a crime) was the worse because of it? And if not that, does he think that we have a special propensity in this country towards homosexuality which calls for special legislation?
These are, perhaps, some of the objections that will be raised. Doubtless there

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will be others. They are weighty objections, and they will have to be met at the appropriate moment. But may I remind your Lordships once again that what we are debating to-day—and I shall certainly divide the House on this—is a matter of principle, a matter of right and wrong. I hope that we may be able to keep this steadfastly in mind throughout the debate and not allow ourselves to be diverted into the alleys and byways, however attractive or unattractive they may be.
The Bill may well be unsatisfactory and in need of amendment, but the issue is clear and we cannot fight it. What we shall have to say squarely from your Lordships' House this afternoon is this: Are we or are we not in favour of homosexual law reform? Do we or do we not think that the present law on homosexual practices is a good and workable law and should remain as it is? Do we or do we not think it right that a man should be persecuted and prosecuted for being what he is born to be? Do we or do we not think it right that hundreds, perhaps thousands, of men should live in permanent fear of blackmail? Do we or do we not think it right to say that the present law endangers the security of this country? These are the issues that we are debating, these and nothing else. I pray that this House may show itself what I believe it to be, a place of progress and of compassion. I beg to move that the Bill be read a second time.
Moved, That the Bill be now read 2a.—(The Earl of Arran.)
2.53 p.m.
LORD BYERS: My Lords, I rise to welcome this Bill and the initiative of the noble Earl, Lord Arran, in putting down this measure for your Lordships' consideration so quickly after the recent debate. I know there are many speakers who wish to air their views in this discussion and I shall therefore be brief. I do not intend to repeat in any detail the main arguments put forward twelve days ago, but I think it right to say—and I can say this because I was overseas at the time of the last debate—that anyone who reads that debate will recognise the very high standard of contributions to it and also the significance of what was said by those in favour of reform. I believe that
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17 out of the 22 speakers in that debate were in favour of reform. Looking at the names of to-day's speakers I do not suppose that we shall have quite such a favourable ratio. Nevertheless, I think that we should recognise that there has been a distinct shift in public opinion over the last few years. Of course, we are always told that public opinion is not ready or would not approve; but, in the ultimate, it must be the collective wisdom of Parliament which bears on this problem and it is Parliament, in both its Houses, which must amend or refuse to alter the law.
No one can deny that, as I have said, there has been a considerable shift in public opinion, and I think that to a large extent it is because of the excellent work done by the Wolfenden Committee. That Committee of eminent people studied this problem for three years, and they reported with a 12 to 1 majority. That, surely, must be an important factor in any consideration of this sort. But one must also notice the significant change in the opinions, of for instance, many Church leaders, of teachers, of dons at university and of others who are in continual and constant contact with young people. And this to me is a very significant change of opinion.
In the newspaper world there has already been the approval of The Times, The Guardian, the Daily Telegraph, the Daily Mirror, the Sunday Times, the Observer and many others. In February of this year—and I am not making this a Party point—the Liberal Council, which lays down the policy of the Party in time for the Annual Conferences, passed a resolution in favour of the Wolfenden recommendations, with nobody dissenting. This is something which would not have happened five years ago. I bring it forward merely to indicate that there has been a remarkable shift in public opinion. I am not claiming that there is a majority of public opinion in favour of reform—I think it extremely difficult to test public opinion in matters of this sort—but what cannot be denied is that the more carefully this matter is studied by people who are sympathetic in general to social reform the more convinced they become that a gross injustice is being perpetrated against the minority of our people and that, in addition, it must be clear that the way we are handling this problem is not in the best interests of society as a whole.

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I say this for three main reasons. First, I believe there will be better protection for the young if those over 21 have an opportunity, should they so wish, to behave homosexually in private without fear of prosecution. Second, I believe that once the criminal stigma is removed from the homosexual practices of consenting adults it will be far easier for those concerned, both those under 21 and those over 21, who wish to do so, to seek help in trying to conquer the problem they face. This is a particular problem, I believe, in the universities and it is something which is very important. Third, as the noble Earl, Lord Arran, has said, it will remove the very great opportunities of blackmail which the present law fosters. This must be of concern to everyone in the country. And I would add that I cannot believe that we can go on dealing with the problem by way of prison sentences. This must be contrary to all modern ideas of reform. I do not believe we shall be able to tackle this problem properly until we get rid of the criminal stigma that this Bill seeks to take away from consenting adults.
I do not believe, as the noble Earl, Lord Arran, said, that it can be right to subject a substantial number of our fellow citizens to the misery and degradation they suffer to-day because, in the eyes of the majority of us, they are not just different but abnormal. No one pretends that this is a simple problem or that we know all about it. We certainly do not. But I believe we have a better chance of finding a social solution if the criminal stigma is removed than if we go on as we are at the present time. Therefore, I commend the Bill to your Lordships. As the noble Earl, Lord Arran, said, many Members of your Lordships' House may find the Bill in its very brief form not exactly what they would like to see as the final measure. But there is to be a Committee stage and we can amend it. It is on the principle that there should be reform along the lines of Wolfenden that we are going to vote on to-day. It may be that some would like to see severer penalties for the possible corruption of the young, and there may be many other things which should be considered; but the principle of the Bill is clear. I would therefore ask the House to give it full support, and I implore the Government to be sympathetic to what we want to do in the way of reform.
2.59 p.m.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, HOME OFFICE (LORD STONHAM): My Lords, I intend, like the noble Earl, Lord Arran, to devote my remarks to the question which is before the House, "That this Bill be read a second time". Twelve days ago we debated a Motion. Speaking for the Government on that occasion I stated the facts and arguments for and against the Wolfenden recommendation, and told you that the Government would not attempt to persuade your consciences into one Lobby or another, but would leave the issue to a free vote. When I sat down I was not concerned for the facts which I had stated. I knew they were correct. But I was concerned in case my own views had rendered my speech less impartial than I would have wished. I need not have worried. The next day I was roundly slated in the Press for my neutrality, and several noble Lords were kind enough to approach me about my speech. They were divided equally between those who welcomed the way in which my personal support for Wolfenden had shone through my words, and those who assured me of their support in my personal opposition to the objectionable proposals. Such, my Lords, are the dubious fruits of neutrality.
My rôle to-day, speaking for the Government, is exactly the same. I have to say that it is entirely for your Lordships to decide the issue, and we want you to decide it. If there is a vote it will be, so far as the Government are concerned, entirely free, with Ministers voting in their personal capacities and not as Ministers. To-day we are debating a Bill—and let me say at once that it is a shockingly drafted Bill. Because, my Lords, it is simple, it is clear, and it is short. No reputable Parliamentary draftsman would have allowed a measure to emerge in a form which a child could understand, so it must be full of legal loopholes. I do not intend to examine any of them because they will be matters for your consideration at a later stage. Like most of your Lordships, and the Government, I am concerned to-day solely with the main principle of the Bill. Any defects can be remedied in Committee, and I was very glad to hear the noble Earl, Lord Arran, give such a

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categorical assurance that he would welcome suggestions and would co-operate in improving the Bill.
I should like to deal with three questions which the noble Earl addressed to me. First of all, he drew attention to the alleged disquiet because his Bill does not explicitly state that homosexual acts committed against minors will still be an offence. My Lords, there can be no doubt on this score. The Bill is clearly limited to acts committed in private between consenting adults. All other homosexual acts would remain criminal. This means that any man who interfered sexually with minors, whether in public or in private, would be guilty of a criminal offence and liable to precisely the same heavy penalties as he is now. The addition of a clause to the Bill specifically declaring this to be so would be redundant and would serve no more than a propaganda purpose. It is not usual for a Statute to list and declare all the laws which it will leave unaffected. Indeed, if this were a Government Bill and such an Amendment were proposed, it would be my duty to ask you to reject it on the grounds that clauses in Bills should be confined to the creation of new laws or the amendment of old ones.
I must also deal with the concern which the noble Earl, Lord Arran, has expressed at the weakening of the ancient law against buggery and the suggestion that in considering the legalising of private homosexual acts we should distinguish between buggery and other forms of homosexual conduct. The object, apparently, would be to repeal the Labouchere Amendment of 1885, which first made indecency in private between males an offence, but to retain the law as regards sodomy. Those who argue in favour of this course feel that, while it might not be so strongly opposed as the Wolfenden Committee's main recommendation it would go some way to satisfy those who are in favour of a change in the law, since it would considerably reduce the scope for prosecution of homosexual conduct in private.
But we must consider the situation which such a well-meaning Amendment would create. Among homosexual acts committed in private between consenting adults there would be one—buggery—punishable by life imprisonment, where-
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as other forms of indecency, which to many people would be no less repulsive, would not be an offence at all. Such a distinction between one form of indecent conduct and others would have no apparent basis in logic or in morals. It would also make the already difficult task of the police in enforcing these laws quite impossible. How could they be expected to tell the precise form of indecent homosexual conduct which had taken place in private between consenting adults? And how could they decide whether these people should be prosecuted as criminals, or left alone? On whom would they rely for evidence—blackmailers, provocateurs? Such a suggestion, however well meaning, appears to be impracticable.
The noble Earl, Lord Arran, also asked me whether the fact that Lesbianism is not a crime has had any effect on conduct in the Women's Services. I am not able to answer that precise question, but as regards the Armed Forces, I would draw your Lordships' attention to the fact that in their Report, in paragraph 144, the Wolfenden Committee recognised that it might be necessary for the Service authorities to continue to treat homosexual acts in private between adults as offences under Service law. We have consulted the Minister of Defence on this particular point, and apparently the Service authorities are inclined to agree—this is just a view—that the Wolfenden Committee might be right. But the position of the Services arouses different considerations which require study, and the passage of this Bill, as it stands, on this issue will not prejudice the position of the Services or of the Ministry of Defence one way or another. Service law creates offences and it could, if necessary, be used to deal with this matter irrespective of your Lordships' decision on this particular Bill.
My Lords, the more one studies this matter the more one comes to the conclusion, as I said twelve days ago, that no compromise is possible. The Wolfenden Committee examined these issues with great care, and came to the conclusion that if a line was to be drawn it should be between offences committed between adults in private and offences committed either in public or against minors. This makes sense, and we must not attempt to evade the issue by grasping

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at compromise where none is possible. If we do we shall end not with a compromise but with a nonsense. The choice before your Lordships is very difficult, but it is also very simple. I should mislead you if I were to suggest that there were alternatives other than those propounded by this Bill, or that there was some way of evading a difficult choice. In making that choice you may wish to take account of the statistics. Some of them are estimated but most of them are official.
If we take 500,000 as the best minimum estimate of the number of adult males in this country who are and will remain all their lives exclusively homosexual, then, even allowing for the fact that a large number of them will stay continent all their lives, the remainder may well constitute the largest class of criminals (except for motoring offenders) in the country: scores of thousands of persistent criminals; they have to be; most of them were born or became that way in childhood, and, as yet, medical science cannot materially change their condition.
Against this large number of offenders, consider the number of prosecutions. Figures over the years show that, although the number of offences known to the police has continually increased, the number of offenders prosecuted has not increased in so high a proportion. In the 1950s, for every five cases known to the police, the police prosecuted two persons. I will not speculate on the reasons but, knowing our police, they would be ones which we should respect. Last year, the total of prosecutions for all homosexual offences, whether in public or private and whether committed against an adult or minor, was 1,300, out of we know not how many scores of thousands. The conviction rate is only a fraction of one per cent.
I hope your Lordships, whether you support or oppose the main Wolfenden recommendation, will agree with me that this situation, is manifestly unsatisfactory. If private homosexual acts are to be crimes, then the criminals should be brought to justice. A decision to keep the existing law is tantamount to a decision that you want it enforced. This would mean that more policemen would spend their time prying into the private lives of individual citizens—for, unless they do this, there is little prospect of
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catching those who commit their crimes in private, except perhaps through blackmail confessions, and your Lordships have agreed that this should be ruled out. If your Lordships are not prepared to instruct the police in this way, the alternative is to change the law as the noble Earl, Lord Arran, proposes. This would mean toleration of a certain amount of private vice. There is no getting away from this. But it certainly need not mean an indiscriminate acceptance of it. Indeed, one of the consequences of allowing limited toleration might well be that the police would be able to devote more of their energy to pursuing and prosecuting those real menaces to the health of our society, the homosexuals who interfere with boys. At present, we have an all-embracing criminal law which neither society nor the police are really united or whole-hearted about enforcing. If we restrict the scope of the criminal law to that area of vice which, I hope, we are firmly agreed should be relentlessly attacked, it might contribute to the strengthening of morality in general.
These, then, are the alternatives. I hope that your Lordships will take one or other of them boldly and not seek to avoid the necessary decision. The worst and most cowardly solution would be to instruct our policemen that "these men are criminals, but you must not be over-zealous in catching them, and if you should happen to catch them you will probably be advised not to prosecute them". I was interested that when we discussed Lord Arran's Motion, twelve days ago, your Lordships were unanimously in favour of the Director of Public Prosecution's arrangements as regards blackmail and stale offences. Both the noble Lords, Lord Rowallan and Lord Balerno, who spoke against the Wolfenden recommendation, said that these offences should not be prosecuted. But it is a little odd to have an arrangement whereby, if a criminal can escape detection for twelve months, he can expect to get away with it for good. We should not think of offering this kind of "close season" to house-breakers.
We have certainly gone to the limit of what can properly be done to mitigate the effect of the present law by administrative action. Some might even say that we have already gone beyond that limit.

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There can be no question of the present indulgence to blackmail or stale offences being extended administratively to offences between consenting adults in private. Although the Director of Public Prosecutions has asked chief officers of police to consult him about this as well, he does not make a general rule of advising against prosecution in such cases. I need not elaborate to your Lordships the constitutional objections to any branch of the Executive making general rules that certain classes of offences which Parliament has declared to be crimes shall not in practice be treated as such.
The limits to which we have already gone in this field are illustrated by the latest figures. In the nine months to April 30 last—that is, up to three weeks ago—76 cases were reported to the Director of Public Prosecutions. This was a total comprised of offences over twelve months old, and offences disclosed in complaints against blackmailers and offences between consenting adults in private. That is an annual rate of about 100 cases, in a field larger than that covered by this Bill. Out of those on which a decision has been taken, there were prosecutions in about 55 per cent. of cases and it was decided to take no action in 45 per cent. If we are down to 55 prosecutions a year on cases submitted to the Director, we have surely reached the administrative limit. It is for your Lordships to decide whether we now finish the job by changing the law, or retain the whole of the law and insist that it is carried out. The choice is yours and yours alone.
I have always believed that no man can be truly impartial on any subject, unless he is totally ignorant of it. My duty of putting the Government's neutral view before your Lordships, therefore, has not been an easy one, although I hope that I have succeeded as well as apparently I did on the previous occasion. Commenting on my speech in the last debate The Times Parliamentary Correspondent declared,
"Fence sitting can be an agonising pastime almost as painful to watch as to perform."
I wholeheartedly agree, and to avoid inflicting any more pain on your Lordships or myself, I shall conceal my personal views no longer. If it comes to a Divi-
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sion, I intend to vote for the noble Earl's Bill. I have reached this decision as a result of the close study which I had to give to this subject in order to speak to your Lordships about it. I certainly approached it with no predisposition in favour of legalising homosexual conduct in any circumstances. But I am satisfied that the injustice and the evils of continuing the present law are greater—very much greater—than the risks involved in making the proposed change.
3.20 p.m.
EARL ATTLEE: My Lords, I rise to support the Second Reading of this Bill. I claim no special knowledge. My only knowledge of the subject goes back to nearly sixty years ago when I was at the Bar and these matters were discussed and I used to go over cases that came up at the Sessions. I am convinced by the arguments in the Wolfenden Report. After all the Wolfenden Committee took a long time in considering this matter, they went into it most thoroughly, more thoroughly than any of us can have done, and they came to a very definite conclusion. I am convinced that the time for this change has come. We have always been careful over the years to get rid of the confusion between the ecclesiastical idea of what is sin and what is a crime. This is one of the exceptions—an exception extended by the mischievous Labouchere Amendment. I believe it is false to imagine that doing away with this matter as a criminal offence will in any way extend the evil. I profoundly believe that the evil is mainly a matter of physical condition; it is a matter of misfortune rather than crime.
I remember very well that a few years ago we discussed this question in your Lordships' House, and I was greatly impressed by a speech made by the late Lord Brabazon of Tara. It was full of good common sense and of that courage which he always showed. It may be that the Bill will require amendment; but we can leave that to the lawyers. I do not think you can have a compromise. I agree with my noble friend Lord Stonham that you need a definite conclusion, and this House is entitled to state its view. That view may have an effect on the debate in another place. Well, let that be so. We have here great experience

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and the highest legal knowledge in the land.
To-day we have the chance of getting rid of an evil of which far more is said than need be. I believe that homosexuality is an evil, and I do not think you will cure it. But I think that blackmail is a greater evil. I am sure that the present law gives an opportunity to the blackmailer, and the sooner we can do away with that opportunity, the better. I will say no more, other than to repeat that I wholeheartedly support the Bill.
3.24 p.m.
VISCOUNT MONTGOMERY OF ALAMEIN: My Lords, I regret very much that I was unable to be present in your Lordships' House on May 12 when the Motion on homosexual offences was moved by the noble Earl, Lord Arran. With great courtesy, he told me that he was going to move the Motion and gave me the date, and I said I would be present. So I apologise to the noble Earl. I read with the greatest interest in Hansard all the speeches that were made on that day, and it seemed to me that overall the speeches dealt mainly with the legal aspect of the law as it stands to-day, covering blackmail and questions of that sort. It also seemed to me that many in your Lordships' House wanted to bring in some measure of legislative reform of legal technicalities on this difficult subject; and may be that is right. But, apart from the strictly legal side of it, there is the human side; and I should like to speak to-clay on the human side of the problem.
I agree very much with what was said by the noble Lord, Lord Rowallan, and the noble Lord, Lord Brocket, on May 12. I cannot reconcile with my own beliefs what was said in their speeches by the most reverend Primates. To condone unnatural offences in male persons over 21, or, indeed, in male persons of any age, seems to me utterly wrong. One may just as well condone the Devil and all his works. I am entirely opposed to this Bill, and I return the courtesy of the noble Earl by telling him so now. I am against any suggestion that we should weaken the law as it stands at present. My main reason is that a weakening of the law will strike a blow at all those devoted people who are working to improve the moral fibre of the youth of this country. And heaven knows! it wants improving.
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With your Lordships' permission, I should like to develop this theme and I will take three categories of young people about whom I know a great deal. Do not let us forget that it is the present young generation who will have to handle the problems that lie ahead in this distracted world of politics, war and mixed-up values. They will need all the help and guidance that we older ones can give them. The first category I take is the boys and young men in our schools and universities, whom I suppose number some millions, although I would not know the exact figure. What influence on their minds and characters will follow if they know that their masters and tutors are indulging in these unnatural practices, and if they know that the law of the land allows it? What effect will this have on the moral fibre of these boys, some of them quite young and under 21? The practices are illegal; and yet suddenly, on the morning of their 21st birthday, they can do what they like, and they are legal.
THE EARL OF ARRAN: My Lords, with great respect to the noble and gallant Viscount, does this not apply equally to the age of consent for girls? Suddenly, over the age of sixteen, it is all right.
VISCOUNT MONTGOMERY OF ALAMEIN: I am not very expert on girls. No doubt the noble Earl knows more about that than I do.
The second category I take is the youth organisations throughout this country. I will mention just a few, about which know quite a lot: the Boy Scouts, the Boys' Brigade, the Church Lads' Brigade, the Cadet Forces, the National Association of Boys' Clubs—and there are other such organisations. In Canning Town in the East End of London you have David Sheppard and his Mayflower Centre. Many London gangs come from that area. I have been there. I have sent boys from that centre to the Outward Bound schools, magnificent places for the building of character. A boy is taken from his home area where the atmosphere may be bad and spends a month having his character developed in an entirely different atmosphere by the sea, in the mountains, and so on. I sent one boy from that school who was a leader of one of the worst London gangs. I saw him before he went; I saw him when he came back, and he was a changed boy.

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The third category I should like to take is the Armed Forces of our nation. It may be that some of your Lordships will think that on the first two categories I have no mandate to speak. On this category, I do not think you could say that. The fighting men of Britain have been my comrades-in-arms for over half a century. What is the greatest single factor making for success in battle, or for efficient and well-trained Armed Forces in peace? It is morale. And what is the very foundation of morale? It is discipline. If these unnatural practices are made legal, a blow is struck at the discipline of British Armed Forces at a time when we need the very highest standard of morale and discipline, with those forces serving throughout the world. Take an infantry battalion. Suppose the men know that their officers, perhaps, are indulging in these practices, and it is legal and nothing can be done. Take a large aircraft carrier, with 2,000 men cooped up in a small area. Imagine what would happen in a ship of that sort if these practices crept in. No action could be taken; it is legal. How can good order—
THE EARL OF ARRAN: My Lords, I really must interrupt the noble and gallant Viscount again. Under Section 66—
SEVERAL NOBLE LORDS: Order, order!
THE EARL OF ARRAN: I beg your Lordships' pardon.
VISCOUNT MONTGOMERY OF ALAMEIN: How can discipline and good order be maintained in such circumstances? Surely, it must not be. Is it going to be said throughout Britain that the House of Lords gave the lead in striking a blow at the moral fibre of the youth of our land, or at the discipline or morale of our Armed Forces?
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, will the noble and gallant Viscount permit me to intervene, because he has made a statement which seems to me to be slightly misleading the House? The noble Viscount will know that the Government are taking an impartial view, but Section 66 of the Army Act will still apply. If it does not apply, as the noble and gallant Viscount
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knows, it is open to the Services to get rid of any undesirable person who practices disgraceful conduct—and I think there can be no argument on the subject that these practices are disgraceful conduct. I do not think we ought to allow it to be suggested that these practices could possibly be condoned in the Services. I hope the noble and gallant Viscount will reconsider his remarks.
SEVERAL NOBLE LORDS: Hear, hear!
VISCOUNT MONTGOMERY OF ALAMEIN: My Lords, I do not reconsider anything I have said about it.
A NOBLE LORD: Never retreat!
VISCOUNT MONTGOMERY OF ALAMEIN: Far from helping these unnatural practices along, surely our task is to build a bulwark which will defy evil influences which are seeking to undermine the very foundations of our national character—defy them; do not help them. I have heard some say—and, indeed, the noble Earl said so himself—that such practices are allowed in France and in other NATO countries. We are not French, and we are not other nationals. We are British, thank God!
Expressed in the simplest terms, I suggest that the issue is this: Is this House, or is it not, to give the lead to the British people by agreeing to a Bill which will have the effect of undermining the moral fibre of the youth of the nation? Hansard to-morrow morning will tell us who wishes to give that lead. In conclusion, let me say this. When the time comes to vote on the Second Reading of this Bill, I would appeal to all noble Lords who have at heart the best interests of the young men of Britain, to go with me into the Not-Content Lobby and knock this Bill for six right out of the House.
3.36 p.m.
THE MARQUESS OF QUEENSBERRY: My Lords, I know that it is the tradition of your Lordships' House that a maiden speech should not be on too controversial a subject, and I hope that you will excuse me for speaking for the first time on this issue. It is, however, a matter about which I have felt strongly for many years, and for this reason it seemed to me that it was appropriate that I should speak on this occasion. During the

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debate on May 12, most of my thoughts on the Wolfenden recommendations were stated most cogently, and I will therefore restrict myself to those few things which do not seem to me to have been covered, and to certain personal reflections.
It seems to have been generally agreed that there are a sizeable minority of men in all countries who are homosexual, and certainly most countries in Europe do not have laws which penalise homosexual acts between consenting men in private. Nobody has so far suggested that these countries have a worse problem over this issue than we do. In Sweden, where in 1944 the law was amended along the lines of the Wolfenden recommendations, there is nothing to suggest that homosexual behaviour has increased. It has been suggested that in Sweden one man out of 100 is homosexual, whereas in the United States of America, where in most States there are laws comparable to our own, Dr. Kinsey estimated that four men out of 100 are probably homosexual. This may well mean that the Americans have a greater propensity to homosexuality than the Swedes. But it might also be looked at in a different way, and one might say that it indicates that the laws in the United States are not acting as a deterrent. I do not believe that our laws on this subject, as they relate to adults, are in any way a solution. They have, if anything, helped to produce a nasty, furtive, underworld that is bad for society and had for the homosexual.
According to the noble Earl, Lord Arran, it has been suggested that in this country possibly one man in 25 is homosexual. Despite this figure, the debate in your Lordships' House on May 12 was almost entirely impersonal. If one accepts this figure as an approximation—and I would—then many of us must have some first-hand knowledge from a homosexual of his particular predicament. I do not mean the sort of situation such as might be experienced by a priest or a doctor when asked advice, but rather an occasion when one has discussed, in a purely personal and private manner, the life of a friend who happened to be afflicted in this way. I have certain friends with whom I have done this, and I do not think that they are in any way more depraved or immoral than either myself, or any other normal man of my acquaint
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tance. They came slowly to realise in early manhood what they were, not through any particular influence of which they were aware. They are unable to explain why it should have been their lot to develop in this way, and I suggest to your Lordships that neither psychologists nor doctors are able to explain this, either. It would seem that it is much more to do with genetic predisposition and environment in early childhood, than it is to do with corruption at an impressionable age.
Mr. Schofield, the sociologist, whose book The Sociological Aspects of Homosexuality is to be published in the autumn, assured me that in his research he has found very little to suggest that homosexuality in the adult is connected with seduction in youth. The majority of homosexuals, I believe, have no particular wish to corrupt youth; in fact I would say that in this respect they are often very much more responsible than the average heterosexual. As an interesting indication of the irresponsibility of the normal man one could take the statement which appeared in the recent report of the Central Council for Health Education on the sexual behaviour of Britain's teenagers, that 38 per cent. of the teenage girls who were approached on this subject indicated that they had had sexual intercourse for the first time with men over the age of 21.
I believe that homosexuals are only too aware of the desperate problems and difficulties of their life. They are, after all, denied the supreme biological function and the great happiness that is to be found in the love between parents and children. Can one expect them to add to this the almost impossible task of living a life of total abstinence? Celibacy, surely, can only be chosen by the
individual; it cannot be imposed by law, except in extreme cases of anti-social behaviour. It is, after all, something that is achieved, with great difficulty, only by members of a religious order. There is no indication that the sexual urge is appreciably different for homosexuals than it is for normal men. Consequently it is easy for any of us to imagine the enormity of what our present law asks them to do. This degree of self-control for which one hopes may be possible for a few, but can one expect it from everyone? One must ask, therefore: what is a homosexual

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expected to do in his particular predicament? As our law stands, he commits a criminal offence if he indulges in any form of physical love with his own kind; and this, we must remember, however unnatural it may appear to us, is natural to him.
I would suggest that the best possible solution, for society and for him, is that he has the opportunity to lead a quiet ordered life, finding, if he must, sexual satisfaction with another adult man. Yet at the moment this is exactly what our law denies to him. I know that by the Christian moral code this life could never be approved of, but it seems to me that it is the best compromise that any reasonable man could hope for.
It would be inappropriate for me in your Lordships' House to say what is the business of the law, but certainly most citizens of this country believe that one of the important principles of freedom is that a man should have the right to choose to do something that is morally wrong, provided that it is not anti-social. It is certainly thought by those who study these matters that most men during their adolescence manifest homosexual tendencies, and that even in the normal adult male an element of this lingers on. We are, after all, a physical and psychic process which we ourselves only partly control and direct, and it is not easy for us to have any final judgment either about ourselves or about others. That great scholar and humanitarian, Dr. Jung, has said:
"There is no man so masculine that he possesses no feminine qualities."
Should one not bear this in mind and, taking into account the statistical probability that any of us might have been homosexual, approach this problem in the spirit of, "There, but for the Grace of God, go I."? I believe these laws will be changed and that when my children are grown up they will be amazed that laws of this sort could have existed in the, middle of the twentieth century.
I agree wholeheartedly with the comment of the noble Baroness, Lady Gaitskell, that the heterosexual garden is not so rosy; and it is perhaps worth while reflecting that the irresponsible act of a normal man can have far more devastating results than the equivalent irresponsible homosexual act. Nature has
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taken care of this. We who are fortunate enough to have been born into what is at least an easier and potentially more happy life should not punish the adult homosexual for what he does in private. Most of us have led by no means perfect lives, and we should do better to remember the words of Christ:
"Let he amongst you who has not sinned cast the first stone."
I support this Bill wholeheartedly, and I trust that your Lordships' House will give it a Second Reading.

SOUTH ARABIAN CONSTITUTIONAL COMMISSION
3.45 p.m.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD TAYLOR): My Lords, with your Lordships' permission I should like to repeat a Statement which has been made by my right honourable friend the Secretary of State for the Colonies in another place, on the Constitutional Commission for South Arabia. The Statement is as follows, and I will use his own words:
"In reply to a Question by my honourable friend the Member for Cleveland on May 11, I said that I would make an oral Statement to the House as soon as practicable about the composition of the Constitutional Commission for South Arabia. I am happy to say that we have secured the services as Chairman of Sir Evelyn Hone who, in the course of a distinguished overseas career, has served in South Arabia and was Governor of Northern Rhodesia in the period immediately before independence.
"My consultations as regards membership of the Commission are proceeding. Honourable Members may have seen speculation in the Press about the possibility of our asking the Secretary-General of the United Nations to suggest one or two names. I think it right to inform the House that we should have welcomed such an arrangement and have in fact discussed it with the Secretary-General. He has told us, however, that while appreciating the suggestion, he has regretfully concluded after giving it careful consideration that

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it would not be feasible for him to adopt it. I am naturally sorry that he has not felt able to do so, but I still have it in mind to secure in addition to United Kingdom membership one or two members from outside the United Kingdom. I will inform the House of the full composition of the Commission as soon as it is possible to do so."
LORD CARRINGTON: My Lords, I am grateful to the noble Lord, Lord Taylor, for repeating this Statement, and I think all of us would welcome the fact that Sir Evelyn Hone is to be Chairman of this Commission. I notice the noble Lord says in the Statement that he still has it in mind
"to secure in addition to United Kingdom membership one or two members from outside the United Kingdom."
I should have thought that this is very unusual in a Commission of this kind. Does he intend to confine outside members to members of the Commonwealth? If not, what other countries has he in mind? And is he going to make it very clear that in the final analysis the responsibility is still Her Majesty's Government's?
LORD TAYLOR: My Lords, with regard to the last part of the noble Lord's question, most certainly the final responsibility is that of Her Majesty's Government. The intention is to try to include possibly one or two persons from outside the Commonwealth, in view of the very unusual circumstances obtaining in Southern Arabia. The formulation of a new Arab and Moslem State in the Middle East involves very special problems, and we want to make the membership of the Commission widely representative, first, so that it may command maximum confidence in the area, which is not an easy matter; secondly, to show that we have nothing to hide, and thirdly, to reflect the wide international interest in this area. All members will be appointed by my right honourable friend and decisions of course, be reached by Her Majesty's Government after receiving the report of the Commission.
LORD CARRINGTON: My Lords, I am grateful to the noble Lord. On the face of it, I am bound to say that I have misgivings about what the Government suggest. But I would rather wait and
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see who the Government manage to persuade to sit on this Commission, and then perhaps we may have some more comments to make.

SEXUAL OFFENCES BILL [H.L.]
3.50 p.m.
Debate on Second Reading resumed.
THE EARL OF KILMUIR: My Lords, I should like to make two preliminary remarks. The first is that it falls to me to congratulate the noble Marquess, Lord Queensberry, on the admirable maiden speech which he has just given to the House; and the fact that, as will appear, I do not agree with his point of view does not diminish the sincerity of the compliment which I am sure I am expressing on behalf of the whole House. The second point is that, looking back over the arches of the years, I find that I was one of those who appointed the Wolfenden Committee; and again I must say that I am grateful for the immense work which they gave to this part of their subject, although again I disagree profoundly and sharply with that one of their recommendations which my noble friend Lord Arran has brought before the House in this Bill. I should like my noble friend Lord Arran to believe this: that I understand and respect the compassion which is in his mind with regard to the unfortunate people whom we are discussing, but I say that legislators like ourselves are bound to consider on the other side the duty of Government—by that I do not mean the Government of any particular Party, but the Government that has to run the State.
Lord Arran was good enough to say that he wished a discussion on the general principle, and, so far as I can, I will try to follow that course. I believe, after some fourteen years in Government, spread over the last quarter of a century, that one of the duties of Government is to maintain minimum standards in every field of life where that is right, and that the necessity to maintain minimum standards is the dividing line which permits the infringement of personal liberty which is so dear to most of us. Long experience in, for example, the fields of safety and public health has proved that these minimum standards can be maintained only by the sanction of the criminal

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law. If you take the whole period from Lord Shaftesbury's first Factory Bills to the present time, you will find that that is one of the necessities of Government: that these minimum standards must be maintained by the sanction of the criminal law. The same, in my view, applies in the field of decency.
I am not going to deal with any technical matters or any defects which the noble Earl has thought of since he produced his Bill; I want to deal with this general problem. That is what I start from. But it is even more important to pause and consider when one is proposing to remove the sanction from something which has been a criminal offence for many centuries. I believe that the result would be, and must be, after 432 years, that if people find that the view is changed, then, in the eyes of many of them, this behaviour will have a respectability that it never had before. I also believe that many of those who now keep silent and discreet about their desires will feel free to proselytise, and this is a matter which is well known. It is no help on this point for the noble Earl to say that importuning would still be an offence. That is not the proselytisation I have in mind. I have in mind the proselytisation which goes out from sodomitic societies and buggery clubs, which everybody knows exist.
THE EARL OF ARRAN: My Lords, I must interrupt the noble and learned Earl. I have no such knowledge, and I have been into this matter closely. The noble Earl may know from his legal knowledge, but I have no such knowledge. I think it is grossly exaggerated and largely untrue.
THE EARL OF KILMUIR: My Lords, the noble Earl is entitled to his view and I am entitled to mine. After all, I did spend thirty years at the Bar, when I did criminal work, and I was Home Secretary for three years. Therefore I do not think that my noble friend ought to deny me the right to state my view, because, after all, that is largely behind most of the arguments he has put to us. He can have his view; I have given mine.
LORD JESSEL: My Lords, may I interrupt, because I am interested in this question? Was that evidence about these clubs put before the Wolfenden Com-
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mittee? I cannot remember. If it is as well known as the noble Earl says it is, I am sure it was brought to the attention of the Wolfenden Committee.
THE EARL OF KILMUIR: My Lords, I cannot answer the noble Lord one way or the other, but I can still give my view. And I can add this to it: that when I was Home Secretary I asked for a report on 96 cases of men who were in prison for homosexual offences. The report covered a psychiatric examination. According to the report given to me, only 15 out of the 96 were genuine inverts. The remaining 81 carried out their homosexual practices for other reasons, such as boredom with women, desire for sensation and for money. Neither this Bill nor any other piece of legislation which I can think of
can distinguish between the genuine 15 and the 81 who were simply not standing up to wickedness. Although I agree that blackmail is a horrible crime, and that the stiffest sentences should be given for blackmail, even in 1965 we should not forget that one way of avoiding being blackmailed is not to commit the offence.
I come now to the question of the disciplined Services. I understand from what the noble Lord, Lord Stonham said, and from the interjection from the noble Lord, Lord Shackleton, that Her Majesty's Government support the Bill on the basis that Section 66 of the Army Act would be retained. That is the Section which provides for the punishment of, inter alia,
"…disgraceful conduct of an indecent or unnatural kind…".
LORD STONHAM: My Lords, if the noble and learned Earl will allow me to say so, at no stage have I said that Her Majesty's Government support the Bill. I gave the position in regard to the Army Act only in relation to the position of the Services, and said that it was thought that the position in the Services would be unchanged by this Bill.
THE EARL OF KILMUIR: I should like the noble Lord to explain that to me, because the Bill says:
"Notwithstanding any statutory …provision, a homosexual act in private shall not be an offence…".
Section 66 of the Army Act is a statutory provision dealing with disgraceful conduct of an unnatural kind. What I want

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to know—this is most important, and my noble and gallant friend Lord Montgomery of Alamein was challenged on this point—is this. Is what we are being asked to pass a Bill which will contain, or which the Government will seek to make contain, a provision by which Section 66 remains in force, or are we discussing a Bill under which, as it stands at present, Section 66 does not remain in force? I should like to hear from the noble Earl, Lord Arran, and from the Government, where they stand.
THE EARL OF ARRAN: My Lords, with great respect, the noble and learned Earl is introducing Committee points. At this stage all we are being asked to vote upon—and I must ask your Lordships to remember this—is whether or not we think the principle of homosexual law reform is correct. The other points which can be brought forward—and I hope the noble Earl will bring them forward himself in Committee at a later stage—are obviously matters which concern your Lordships very deeply. But at this stage, as the noble Lord, Lord Stonham, has said we are on Second Reading, and I do not think we are asked to vote on that point but only on the question of a Second Reading.
LORD HOBSON: My Lords, if the noble and learned Earl will allow me to say so, is the noble Earl, Lord Arran, unaware that it is utterly impossible to amend the Bill on the lines he is indicating in regard to Section 66?
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, I think that we ought to allow the noble and learned Earl, Lord Kilmuir, to proceed.
THE EARL OF KILMUIR: I do say—and it has been shown already by my noble and gallant friend Lord Montgomery of Alamein—that this is an absolutely vital matter. If we are being asked to pass a Bill which does not protect the position of the Armed Services, that is entirely different from being asked to pass a Bill which does protect them. If my noble friend Lord Arran were to say, "I accept in principle and I shall look at it later"; if the noble Lord, Lord Stonham, were to say, "The Government would not have anything to do with a Bill which did not protect the position of the Armed Services", then I am sure that a number
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of your Lordships might feel very differently. But unless we begin there, we do not know where we are.
LORD STONHAM: My Lords, if the noble and learned Earl will allow me to intervene, my noble friend Lord Shackleton dealt with this point earlier, apparently not quite to the noble Earl's satisfaction or sufficiently fully. But I would suggest that, with regard to the assurance that he wants, this and other legal points which may arise—and I understand the noble and learned Viscount, Lord Dilhorne, will be speaking later—can be dealt with afterwards by my noble and learned friend the Lord Chancellor.
THE EARL OF KILMUIR: This is not a legal point. I do object—I object, of course, without any ill feeling of any kind, as the noble Lord knows—that, because I happen to have been bred to the law, every point I make should be described as a legal point. This is a point which is of vital importance to the Government—namely, are we or are we not going to provide that in the Armed Services buggery between officers will continue to be an offence? I agree with my noble and gallant friend Lord Montgomery of Alamein that if you legalise buggery you still cannot expect other ranks to have any respect for officers who are known to go to bed together.
SEVERAL NOBLE LORDS: Hear, hear!
LORD HOBSON: Quite right.
THE EARL OF KILMUIR: Of course, they will not have any respect for them, and that. I am sure, is the experience of everyone. But it does not stop there. Even if my noble friend Lord Arran and the Government were prepared to give this undertaking, which they obviously are not, what about other disciplined services, like the police forces and the prison service? They are not covered by the Army Act. Are your Lordships going to pass a Bill that will make it lawful for two senior officers of police to go to bed together? If that is the position, do your Lordships think that they would get any respect from the men under them? Of course they would not. The same applies to the Prison Service.

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There are two entirely different problems involved. One noble Lord interrupted—and I never mind being interrupted—to raise a different point, the fact that Lesbianism is not an offence. That does not affect my point that for a force that is responsible for the protection of law and order, like the police force, to be in a position where this could happen, and for your Lordships to pass a Bill to bring that about, is, in my view, entirely wrong.
I should like to put one wider point to the House. Are your Lordships sure that it is right at this moment to extend what, for want of a better phrase, I call the permissive world, at a time when crime is increasing and personal standards are admittedly low? As I have said, compassion is comprehensible, and must always exist towards the element of misfortune which accompanies crime; toleration of a different point of view with which one disagrees can be good if it does not become facile acquiescence. But toleration of actions of lying and cruelty and indecency can never be right. It then becomes indifference, and indifference to the spread of actions which the vast majority of people think wrong, unnatural and degrading is something which the legislators of a country cannot afford.
I know, my Lords, that there is a point of view to-day which has some popularity and which would say that because it is 432 years since the passage of the Act of Henry VIII on buggery, it is therefore a good thing to change it. I respectfully ask your Lordships to consider the more modest and humbler but more democratic point of view put forward by a great friend of mine. It is worth remembering that the dead are the great majority, and many of the dead were not fools. I ask your Lordships to reject this Bill.
4.12 p.m.
THE LORD BISHOP OF CHICHESTER: My Lords, I hope that I may first add my own tribute to the noble Marquess who made his maiden speech just now. If he has not resisted the natural temptation to wait for a non-controversial occasion, then it is because he has been speaking on a subject on which he has deep convictions, and he has given his
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own opinion to us with great sympathy and great insight and made a notable addition to our debate.
In the previous debate to which reference has already been made there was such a remarkable weight of support from all sides of the House for the Motion of the noble Earl, Lord Arran, that he has every justification for bringing forward a Bill on this subject with the expectation of sympathetic support for it. Many of your Lordships have noted already the degree to which public opinion has in these last few years crystallised in favour of reform. We may be, in some sense, seeking to lead public opinion; we are also alive to its voice. That debate aroused much sympathetic interest throughout the country, and what was chiefly encouraging was that whereas this subject can rarely be handled without arousing deep emotions, on that occasion is was free from anything but clear, plain thinking which we should all wish to be extended also to the consideration of the present Bill.
I want first to say that I hope this Bill will receive a Second Reading. There is no need, after that last long debate, to repeat all the arguments which came from these Benches, or from elsewhere in the House, but on that occasion the two most reverend Primates and two right reverend Prelates spoke in favour of reform, and they spoke for many of us who did not then take part. We must, of course, continue to assert, as one of the most reverend Primates did, that homosexual acts are always in principle wrong. There is no intention on our part, as the noble and gallant Viscount, Lord Montgomery of Alamein, suggested, that we should appear to be condoning such conduct. We should be inclined to say that the moral fibre of the nation may be just as much undermined by heterosexual misconduct as by homosexual misconduct—
NOBLE LORDS: Nonsense!
THE LORD BISHOP OF CHICHESTER:—and that some of the indignation levelled against the one might be levelled against the other. But we must also assert that the law relating to private homosexual conduct between consenting adults does grave injustice to a large number of individuals. It is productive

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of much misery. It produces a squalid underworld of suspicion and fear. It leads to blackmail. It leads often enough to the tragedy of suicide. Moreover, it obstructs the very purposes which the law should make possible—namely, the pastoral care and treatment of the offender and the rescue of many would-be offenders struggling, it may be, against a weakness which they have been born with, whose own resistance to the danger at present cannot receive the reinforcement and the counsel which they so desperately need. Indeed, what we wish to bring to this problem is the possibility of an area of compassion and of spiritual resources, which are almost precluded under the present state of the law. I hope, therefore, that it is enough for me briefly to repeat what has been said in support of the Second Reading of the Bill.
I know that what I have to say will be widely supported both by Bishops and clergy, who know from their own experience the unhappiness and the waste of life which the present state of the law only prolongs. The two Primates would have come here to speak in person, if it had not been for engagements in other parts of the country to which they are both bound, but I am entitled to say that they themselves, had they been here, would both have risen in support of the Second Reading. At the same time—and I think the Primates would share this view, too—without any diminution of that support which we should wish to give, I must add certain reservations.
The Bill as it stands, in its present limited form, would not be wholly acceptable to us. The promptness of the Bill is, of course, an indication both of the fervent convictions of the noble Earl, Lord Arran, and of his own real awareness that the present climate of opinion is demanding some action. Nevertheless, I must regret that his proposal comes to us only in this truncated form. The noble Earl, Lord Dundee, in the last debate expressed the fear which has been shared by many, that any relaxation of the existing law would give the appearance of extending social approval to homosexual conduct. That is the last thing we should desire or support, but it is much more likely to be true if the Bill were passed in its present limited form.
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We certainly have a responsibility, which has been widely voiced, towards that section of society—perhaps a very limited section—whose actions would be covered by this particular clause. We also have a responsibility for the preservation of moral standards in society, and for retaining a strong public opinion on this matter. Above all, we have a great responsibility for the protection of the young, and it is so often out of consideration for them that hesitations grow about any reform of the homosexual laws. The recommendation to which this Bill confines itself leaves the present law mainly as it stands, but I do not think that that is enough. The Wolfenden Committee made it quite clear that they did not think so either. The recommendations in that Report covered not only the release from criminal penalty of consenting adults, but also a number of ways in which the welfare of minors could be safeguarded. To leave this aspect out of the Bill, or to remit it to some later stage of legislation, would seem both wrong and misleading. There would be grave danger that, if once the objective of this clause were achieved, the urge to go forward and complete the process of reform as outlined in that Report would lose its impetus.
Therefore, in addition to this clause, we would ask, in the first place, that the law in England and Wales should be brought into line with that of Scotland in regard to proceedings against persons under the age of 21. It is desperately important that a distinction should be drawn between conduct which is of a vicious and criminal 'tendency and acts which betray a mere passing aberration. This would mean enacting the fourth recommendation of the Wolfenden Report—namely, that no proceedings should be taken against such persons except by the Director of Public Prosecutions or with the consent of the Attorney General.
Secondly, we consider that the seventh recommendation of the Wolfenden Report should also be included: that there should be introduced revised maximum penalties in respect of the gravest offences, so that the penalties for seducing young people may he increased. We must remove all possible grounds for the suspicion that any relaxation for consenting adults implies that either Church or society is taking more lightly the danger to which the young may be exposed, or is proposing

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to relax its vigilance for their protection. For similar reasons, we would press, also, for the implementation of another recommendation, Recommendation (xvi), that when a person under the age of 21 is found guilty of a homosexual offence, the court should be required to obtain a psychiatric report before sentence is passed. It is, in fact, for the inclusion within this Bill of safeguards in respect of those under 21 for which we most strongly press.
I have no doubt that discussion and reflection will reveal other ways, some of which have already been indicated, in which the Bill should be improved. If the private relations of adults cease to be a crime, then there would be certain consequences which would require watching in many different fields of society. We do not want this to open the door to any suggestion of condonation. Perhaps the medical profession would wish to reserve their judgment about any alteration in their definition of "unprofessional conduct". Certainly the Church of England will wish to retain such behaviour as a most serious offence for which a clergyman is liable under Ecclesiastical Law; and there may be other aspects, too. I mention these now since I believe that the Bill should be amended in Committee to take them into account if it is to have the wide acceptance which we all desire it to have. I hope that this comes within the intention of its promoter, for we are convinced that this proposed clause is in itself necessary. I can only reiterate, my Lords, my own conviction, without diminution in any degree of our support in principle, that there is all too much evidence of the difficulties under the present state of the law in helping homosexuals to reform and overcome their difficulties, once they have committed an offence within the reach of the law. It is for this reason alone that it is our earnest hope from these Benches that the House will give a Second Reading to this Bill.
4.25 p.m.
LORD GODDARD: My Lords, I rise to say that I certainly cannot support this Bill—and this Bill is the only Bill we are dealing with. What Bill the noble Earl, Lord Arran, may eventually produce, or what Bill may be produced after this one has been through the Committee stage in the two Houses, I do not know. We are asked to give a Second Reading
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to a Bill which, in three lines, takes out of the category of criminal law a crime which has always been treated in this country as one of the gravest crimes that can be committed, and which has been before Parliament for discussion on several occasions.
I hope it will not be thought unnecessary to remind your Lordships of the history of this matter. Sodomy and buggery has been an offence in English law ever since there has been law, but until the reign of Henry VIII it was dealt with in the ecclesiastical courts. The ecclesiastical courts were not notorious for long sentences, at any rate on those classed as clerks, and the benefit of clergy was given very freely—so freely, indeed, that in Henry VIII's reign Parliament intervened and passed a law against buggery and made it a felony. All felonies were capital, so it was punishable by death. The penalty for felony remained in that state until the year 1829, when, under Sir Robert Peel, the great revision took place of capital felonies, and so forth. Buggery, however, was kept as a capital felony, and it remained so until 1861, when the great consolidation of the criminal law took place.
In that year, in the Offences against the Person Act, it was made an offence punishable by penal servitude for life, but with the exceptional provision that the sentence had to be not less than 10 years. So down to 1861 Parliament was treating buggery as an exceptional offence deserving exceptional penalties. The penalty of penal servitude for life, and certainly for not less than ten years, remained until 1891, when there was again a revision—a very beneficial revision—of the criminal law with regard to sentences. From then, any sentence of imprisonment imposed could be for two years only, after which the sentence had to be of penal servitude. Sentences of penal servitude could be for anything between three years and life, unless, of course, a particular offence carried a maximum of fourteen years or seven years. But no minimum sentence was provided.
Your Lordships are now being asked to give a Second Reading to a Bill which wipes that away and does not distinguish between that offence and the offence of gross indecency, which came into existence almost, one may say, by accident. In 1885, the Criminal Law

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(Amendment) Act was before Parliament. That was the Act which, following on W. T. Stead's great campaign, generally known as the Maiden Tribute to Modern Babylon, was introduced to protect young girls. It is under that Act that so many prosecutions are now brought. No Assize or quarter sessions goes by without there being prosecutions for carnal knowledge of a girl under 16. That was the Bill where, on the Report stage (no one had discussed any homosexual offences before then), Mr. Labouchere managed to get a clause inserted which dealt with the offence, as it is now called, of gross indecency. I quite agree that prosecutions for that offence might deserve a great deal of consideration now. The extraordinary thing is that if you consult Hansard you will find that that clause was accepted without any discussion at all, except as to whether it was competent to be put into the Bill because the Bill dealt simply with women and children. The Speaker ruled that it was, and so that matter went in really without any discussion in Parliament at all.
Believing as I do that the Wolfenden Committee did useful work, I think I have to approach this subject with the view of the Wolfenden Report that homosexuality is not the result of a disease or of any illness or anything of that sort. You have to take those who practise it as being as responsible as any others who come before the courts.
There is one thing the Wolfenden Committee did not deal with and did not even mention in their Report; and it is something, I think, which would be greatly assisted if this Bill goes through. There is no judge who has to go on circuit, as I did for many years, who does not from time to time find that in various parts of the country—in quite different parts of the country—there are what are generally referred to among the people who practise these things as "buggers' clubs" or associations or coteries of people who are given to this particular vice. They are often careful to see that they keep out young boys, because they know that they get very heavy sentences if they are found out; but at these coteries of buggers, the most horrible things go on. As a judge, one has to sit and listen to these stories which make one feel physically sick.
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If this Bill goes through, so that buggery is no longer a criminal offence provided it is done in private and with no boys concerned, then it will be a charter for these buggers' clubs. They will be able to spring up all over the place. I can assure your Lordships that it is a very real risk. I remember once, when I was on circuit in Suffolk, that I had 16 people in the dock at the same time. None of these men would have been guilty of a criminal offence at all if this Bill had gone through. If you had seen them, perhaps your Lordships would have agreed that they ought to have been put out of circulation. I hope that this Bill will not go through; though it may be—and I think it very likely—that some amendment of the law or some changes will be made.
I should now like to say a few words about blackmail. It is always said that these acts facilitate blackmailers. Let us suppose that this law goes through. Have we come down to such a state in England that a threat to expose a man to his friends as a bugger will have no effect? May not the blackmailer threaten to expose a man, not to the police, but to his friends and to decent society—and I am thinking of all ranks of society—so that he will be ostracised from decent society? They will not have buggers. I do not think, therefore, that blackmail need enter into our considerations at all. Blackmail can exist now, with the law as it is; and it is certain to exist with the law as it is to be.
Another point is that family life will run a serious chance of deterioration or break-up. If it is known that there is a bugger in the family and that he cannot be dealt with, one need not wonder very much at what will happen. I hope that this Bill will not be read a second time. It may be that another Bill dealing with some aspects of this matter might commend itself to your Lordships. I am simply dealing with this one Bill which, to my mind, carries out a most undesirable revolution in criminal law.
4.34 p.m.
LORD BOOTHBY: My Lords, I am sure that I am expressing your views when I say how much we welcome and appreciate the intervention of the noble and learned Lord, Lord Goddard. If, when I reach his great age and

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experience, I can deliver a forthright speech, without a note, and one which is absolutely perfect of its kind, I shall be very satisfied. In fact, I feel rather like I did on the occasion when I made my maiden speech in the House of Commons, when I had to follow Mr. Lloyd George, then at the zenith of his powers. It is an unnerving experience for anybody, on a subject like this, to follow the noble and learned Lord, Lord Goddard. My only excuse for doing so is that I was to some extent responsible for getting the Wolfenden Committee set up.
In February, 1954, more than eleven years ago, I made a speech to the Hardwicke Society on this subject which received a good deal of publicity in the Press, and attracted the attention of the Home Secretary who, at that time, was Sir David Maxwell-Fyfe. I concluded this speech by saying:
"I am well aware that this is not a popular cause … Nevertheless, I believe that the magnitude of the problem and the amount of avoidable suffering that is now being caused demand that it should be faced. That is why I am asking for the appointment of a Royal Commission, or some similar authoritative Inquiry to furnish Parliament with the expert knowledge and guidance which are necessary for appropriate legislation and administrative action."
I followed this up with a Memorandum to the Home Office. And this, in turn, was followed by a correspondence with the then Home Secretary (who I am delighted to see in the House), which resulted in the appointment of the Wolfenden Committee. In his final letter to me, Sir David Maxwell-Fyfe (now the noble and learned Earl, Lord Kilmuir) said that he had decided to appoint a Departmental Committee "after anxious reflection"; but that, having reached this decision, he was determined to appoint the strongest Committee he could find. That he certainly did! The Wolfenden Committee was appointed in August.
In the public discussion that has inevitably followed publication of the Wolfenden Report, an element of quite irrational emotion has frequently impinged, no doubt because, as Dr. Edward Glover has said,
"The greatest obstacle to an objective understanding of sex problems lies in the moral prejudice, either conscious or unconscious, of the observer."
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I regret this because I believe that the approach to this problem should be neither emotional nor passionate; but severely practical; and I think that in saying this I shall carry the noble and learned Lord, Lord Goddard, with me. The question we have to ask ourselves is: What ought now to be done in the public interest? At this point, and on this point, I hope your Lordships will forgive me if I trot out an old hobbyhorse. The longer I live, the more convinced I become that Scotland is, in many respects, a much better and a much more sensible country than England. Above all, Scottish law, which is based on Roman law, is immeasurably superior to English law. There is no evidence that homosexuality is less prevalent in Scotland than in England; yet, in the words of the Wolfenden Report:
…the number of men prosecuted in Scotland for homosexual offences committed in private with consenting adult partners is infinitesimal in comparison with the number so prosecuted in England and Wales."
Indeed, in Scotland, it is hardly a problem at all.
Why is this, my Lords? Because they are prosecuted "in the public interest" by the Procurator-Fiscal, and only in the public interest; because all cases in which the alleged offence is more than six months old must be referred to the Crown Office before proceedings can be taken; because the standard of proof required by the law of Scotland is higher than that in England—for example, the uncorroborated evidence of a single policeman is not sufficient; and, finally, because over all stands the majestic figure of the Lord Advocate, whose agents the Procurators-Fiscal are, appointed by him, and who remains, at all times, in firm control of the whole situation. In every case the overriding consideration in Scotland is the public interest. And, to quote the Wolfenden Report,
"Since no obvious public interest is served in the prosecution of stale offences, it is most unlikely that proceedngs in such cases would be instituted in Scotland."
By comparison (I hope that the noble and learned Earl, Lord Kilmuir, and the noble and learned Lord, Lord Goddard, will forgive me when I say it; but I believe it to be true), the English law, as at present administered, can be described only as a chaotic mish-mash. There is no uniformity of practice; there

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is no uniformity in the sentences imposed upon those convicted of homosexual offences. Chief constables—and there are dozens of them—can prosecute or not, according to their own personal whim or how they are feeling when they get up that morning. There is no obligation on them to have regard to the public interest; and the Director of Public Prosecutions has no power to enforce his request for consultation.
The law as it stands, and as the noble and learned Lord, Lord Goddard, pointed out, derives from the ecclesiastical doctrines of the Middle Ages, and therefore from the Israelites, with the inevitable emphasis upon the reproduction of a race struggling for survival against overwhelming odds. Solomon could have a thousand wives, but homosexuality in Israel was punished by death. So, as Lord Goddard has reminded us, it continued in this country: death in the Ecclesiastical Courts until the reign of Henry VIII; death again by a Statute of 1533, which was repealed in 1547 and 1553, but reenacted in 1548 and 1562.
But, my Lords, the law we are considering this afternoon, directly as a result of the noble Earl's Bill, is Section 11 of the Criminal Law Amendment Act, 1886; and that, I would remind my noble and learned friend Lord Kilmuir, was very much less than 400 years ago. Upon this, it seems to me, the final authoritative word has been said by Sir Travers Humphreys; and, for the sake of the record, I propose to quote it in full. It will not take long, because I shall read it very fast, and then hand it in to the Official Reporters. This is what Sir Travers Humphreys said:
"Until that Act came into force, on January 1, 1886,"—
he was referring to the Criminal Law Amendment Act—
"the criminal law was not concerned with alleged indecencies between grown-up men committed in private. Everyone knew that such things took place, but the law only punished acts against public decency and conduct tending to the corruption of youth. The Bill in question, entitled 'A Bill to make further Provision for the Protection of Women and Girls, the Suppression of Brothels and other purposes', was introduced and passed by the House of Lords without any reference to indecency between males. In the Commons, after a Second Reading without comment it was referred to a Committee of the Whole House. In Committee Mr. Labouchère"—
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an eccentric gentleman—
"moved to insert in the Bill the clause which ultimately became Section 11 of the Act, creating the new offence of indecency between male persons in public or private. Such conduct in public was, and always has been, punishable at common law. There was no discussion except that one member asked the Speaker whether it was in order to introduce at that stage a clause dealing with a totally different class of offence to that against which the Bill was directed. The Speaker having ruled that anything could be introduced by leave of the House, the clause was agreed to without further discussion, the only amendment moved being one by Sir Henry James with the object of increasing the maximum punishment from 12 to 24 months, which was also agreed to without discussion.
"It is doubtful whether the House fully appreciated that the words 'in public or private' in the new clause had completely altered the law; but as soon as the Royal Assent had been given and the Act was published, there began a spate of correspondence in the newspapers, both legal and lay, and references to the subject on various public platforms, which were duly reported. A learned Recorder dubbed it 'The Blackmailer's Charter'; and an eminent Q.C. prophesied that juries would refuse to convict where the alleged acts were in private and not visible to any member of the public. On the other hand those interested in the welfare of girls welcomed the Act as a whole so warmly (and indeed it was an excellent Act, apart from Section 11), and it was so clearly impossible to do anything except let the law take its course, that after a few weeks the clamour died down and the public interest became centred upon some more savoury topic."
I think it is important to get those words into the OFFICIAL REPORT, because I do not think they can be challenged; and the main object of the noble Earl's Bill this afternoon is to delete what has become known as the Labouchere Amendment to the Act of 1886.
My Lords, I do not propose to traverse again the ground that has been so well covered in the Wolfenden Report. I am content to say that I agree with paragraphs 13 and 14, and particularly with the Committee's statement:
"It is not, in our view, the function of the law to intervene in the private lives of citizens, or to seek to enforce any particular pattern of behaviour, further than is necessary to carry out the purposes we have outlined."
There is a sharp distinction to be drawn—and I think that in saying this I may carry the noble and learned Lord, Lord Goddard, with me—between conduct which may be held by some to be sinful and conduct which ought to be held by the State to be criminal. Promiscuous fornication, adultery, Lesbianism and

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prostitution, as such, are not criminal offences. Yet many believe that they are greater social evils than homosexuality between consenting adults in private. There are certainly strong arguments which can be adduced in favour of this view. If this is to remain a criminal offence indefinitely, then the others should be made criminal offences, too; and all should be enforced, because, as has been admitted to-day, the present laws regarding homosexuality are not in fact enforced, except sporadically and without uniformity, and therefore with very little justice; and I say to noble Lords who propose to vote against this Bill, "If not, why not?" In my submission—and it is a view I have long held—the law should provide for the appropriate punishment of those who are guilty of the seduction or attempted seduction of youth, of violence in any shape or form, of importuning, and of acts of indecency committed in public. And there the law should stop.
Before I sit down I should like to make one comment upon what the noble and learned Lord, Lord Goddard, said on the subject of blackmail, which I think everybody will admit is the ugliest consequence of the law as it now stands. Mr. Montgomery Hyde has quoted the late Lord Jowitt as having said that 90 per cent. of blackmail cases were homosexual, and that it was obvious that there is a class of persons who are carrying on business as homosexuals and making a living out of blackmail. That I believe to be true, but I am content to rely on the comment of the Wolfenden Committee:
"We know that blackmail takes place in connection with homosexual acts … At the least it is clear that even if this is no more than one among other fields of blackmailing activity, the present law does afford to the blackmailer opportunities which the law might well be expected to diminish."
There is only one protection and only one remedy for this, and that is a change in the law. I agree completely with the noble Lord, Lord Stonham, that ultimately we are faced with a straight choice between acceptance and rejection of the main Wolfenden recommendation. There is no compromise.
My Lords, I have done. I want to say only one thing more before I sit
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down. This Bill, as the noble Earl who introduced it said, is not definitive or final in form. If I thought it was, I could not vote in favour of it. I agree with a great deal of what my noble and learned friend Lord Kilmuir said, and also what the noble and learned Lord, Lord Goddard said. If we pass this Bill we shall be dealing only with the main but vital recommendation of the Wolfenden Committee. If your Lordships pass it, the other recommendations will have to be taken into account by the Government, including the important question of the Services, and also the questions raised by the noble and learned Lord, Lord Goddard.
I regard this Bill as simply a question, put to your Lordships directly, on whether you think that some reform of the law regarding homosexuality is necessary or not; and I believe that, in saying this, I carry the noble Earl, Lord Arran, with me. He is not saying that this Bill is the last word, the only word on the subject, but is merely asking your Lordships to give a vote to say whether or not you think reform is necessary. It is a great responsibility, because the Government have, in fact, disclaimed responsibility, and thrown it upon the shoulders of Parliament. I make no complaint of this, but it does not often happen. Parliament has, of course, the ultimate responsibility and power; but it is seldom that a straight decision of this kind is referred by the Government of the day to Parliament.
Mr. Henry Brooke said on television the other night that, as Home Secretary, he did not like having to administer the present law, but that he thought that public opinion was not yet ready for a change. My Lords, I do not think we can really tell; at any rate, not without a plebiscite, which is alien to our practice in this country. Public opinion may be ahead of us or it may be behind us, or it may disagree with us—we do not know. What we do know in our hearts is that a change of some kind in the law is bound to come. Some noble Lords may not agree, but, in my opinion, it is overdue. If we say, "No", to the principle of such a reform in the law—and that is what we are being asked to vote about to-day: I am sure that the noble Earl will concur—it will simply mean that the miasma of misery, squalor, tainted

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evidence, robbery and blackmail, which darkens the lives of too many people, who in other respects are good and often valuable citizens, will continue for a few more years or months. Therefore, it is my sincere hope that your Lordships will give the leadership and show the courage for which the right reverend Prelate the Lord Bishop of Southwark pled so eloquently in the recent debate on the noble Earl's Motion.
4.51 p.m.
LORD ROWALLAN: My Lords, we have listened this afternoon to a great many excellent debating points, and before I go on to the question I would add my congratulations to those already given to the noble Marquess for his courageous and excellent maiden speech. I know that it is a difficult thing to do and I am sure that we are all agreed that he made a very fine job of it.
We have heard this afternoon that what is wrong when done in public is right when done in private. What is private and what is public is very difficult to say, as I think some of the legal pundits would confirm. We have also heard that what is wrong in the Services, and is to be preserved as a wrong in the Services, is perfectly right in civil life. The question will have to be decided whether what takes place when two servicemen are on leave or between one serviceman on leave and a civilian is wrong or right. That is a nice question for the Adjutant General to answer. We have heard, also, that this Bill has no effect whatsoever on young people and that everybody is desirous that young people should be protected. I find it very difficult to believe that young people will be protected by allowing their elders to do things which they are not allowed to do, things which are not criminal for their elders but wrong for them.
I hope that your Lordships will bear with me for a moment while I quote part of the concluding paragraph of the Memorandum produced by the Standing Conference of National Voluntary Youth Organisations:
"We are bound to uphold the position that our young members must be protected against sin and perversion and must also he fortified to overcome them if they meet them."
After giving details of the different influences which fortify them, the Memorandum says:
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"The legal question should in our view be seen against this background".
This conclusion must surely be acceptable to your Lordships. Paragraph 58 goes on to say, after speaking of the anxiety felt by some witnesses who appeared before them that the proposed changes in the law would indicate a degree of tolerance by the Legislature of homosexual behaviour:
"It may well be true that the present law deters from homosexual acts some who would otherwise commit them and to that extent an increase in homosexual behaviour can be expected."
The real argument in other words, is: never mind if we have an increase in homosexual behaviour; it is all in the good cause of making it easy and respectable for those who have already fallen into those habits to carry on and gather to themselves a number of other young people as well. That is the real argument. But is it really the case that what the right reverend Prelate called the change in public opinion desires that the innocent should always have to suffer for the guilty? I know that at the present time it is fairly widely held that those who are guilty must be protected from the consequences of their guilt, even though it may mean that much greater difficulties will have to be met by the innocent.
These are difficult times for young people. They are living in a world where standards have fallen to a level which has not existed for perhaps many decades, and we can see no end at present to this fall in standards. Many people are trying to fortify those standards. Can we believe that the acceptance of this Bill, which will inevitably lead to an increase in homosexuality, is not going to sway over to the other side some of those who, although they may have the inherent tendency, are by self-discipline and by strength of character standing out against accepting those standards? Are they not going to be led into thinking that the battle is not worth the candle and give way, and then suffer
that loneliness and sense of guilt which we are told are the lot of the homosexual? I beg the House to give this Bill no Second Reading to-day, but to think of the generation that is growing up and help them to live decent and honourable lives.
4.58 p.m.
LORD FRANCIS-WILLIAMS: My Lords, I rise to support the noble Earl's

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Bill. I do not propose to take much of your Lordships' time. The ground has been well covered. It was excellently covered in the earlier debate, in which I expressed my own views. But I should like to ask your Lordships to consider what exactly we are about to do to-day. Either we agree that some reform is necessary and pass this Bill, or else we must in honesty say that we believe that the existing law is right and it should be implemented with much greater force than it is at present. We cannot go on as we are doing, just pretending in a great number of cases that the present law does not exist, whittling it down all the time by administrative practices, while leaving it there as a weapon which can be used by the blackmailer if he gets the opportunity.
LORD BOOTHBY: And inevitably with capriciousness by the State.
LORD FRANCIS-WILLIAMS: I entirely agree—with capriciousness, so that nobody knows where it is going to fall or when.
We were told by the noble Lord, Lord Stonham, that the estimated number of homosexuals, according to the best available estimate, is about half a million. If we are believers in the present law, are we going to implement that law against the whole of that 500,000, the largest criminal class in the community? And if so, are we going to turn our prisons into homosexual ghettoes or homosexual brothels?—because that is what the result will be. We have to face up to the facts of the situation. The fact is that the whole trend of public opinion and official opinion is against implementing the law to the full extent, and, indeed, that to try to implement it would be absolutely unworkable. When you reach such a condition, apart altogether from the question of morality which I believe arises in this instance, the only sensible and practical thing to do is to look at the law, revise it and have a law which is both acceptable and workable. What this House is being asked to do to-day is to make an amendment to the law which will make the law acceptable and practical.
Here I should like to express my shock and horror at the picture of British society which apparently exists in the
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minds of the noble and gallant Viscount, Lord Montgomery of Alamein, the noble Lord, Lord Rowallan, and, to some extent, the noble and learned Earl, Lord Kilmuir. We were told by the noble and gallant Viscount that, if there were a change in the law, university graduates, undergraduates and school children would immediately become aware that all their masters and tutors were busily engaged in homosexual practices and would want to rush and join them. And he even went on to tell us that, if this situation were allowed to exist, men in the ranks in the Army would become aware that their officers, also, were busily spending their time on these practices. We are told by the noble Lord, Lord Rowallan, that it is necessary not to pass this Bill, because, he says, with, so far as I am aware, no evidence whatever to support his statement, standards have fallen in this country to the lowest level for decades.
LORD ROWALLAN: My Lords, I should have thought that the noble Lord, being connected with the Press, would know what the Press have said in recent years about the lowering of standards among the young people of the country. It is admittedly a small proportion, but it is a proportion which does a great deal of damage to our public life.
LORD FRANCIS-WILLIAMS: If the noble Lord knew as much as I do about the Press, he would not so eagerly seize on what they say in their wilder moments.
LORD ST. OSWALD: Which part of the Press? Answer for yourself.
LORD FRANCIS-WILLIAMS: Can it really be suggested that the standards of the youth of this country are falling, falling, falling, in this horrifying fashion? Can it be suggested that if an alteration of the law as is now proposed were to take place we should have an immediate rush on the part of tutors, lecturers, professors and Army officers into a sort of mass buggery? All the evidence suggests that those who are affected by homosexual tendencies are so affected for physical and psychological reasons, of which we do not know the cause and for which we do not know the cure; and that, on the whole, when they have reached the age 21 and beyond they are, poor, unfortunate, creatures,

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set in their habits and cannot change them: and they cannot change them because we do not know whether there is any cure or any way in which this condition can be altered.
We have to legislate in the world as it is; in a world in which the vast majority of people follow ordinary normal sexual lives, and only a comparatively small unfortunate minority is homosexual: a world in which, so far from these terrific pictures of this sudden rush to homosexuality being to any extent true, the total number is unlikely to change at all. We are concerned to make a law that is just and workable. The present law is neither. What it does, I would say to those who are worried about the effect on youth, is to make homosexuals a sort of secret society, which sometimes has a glamorous appeal to the unbalanced young. I believe that we should bring it into the open and be prepared to legislate for it sensibly, and that is why I hope the House will support this Bill.
5.5 p.m.
THE EARL OF IDDESLEIGH: My Lords, I have a real series of surprises. My first surprise is with regard to the procedure which the noble Earl. Lord Arran, has seen fit to adopt in this matter. In the first place, the noble Earl put down a Motion for Papers. If he had wanted to get a verdict of the House on the desirability for some reform of the law on this subject, I cannot conceive why he did not put down a Motion:
"That this House approves the recommendations of the Wolfenden Report."
He could then have had a straightforward vote of the House. I think it would have been wiser, as well as more straightforward, if the noble Earl had adopted that course. Instead of that, the noble Earl put down a Motion on which we could not possibly vote with any sense at all; and now he has introduced this Bill. And what a Bill! This Bill is first of all put down for Tuesday, and then, at the request of the noble Earl, put forward to Monday.
THE EARL OF ARRAN: My Lords, I really must interrupt. That is simply not true. I was asked by the Whips to put it back one day. I had no such wish. It caused great inconvenience, particularly to the Lords Spiritual. Further-
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more, the noble Earl said that it would have been more straightforward to put forward a Motion. I couched my first Motion in the most vague 'terms because I wanted to test the feeling of the House. The feeling of the House, as I thought, having been obtained, it seemed to me appropriate to bring forward a Bill as early as possible. Why I did so was explained by the noble Earl the Leader of the House—because the other place were voting on this subject on Wednesday and I thought it appropriate that we should give a lead. I must put the noble Earl right on those points.
THE EARL OF IDDESLEIGH: I accept, of course, what the noble Earl says. That brings me to my next point: this strange constitutional doctrine that we must always give a lead to another place. This seems quite novel to me, and I doubt whether Members in another place would find it very acceptable. I believe it is the first time that the House of Lords has regulated the course of its business with reference to a Private Member's Bill in another place, of which officially we can know nothing. I have a different view of our duty. I would say it is our duty very carefully to consider all possible aspects of a matter before we vote on it, and still more before we legislate on it.
Five years ago my noble friend Lord Butler of Saffron Walden, then Home Secretary, announced that he was setting up an Inquiry under the auspices of Birkbeck College, in which Mr. Schofield was to be engaged under the direction of Professor Rogers. We heard on May 12 last from the noble Lord, Lord Stonham, that their report was nearly ready for publication and would be published later in the year. That fact makes it very hard to understand the urgency and hurry of the supporters of this cause. Why do they not give us an opportunity of reading the conclusions of Mr. Schofield? Most of us—and I am one—know comparatively little of this subject. It is not, as the noble Earl, Lord Arran, said, that I do not want to know; it is simply that very little authoritative material outside the Wolfenden Report has been published on this matter.
Even in this debate we have had the most astonishing differences of view regarding the causation of homosexuality. The noble Earl considers that it is entirely a matter of pre-natal influences—

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that homosexuals are born, and not made. Others consider that it is a hangover from adolescent homosexuality; others again profess, as I do, that there appear to be a multiplicity of causes. I noted that the noble Earl, Lord Huntingdon, himself a member of the Council of the Homosexual Law Reform Association, professed considerable doubts as to the origin of this unfortunate condition in adults. I do not know, but I shall know when this Report is issued. I suggest that we should be wise to postpone any legislation on this topic until we do know.
LORD STONHAM: My Lords, if I may mention it to the noble Earl, the Research Committee to which he referred is not going into the causation of homosexuality at all. It is an inquiry into the behaviour of homosexuals and, indeed, non-homosexuals. There is not likely to be any result at all which will tell us about how homosexuals become homosexuals.
THE EARL OF IDDESLEIGH: Apparently the noble Lord, Lord Stonham, knows the Report. I do not, and so I must accept what he says. I am sorry that they do not go into the question of the causation of homosexuality, because that seems to be an important and profoundly relevant consideration.
Here we have this Bill, and I must say that I have never before known of a Bill to amend the criminal law with no repeal laws and no definition clauses. Although it is the view of some noble Lords that we are merely passing a Motion that some reform is desirable, it is not thus that I understand the meaning of a Second Reading. I should have thought that a vote for the Second Reading implies that the Bill is a possible one with the reservation that some amendment will be required later on. But in this case it is not a matter of amending the Bill; it is a matter of completely re-writing the Bill. I think that the noble Earl, Lord Arran, should have gone to the trouble of presenting us with a Bill which is capable of proper amendment and does not require, as this obviously does, a complete re-writing.
I have referred to a speech made by my noble friend Lord Butler of Saffron Walden in another place nearly five years ago, on June 29, 1960. In the course
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of that speech my noble friend asked two questions which seemed to me profoundly relevant. The first question was this:
"… can someone help me to say how we should define the words ' in private'?"—[OFFICIAL REPORT, Commons, Vol. 625, col. 1493, June 29, 1960.]
No attempt has been made in the course of this debate to tell us what "in private" means. I am a mere layman in these matters, but I looked up Lord Jowitt's Dictionary of English Law, and I found that there was no entry under "private" at all. All he dealt with was Private Bills and private chapels. There seems to be no clear legal definition of what "privacy" means. For example, is a club a private place? I do not know the answer, and I have not been supplied with any answer. It will certainly have to be raised in connection with the buggery clubs, of which the noble and learned Earl, Lord Kilmuir, and the noble and learned Lord, Lord Goddard, have spoken.
I must say that it surprised me very much that the witness of those two noble Lords, one of whom was Home Secretary and the other Lord Chief Justice, should be doubted, and there is little that I can add to it. I can only recall that when I was a young man I walked through Soho with a knowledgeable friend who pointed out to me the door of a well known buggery club, and if the noble Earl, Lord Arran, were present I would tell him that the evidence of my then friend who made that statement to me cannot be disregarded, since he was a member of the staff of the Evening News. It is obvious that if we pass this Bill we shall have an increase of these clubs, and we shall have to consider the question whether the club in which men dance with male partners and see the kind of cabarets that homosexuals want to see is, or is not, a private place. We shall have to face similar questions about hotel rooms. Are they private? We shall have to ask difficult questions to which the supporters of this Bill have provided no answer at all.
Then the other question which my noble friend Lord Butler of Saffron Walden
asked was:
"What does 'consenting' mean?" [col. 1493.]
I take it that there are two ways in which a man may be persuaded to adopt a homosexual way of life. One of those ways is

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a close and intimate friendship—a friendship on the lines of David and Jonathan in the Old Testament, in which emotion develops to such an extent that in some unguarded moment a physical expression seems natural and inevitable. Those friendships are, of course, dangerous, but they can be beautiful. It may account for a certain amount of homosexuality in this country. But I know one other way in which a man may be introduced into homosexual habits which is very much less beautiful. When I was a young man I knew two consenting adults who shared a flat together in private. These two men were (or should have been, one would have thought) satisfied in their loving relationship to each other. One of them was not a very young man; he must have been nearly forty. I knew that these men were doing their best to corrupt a third and very innocent young man and to induce the third man to take an interest in homosexual practices. The young man escaped; but not all young men are so fortunate.
I want your Lordships to consider how innocent a young man of 21 may be. He conies, perhaps, from a decent working-class home; he goes to a day school in his local town and goes home every night, unless he is occupied with scouts or a well-conducted youth club. He goes to a local university, still coming home every night. What should that young man know of these forms of vice? His sexual experience is probably limited to holding a girl's hand at the cinema and giving her a rather awkward good-night kiss.
Then he gets a job in London. Let us suppose it is a good job. He goes to London where he knows nobody, where he is desperately shy of the smart London girls. He goes to work and he realises at once that his whole future depends on his immediate boss, his branch manager or whatever it is; one word from this immediate superior and the young man is likely to be dismissed, dismissed from his first job for incompetence. From the point of view of his career that young man would be ruined. Very well. But the boss is favourable to him, pats him on the back, kindly teaches him how to do his work, and one evening asks, "Come and take supper with me in my flat. I am a bachelor, you know, but I think I am a pretty good cook." The boy goes to the flat; he is given réchurché food he has
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never had before, and he tastes interesting wines and liqueurs. And in the course of that dinner certain suggestions are made to him, interesting ideas that he has never heard of before, given him with all the authority of an older, more cultured, more experienced man. That, my Lords, is what we are now asked to make easier.
5.25 p.m.
LORD BRAIN: My Lords, I should like to begin by congratulating the noble Marquess, Lord Queensberry, on his maiden
speech. He said some things which I very much hoped would be said, and I do not think they could have been said better. The recommendation of the Wolfenden Committee on which this Bill is based sprang from the view that it is not proper for the law to concern itself with what a man does in private unless it can be shown to be so contrary to the public good that the law ought to intervene in its function as the guardian of that public good.
Much of the debate, twelve days ago and to-day, has quite rightly been concerned with the proviso in that sentence. But the whole proposition, "Do I believe it to be right?" is essentially a negative one, and it is clear that many of your Lordships are in favour of a change in the law for a much more positive reason: that the law as it stands inflicts much suffering which can be justified only if it can be shown to be in the public interest, and that this is not the case; indeed, the way we deal with homosexuality tends to make this social problem more difficult than it otherwise would be.
I approach this question as a doctor. Why should homosexuality concern the doctor? As we have heard, it is not a disease but a disorder of emotional development. Nevertheless, it impinges on medicine at many points. Doctors, and especially psychiatrists, are necessarily concerned with emotional problems, and it is easy to imagine the emotional stresses to which homosexuals are exposed in our present society. But perhaps the most important thing is that homosexuality is not something which is either there or not there. Sexual behaviour is a spectrum. At one end are the normals, the heterosexuals, the large majority of the population; at the other end are the hard-core homosexuals, a

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very small percentage. But in between there are gradations, people who are in some sense both, perhaps married and with children but with homosexual tendencies which may or may not be given overt expression. These people may be of either sex, and they may have married without realising fully their own natures. Such marriages obviously may create difficult problems and the doctor is often called in as an adviser.
There is another danger to which the latent homosexual, if I may call him that, is exposed. He may succeed in controlling his homosexual impulses until something diminishes his normal self-control. This may be an illness, such as a depression or thickening of the blood vessels of the brain; or self-control may weaken as he grows old, or even as a result of taking alcohol, and then the previously latent homosexual tendency may become apparent.
I mention these facts because the public impression of homosexuality, derived almost solely from the reports of prosecutions in the courts, is quite inadequate and very misleading. There are homosexuals in all walks of life, many of them valuable citizens, and there are many who themselves would regard the kind of offences which bring some of their numbers to court as immoral and vicious. Though it may seem strange to normal people, I think one can say that at the other extreme from the courts homosexuals are as capable as heterosexuals of tender feeling and mutual devotion. But it is a paradox of the present law that it makes stable homosexual relationships almost impossible, for men but not for women, while it clearly cannot prevent, and may indirectly encourage, casual relationships and prostitutions.
Is there nothing constructive we can do? It has often been said that the cause of homosexuality is unknown. That is perfectly true. I do not myself think that it is likely to be known for some time, and even if it were discovered it might well be found that prevention involves the difficult step of educating parents. Is it incurable? Most psychiatrists would agree that the hard core of homesexuals will never be changed. Even if treatment were feasible, most of them would not co-operate in it. But I agree with the note by Doctors Curran and
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Whitby in the Wolfenden Report. It is wrong to be too pessimistic about treatment. As I have shown, not by any means do all homosexuals belong to the hard core. And there is evidence, as Doctors Curran and Whitby have shown, that psychiatry, including, as they say, a mixture of physical, psychological, social and environmental measures, may be valuable. But it would be much more valuable in a different social setting. When physical homesexual relations are criminal, it is most difficult for someone who has been involved in them to seek help, even from a doctor. Our present system is so concerned with condemning the results of homosexuality that it increases the difficulty of preventing them.
To add to the paradox, the defenders of the status quo claim that any
relaxation of the law would make matters worse. To be logical, they should bring in a Bill to give the moral benefit of the present law to women. I have listened to the lawyers with the greatest respect. Homosexuals, whether they are
responsible in law or not, are certainly not responsible for their own condition. Justice may be done to them according to law; but I believe those of us who advocate this reform want it because we want a different kind of justice for them as human beings.
5.32 p.m.
BARONESS GAITSKELL: My Lords, I, too, should like to add my tribute to the maiden speech of the noble Marquess, Lord Queensberry, and I hope that when he reaches the great age of Lord Goddard he will still maintain the liberal views which he expressed. We have now discussed
in depth the Wolfenden proposals on homosexuality which are embodied in this Bill. We have been somewhat discreet about the physiological explanation of this deviation, and I was hoping that Lord Brain, who has just spoken, might enlighten us a little. I myself, having failed my second M.B. examination many years ago, but having dissected the human body, think that all the ramifications of the human nerve system throw some light on the origins of this deviation, when the psychological explanations, good as they are, still leave us rather baffled. In fact, when judging this problem we need to muster all our knowledge of human nature, gleaned from our worldly experience, our

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reading of poetry and novels, and psychology and philosophy, and, finally, from our own knowledge of ourselves. Only in this way can we begin to piece together the jigsaw puzzle of the human personality when many large pieces do not fit in with our preconceived ideas.
Here, may I refer to the speech of the noble and gallant Field Marshal, Lord Montgomery of Alamein? I think he performed a great disservice to the Forces when he suggested a collapse of morale if this Bill became law. He knows perfectly well that Section 66 of the Army Act ensures that homosexual behaviour, even with consulting adults, is dealt with by court martial. Lord Shackleton pointed this out, but still the noble and gallant Field Marshal did not withdraw.
VISCOUNT DILHORNE: My Lords, if I may say so, I will endeavour to deal with that when I come to reply, because I share the view of the noble and gallant Field Marshal, that this Bill overrides that provision.
BARONESS GAITSKELL: My Lords, I am not a lawyer and therefore I cannot comment on that. I wish only to point this out, and when we hear the speech of the noble and learned Viscount, I shall then judge on what he says. I rather deplore the views expressed by the noble and gallant Field Marshal about the moral fibre of the young. I think there is too much nonsense talked these days about this lack of moral fibre in the young, and even in the middle aged and the old. Of course, our affluent society has its problems—we know that; but I sometimes wonder whether there is not more crime simply because there are more people. It seems a fairly reasonable explanation.
As for the Armed Forces, and the foundations of morale being only in discipline, I think that this is perhaps too simple a view of morale. The Field Marshal was in brilliant command of millions of men, and he did a wonderful job. I am amazed that he did it with, in a way, so little knowledge of the sex habits of the men under his command. He asked, "How can we maintain discipline if the men know that two officers are committing homosexual practices somewhere or other?" But how can we maintain the morale of the troops when,
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after all, his men might know that two officers were committing all sorts of heterosexual but undesirable practices somewhere or other?
However, to get back to what I wanted to say in my speech, all our discussions to-day, and those on the last occasion when this matter was discussed, converge mainly on the hazard to our young boys from older men if the laws are relaxed. Many people fear this kind of corruption. But the Wolfenden proposals would strengthen the laws against just this kind of corruption. They would increase the insurance against this risk. As for the idea that, with the relaxation of the laws against consenting adult male homosexuals, there would be a sudden and large defection from heterosexual ranks to join homosexual brigades, surely that is ludicrous.
Those of us who are in favour of tempering the harsh attitude of the law against adult homosexuals and its incidental green light to blackmailers. feel as we do because, among other things, we cannot subscribe to the universal conspiracy of illusions about sex. These illusions snare and lure us into believing that everything about sex begins and ends with boy meets girl. The State does not pry into the private behaviour between men and women, between women and women, but only between men and men. Here, the law is based primarily on feelings of intolerance, disgust and indignation—natural feelings, you may say. But surely our laws are not based entirely on such instinctive feelings. Surely we endeavour continuously to scrutinise our laws and subject them to the light of reason and compassion. When this happens, I submit that many of our feelings of disgust and indignation are transmuted into understanding and tolerance. So, finally, I should like to commend this Bill. Let us amend it in Committee wherever it is necessary; but let us try to influence public opinion—this body of men, with its experience, its knowledge and its ability to think clearly. Let us commend this Bill to the Government.
5.40 p.m.
LORD BROCKET: My Lords, once more we have had a very interesting debate. I think that it is an advantage

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to speak fairly late in a debate of this kind when one has heard the opinions of noble Lords and noble Ladies from both sides of the House. I do not want to have an argument with the noble Baroness, Lady Gaitskell, but I should say that the noble and gallant Viscount, Lord Montgomery of Alamein, knew far more of what was going on in the armies which he commanded than Lady Gaitskell might have known in those days. I will take it from him that he really did know about these things and that he also knew the risks which might be run. Speaking of the Army, I was very interested to hear the ex-Lord Chancellor, Viscount Dilhorne, say that if this Bill were to become an Act it would override the Army Act. I am only a non-practising barrister but I, also, thought that that would be correct. I shall look forward to hearing the noble Viscount recount his views on that subject.
We have heard this afternoon a very remarkable speech from Lord Montgomery of Alamein. We have also had a speech from the same side on which I find myself by the noble and learned Earl, Lord Kilmuir. Lord Kilmuir I regard as being an expert on this particular aspect of the law. Not only was he Home Secretary for a number of years, but he graced the Woolsack of this House for a considerable number of years. If I were a Peer coming to the House to-day with no preconceived views one way or the other, I would lay great store by what Lord Kilmuir said on this subject.
We then had the very remarkable speech (a speech, as has already been said, delivered without a note) of the late Lord Chief Justice, Lord Goddard. He, again, is a person who has had great experience on this subject. Both he and the noble Earl, Lord Iddesleigh, spoke about these clubs which are so unhappily named "Buggers' clubs." I must say I shall take it from them that these clubs exist, although, so far as I am concerned, I have not heard so much of them as they have. Then again we had a speech from the noble Lord, Lord Rowallan, late Chief Scout, who has been interested in looking after the morals and interests of Scouts for so many years. I cannot help feeling that the evidence which all
these noble Lords have put forward would convince
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the ordinary Back Bencher, because they founded their evidence on fact.
The noble Lord, Lord Brain (who is not here at the moment), an eminent doctor, has confirmed what I have always heard about homosexuals. He used the term that I use; that is to say, the different colours of the rainbow are applicable as analogy. At one end one gets somebody who is born a homosexual and has homosexual views altogether; at the other end one gets the heterosexual; in between one gets the different colours of those people who may be convinced one way or another. I feel that a good many of those in the middle of the spectrum will be influenced by what I call the deterrent of the present law as it stands. I feel that, if Lord Arran's Bill becomes law, these young boys, when they become 21, may very well say, "Now we are 21, everything is all right. We can do this to our heart's content." I think it is a very serious matter and it would be a very reprehensible thing if that encouragement were given to them.
I noticed that the two Archbishops, during the last debate on Lord Arran's Motion (and also we have had a speech from one right reverend Prelate this afternoon) were in favour of Lord Arran's Bill. I should not like it to be thought that the Church of England as a whole supports these two Archbishops and other Bishops. I happen to be an ordinary member of the Church of England. I am a church warden at my own church, and since I made my few remarks the other day I have had many letters from, and opinions expressed by, members of the Church of England who are not in agreement with their leaders on this subject. I had a letter from a vicar, the Reverend S. G. Newson, in which he referred to blackmail. I was interested the other day, shortly after our previous debate on this subject, to watch an I.T.V. programme on homosexuality. A well-known Member of another place when talking about blackmail got so excited on the subject, saying what a terrible thing it was and that the law on blackmail should be changed, that he actually called it "blackballing" and not blackmail. That may have happened at a club, but I hope that is confined to clubs.
People take this subject very seriously from both sides. I should like to read an extract from the letter written by the

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vicar whom I mentioned, on the question of blackmail. In the second paragraph of his letter he says:
"Then again we are told that if the above became legal, it would reduce blackmail. To the contrary—it would multiply blackmail over and over again and a much worse kind of blackmail. It would not be blackmailing the guilty for money. It would be blackmailing the innocent for sin. In our dictionaries we are told that 'blackmail is extortion through intimidation '. There are many employers of labour that are not Christian men, they have dirty minds, but are kept within certain bounds through fear of the law. Remove that fear and they will try to extort consent through intimidation, namely threatening unemployment if consent is not given … If our national laws with regard to women are not satisfactory, by all rightful means, let us rectify them, but that is no reason why our present laws governing the behaviour of the men should be altered—laws which have made the Englishman honoured and respected throughout the world."
That is the opinion of an ordinary vicar.
I also received a letter from a doctor on this subject. The doctor, Dr. C. G. Learoyd, says:
"The Bishops' picture of the homosexual as a person persecuted by society for something which he cannot help, a poor hunted martyr, is false. Most of the ones I have dealt with are very pleased with themselves, scornful of the normal person, and have not the slightest intention or desire to change. They are nearly all promiscuous; a long partnership between males is rare. Most of them admit that boys would not be safe with them."
There are these matters of opinions one way or another. I feel that this is one of the most serious debates we have had in your Lordships' House for many years. I feel that it is not right to say that homosexuals are born and not made. Some may be, and some are not. It is like theft. Others are tempted to do this, and I feel that if all the deterrents were removed theft would increase. Speaking about theft and crime in general, and thinking of words of an ex-Prime Minister, I say we have never had it so bad. There is now more crime in this country than there was, and certainly a greater percentage of crime. It is partly due to inflation. The fines which used to be considered a deterrent many years ago are now a very small proportion of the week's wages which teenage boys and girls may earn. Frankly, I consider that the deterrents for crime in general should be made greater, not less.
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I do not intend to take up your Lordships' time very much longer, but I feel that the House of Lords is regarded as the highest legal court in the country. To-morrow we shall be discussing the War Damage Bill arising from a decision of the House of Lords. I will not anticipate discussion on that Bill, but will merely say that the House of Lords is the highest court in the country and many people all over the country think of the House of Lords as a very high moral court. I should not like the results of the Division to go out to the country and be interpreted by many people as showing that the House of Lords approves of homosexual conduct—in other words, to put it very vulgarly, that the House of Lords is in favour of buggery.
LORD JESSEL: My Lords, I will be brief. I rise only because I think all of us who supported my noble friend Lord Arran in the debate on May 12 should show to-day that on that occasion we were serious and meant what we said when we advocated a desire for a change in the law; and therefore we should vote for the Second Reading of this Bill to-day. I have heard nothing to-day that has altered my opinion in that respect.
As I see it, quite simply, this Bill takes out of the criminal law offences between consenting males in private. Whether the Army Act is affected, I am not quite sure, and I look forward to the views of the noble and learned Viscount, Lord Dilhorne, on that subject but, in any case, if it is so I do not think it affects the main issue. I think we can look after that matter by amendment, if it is considered necessary. It seems to me that the only possible argument against this change in the law was really put by the noble Lord, Lord Brocket, just now, and it is well summed up in an article in this week's New Statesman. The argument goes like this: that if we stopped punishing private homosexuality we should be telling young boys that it had become lawful and that they could now start. I do not believe this, nor did twelve out of thirteen members of the Wolfenden Committee; in fact, they thought exactly the opposite.
The noble and gallant Viscount, Lord Montgomery of Alamein, seemed to think that people who wanted to be homosexual were inherently wicked. I feel

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sure that he had a good many homosexuals under his command in the war who were just as brave and just as good soldiers as the others.
VISCOUNT MONTGOMERY OF ALAMEIN: My Lords, I did not say that.
LORD JESSEL: If I am wrong, I apologise.
VISCOUNT MONTGOMERY OF ALAMEIN: My Lords, may I intervene? I think the noble Lord said that I had said that people
who were homosexual wanted to be wicked. I never said that.
LORD JESSEL: I said that the noble and gallant Viscount thought they were inherently wicked.
VISCOUNT MONTGOMERY OF ALAMEIN: I did not say that.
LORD JESSEL: My Lords, I am sorry if I misquoted the noble and gallant Viscount. I still think that my second point is valid: that he must have had some homosexuals under his command who were just as brave and just as good soldiers as the heterosexual ones.
VISCOUNT MONTGOMERY OF ALAMEIN: I have been told by the noble Baroness that I did not know what was going on under my command.
LORD JESSEL: I did not say that the noble and gallant Field Marshal did not know.
VISCOUNT MONTGOMERY OF ALAMEIN: I thought that if there was one person who did know, it was I.
LORD JESSEL: The noble and learned Earl, Lord Kilmuir, seemed to me to say that from his long experience of the law he knows better than Wolfenden. He may do, but those of us who have read the Wolfenden Report with some care happen to prefer their conclusions. We have heard in this House from the Church, and through the very interesting and understanding speech of the noble Lord, Lord Brain, we know that the doctors are sympathetic to this Bill. I think that this is a great chance for us to give a lead to public opinion and to show that we are not the stronghold of reaction which we are supposed to be.
5.54 p.m.
THE LORD BISHOP OF SOUTHWARK: My Lords, as I have listened to the debate this afternoon there have seemed to be three arguments against what has been proposed by the noble Earl, Lord Arran. Two of the arguments are rational and demand consideration. The third argument is, I think, irrational.
The first argument goes like this. None of us likes the present law. Indeed, the noble and learned Lord, Lord Goddard, in a speech which commanded the attention of this Bench, suggested that a change is desirable in some respects, but that, even so, we must be careful to do nothing which might suggest that we are licensing viciousness. This is no new argument. It has been used time and time again whenever a change in the law on public affairs has been suggested. We on this Bench have been as ready as any of your Lordships to use this argument. To give but one example, when, in 1810, there was a proposal in this House to abolish the death penalty for stealing property worth less than 5s., seven Bishops helped to bring about the rejection of the Bill, not because they favoured hanging but because they thought that a change in the law would imply that the Government had ceased to have a regard for the sanctity of private property. Thus it was that, within a short time of that decision by the Bishops and other Members of this House, a child of under ten was condemned to death for stealing twopenny-worth of paints.
I suggest that we should not deceive ourselves as did our predecessors. To argue that we are licensing viciousness is an unworthy argument. It casts a reflection on the intelligence of ourselves, as legislators, and of the people of this country. Moreover, if it should be assumed by anybody that we have become indifferent to the well-being of the young or the security of the Forces, we have the opportunity in the Committee stage to make our purposes clear. Indeed, I agree with the noble and gallant Viscount, Lord Montgomery of Alamein, that it would be most undesirable if discipline were so lightly regarded that officers disregarded the customary conventions. But that applies to officers of both sexes and between both sexes.

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The second argument which deserves serious consideration is that by removing
existing prohibitions against the private behaviour of homosexual adults we are weakening social support for morality. But surely, my Lords, in the sphere of personal behaviour morality means freedom to choose between right and wrong in the context of personal responsibility. Male homosexuals, unlike adulterers, fornicators and Lesbians, do not have freedom at this moment. For them the law provides not morality but something less, because it draws no distinction between public and private behaviour or between sexual acts committed between adults or with minors. All are equally criminal. Not only is the existing law immoral in this negative sense; it is immoral in a positive sense, leaving a trail of unhappiness and sometimes tragedy, not only among those homosexuals whom it directly affects, but also among their families, parents and friends.
I wonder whether those who theorise about the rôle of the law in upholding moral standards in this matter have ever had to deal with its results in shattered lives. It is right that your Lordships should ponder the advice of a soldier and of a judge, but I hope—and I say this with humility—you will ponder also the experiences of the priest and the pastor. For more than a quarter of a century, both in the confessional and in my study, I, like my brother Bishops, have listened to the tragedies and heartbreak of weak human nature. I gave your Lordships two illustrations two days ago. I could give the noble and gallant Viscount illustrations from men who, under his leadership, gave of their best to the Forces and died in the service of their country, and yet were faced with this grave problem in their own lives. I could also quote from a case which came to my notice only this morning, of a young man who has spent out over £3,000 to blackmailers over the past nine months; who is having to work seventeen hours a day to keep body and soul together while meeting their demands; who is far too terrified to take the advice of the noble Lord, Lord Stonham, and report his plight to the police. These cases come to the priest time and time again, and we inevitably think of them from the point of view of what we can do to help
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them to integrate their lives usefully into the life of the society.
The third point to which I would draw your Lordships' notice—and it is an argument which seems to me to be quite irrational—is that based on the revulsion which people feel at the behaviour of the homosexual. Many who want the law changed share this revulsion, but surely no one seriously believes that
everything which he personally feels to be unpleasant or disgusting should, for that reason, be a crime. The fundamental point at issue here is not whether we can or cannot stomach the thought of this or that type of sexual behaviour: it is whether or not we believe that true morality, and the best way of cultivating personal responsibility, is to be found through freedom or through compulsion, and whether or not we believe that the present law on this subject does more harm than good.
My Lords, it is the opinion of many of us on this Bench that the law as it stands is one of the most misguided, the most vicious and the most evil in its consequences of any law upon our Statute Book. And when I say "on this Bench", may I make it quite clear, in view of what was said recently by one of the noble Lords, that I am not referring just to a few Bishops in this House. When the Wolfenden Report was disccussed by Church Assembly, that was the opinion of all three Houses in the Church Assembly. It is the considered opinion of Bishops, priests and laity in the Assembly which has been set up for this purpose, so that the Church can express its considered view upon social matters. So when the right reverend Prelate the Lord Bishop of Chichester, and, on the last occasion, the most reverend Primate and I myself to-day, urge this House to support a change in the law, we know that we are doing this with the full support of the Assembly of the Church of England—allowing, of course, for the minority view.
My Lords, as I conclude, may I once again reiterate what I have said earlier? We on this Bench are burdened with the sense of difficulty that comes to us in our pastoral task. If only you could join with us in that! I can see the difficulty from the point of view of the judge, the person who is in a position

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of discipline. I can see the extreme difficulty that comes his way. But try to see it from our point of view. I am not appealing to sentiment: I am appealing to reason. Here are people who are born like this, who become like this. We must try to help them. Time and time again, as one has heard their story, one has been, to put it frankly, revolted. But let us also be honest. In the confessional, time and time and time again I have been equally revolted by the confessions I have heard of heterosexuals. But, even then, whatever my reaction has been, I have said, "I am a pastor, and it is my job to help, so that they may win back their self-respect and play their part usefully in society".
The other thing that I have to say, my Lords, as a pastor (I know that I am being very frank, but here I speak the Bishops' Bench, and I believe your Lordships would not have me say any thing but what I am about to say), is that one of the great dangers of this sort of debate, it seems to me, is that it is so easy for us to sit in judgment upon our brethren. I remember an incident in the Gospel, when the Master said:
"He that is without sin, let him cast the first stone."
If we were to apply that test to-night, there are not many of us who would feel, I think, ready to vote against some Motion which is seeking to help those who have been born with these strange quirks of nature. Even though they may not be ours, thank God!, yet nevertheless, we have those of our own. Let us, then, with sympathy, with compassion and with understanding, do something which will help us to help them in service.
6.5 p.m.
LORD AUCKLAND: My Lords, the House will be very grateful to my noble friend Lord Arran for having brought this Bill forward for its Second Reading. It has enabled discussion to take place and a number of very eminent noble Lords from all sides to play their part—from the clergy, from the law and from the Services. I rise to oppose this Bill, and I shall, very briefly, try to explain why. In the first place, it seems to me to be a totally inadequately drafted Bill. A great deal has been said about how it can be amended in Committee. The only
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way to amend it in Committee, as I see it, is to add a great deal more to the Bill, and I myself do not consider that that is good legislative practice. However, that is purely a matter of opinion.
I should like to congratulate the noble Marquess, Lord Queensberry, on a most moving and eloquent maiden speech, and I join in those who hope he will be heard very much more often. I myself was particularly impressed with the speech of my noble and learned friend Lord Kilmuir, and of the noble Lord, Lord Rowallan. The noble Lord, Lord Rowallan, and the noble and gallant Viscount, Lord Montgomery of Alamein, dwelt on the subject of youth, and I propose to follow this line of argument. Next Saturday I have been asked to take the chair for the twenty-fifth anniversary celebrations of our local Boys' Brigade. My Lords, I could not face these lads in all conscience without at least having registered my protest against this Bill. I am quite well aware that steps can be taken, and no doubt will be taken, to increase the penalties for offences against boys and youths, but I remain to be convinced that a confirmed homosexual, who may well practise his offences against men of 21 and over, will not also attack small boys. There may be medical evidence to disprove this, but short of seeing it and having it proved to me, I fail to be convinced.
There is no doubt that to-day we face two very big problems. The first, as we are constantly reminded, is the increase in crime, as my noble friend Lord Kilmuir mentioned. Secondly, we are reminded of the lack of moral fibre among our youths, although I do not entirely accept that as an argument. But there is no doubt that promiscuity among youth is on the increase; and I agree with the view that has already been expressed: that, if this Bill in its present form were to become law, it would give youth the idea that, because their elders are given consent to take part in these practices, even though they are with consent, they can follow suit and increase their criminal activities.
This may be taken as a cynical point of view; but I have spoken to a number of people in all walks of life about this Bill and I have been impressed by the views which I have received from the

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country at large, that this relaxation in the law is not wanted. There is, too, this question of consent. It has frequently been said that if this Bill becomes law the problem of blackmail will be largely solved. But will it? Suppose an act occurs with the consent of the two partners and physical damage is done. What is to prevent litigation taking place? And are not the courts going to be faced with some insuperable problems here? That is one point.
As I said earlier, we are trying to solve the problem of the ever-increasing numbers of unmarried mothers, of teenage children who get into pregnancy difficulties. Yet we are seeking to make these unnatural practices legal among consenting males. I do not doubt for one moment that the present law needs some form of alteration. I listened to the right reverend Prelate, the Lord Bishop of Southwark, whom I knew in the early 1940s when he was school missioner of my school in the West Country and was the rector of Fishponds in Bristol. I know what sterling work he has done for youth. But I am bound to say that I, for one, cannot agree with the views expressed by the right reverend Prelates, even though they have come up against this problem a good deal more than have I and, I imagine, many noble Lords in this House. There is certainly no room for compromise. That, I agree. I cannot help feeling that it is incumbent on those who would wish these practices to be legalised to find some way of legalising them; but I cannot see that this present Bill is the answer, and I hope it will be rejected.
6.13 p.m.
THE EARL OF HUNTINGDON: My Lords, after two days' debate on this subject, and after a considerable number of speeches, I think one need add very little. Certainly a long speech is not called for. I rise only to express my support for this Bill and to say how impressed I was with the speech of the right reverend Prelate, the Lord Bishop of Southwark, which seemed as sincere and powerful a speech as has been heard in this House for a long time.
I support this Bill. I think it could be amended; there is nothing to stop us adding new clauses to a Bill, if necessary. My own feeling is that the age
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of 21 is a little too late, and that the age of 18 would be far better. The idea that our men of 18, 19 and 20 can be regarded as children and not to know their own minds seems to me extreme, particularly when you get the opposite point of view, that young girls are deemed to be fully knowledgeable at the age of 16. However, that is a minor point, which no doubt might be discussed in Committee stage.
Looking at your Lordships' debates on this subject (I am taking the two debates together: though unfortunately I was unable to be here for the start of to-day's debate), certain things stand out. Homosexuality is to a large part innate; it is not something one chooses to be. That seems fairly certain. I myself believe, having read the Wolfenden Report, and having talked to doctors and to one psychiatrist on the subject, that the idea of corruption is exaggerated in many people's minds. It can exist; but the number of people who turn homosexual through being corrupted, or are induced by a favourable picture, is really very small—no greater, in fact, than the number of young girls corrupted into a way of life that is very undesirable.
LORD SOMERS: My Lords, may I interrupt at this point? The noble Lord is saying that homosexuality is innate and not something one chooses to be. 'I hat argument might be carried to the normal person in whom normal sexual relationship is innate and not something he chooses to be; hut, none the less, he has to exercise some self-control and self-discipline over it.
THE EARL OF HUNTINGDON: My Lords, with great respect to the noble Lord, this is a case where the ordinary person (though I might agree that his heterosexual instincts are strong) has nothing in the law to stop him from exercising them. Where the law stops him is in cases of divorce, where there is a question of harm being done to one partner, or from some practices which are obviously very unfortunate—for example, sodomy. But the law does not stop the ordinary relationship between man and woman which is innate as it does in the case of homosexuality. So I cannot see the noble Lord's argument on this aspect. I may be obtuse—I do not know.

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However, I suggest that the actual corruption is not such a danger as it is thought to be, although it can, and does, occur in both sexes. It seems to me that the overriding issue of importance is that we have this very large population (which has been estimated at anything from half a million to one million) who are living in a state of either frustration or fear. They have this strong homosexual instinct for which no cure has yet been found. We are penalising them and making them miserable for something they probably cannot help. There is also the point that the law, as it stands at present, is a blackmailer's charter, if ever there was one. One need only think, as I mentioned in the other debate, of a foreign agent getting a blackmail hold on someone in an important position who has information that might be valuable to an enemy. And, as I suggested in my speech in the other debate, I believe that this Bill could at one blow take the weapon from the blackmailer, take the weapon from the foreign agent, and enable hundreds of thousands of people, who are now committed either to living against the law, or in terrible, fearful and frustrating circumstances, to live decent reasonable lives. For those reasons, I hope that your Lordships will at least give this Bill a Second Reading.
6.19 p.m.
VISCOUNT DILHORNE: My Lords, I am sorry I did not hear the debate on May 12 on the Motion moved by my noble friend, Lord Arran. I have read everything said in that debate, and now to-day, owing to sitting judicially, I was unfortunately—and it is my misfortune—unable to hear the opening speech of my noble friend and some of the subsequent speakers. But since 4 o'clock I think I have heard almost every word said in this debate, and it certainly has been a very interesting and, in my view, also an extremely important debate. Ordinarily, I should never dream of taking part in a debate when I had not heard the opening speeches, but I hope that those whose speeches I did not hear will forgive me for doing so to-night, and I hope that my noble friend Lord Arran will do so, although my purpose is to seek to persuade your Lordships that this is a
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thoroughly bad Bill to which your Lordships should not give a Second Reading. I should like to make it clear that I am not speaking on behalf of my Party. This is a subject on which there are no Party lines, and if my noble friend presses his Motion to a Division to-night we are all free to vote as we think right. I speak to-night because I feel very strongly that this is a bad Bill which should not receive a Second Reading.
On May 12, my noble friend, in consequence of the advice given to him, decided not to press his Motion, which was a Motion for Papers, to a Division. I can well understand his desire to find out whether the views he then expressed met with the approval of your Lordships' House. He could have done that, as the noble Earl, Lord Iddesleigh, pointed out, by tabling a simple Motion: a Motion, for instance, asking this House to agree that the law relating to homosexuality should be changed, or a Motion, for instance—to take the words of the noble Lord, Lord Boothby—to express the view that there should be some reform of the law; that some reform is necessary. That he has not done. Instead he has taken the first of the many recommendations made by the majority of the Wolfenden Committee and embodied it in the Bill.
The noble Lord, Lord Boothby, on May 12 thought that all that was being talked about then was a repeal of what had been called the Labouchere Amendment—the Amendment moved on the Report stage in another place of a Bill to give further protection to women, and passed, as we have been told, without any discussion as to its substance. The noble Lord, Lord Boothby, said on May 12 that that was all the Wolfenden Committee wanted removed. He was wrong about that then. I had hoped that before to-night he would have detected his error, because he was corrected on that occasion. Wolfenden went beyond that, and this Bill goes beyond that, and it would be quite wrong to suppose that if your Lordships give a Second Reading to this Bill you will just be expressing an opinion that some change should be made in the law. Your Lordships will be doing much more than that. You will be giving approval in principle to two major changes of our law. Let us be under no illusion about that.

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It comes under two heads. We have heard the views expressed by the right reverend Prelate the Bishop of Southwark expressed from the Bishops' Benches, but I think those two particular heads have been somewhat blurred. If this Bill receives a Second Reading to-night it will be taken throughout the country that this House approves in principle of sodomy between adult consenting males. That is what we shall be voting for.
SEVERAL NOBLE LORDS: Nonsense!
VISCOUNT DILHORNE: It is all very well to say "Nonsense", but this Bill applies to that. What we are considering is not what this Bill might become, but what it is. The Bill will be taken as permitting any form of gross indecency between male persons.
May I digress for a moment? We heard from the right reverend Prelate the Bishop of Southwark of the difficult cases which have come to his notice arising from homosexual tendencies. We have heard criticisms made of lawyers and of the attitude it is sometimes said that lawyers take to reform. I would ask the right reverend Prelate to bear in mind that some of us who have practised at the Bar and in the criminal courts have not always appeared for the prosecution. We have often appeared for the defence and we, too, have knowledge of the distressing personal problems that affect homosexuals. I hope your Lordships will believe that it is through no lack of sympathy with them in their difficulties and no lack of desire to see that everything possible that can be done shall be done to help them in their difficulties that I adhere to the view that we should not alter the law as is suggested in this Bill to-night.
In 1861, when that Act was passed, sodomy was described in it as "the abominable crime". I must regret that in the process of consolidation in the Sexual Offences Act those words have been omitted. Now we are asked by this Bill to say that sodomy between consenting male adults in private should not, in this modern age, be a crime at all. Ought such conduct between consenting adult males to be regarded as abominable, even when committed in private? Is it so abominable, and such an affront to decency that it should remain a crime, as it has been for the last four hundred
702
years? As I see it, those are the questions upon which we are asked to express a view to-night—not just the question whether any change should be made in the law.
I am sorry indeed that the most reverend Primate is not able to be with us this evening. I read what he said in our last debate with the interest and with the respect I always pay to what he says. In the course of his speech he said that homosexual acts are always wrong. My Lords, I am sure we can all agree about that. Then he went on to say and I quote his words:
"If the line can reasonably be drawn anywhere, homosexual acts in private between consenting adults fall properly on the same side of the line as fornication."—[OFFICAL REPORT, Vol. 266 (No. 73), c. 82, May 12, 1965.]
My Lords, it may be that when the most reverend Primate said that he had not sodomy in mind, but the words he used were wide enough to include that, and from those words it would appear that the most reverend Primate equates sodomy between consenting adult males in private with fornication.
I hope I have drawn the wrong conclusion from what he said, but I did not find anything said to-day which led me to suppose that the conclusion was wrong. If that is the right conclusion, then I must tell the most reverend Primate that, with the greatest respect, I entirely disagree with him; and if that is his view and if that is the view of the Bishops' Benches to-day, I can only say that it differs from the opinion of the noble Lord, Lord Fisher of Lambeth, which he expressed in debate in this House on the 4th December, 1957. May I just remind your Lordships of the passage in Lord Fisher of Lambeth's speech? He said:
"I know many people have grave hesitation about this recommendation. They think it will lead to an increase in offences. Their information may be different from mine, and it is not at all easy to be dogmhatic; but, like the Church Assembly itself, I feel that if there is a doubt the risk should be taken."
I would ask your Lordships to mark those words. He continued:
"I would add only this one further reflection: that if it proved legally possible—I do not know whether it is—to separate what the noble Lord, Lord Pakenham, called the extreme offence, and to leave that still a crime, I should wish to leave it a crime still. The Report goes so far as to say this. We believe that there is some case for retaining

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sodomy as a separate offence.' I believe that if that could be done, it would relieve the anxieties, fears and indignation of a great number of people: and, more than that. I believe that this crime does stand in a class by itself and is almost different in kind from other homosexual offences."—[OFFICIAL REPORT, Vol. 206, col. 757, December 4, 1957.]
There can be no doubt that the Bill as drawn applies to that offence and that the noble Lord, Lord Boothby, was incorrect in saying that all the Bill was concerned with was Section 11 of the Criminal Law Amendment Act. I must say that I regard sodomy, be it in public or in private—and, of course, it is seldom committed in public—as abominable, and I am sure that there are many in this country who think as Parliament thought in 1861, that this is the right word to apply to such conduct.
I want to be strictly accurate. This Bill does not legalise all forms of sodomy. Sodomy with a woman or animal will remain a criminal offence. Such crimes are committed but not in sight of the public, and their commission does not depend on whether they are done in public or in private. All forms of homosexuality are wrong, as the most reverent Primate has said; but surely some forms of sexual misbehaviour are more wrong than others, and surely some forms are so abominable as to merit condemnation by the State. So I believe that they should be regarded and treated as criminal.
The Wolfenden Report stated that it was part of the function of the law to "preserve public order"—and I would ask your Lordships to mark these words—"and decency". The Committee then went on to express the view that it was not proper for the law to concern itself with what a man does in private unless it can be shown to be so contrary to the public good that the law should intervene in its function as guardian of the public good. For 400 years or so the State has regarded sodomy as so contrary to the public good as to justify its being regarded as a most serious crime. And I believe it is for those who advocate a change now to show that that view is wrong.
But if the test suggested by the Wolfenden Report is right, and if the view is that sodomy between consenting males in private should be lawful, on what
704
ground can one validly distinguish between sodomy between consenting males in private and other forms of sodomy committed in private—with women and bestiality? What about incest? The noble Earl, Lord Arran, said on May 12 (col. 72):
"If we can agree that men over 21 may do what they like together in private so long as no one else is the worst off because of it, then we shall have accepted the spirit of Wolfenden."
If the test is that adults should be free to engage in any form of sexual misbehaviour, so long as it is in private and nobody else is any the worse off, can incest between consenting adults remain a crime? The offence does not depend on pregnancy. The most usual kind of incest is that of father and daughter—and distressing these cases are; but it does happen between brother and sister, and between half-brother and half-sister.
I remember hearing, many years ago, a very sad case of a half-brother and a half-sister who were charged with incest. They already had been previously convicted. No one, looking at them, would have thought that they were related, and they were obviously deeply in love with each other. They were convicted—and they had not harmed anyone else. It is not only homosexuals who suffer these strains and stresses, and this misery. I would suggest that it is not misery created by the law, but misery because of their particular affliction or tendency. I doubt whether the keenest advocate of homosexual licence would say that incest in private should not be a criminal offence. I doubt whether anyone would say that bestiality in private should be lawful. But if the test is privacy, and whether anyone else is harmed, then it would appear to follow logically that such conduct should be permissible. It is worth wondering for a moment why this is not advocated. In my belief, the answer is that incest and sodomy with animals are so abominable, so disgusting and so degrading—and, I would say, such a grievous sin—that it is accepted as right that they should be regarded as criminal. In my view, sodomy with a human being comes in the same category.
The Wolfenden Committee asserted that part of the function of the law was to preserve public order and decency. To

705
preserve decency, is it not right that it should remain a crime to commit sodomy, even when in private and between consenting males? In my view, this Bill should not apply to either sodomy or attempted sodomy. If my noble friend Lord Arran, accepts that, as he well may when he comes to reply; and if he says, "Give this Bill a Second Reading, and I will move an Amendment excluding sodomy and attempted sodomy in Committee," that is one thing, though it would not induce me to vote for the Bill as it stands, with the principle that it embodies to-night. But if that course were taken, what would the scope of the Bill be? It would be to permit acts of gross indency between consenting males in private. That would be less objectionable, but it would still be open, I think, to very considerable objections. I do not think that the observations of the right reverend Prelate the Lord Bishop of Southwark about our law at the present time are well founded. I cannot share his view that the law about sodomy, for instance, is one of the most misguided, most vicious and most evil of our Statutes, if I may use his own words.
If I may come back to what would be left, if sodomy and attempted sodomy are eliminated, the argument for making the change is then perhaps stronger, because of the way that indecency between males became a criminal offence. While it is true that the substance of the Labouchere Amendment was not debated, I find it difficult to suppose that the Parliament of that day did not appreciate the content of that Amendment. Now we are asked to say that gross indecency should be lawful, if it is by consent and in private. The Wolfenden Committee recognised that money gifts or hospitality can be used to induce consent. Do we really want, in these days, to encourage male prostitution by making that legal? Surely we should not do that. And is there not a real risk that gross indecency between males may lead to their committing the full offence? Surely making gross indecency legal at the present time is likely to lead to a less serious view being taken of the offence of sodomy? To repeal the application of the gross indecency law in respect of adults over 21 who consent is a very different thing from introducing this particular feature of the law, if it did not already exist.
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What exactly is meant by "private "? This is a real question. The Bill gives no definition. If there are two in a room engaged in homosexual practices, presumably that is in private. Is it still to be regarded as in private if there are a considerable number of homosexuals engaging in these practices in the same premises or in the same room? The Wolfenden Committee recommend in Paragraph 64 that the indecent act should be criminal
"if committed in a place where members of the public might be likely to see it and be offended by it."
That appears to envisage that it will be an offence only if it is seen by those who are not homosexuals; because if they are, then they are not likely to be offended by it.
THE EARL OF ARRAN: With great respect, if I may interrupt the noble Viscount, paragraph 64 also says:
"It will be for the courts to decide, in cases of doubt, whether or not public decency has been outraged …".
The words "in private" are not intended to provide a legal definition.
VISCOUNT DILHORNE: I agree that that is what the Wolfenden Report says about it. But the noble Lord has put in his Bill the two words "in private", and has given no guidance whatever to the courts. There is nothing about public decency, but just the words "in private". Perhaps, when the noble Earl comes to reply, he will say what he means by "in private".
What I was saying was that if that is the right interpretation of the sentence in the Wolfenden Report, then it would seem that homosexual parties at which only homosexuals are present are to be regarded as private. If that is the same view as my noble friend has of the meaning of the word "private", then the way is open to the kind of clubs to which my noble and learned friend Lord Goddard drew attention. If a house in the town or in the country becomes a resort for those wishing to engage in homosexual practices, and that becomes known, I can see that this is likely to cause very great offence and great scandal. But under this Bill, if it is to be interpreted in the light of Wolfenden, nothing can be done about it. The noble Earl, Lord Huntingdon, thought that the age of

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consent was a little high. I wonder whether it is a little low. Does the risk of corruption cease at 21? Is it not the case that there are a number of homosexuals who seek to recruit others to join their ranks?
As I say, this Bill touches on what are at present two criminal offences—namely, sodomy between males and gross indecency; and it touches too, in my belief, on those in the Armed Forces. It is perfectly true that Section 66 of the Army Act provides for the punishment of disgraceful conduct of an indecent or unnatural kind. But this Bill provides:
"Notwithstanding any statutory or common law provision, a homosexual act in private shall not be an offence provided that the parties consent thereto and have attained the age of 21 years."
So that, as I see it, without the slightest doubt, if someone is prosecuted under Section 66 of the Army Act he will be able to turn to this Bill, if it is enacted, and say: "Notwithstanding this statutory provision in the Army Act, it is not an offence for me to do it."
LORD AIREDALE: My Lords, surely it would be possible in Committee to amend this Bill simply by saying that Section 66 of the Army Act is not repealed by this Bill.
VISCOUNT DILHORNE: If the noble Lord had not interrupted me, I was going on to deal with the possibility of amending it in Committee. I gather that the noble Lord, Lord Boothby, also wants to say something.
LORD BOOTHBY: I merely wanted to say that the noble Earl, Lord Arran, made it clear that he was prepared to accept an Amendment that Section 66 of the Army Act should remain in force.
VISCOUNT DILHORNE: I am glad that the noble Lord, Lord Boothby, has filled a gap in my knowledge. I began my speech by saying how much I regretted that it was impossible for me to hear the noble Earl's speech, and the contributions of some of those who followed him. I was dealing with the point as it is at the present time. Of course an Amendment can be tabled to the Bill. One could table an Amendment to exclude sodomy. One could table
708
many Amendments. However, what we are asked to do in your Lordships' House to-night is not to consider what Amendments might or might not be moved, but to give approval, in principle, to this Bill.
What are the arguments, if I may touch on them quite shortly, for doing this? It is said that the Labouchere Amendment is a "blackmailer's charter." The noble Earl, Lord Arran, said that he regards blackmail as worse than buggery. The Wolfenden Report says, in paragraph 110, that:
"the amount of blackmail which takes place has been considerably exaggerated in the popular mind."
The Committee goes on, in paragraph 111, to express some doubt as to whether blackmail is due primarily to exposure or primarily to the threat of a criminal prosecution. If the course of this debate it was said, I think by my noble friend Lord Goddard, that the threat of exposure is a very potent weapon in the hands of the blackmailer; that is to say, exposure to one's friends or exposure to one's employers. While these practices are condemned by social opinion, the possibility of blackmail still exists. But there is the possibility of blackmail for many other forms of human misconduct. If it were the case that the repeal of the Labouchere Amendment, the alteration of the law as proposed by this Bill, would materially reduce the risks of blackmail, I myself would still say that that is not an adequate reason for such a radical change in the law.
I should like to add this. I believe that those who are being blackmailed should be encouraged to report the matter to the police, and that when it is clear that the story of blackmail is genuine and not just a device to avoid prosecution for sodomy or indecency, the person who is being blackmailed should not be prosecuted. But that is another thing from changing the law as is proposed. It is said that the law does not work, and so only a few homosexuals come before the court. I do not think that is a valid argument. If it were, in these days one might have to consider making theft and burglary lawful, because, after all, not so high a percentage of those offenders come before the court.
I feel that this Bill is not one to which your Lordships should give approval. If

709
we pass it to-night, I think it is inevitable that we shall be regarded as giving approval to these practices; we shall be regarded as condoning them. If there is any change to be made in the law—and I am not opposed to change of the law—I think consideration should not be given to the kind of change proposed in this Bill, but to whether or not in these days it would be right just to have a simple repeal of Section 11 of the Criminal Law (Amendment) Act. But, having said that, this is a very different thing from a limited repeal for the benefit of homosexuals over the age of 21.
Whatever view may be held by the Church Assembly, if we give a Second Reading to this Bill to-night I cannot help but think that there will be many young people who will think that homosexuality is not as bad a sin as they were led to suppose. The most reverend Primate the Archbishop of Canterbury, on May 12, concluded his speech with two sentences which f should like to quote in the inverse order to that in which he put them. His last sentence was:
"The proposed reforms would, I believe, help greatly by enabling a greater balance between the forces of law, morality, remedial science and the cure of souls, by promoting what is good and right."—[OFFICIAL REPORT, Vol. 266 (No. 73) col. 84, May 12, 1965.]
I cannot believe that for the State to appear to condone gross indecency and sodomy between consenting adults is promoting good and right. His penultimate sentence was:
"In the moral state of our country we need all the forces available to combat evils, of which homosexual practices are one."
My Lords, there I entirely agree with the most reverend Primate. It is because I believe that we need all the forces available to combat evils, and the evils of homosexual practices, that I ask your Lordships to reject this Bill.
6.50 p.m.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, during the course of this debate my noble friend Lord Stonham said that, as points of law were being raised, he would ask me to say a word about them at the conclusion of the debate. The recommendation of the Wolfenden Committee was that:
"Homosexual behaviour between consenting adults in private should no longer be a criminal offence."
710
And they said that by "adult" they meant the age of 21 or over. This Bill would provide that:
"… a homosexual act in private shall not be an offence provided that the parties consent thereto and have attained the age of 21 years."
These are all very ordinary English words. If this Bill passes its Second Reading and if any of your Lordships think that any of these words requires further or special definition, no doubt Amendments will be put down on Committee stage.
It seems to me that only one question of law has been raised during the debate—and I am concerned only with questions of law—and that is the question whether Section 66 of the Army Act, and other comparable Service Acts, would be preserved if the Bill were passed in this form. I regard that as a matter of some doubt. Of course, proceedings could be taken under Section 66, although what the Serviceman would have done is that which would not otherwise constitute an offence. But I do not propose to trouble your Lordships with the arguments on the two sides, because the noble Earl, Lord Arran, has told me that he intended that Section 66 should be preserved, and that if there was any doubt about it—as I think there certainly is—he proposed to put down an Amendment at the Committee stage to make it quite clear that Section 66 is preserved. As that is so, I do not think I need trouble your Lordships any further.
6.52 p.m.
THE EARL OF ARRAN: My Lords, I am going to be very brief indeed. We have had a controversial debate—I had expected it to be. I have been impressed by the arguments brought forward for voting against the Bill. I have been impressed but I have not been over-impressed, not unduly impressed. As the noble and learned Lord who sits on the Woolsack has told your Lordships, any measure for strengthening Section 66 of the Army Act which may be called for I personally would certainly espouse. As for the ultimate defence which has been raised by noble and learned Lords, I can only say that if there are others of your Lordships who feel the same, as there may well be, and who wish to regard it as a special

711
case, let them say so at the appropriate time.
If this Bill is wrong let us put it right, and let noble Lords who think it wrong help to put it right. As I said in my opening speech, the issue remains a simple one, and no amount of (if I may use the word) smokescreens can confuse it. What we are going to say, contrary to what the noble and learned Viscount, Lord Dilhorne, said, is simply that this House wants, or does not want,
Resolved in the affirmative. Bill read 2a accordingly, and committed to a Committee of the Whole House.
homosexual law reform. That is what it is all about. There are no ifs or buts. Make no mistake about it. That is the way the vote will be interpreted throughout this country. I devoutly hope that this afternoon we may give a lead.
On Question, Whether the Bill shall be now read 2a?
Their Lordships divided: Contents, 94; Not-Contents, 49.

CONTENTS

Addison, V.

De La Warr, E.

Mitchison, L.

Ailwyn, L.

Drogheda, E.

Monson, L.

Airedale, L.

Effingham, E.

Mottistone, L.

Amherst, E.

Elliot of Harwood, B.

Napier and Ettrick, L.

Amulree, L.

Emmet of Amberley, B.

Norwich, V.

Archibald, L.

Faringdon, L.

Phillips, B.

Arran, E. [Teller.]

Ferrers, E.

Ponsonby of Shulbrede, L.

Attlee, E.

Fleck, L.

Poole, L.

Barrington, V.

Francis-Williams, L.

Queensberry, M.

Bedford, D.

Furness, V.

Radcliffe, V.

Beswick, L.

Gaitskell, B.

Rea, L.

Blackford, L.

Gardiner, L. (L. Chancellor.)

Reay, L.

Boothby, L.

Gifford, L.

Redesdale, L.

Boston, L.

Gladwyn, L.

Ripon, L. Bp.

Bowden, L.

Goschen, V.

Ritchie of Dundee, L.

Brabazon of Tara, L.

Greenway, L.

Robbins, L.

Brain, L.

Haire of Whiteabbey, L.

Royle, L.

Bridgeman, V.

Harvey of Tasburgh, L.

Runciman of Doxford, V.

Brockway, L.

Henderson, L.

Sainsbury, L.

Burden, L.

Henley, L.

St. Davids, V.

Burton of Coventry, B.

Hertford, M.

Segal, L.

Byers, L.

Huntingdon, E.

Shackleton, L.

Chelmsford, V.

Jellicoe, E.

Southwark, L. Bp.

Chichester, L. Bp.

Jessel, L. [Teller.]

Stamp, L.

Chorley, L.

Kennet, L.

Stonham, L.

Chuter Ede, L.

Killearn, L.

Strabolgi, L.

Cohen, L.

Kinross, L.

Strang, L.

Colgrain, L.

Lincoln, L. Bp.

Strathcarron, L.

Colyton, L.

Listowel, E.

Ward of Witley, V.

Craigton, L.

Longford, E. (L. Privy Seal.)

Wilberforce, L.

Cranbrook, E.

Merthyr, L.

Wootton of Abinger, B.

Darwen, L.

NOT-CONTENTS

Albemarle, E.

Grenfell, L.

Morton of Henryton, L.

Aldington, L.

Grimston of Westbury, L.

Netherthorpe, L.

Alport, L.

Hawke, L.

Northchurch, B.

Auckland, L.

Hobson, L.

Peddie, L.

Blyton, L.

Horsbrugh, B.

Rowallan, L.

Brocket, L.

Howard of Glossop, L.

St. Aldwyn, E.

Champion, L.

Hylton, L.

St. Helens, L.

Chelmer, L.

Iddesleigh, E.

St. Oswald, L.

Clwyd, L.

Ingleby, V.

Shannon, E.

Daventry, V.

Kemsley, V.

Shepherd, L.

Denning, L.

Kilmuir, E. [Teller.]

Somers, L.

Dilhorne, V. [Teller.]

Leatherland, L.

Strange of Knokin, B.

Erroll of Hale, L.

MacAndrew, L.

Stuart of Findhorn, V.

Exeter, M.

Milverton, L.

Swansea, L.

Forster of Harraby, L.

Monsell, V.

Wigram, L.

Goddard, L.

Montgomery of Alamein, V.

Wolverton, L.

Granville-West, L.

CRIMINAL PROCEDURE (ATTENDANCE OF WITNESSES) BILL
Brought from the Commons; read 1a, and to be printed.
HIGHWAYS (AMENDMENT) BILL
Brought from the Commons; read 1a, and to be printed.

SHOPS (EARLY CLOSING DAYS) BILL
Brought from the Commons; read 1a, and to be printed.

£'000

Her Majesty's Government's contribution as a percentage of the total

United Nations Regular Budget

2,200

7·58

Special Accounts

Middle East Operation (U.N.E.F.)

550

9·3

Congo Operation (O.N.U.C.)

467

8·7

United Nations Relief and Works Agency

1,929

15·9

World Food Programme

596

not available

Congo Civilian Operation

179

8·6

Cyprus Operation (UN.F.I.C.Y.P.)

1,762

not available

United Nations High Commissioner for Refugees

80

6·1

International Atomic Energy Agency (I.A.E.A.)

Regular Budget

176

7·0

Operational Budget

52

7·0

Expanded Programme of Technical Assistance

1,339

7·2

Special Fund

2,232

7·4

United Nations Children's Fund (U.N.I.C.E.F.)

335

3·8

Specialised Agencies

Food and Agricultural Organisation (F.A.O.)

642

10·09

Food and Agriculture Organisation's Voluntary Schemes

133

not available

World Health Organisation (W.H.O.)

850

6·88

United Nations Educational, Scientific and Cultural Organisation (UNESCO)

491

7·23

International Labour Organisation (I.L.O.)

540

9·22

International Civil Aviation Organisation (I.C.A.O.)

158

9·84

International Telecommunications Union (I.T.U.)

83

5·43

World Meteorological Organisation (W.M.O.)

27

6·05

Inter-governmental Maritime Consultative Organisation (I.M.C.O.)

27

12·43

Universal Postal Union (UP.U.)

11

2·59

International Development Association

9,000

13·3

International Bank for Reconstruction and Development.

Her Majesty' Government provide 12·4 per cent, of the capital

International Finance Corporation

—

14·6

TOTAL

23,859

House adjourned at nine minutes past seven o'clock.

  UNITED KINGDOM'S CONTRIBUTION TO UNITED NATIONS
  UNITED KINGDOM'S CONTRIBUTION TO UNITED NATIONS