Sitting of 12 July 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS

  LIVERPOOL CORPORATION BILL
  [Queen's Consent, on behalf of the Duchy of Lancaster, signified]
  Bill read the Third time and passed.

SCOTTISH UNION AND NATIONAL INSURANCE COMPANY BILL [Lords]
Read the Third time and passed, without Amendment.

GREATER LONDON COUNCIL (GENERAL POWERS) BILL
[Queen's Consent, on behalf of the Crown, signified]
Bill read the Third time and passed.

TEES AND HARTLEPOOLS PORT AUTHORITY BILL [Lords]
To be read a Second time on Thursday,
TEES VALLEY AND CLEVELAND WATER BILL (By Order)
Consideration, as amended, deferred till Thursday.
EXETER CORPORATION BILL [Lords] (By Order)
Second Reading deferred till Thursday.
ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    Married Women (Income Tax)
    Mr. Onslowasked the Chancellor of the Exchequer what estimate he has made of the overall economic effect of introducing separate Income Tax assessment for the earnings of married women, taking into account the incentive which this would provide to more married women to take up full- or part-time employment.
    The Chancellor of the Exchequer (Mr. James Callaghan): The special Income Tax reliefs for a wife's earnings already have the effect that over practically the whole field the Income Tax due on her earnings is the same as that for a single person. I am circulating some examples in the OFFICIAL REPORT which show that in the normal case the tax due from a married couple who are both earning is not only less than it would be if the husband earned all the income himself, but also less than At would be if husband and wife were two single persons.
    Mr. Onslow: Notwithstanding that reply, since the official denials that a July Budget is to be introduced by the Chancellor make it clear that a July Budget is to be introduced by the Chancellor, will the Chancellor make it plain that he would not rule out some further extension in the Budget he is to introduce shortly?
    Dr. Gray: Is my right hon. Friend aware that many tax officers write to men about their wives' Income Tax matters? Will he consider issuing an instruction to all tax officers that they should write to the women concerned about their personal tax matters and not write to their husbands as though they were under permanent tutelage?
    Mr. Callaghan: If married women are separately assessed, that procedure should certainly be followed. However, I do not think that this supplementary question arises out of the Question any more than the last supplementary question did.
    Following are the examples:

    Earnings (per year and per week)

    Tax paid per annum

    Tax paid per annum if they were two single persons

    Husband

    Wife

    Husband

    Wife

    Total

    Tax paid per annum if all the income earned by
    husband

    On husband's income

    On wife's income

    Total

    £

    s.

    d.

    £

    s.

    d.

    £

    s.

    d.

    £

    s.

    d.

    £

    s.

    d.

    £

    s.

    d.

    £

    s.

    d.

    £520 (£10 a week)

    £260(£5 a week)

    12

    17

    9

    —

    12

    17

    9

    70

    0

    0

    45

    6

    8

    —

    45

    6

    8

    £780 (£15 a week)

    £520(£10 a week)

    70

    0

    0

    45

    6

    8

    115

    6

    8

    233

    1

    8

    115

    15

    0

    45

    6

    8

    161

    1

    8

    £1,300 (£25 a week)

    £780 (£15 a week)

    233

    1

    8

    115

    15

    0

    348

    16

    8

    483

    6

    8

    282

    11

    8

    115

    15

    0

    398

    6

    8

    £2,080 (£40 a week)

    £1,040 (£20 a week)

    483

    6

    8

    199

    3

    4

    682

    10

    0

    817

    0

    0

    532

    16

    8

    199

    3

    4

    732

    0

    0

    £3,640 (£70 a week)

    £1,040 (£20 a week)

    983

    16

    8

    230

    2

    1

    1,213

    18

    9

    1,348

    8

    9

    1,033

    6

    8

    199

    3

    4

    1,232

    10

    0

    London Airport (Customs)
    Mr. St. John-Stevasasked the Chancellor of the Exchequer whether he will take steps to improve and speed up cargo handling arrangements by the customs authorities at London Airport to coincide with the opening of the new cargo terminal in December, 1968.
    The Financial Secretary to the Treasury (Mr. Niall MacDermot): The Customs are already co-operating to speed the clearance of goods, without waiting until December, 1968.
    Mr. St. John-Stevas: Is the Financial Secretary aware that The Times newspaper for 8th June reported that the Customs and Excise at London Airport had rejected a perfectly viable scheme put forward by the Institute of Shipping and Forwarding Agents, that this decision will probably result in congestion, and that it could result in the country losing millions of £s worth of invisible exports? Will the hon. and learned Gentleman look into this matter as a matter of urgency?
    Mr. MacDermot: I am aware of the report and I would challenge practically everything contained in it.

    Foreign Investment
    Mr. Cantasked the Chancellor of the Exchequer whether, in view of the public concern about the problem of long-term capital imports and exports, he will initiate an official cost-benefit analysis of foreign investment.
    Mr. Callaghan: Some aspects of this important matter are already under study and further research may become necessary.
    Mr. Cant: Discounting the de Gaullist sentiments contained in Question No. 11, may I ask my right hon. Friend whether he does not find it strange that the Governor of the Bank of England thinks that foreign investment is absolutely vital, whereas Mr. Catherwood of N.E.D.C. thinks that capital investment abroad is the source of all our problems?
    Mr. Callaghan: I should get into deep waters if I were to try to reconcile the conflicting statements of those who make pronouncements outside the House.
    Mr. Speaker: Hon Members should not anticipate other hon. Members' Questions.

    Selective Employment Tax
    Mr. Ridleyasked the Chancellor of the Exchequer if he will exempt all fixed-price contracts for building and civil engineering works which were existing on 3rd May, 1966, from the operation of the Selective Employment Tax.
    Mr. Callaghan: No, Sir. I would refer the hon. Gentleman to what I said in the Second Reading debate on the Selective Employment Payments Bill on 23rd June.
    Mr. Ridley: The Chancellor having conceded the principle of this, does he not think that it is extraordinarily unfair that those who have contracts from the Government or local authorities are to get at least some refund, whereas those who have not but who have contracts with private employers are to get none? Does not the right hon. Gentleman agree that the only equitable way to put this matter right is to legislate that all such contracts will receive a refund?
    Mr. Callaghan: No, I do not think so. The Government have indicated what their practice will be. We have debated it at great length. It is for private contractors to follow suit, if they think the practice is reasonable.
    Sir Frederic Bennett: The Chancellor has now said that the Government have said what the practice of Government Departments will be, but no doubt he will recall that he earlier said only what the principle will be in taking decisions. Will he undertake to give some details, because at present varying decisions are being taken by authorities and by Government Departments? Surely it is time that we had some more general but specific lead.
    Mr. Callaghan: It is a general question. If the hon. Gentleman has any particular points in mind, no doubt he will put them to me.
    Mr. Biffenasked the Chancellor of the Exchequer what is the estimated total payment of the Selective Employment Tax which will be borne by manufacturing industry before the payment of premiums commences.
    Mr. MacDermot: About £140 million.
    Mr. Biffen: Will the hon. and learned Gentleman assure us that a statement will be made from the Treasury before the Recess about the attitude which should be taken by the banks towards any request for credit to meet this kind of figure?
    Mr. MacDermot: That is the subject of a later Question.
    Mr. Nott: Will the hon. and learned Gentleman, even at this late stage, consider not paying a premium to manufacturers, which is an incentive to them to hoard labour, and instead use the proceeds for some kind of rebate to development areas and outlying districts?
    Mr. MacDermot: We shall have an opportunity to debate that proposal on the Selective Employment Payments Bill.
    Mr. Ridleyasked the Chancellor of the Exchequer what will now be the net yield of the Selective Employment Tax in the first year and in a normal year, taking into account all the concessions he has so far made.
    Mr. Callaghan: Of the order of £300 million in 1966–67 and £220 million in a full year.
    Mr. Ridley: Is not the Chancellor ashamed of himself for having brought in a tax which is so ill thought out that he has had to chop £20 million off its annual yield before we ever start to get to the Committee stage of enacting permanent legislation?
    Mr. Callaghan: The point that arises, apart from the castigation of my character, is that with a new tax it is obviously not possible to make a precise estimate. A second point is that if one makes concessions, the yield is bound to be less.

    Balance of Payments
    Mr. Biffenasked the Chancellor of the Exchequer what is his current estimate of the date when he expects the United Kingdom balance of payments to move out of deficit.
    Mr. Stratton Millsasked the Chancellor of the Exchequer if he will make a statement on when he estimates the United Kingdom balance of payments is likely to move into surplus.
    Mr. Callaghan: Temporary factors will result in a period of fluctuation during the next few months, but the aim is to move into surplus during next year.
    Mr. Biffen: In arriving at that answer, did the right hon. Gentleman consider and reject what many of us regard as good advice—that the economy requires further deflation of consumer demand?
    Mr. Callaghan: I always accept good advice.
    Mr. Mills: As the right hon. Gentleman was wrong in his three previous estimates, will he now estimate the likely deficit for 1966? As all the signs show that the country is approaching an economic blizzard, does he intend to act or refrain from action—as he has done in the last eighteen months?
    Mr. Callaghan: It was not possible to foresee at the last Budget the effect of the seamen's strike, which has, in fact, had a serious effect on the economy. That, combined with the unfavourable movement of commodity prices, including the astronomical rise in the price of copper, was not completely foreseen. This has had the effect of putting the balance back.
    Mr. Iain Macleod: Will the Chancellor recognise that what he has said departs very much from all his previous forecasts even taking into account fully the seamen's strike? Can he define a little more closely what he means by the term "moving into surplus next year"? Does he mean at the beginning of the year or at the end?
    Mr. Callaghan: I think that we would move out of the deficit during the course of next year.
    Mr. Manuel: Is my right hon. Friend aware that, despite the loaded questions and innuendoes from the Opposition, we on this side will give him full support in any action he may take to move out of the balance of payments deficit at the earliest possible moment?
    Mr. Callaghan: I am obliged to my hon. Friend. I think that that is the view of the country as a whole.
    Sir A. V. Harvey: Is the Chancellor aware that the country will also give full support if the Government give the lead?

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    Is he aware that his statement yesterday that all will be well when the S.E.T. comes into operation impressed neither foreigners nor the country? Will he do something immediate?

    Her Majesty's Stationery Office
    Mr. Richard Wainwrightasked the Chancellor of the Exchequer, in view of the fact that outside London there is no branch of Her Majesty's Stationery Office available to the public in the eastern half of England, whether he will conduct market research into the feasibility of opening such a branch in at least one of the regional centres, namely, Leeds, Newcastle-upon-Tyne, and Nottingham.
    Mr. MacDermot: The likely demand for Government publications in these centres can already be closely estimated. It falls considerably short of what would be required to support the opening of a new Government Bookshop.
    Mr. Wainwright: Is the hon. and learned Gentleman aware that the low demand is likely to be due to the extraordinarily high price of Stationery Office publications? Will he consider reducing these prices if greater sales could be promoted through regional shops?
    Mr. MacDermot: I do not think that that is the reason. We already get a fairly accurate assessment of the demand for these publications.

    Decimal Currency System
    Mr. J. H. Osbornasked the Chancellor of the Exchequer what representations he has had since 17th May, 1966, from trade, commercial and industrial associations, and organisations connected with consumer protection about the decision to bring in a £ cent system of decimal currency; and if he will publish a White Paper outlining the various systems of decimal currency which he has considered, the merits and demerits of each and the reason for the decision to adopt the £ cent system.
    Mr. Callaghan: I have received seventeen representations. A White Paper will be published in due course which will, among other things, set out the reasons why the Government decided to retain a major unit. The merits and demerits
    1194
    of other decimal systems are considered in the Halsbury Report.
    Mr. Osborn: Would not the right hon. Gentleman agree that by 1971 the nation will have made an irrevocable decision based on the decision of 1st March? Is it not reasonable that those affected, including the National Chamber of Trade and other organisations among the seventeen, should make their arguments? Would the right hon. Gentleman not consider these representations?
    Mr. Callaghan: I have already said on previous occasions that this is, of course, an irrevocable step. My information is that industry broadly welcomes the fact that a decision has been taken and that we are to move into decimalisation. The Government have adopted the majority view of the Halsbury Committee which investigated this at very great length for a very long time.
    Mr. Cant: Is it not true that the overwhelming body of information from industry and commerce is in support of the 10s. unit? As my right hon. Friend has said previously that he is legislating for one thousand years, can his decision he pragmatic and not prestigious?
    Mr. Callaghan: As I have explained previously, the Halsbury Committee set out a number of good reasons why the £ unit should be retained.

    Income Tax (Fraudulent Claims)
    Mr. J. H. Osbornasked the Chancellor of the Exchequer how many prosecutions he has made against private and public companies and other corporate bodies for fraudulent claims against Income Tax in connection with investment, initial and annual allowances for buildings and plant and machinery; what were the sums involved; how many prosecutions were successful; and what fines were imposed in total for each of the last five years.
    Mr. MacDermot: None, Sir.
    Mr. Osborn: Am I not right in saying that the present system of initial allowances and annual allowances has worked effectively? Is the right hon. Gentleman satisfied that the new system we have been debating on the Industrial Development Bill will be wholly effective?
    Mr. MacDermot: Yes, Sir—if the hon. Gentleman is referring to the effect of penalties, because there will be similar penalties in respect of both.

    Imports
    Sir C. Osborneasked the Chancellor of the Exchequer what quotas or other physical controls he proposes to put on imports into the United Kingdom when the present surcharge of 10 per cent. is taken off; what other safeguards he proposes to prevent excessive imports seriously affecting the balance of payments; and if he will make a statement.
    Mr. Hamlingasked the Chancellor of the Exchequer what steps he proposes to take to reduce the excessive imports of manufactured consumption and capital goods when the 10 per cent. surcharge is abolished.
    Mr. Callaghan: Her Majesty's Government do not intend to replace the temporary import charge by other physical controls. My Budget measures, affecting imports as well as other items, were designed to safeguard the balance of payments.
    Sir C. Osborne: If the taking back of the surcharge will make no material difference to the balance of payments problem, why was it put on originally?
    Mr. Callaghan: It has had a substantial effect, but that effect is wearing off and getting less every year that passes.
    Mr. Barnett: Will my right hon. Friend not close his mind completely to the question of import quotas? Does not he agree that the other alternatives could be even more difficult?
    Mr. Callaghan: I am not sure what other alternatives my hon. Friend is referring to. It is not, in my view, necessary to replace the temporary import surcharge by physical controls now.
    Mr. Clark Hutchison: Will the right hon. Gentleman consider using the tariff and quota system to the utmost necessary?
    Mr. Callaghan: I would not rule out the use of any instruments if they were demanded. One would hold oneself free to use any instrument.
    Mr. Dickens: Is my right hon. Friend aware that many on this side of the House consider that selective import controls are much preferable to measures resulting in unemployment? Will he not exclude this possibility from his mind in the next few months?
    Mr. Callaghan: The Government's policy has been clearly based on the preservation of full employment and using necessary instruments in order to achieve it.

    British Companies (Take-over Bids)
    Sir C. Osborneasked the Chancellor of the Exchequer, in view of the increasing number of take-over bids by United States concerns of British companies, if he will give an assurance that he will refuse Treasury sanction in future, except in most exceptional cases, with a view to preventing the British economy from becoming a subsidiary of United States capital, primarily conditioned according to United States needs; and if he will make a statement.
    Mr. Callaghan: Our general policy is to welcome inward investment in this country by United States and other foreign countries. Cases involving the takeover of existing companies which by their size or their nature constitute a vital part of British industry are considered on their merits.
    Sir C. Osborne: Does the right hon. Gentleman recall the occasion, ten years ago, when both he and the present Prime Minister protested vehemently against the take-over of Trinidad Oil and the use of capital as revenue, especially as a defence against possible deflation? Is not the situation similar today? Will he prevent the use of British capital today for Revenue purposes?
    Mr. Callaghan: We have to look at all these cases individually from the point of view of the effect on our economy. In some cases it would not be advantageous and in others it would. We must take decisions according to the value we see in each case.
    Mr. Woodburn: Is my right hon. Friend aware that this attack on the United States is ludicrous in view of the fact that over 100 years ago two of our biggest employers with two of the most

    1197
    successful companies here came from the United States?
    Mr. Callaghan: I agree that the mutual interchange of knowledge through foreign investment can be valuable to all countries, and this country has a substantial stake in the United States in this direction.

    Industrial Civil Servants (Report)
    Mr. St. John-Stevasasked the Chancellor of the Exchequer what steps have been taken to implement the Treasury statement of Tuesday 21st June on the Report of the National Board for Prices and Incomes on Industrial Civil Servants.
    Mr. MacDermot: The Report was discussed with representatives of the trade Unions on 4th July. There will naturally have to be further discussions on this very complicated subject.
    Mr. St. John-Stevas: As the Report concluded that a 30 per cent. improvement in efficiency and productivity could be brought about quite easily, should not the Government be taking urgent steps to implement it now? Would they not be better employed on that rather than on sponsoring a Bill, such as the Early Warning Bill, which is an economic irrelevancy and also a major threat to the future of our free society?
    Mr. MacDermot: That was a rather involved supplementary question. I do not remember the words "quite easily" in the Report. Certainly these are aspects of the Report which we must discuss with the trade unions. The rest of the hon. Gentleman's question seemed to be anticipating the debate which we shall be having shortly.

    Bank Advances (Selective Employment Tax)
    Mr. Hordernasked the Chancellor of the Exchequer if he will now announce the form of the special assistance to be provided to the clearing banks to allow them to finance companies to pay the Selective Employment Tax.
    Mr. Cantasked the Chancellor of the Exchequer whether, in view of the deterioration in the balance of payments in the first quarter of 1966, he will indi-
    1198
    cate to the clearing banks that he will not make special arrangements to offset the liquidity squeeze arising from the operation of the Selective Employment Tax and other tax factors.
    Mr. Callaghan: There is no room yet for any relaxation of monetary restraints, and I have therefore agreed with the Governor of the Bank of England that the present ceiling on bank advances of 105 per cent. of the level in March, 1965. should remain from now until the end of March, 1967, and until further notice thereafter. I shall continue to keep the position under review, but it follows that there will be no general arrangements to offset the intended effect of the tax.
    Mr. Hordern: Does not the Chancellor realise that this involves a great shock to industry and to many organisations throughout the country who had been led to believe by the Chancellor's Budget speech that some assistance would be forthcoming? Does he not now appreciate that this appears to be a reversal of what was intended?
    Mr. Callaghan: The hon. Gentleman ought to read the speech before making those deductions from it. What I said then, and what I have said subsequently, was that I would review the position in order to see whether any relaxation could or should be made.
    Mr. Cant: I welcome my right hon. Friend's statement. Does he not think it reasonable, however, that he should give the clearing banks as much notice as possible so that they can adjust their portfolios accordingly?
    Mr. Callaghan: Yes, Sir. That is why I have answered this Question now. The review has been going on and hon. Members have asked me to make a statement at the earliest possible moment. I have now done so.
    Mr. Ronald Bell: In view of what he has said, does the Chancellor still think that the Selective Employment Tax will supply a boost to manufacturing industry?
    Mr. Callaghan: Over the long run, as it is a permanent tax and will have beneficial effects, there can be no doubt that it will be advantageous.
    Mr. fain Macleod: Can the Chancellor tell us whether in his discussions he has proposed any exemptions to the indication of which has has just informed the House? In other words and in particular, are firms which have a large export business and which are adversely affected by S.E.T. to have special arrangements made for them?
    Mr. Callaghan: I doubt whether there would be such firms, because, as the right hon. Gentleman will know, the banks have already given and are now giving top priority to exporting firms which are in need of credit.
    Mr. Barnett: Despite the contradictions of hon. Members opposite who on the one hand want more deflation and on the other want less, will my right hon. Friend resist pressures for further massive deflation? Has he any information as to the present effect of the deflationary policies over the past 18 months, as it seems that there is some indication that they are now beginning to take effect?
    Mr. Callaghan: I am much obliged to my hon. Friend for his helpfulness, but I do not think that an answer to that question would arise out of the original Answer.

    School Uniforms (Tax)
    Dr. Winstanleyasked the Chancellor of the Exchequer if he will amend the Purchase Tax regulations so that all school uniforms are exempted and not merely those below a certain size.
    Mr. MacDermot: No, Sir. This would be impracticable.
    Dr. Winstanley: Is the Financial Secretary satisfied with a system which discriminates between schoolgirls purely on the basis of bust measurement? Does he think it right, for example, that a miniskirt for an adult should be exempt from Purchase Tax whereas a gym slip for a well developed schoolgirl should not?
    Mr. MacDermot: With changes in fashion, limitations merely by length of clothing become a somewhat inadequate test of what is suitable clothing for young children.
    Mr. R. C. Mitchell: Does not my hon. and learned Friend think it ridiculous that whether or not Purchase Tax is paid on
    1200
    a girl's school uniform depends on whether she is a late developer or an early developer?
    Mr. MacDermot: I take the point. It has proved difficult ever since the test was first introduced in 1940 to draw a satisfactory dividing line. What we do is to keep in close consultation with the trade and try to apply generous limits when dealing with articles which clearly are school uniforms.
    Several Hon. Members—
    Mr. Speaker: Order. We had better move on.

    Purchase Tax (Small Firms)
    Dr. Winstanleyasked the Chancellor of the Exchequer if he will revise the Purchase Tax collection arrangements in order to assist small firms which have difficulty in carrying the burden imposed by the present quarterly collection one month in arrears.
    Mr. MacDermot: No, Sir. The present arrangements which give an average period of credit of 2½ months for payment of tax represent a fair balance between the trade and the Exchequer.
    Dr. Winstanley: Does not the Financial Secretary think that he owes something to the small traders who are acting as unpaid tax collectors and who under the present system are in great difficulties and put to considerable expense in doing so?
    Mr. MacDermot: Difficulties resulting from the extension of credit by traders to their customers are not limited to small traders, but I remind the hon. Gentleman that the tax is imposed on the trader.

    International Monetary Fund (Drawings)
    Captain Elliotasked the Chancellor of the Exchequer what is the total amount owed by the British Government to the International Monetary Fund; when repayment starts; at what rate it is made; and how the money to repay the debt is to be raised.
    Mr. Callaghan: £901 million since reduced by other countries drawings to £868 million; December, 1967 in respect

    1201
    of the first drawing; no rate of repayment has been fixed; but will be made out of surpluses earned or reserves.
    Captain Elliot: The Government are now in process of selling up the nation's capital assets in the United States. Are the proceeds to be used to repay this debt?
    Mr. Callaghan: That does not arise out of this Question in any way whatsoever.
    Mr. Iain Macleod: Is the Chancellor still as confident as he was a month or so ago that we may be able—and this, of course, was welcome—to make repayments at or even before the first date?
    Mr. Callaghan: I would certainly hope that we could begin to do so. Indeed, we have already made a start, because other nations are already drawing down sums that are owing.

    Dog Licences
    Mr. Fisherasked the Chancellor of the Exchequer whether he will introduce legislation to increase the price of dog licences; and whether he will take action to make it illegal for anyone to buy a dog without first taking out a licence.
    Mr. MacDermot: The Local Government Bills provide for varying the dog licence fee by an Order made by the Minister of Agriculture or the Secretary of State for Scotland. It is already illegal to keep a dog aged six months or over without having a valid licence.
    Mr. Fisher: I know that, but would the hon. and learned Gentleman bear in mind that nowadays many people tend to buy dogs perhaps without quite realising what they are taking on and that this subsequently can become rather hard on the dog? Would he agree that if they had to buy a higher priced licence before buying a dog, dog owners might be encouraged to have a greater sense of responsibility towards their pets?
    Mr. MacDermot: I do not think that a solution lies in that suggestion, because breeders and the owners of pet shops usually sell puppies well below the six months' age limit and it would be somewhat an innovation to require the sellers
    1202
    of dogs to be responsible for enforcing Revenue requirements.

    Taxation
    Mr. Boyd-Carpenterasked the Chancellor of the Exchequer what is the total burden of taxation, central and local per head of the population in the present financial year; and if he will give comparable figures for 1964 and 1951.
    Mr. Callaghan: About £229 for the financial year 1966–67 compared with £180 for the calendar year 1964 and £96 for 1951.
    Mr. Boyd-Carpenter: Does not this increasing burden on the citizen account in some measure for the lack of zip and expansion in the economy?
    Mr. Callaghan: It should also be contrasted with the fact that average weekly earnings of men in the Government's first period of 18 months have gone up by more than £2 a week—probably more by now—and it must also be set against the fact that the whole House has agreed to substantial additional expenditure on things such as roads, education, health and benefits and assistance, and, indeed, has pressed the Government to do more.

    Non-Industrial Civil Servants
    Mr. Boyd-Carpenterasked the Chancellor of the Exchequer what was the total of non-industrial civil servants at the latest convenient date; how these figures compare with those of two years ago; and whether he expects them to rise or fall by this time next year.
    Mr. MacDermot: Excluding the Post Office, 430,274 at 1st April, 1966. On a comparable basis there were 413,723 at 1st April, 1964. A further rise is expected.
    Mr. Boyd-Carpenter: Does the hon. and learned Gentleman recall his party's promise, contained in its election manifesto, to streamline the Government? Is not the streamlining buckling a little?
    Mr. MacDermot: No, Sir. We are making full use of modern techniques, but the growth of the Civil Service is a natural result of the need to implement

    1203
    the Government's new policies, apart from the growth which, results from existing policies.
    Mr. Onslow: Can the hon. and learned Gentleman say by how much the Civil Service is still under establishment?
    Mr. MacDermot: No, Sir, not without notice.

    B.A.O.R. (Support Costs)
    Mr. Eldon Griffithsasked the Chancellor of the Exchequer if he will make a statement on his recent talks with the West German Finance Minister on the subject of off-set support for British troops in Germany.
    Mr. Bruce-Gardyneasked the Chancellor of the Exchequer whether, as a result of the conversations with the German Chancellor on 24th and 28th May, he now proposes to seek a new agreement for offsetting the total foreign exchange costs of British troops in Germany during the current financial year.
    Mr. Callaghan: I have nothing to add to my reply to a similar Question by my hon. Friend for Derbyshire, South-East (Mr. Park), on 5th July and to my speech on the Second Reading of the Finance Bill on 25th May.
    Mr. Griffiths: While we all wish the Chancellor well in these forthcoming visits to Germany, does he really believe that against the background of the German balance of payments deficit this year of something like £500 million he is going to be able to cover the whole cost of B.A.O.R.? Is he not kidding himself in suggesting this?
    Mr. Callaghan: I am grateful for the hon. Gentleman's initial remarks, and I hope that he will not weaken my position when the negotiations start. It is still my intention to claim that the cost of the British forces in Germany should be offset by the German authorities.
    Mr. Bruce-Gardyne: Will the Chancellor mind answering my Question No. 24? Is it his intention to obtain a full offset for the current financial year as he inferred in his Budget statement?
    Mr. Callaghan: I am afraid that however often the hon. Gentleman asks that
    1204
    question, and he has asked it three times now, I would still prefer not to answer it while I am in the middle of negotiations.
    Mr. Shinwell: Will my right hon. Friend understand that we will not take it amiss if he is a bit tough with the German Chancellor on this issue? Is he aware that the taxpayers here are meeting the costs which the Germans ought to undertake? If the only alternative is to withdraw many of our forces, we shall have to do so.
    Mr. Callaghan: I hope that my right hon. Friend's supplementary question has been noted in all the appropriate quarters.
    Mr. Michael Foot: Will the Chancellor explain to the House what he will do if he does not get a complete offset, and would he recognise that there is a widespread and a growing feeling that it is absolutely mad for this country to bankrupt itself partly in allegiance to a pledge given by the Conservative Party and which Sir Winston Churchill said the day after that he would break?
    Mr. Callaghan: I have read the exchanges that took place at that time and I thought that they were extremely interesting. On the whole, it is rather more difficult to get out of engagements that have been entered into, even by one's predecessors, than it is to embark upon new ones. I welcome the encouragement of my hon. Friend.

    Tax Avoidance
    Mr. Dickensasked the Chancellor of the Exchequer if he will state the estimated loss to the public revenue resulting from tax avoidance in 1965–66.
    Mr. MacDermot: I am unable to give an estimate.
    Mr. Dickens: Is my right hon. Friend aware that this reply is most disappointing? Is he further aware that tax avoidance is a major industry and that many firms in the City of London, notably firms of solicitors, by devising ingenious schemes of avoidance make a fat living? Is he aware that nothing would encourage the young managerial classes of this country more than a wholesale Government attack upon tax avoidance?
    Mr. MacDermot: I can assure my hon. Friend that we are well aware of the

    1205
    importance of countering tax avoidance, and we have taken a number of steps in order to do so. It would not help to try to keep the sort of account that is envisaged by this Question, even if it were practical to do so.

    Gold Coins
    Mr. Higginsasked the Chancellor of the Exchequer how many people who still hold more than four gold coins minted after 1837 and who have not yet either applied to retain them or sold them to an authorised dealer have been prosecuted under S.I., 1966, No. 438.
    Mr. MacDermot: None, Sir.
    Mr. Higgins: Can the Financial Secretary confirm that people in the position described in the Question are liable to prosecution?
    Mr. MacDermot: If they retain them without making an application for an authorisation, yes. We think it is right to give people a reasonable time to comply with the Order. About £100,000 worth have already been sold.
    Mr. Higginsasked the Chancellor of the Exchequer how many applications to retain non-existent gold coins have been granted by the Bank of England under S.I., 1966, No. 438.
    Mr. MacDermot: I know of one case. The applicant was a well-known numismatist.
    Mr. Higgins: Does this not suggest that the Government are not qualified to judge this matter? Should not some other arrangement be made.
    Mr. MacDermot: No. They have the advice of experts, including the numismatist in question.

    Bank Credit Cards
    Mr. Rowlandasked the Chancellor of the Exchequer what estimate he has made of the effect on the costs of goods and services of the use of bank credit cards; and if he will make a statement.
    Mr. MacDermot: No estimate is possible.
    Mr. Rowland: May I tell my hon. Friend that I am slightly disappointed by that Answer, and may I ask him to
    1206
    look at this matter again? Would he not agree that these bank cards create demand inflation and cost inflation because someone must pay for this credit to the holder of the card? Would he not also agree that there is a growing and quite unnecessary snobbishness in the use of these cards?
    Mr. MacDermot: With regard to the question of increasing the costs, this does not necessarily follow. There may be some offsets as a result of increased turnover. There could also be savings as a result of a reduction in other forms of credit and perhaps in consequence a reduction in the handling of cash. I do not feel qualified to comment on the other point.
    Mr. Sheldon: Is my hon. Friend aware that it is of little use urging credit restraint upon banks in lending money to industrial organisations when at the same time they are lending it for the purposes of consumer inflation?
    Mr. MacDermot: This scheme is well contained within the existing Government credit restraint policies and that is fully understood by the banks concerned. This lending will have to be kept within the limits of the reduced total credit available for the personal sector after priority has been given to exports and other important categories.
    Sir C. Osborne: Is not the greatest problem facing us now the excessive demand in the home market, and will not this cause that demand to be greater? Therefore, ought there not to be some check upon this inflationary movement?
    Mr. MacDermot: The steps that are already taken to reduce the payment include the restriction of credit. This scheme is contained well within those restrictions, and I do not think it is right, within this restriction, to stop people adopting modern techniques if they promote greater efficiency.

    Co-operative Shares (Taxation)
    Mr. Roebuckasked the Chancellor of the Exchequer if he will introduce legislation to give the first £15 of interest on co-operative shares the same income tax concessions as are allowable on deposits in Post Office and Trustee Savings Banks.
    Mr. Callaghan: No, Sir.
    Mr. Roebuck: Is my right hon. Friend aware that this is a form of saving which is most convenient to the housewife, whose dividend on her purchases in cooperative shops can be transferred to share capital by a book-keeping operation? Will he look at this matter again, in the interests of encouraging small savers?
    Mr. Callaghan: I follow the point, which has been put to me a number of times, but the principle upon which this concession is based is that it is in respect of small savers who place their money with the Post Office Savings Bank and so lend it direct to the Government.
    Mr. Rankin: In view of the fact that on 10th June, 1964, my right hon. Friend the Chancellor and 21 Ministers in the present Government voted for this reform, can he say what circumstances have now arisen to make them change their views?
    Mr. Callaghan: My hon. Friend has a most inconvenient memory. I must go away and look up the Division lists.
    Sir G. Nabarro: Is it not a fact that the objective of this Question could be better achieved by cancelling the Selective Employment Tax for all co-operatives?
    Mr. Callaghan: No, Sir. I do not think that the two matters are related in any way.

    Off-Shore Radio-Stations (Customs and Excise)
    Mr. Brooksasked the Chancellor of the Exchequer what arrangements exist to effect examination by Her Majesty's Customs and Excise of persons entering this country from those vessels moored off the British coast which are engaged upon radio transmissions to this country.
    Mr. MacDermot: They are subject to the usual Customs controls and no duty-free allowances are given.
    Mr. Brooks: Is my right hon. Friend entirely satisfied that the radio pirates are not also smugglers? Can he assure the House that there is no selective entry tax upon visitors to this country from overseas?
    Mr. MacDermot: The Customs are satisfied that they are exercising adequate
    1208
    control over these ships. There have been one or two unauthorised landings, but these have been adequately dealt with.

    Inspectors and Tax Officers
    Mr. Costainasked the Chancellor of the Exchequer how many resignations have been received by the Board of Inland Revenue from inspectors of taxes and tax officers, higher grade, since January 1965; if he is satisfied that the present rate of recruitment is adequate to replace them; and if he will make a statement.
    Mr. MacDermot: Thirty-two and 260. Recruits at both levels exceed resignations. Recruitment of inspectors has improved this year and, outside the London area, recruitment of tax officers (higher grade) is satisfactory.
    Mr. Costain: Is the Financial Secretary aware that there are delays in tax offices and how does he reconcile that with the statement he has just made?
    Mr. MacDermot: If the hon. Gentleman will give me the cases to which he is referring, I will look into them.

    Flats, Wokingham (Rating Assessment)
    Mr. van Straubenzeeasked the Chancellor of the Exchequer when he anticipates the current shortage of Inland Revenue staff will enable the case to be presented in respect of the rating assessment for flats in Wokingham Borough which was originally lodged on 25th March, 1964.
    Mr. MacDermot: The valuation officer hopes to meet council officials soon with a view to reaching agreement on values. The delay was not primarily due to staff shortage.
    Mr. van Straubenzee: Does the hon. and learned Gentleman realise that his information is in direct conflict with my own personal information which has been very carefully checked? Is this not a reflection of the immense burden placed on Inland Revenue staff by present legislation?
    Mr. MacDermot: The hon. Gentleman's view is directly contrary to my information, which is that the valuation officer has been awaiting a decision of

    1209
    the local valuation court—which is now to hand—on the general basis of the valuation of local authority flats in the area.

    Churchill Crowns
    Mr. Henigasked the Chancellor of the Exchequer how many Churchill crowns have been issued; and if he will make a statement about future production.
    Mr. MacDermot: About l8½ million. More than a quarter were exported. This far exceeds any previous issue and I would like to thank the banks and the Post Office for their help in distributing them. Production has now ceased, but stocks are still available. Those who still wish to obtain crowns should apply to a bank or Crown post office without delay.

    Export Rebates
    Mr. Danceasked the Chancellor of the Exchequer if he will amend subsection 6(a,i) of Section 7 of the Finance (No. 2) Act, 1964, so that companies in this country which export goods to companies abroad can qualify for the export rebate even where those overseas companies are incorporated in the United Kingdom.
    Mr. MacDermot: No, Sir. I am not convinced that this would benefit export trade as a whole.
    Mr. Dance: Is the hon. and learned Gentleman aware that in my constituency there is a car component manufacturing company which exports a large proportion of its products to car manufacturers and gets this rebate from all countries except one because the company from that country has set up a registered office here in this country? Is not this entirely wrong, and should not it get this rebate because it is doing a lot to further exports?
    Mr. MacDermot: I cannot discuss particular instances on the Floor of the House. I do not accept that the distinction is wrong. This matter was debated at the time of the relevant Finance Bill. What is needed above all is certainty in this matter, and that is provided by the place of incorporation. Residence does not provide it.

    Rent Payments (Receipts)
    Mr. Doigasked the Chancellor of the Exchequer if he will seek to amend the law to make it compulsory for receipts for the payment of rent to be stamped even when they are on rent books which are the property of the landlord.
    Mr. MacDermot: No, Sir.
    Mr. Doig: Is my hon. and learned Friend aware that rent books are the only receipts which most people have and that this Answer is making Stamp Duty a voluntary duty which they can please themselves whether they pay or not?
    Mr. MacDermot: I would remind my hon. Friend that there is no duty to give a receipt unless it is asked for. The entry made in a rent book belonging to the landlord does not constitute in law the giving of a receipt. Any tenant is at liberty to demand a receipt in addition which must be stamped.

    Government Securities (Steel Nationalisation)
    Mr. Stratton Millsasked the Chancellor of the Exchequer if he will direct the Bank of England, after consultation with them, to take steps to prevent a deterioration in the market in Government securities resulting from the proposal to acquire the steel industry by means of the issue of about £580 million Government stock.
    Mr. Callaghan: When the time arrives I will, of course, consider what action might be necessary to accommodate the issue of compensation stock.
    Mr. Mills: Has the right hon. Gentleman noted the very rapid deterioration in the gilt-edged market over the last few days, which is having the effect of pushing up interest rates to all sections of the community? Is he not far too complacent about this trend, and will he take some action on it?
    Mr. Callaghan: This Question relates to a future event, namely, the position which will arise when the steel industry is nationalised.

    War Loans
    Mr. Bessellasked the Chancellor of the Exchequer if he will now repay war loans at par to all persons over the age of eighty-five years.
    Mr. MacDermot: No, Sir.
    Mr. Bessell: Is the right hon. Gentleman aware that that is precisely the Answer which I anticipated? Considerable hardship is caused to many very old people and the amount involved would not be very great. Will he look at this matter again more seriously?
    Mr. MacDermot: I am not surprised at the hon. Gentleman's lack of surprise, because the proposal which he makes would be quite unfair to people who had decided the sell because of the repeated assurances given in the past that no action of this kind could be taken.

    Credit Cards
    Mr. Garrettasked the Chancellor of the Exchequer if he will introduce legislation to terminate the use of the credit card system.
    Mr. MacDermot: No, Sir.
    Mr. Garrett: Is my hon. and learned Friend aware that his reply will be received with great disappointment by Members on both sides of the House who look upon this system as a form of economic sabotage?
    Mr. MacDermot: I do not think that I can add to the replies which I gave to previous questions on this subject.

    Overseas Investments (Voluntary Programme)
    Mr. Turtonasked the Chancellor of the Exchequer whether he will make a statement on the effect of his guidance to investors against investment in the more developed countries of the sterling area.
    Mr. Callaghan: The Voluntary Programme has an important part to play in our task of putting our balance of payments right. This is recognised both by the countries affected and by those firms and institutions whose co-operation in the Programme has been sought. Al-
    1212
    though a few replies are still awaited, company chairmen have in general offered their co-operation in the Programme.
    Mr. Turton: As the Chancellor today admitted that the interchange of knowledge through investment is valuable to all concerned, and as a likely effect of this proposal is to damage our exports, particularly to Australia, will the right hon. Gentleman take the opportunity of the presence of the Prime Minister of Australia to revise this suicidal policy?
    Mr. Callaghan: I have had the advantage of discussions with the Prime Minister of Australia and I have been able to investigate the effect which this is having upon investment in Australia. I am satisfied that no damage is being done to either country.

  SEAMEN'S STRIKE (OUTSIDE INFLUENCES)
  Mr. William Hamiltonasked the Prime Minister if he will now consider the publication of a White Paper setting out in detail all the evidence in his possession of the use of intimidation and other methods by outside influences to prolong the seamen's strike.
  The Prime Minister (Mr. Harold Wilson): I have nothing to add to the speeches I made in the House on 28th June.
  Mr. Hamilton: May I infer from that Answer that the Prime Minister has nothing to add to what he said on that occasion? If so, the House and the country will be extremely disappointed, since what he said then was common knowledge to almost every member of the community who takes an interest in these matters.
  The Prime Minister: No, Sir; it went considerably beyond what was common knowledge. I have nothing useful to add to the speeches which I made in the House then.
  Mr. Hugh Fraser: Surely the right hon. Gentleman discussed this matter with my colleagues on the Opposition Front Bench. Surely it was agreed that there should be a further review and a further statement. Otherwise, the House will be permanently menaced by some of the

  1213
  so-called revelations of the right hon. Gentleman.
  The Prime Minister: I had a discussion with the Leader of the Opposition some days before I made this statement, but it is the case that in winding up the debate in the evening I said that I would certain.y consider, when the strike was over, the suggestion made by the Leader of the. Opposition about a possible further inquiry. I have not yet had time to do that, but I might well suggest to the right hon. Gentleman that we meet to discuss it further.
  Mr. Heath: I am willing to meet the Prime Minister to discuss the matter, but it is 2½ weeks since the strike came to an ends Is the right hon. Gentleman saying that, with all his abilities and speed of mind and the advice of his colleagues, he has not been able to reach a decision after 2½ weeks?
  The Prime Minister: It is not actually 2½ weeks. The strike came to an end on 1st July. Therefore, it is 11 days. But I still agree that in normal circumstances one should have been able to have dealt with the matter more quickly. If the right hon. Gentleman is willing, as he says he is, it will be necessary to discuss this matter with him in all its aspects.
  Mr. Heath: I assure the Prime Minister that I am willing to discuss it at any time. The quicker he reaches a decision, the better, because obviously with the passage of time the possibility of an inquiry getting the exact information from those concerned becomes weaker.
  The Prime Minister: I will certainly bear that in mind.
  Mr. Michael Foot: Will the Prime Minister also bear in mind that there are many of us in the House who, as we said at the time, are strongly opposed to any such inquiry as the Leader of the Opposition suggested? [HON. MEMBERS: "Why?"] Because we believe that innocent people would suffer, just as they always have suffered when such inquiries have been conducted. Many of us are absolutely opposed to any kind of McCarthy inquiry in this country.
  The Prime Minister: If there is to be an inquiry, the form of it is very important. That is one of the things which I would want to discuss. When I made
  1214
  this speech there were those on both sides of the House, including the Leader of the Opposition, who expressed great doubt about whether this would prolong the strike. In fact, it did not.

  LAND, HOUSING AND CONSTRUCTION INDUSTRIES (MINISTERIAL RESPONSIBILITY)
  Mr. Ripponasked the Prime Minister what steps he is taking to co-ordinate the responsibilities of the Ministries of Housing and Local Government, Land and Natural Resources and Public Building and Works in regard to land use, housing and the construction industries.
  The Prime Minister: I would refer the right hon. and learned Member to the Answer I gave on 17th May to Questions by the hon. Member for Hereford (Mr. Gibson-Watt) and my hon. Friend the Member for Acton (Mr. Floud).
  Mr. Rippon: Is the Prime Minister aware that building programmes are falling and costs are rising at a record level? Does he agree that in the next 12 months the cost of a three-bed-roomed house is likely to rise by £150? Would he say what is happening about the clear pledge which the Labour Party gave in its manifesto in 1964 to introduce new machinery to increase the output of the construction industries?
  The Prime Minister: The right hon. and learned Gentleman will, I think, be aware that there are abundant signs that the housing situation is improving—[HON. MEMBERS: "Oh."]—that the housing situation is now picking up. I should not like to make any estimates about the cost of a three-bed-roomed house, but I recall that when the surcharge was imposed we were told that it would add £70 to the cost of a house. Perhaps that could be subtracted from any estimate that the right hon. Gentleman makes.
  Mr. Costain: Is the Prime Minister aware that the so-called increase in the housing programme is due to houses starting and the reason why housing is starting is fear of the Land Commission Bill?
  The Prime Minister: I think that there are signs that the position with regard

  1215
  to both starts and completions will pick up. Concerning the big point made by hon. Members opposite—which I understand—about finance for private enterprise housing which has been lagging, the hon. Gentleman will be glad to know that advances by building societies in June at £70 million were the highest ever recorded.
  Mr. Freeson: Will my right hon. Friend bear in mind that major progress is being made in the public sector of housing and that the main reason in many people's minds for the failure in the private enterprise sector is the greatly inflated prices year after year in the sale of these houses?
  The Prime Minister: My right hon. Friend has, of course, had discussions with the private builders about building in the private sector. He is willing to give them any help he can, not only to start more houses, but to finish more of those already started. Certainly price is the big factor.
  Mr. Ripponasked the Prime Minister whether he will give the Secretary of State for Economic Affairs direct responsibility for co-ordinating the housing programme.
  The Prime Minister: No, Sir.
  Mr. Rippon: Is the Prime Minister aware that the Minister of Housing was reported in The Times of 2nd March as saying that this year well over 400,000 houses would be built? Does the Prime Minister agree that we need to build at least 420,000 houses this year if we are to fulfil the National Plan? Will he agree that something needs to be done to coordinate the activities of his right hon. Friend the Minister of Housing?
  The Prime Minister: I do not think that any steps are needed in the matter of co-ordination, not even the lively suggestion made by the right hon. and learned Gentleman in his question. As to the housing programme, we are committed to a programme of 500,000 houses a year by 1969–70. This will mean a progressive increase year by year until that figure is reached.
  Mr. Channonasked the Prime Minister if he will appoint an additional Minister of State in the Department of Housing and Local Government to deal
  1216
  with the problem of building dwelling-houses.
  The Prime Minister: No, Sir.
  Mr. Channon: In view of the Prime Minister's last Answer and the fact that he has a target of 500,000 houses a year by 1969–70, is he not at least extremely worried that housing completions for the first five months of this year were nearly 4,000 down on last year? With that rate of progress, how does he hope to reach his target?
  The Prime Minister: Certainly, in the public sector a pick-up is being recorded. As to the private sector, there now seems to be no reason why much more urgency should not be shown in completing a lot of houses already started.
  Mr. Rippon: Why will not the Prime Minister follow the precedent of the Conservative Government and publish a White Paper explaining exactly how he expects to get these additional houses in the progressive way which he has suggested?
  The Prime Minister: If we were to follow the precedent of the right hon. and learned Gentleman's party, when they first increased the housing programme to 300,000 houses a year they stopped all other building, including schools, hospitals and factories. It was in 1952 —[Interruption.] They can look up the facts if they wish. That was their position. The right hon. and learned Gentleman will at least be interested to know that one project to which he gave a lot of his time, and to good effect—namely, the industrialised housing programme—is now going great guns.
  Mr. Heath: Is the Prime Minister aware that in a Press hand-out today the Minister of Housing and Local Government has expressed a strong wish to arrest the decline in the number of houses being built and the loss of confidence among house builders? This, therefore, is a confession of failure by the Minister of Housing and Local Government. Will the Prime Minister get rid of him? How does he propose now to meet his target of 420,000 houses this year?
  The Prime Minister: That particular target seems to be a target of right hon. Gentlemen opposite. As I have already

  1217
  said, the situation is now improving. Not only have I given the figures of the record lendings, but the latest figures available, to the end of May, show that the amount committed but not yet lent is also al. a record level. So there is really no alibi or excuse any more about the lack of finance for finishing these houses. Since the situation is now picking up, I recommend the right hon. Gentleman to make the most of it while he can.
  Mr. Channon: In view of the most unsatisfactory nature of the Answer, I give notice that I will raise this matter on the Adjournment at the earliest opportunity.

  MERCHANT SHIPPING ACT, 1894
  Mr. Ian Lloydasked the Prime Minister what Government Departments have been involved in the meetings held with the National Union of Seamen, Officers' Association and shipowners to consider the revision of the Merchant Shipping Act, 1894; and when these meetings commenced.
  The Prime Minister: The meetings, which began in December 1963, were conducted first by officials of the Ministry of Transport and later, when that Department took over responsibility for shipping, by officials of the Board of Trade.
  Mr. Lloyd: Will the Prime Minister now concede, in view of the dates which he has given, that the whole and main responsibility for the delay in the revision of the Merchant Shipping Act has been that of the Government—not the shipowners—and in particular his Government?
  The Prime Minister: This is an extremely complicated matter, as the previous Government and we have both found. There are 200 Sections involved in the Act. The previous Government had charge of these difficult and complex negotiations for ten months. Obviously, they could not have finished them in that time. While we were having discussions, and making progress also, the talks were broken off when the dispute began between the two sides in November of last year. That was why the delay occurred. Now, however, as the hon.
  1218
  Member will know, the Pearson court of inquiry is specially charged with bringing this matter to a successful conclusion.
  Mr. Shinwell: Is it not true that considerable progress has already been made as a result of the discussions between the shipowners and the National Union of Seamen and other seafaring organisations and that considerable credit is due to my hon. Friend the Minister of State, Board of Trade, who has taken a prominent part in these discussions?
  The Prime Minister: Yes, Sir. I think that considerable progress was being made until the talks were suspended last November. I believe now that the right course is for the court of inquiry to get on with this task. It has, however, been very complex, as right hon. Gentlemen opposite will know. In addition to the complications of the Act, they had to consult, and we have had to consult, no fewer than 15 Departments of State which are materially affected.

  AUSTRALIAN PRIME MINISTER (VISIT)
  Mr. Eldon Griffithsasked the Prime Minister if he will make a statement on his talks with the Australian Prime Minister.
  Mr. Martenasked the Prime Minister what talks he has recently had with the Australian Prime Minister; and if he will make a statement.
  Mr. Wallasked the Prime Minister if he will make a statement about his conversations with the Prime Minister of Australia.
  The Prime Minister: I was very pleased to welcome Mr. Holt on his first visit to this country since becoming Prime Minister of Australia, and we have had most useful discussions on matters of common concern.
  As hon. Members know, it is not the practice to issue any detailed statement on confidential talks with other Commonwealth Prime Ministers.
  Mr. Griffiths: Did the Prime Minister assure Mr. Holt that many people in this country and in this House feel admiration and gratitude for the bravery of the Australian troops fighting a common

  1219
  enemy in Vietnam? Can he now confirm that, in the matter of the British Government's dissociation from American bombing of Haiphong, Her Majesty's Government in Canberra have now dissociated themselves from Her Majesty's Government in London?
  The Prime Minister: It is well known that on the question both of having troops in Vietnam and the bombing of Hanoi and Haiphong the Government of Australia and we ourselves take different positions. We are both sovereign and independent countries, and we are entitled to do so for what would appear to be good reasons in both cases.
  Mr. Marten: Would the Prime Minister agree that Australia does not wish to become totally dependent upon America for defence purposes? Therefore, to restore Australian confidence in Britain, will he give an assurance that a substantial part of the forces at present in the Far East will be moved to British bases in Australia when we get them?
  The Prime Minister: I do not think that there is any question of a lack of confidence in Britain which needs to be restored on the part of Australia. The Australian Government fully understand our position. They fully understand the position which we have set out in the Defence Review. The problem of stationing British troops in Australia is much more complex than the hon. Member seems to think.
  Mr. Wall: As the tenure of our forces in Singapore must depend upon the Singapore Government, did the Prime Minister discuss the possible preparation of a British base in Australia? Might not this give much assurance to those who believe that Britain should continue to fulfil her responsibilities?
  The Prime Minister: We have always made clear that our position about bases is conditioned by the extent to which we are welcomed there by the Government and people. It is our position, as stated in the Defence Review, that we are staying in Singapore. There could be, as the hon. Member says, a situation in which it might become untenable. In that case, of course, it might be necessary to withdraw to Australia. Discussions on that point have already been
  1220
  initiated, as my right hon. Friend yesterday told the House.
  Mr. Hugh Jenkins: Is my right hon. Friend aware that a recent opinion poll in Australia suggests that the policy of the Australian Government is supported by only four out of every ten people in Australia and that the policy of the Australian Labour Party of total opposition to war in Vietnam is supported by the majority of the Australian people?
  The Prime Minister: I have not had a lot of time to read public opinion polls in Australia. In the case of one prominent Conservative newspaper in this country, I do not get an opportunity to read the excellent results which it is getting because it will not publish them.
  Sir Alec Douglas-Home: Will the Prime Minister recall the pledges he made before the last election to promote more effective and frequent consultations with Commonwealth countries? Will he reveal to the House the explanation which he gave to Mr. Holt of why he did not consult him before dissociating himself from American action?
  The Prime Minister: Yes, Sir. We have carried on very adequately and, perhaps, improved upon the system of consultations with Commonwealth Governments for which the right hon. Gentleman was once responsible. In this case, the facts were as I suspected: that at the time we were told, the Australian Government had not been told of the particular bombing. We were told in the strictest confidence. There is certainly no feeling on the part of the Australian Government that we ought to have consulted them. It is a feeling which is exclusively located on the Opposition Front Bench.
  Mr. Roy Hughes: May I ask my right hon. Friend if he made clear to the Australian Prime Minister the strong feeling in this country against continued support for American policy in Vietnam?
  The Prime Minister: I think that the Prime Minister of Australia is fully aware of all the feelings in this country, in the United States and in his own country, and he is also fully aware of the position of Her Majesty's Government on Vietnam which was endorsed by this House last Thursday.
  Mr. Boyd-Carpenter: Did the Prime Minister also make clear to Mr. Holt that there would be no restriction on the provision of arms to the Australians for the use of their forces in Vietnam?
  The Prime Minister: There has never been any question of restriction or conditions on our arms supplies to Australia.
  Several Hon. Members rose—
  Mr. Speaker: Order.

OFFICIAL FACILITIES (No. 10 DOWNING STREET)
The following Question stood upon the Order Paper:
Q16. Mr. IAN GILMOUR: To ask the Prime Minister whether he will make a further statement about official facilities made available at No. 10 Downing Street.
The Prime Minister (Mr. Harold Wilson): With permission, Mr. Speaker, I will now answer Question No. Q16.
I am grateful to the hon. Gentleman for giving me this opportunity of correcting a slip which I made on 26th May when, in response to a supplementary question by my hon. Friend the Member for Woolwich, West (Mr. Hamling), I said that official facilities had been given to party speechwriters under previous administrations. I had meant to say unofficial.
I should add that in one case to which I obliquely referred, though not in others, the facilities were given only during the period of a General Election.
Mr. Gilmour: Is the Prime Minister aware that I am most grateful to him for his apology for what was obviously a slip of the tongue?
The Prime Minister: I really thought that I had said "unofficial". The next morning, when I saw it in the Press and confirmed in HANSARD that I was reported as having said "official", as the hon. Gentleman knows, I got in touch with him in an hour, and I said that, instead of answering a Question in the usual way, by a Written Answer, if he liked to put it down I would like to correct orally something that I had said orally.

FRENCH PREMIER AND FOREIGN SECRETARY (VISIT)
Sir T. Beamish: On a point of order, Mr. Speaker. In view of the fact that there are four Questions on the Order Paper about the visit of the French Premier and French Foreign Secretary, and the Prime Minister has seen fit to answer a quite unimportant Question after Question Time, would it not be possible for him to meet the convenience of the House on this important matter and answer those four Questions now?
Mr. Speaker: It is always possible, but I have received no such request.
The Prime Minister: Further to that point of order, Mr. Speaker. I did not consider the Answer that I gave to the hon. Member for Norfolk, Central (Mr. Ian Gilmour) unimportant. I thought it right to say it.
With regard to the Questions about the French Prime Minister's visit, perhaps it will help the hon. and gallant Member for Lewes (Sir T. Beamish) if I say that I am seeking leave to publish the communiqué in HANSARD today.

PRIVATE NOTICE QUESTION
Mr. Winniek: On a point of order, Mr. Speaker. I have tried to raise, by way of Private Notice Question, the announcement today—
Mr. Speaker: Order. No hon. Member can raise as a matter of order the substance of a Private Notice Question which has been refused. May I also tell the hon. Gentleman that the question whether to permit a Private Notice Question is something which the House has put in the hands of Mr. Speaker, and that the hon. Gentleman must just accept his decision.

COMPLAINT OF PRIVILEGE
Mr. Speaker: I wish to give a Ruling on the matter which was raised by the hon. Member for Eastbourne (Sir C. Taylor) yesterday.
May I begin by making an observation? I believe that privilege is something precious and something which I

1223
would hope the House would never invoke lightly, nor hesitate to apply if necessary.
Yesterday, the hon. Member for Eastbourne drew attention to an advertisement in the Sunday Times of 10th July and complained that the terms of the advertisement purported to quote from a speech which he had made in the House and that, taking his words out of context, it linked them with a certain book, named in the advertisement but which the hon. Gentleman did not name.
I sympathise with the hon. Gentleman. I appreciate his distress, to which he made reference in the House yesterday. The right to ensure that speeches made in Parliament are not misrepresented outside Parliament is an essential part of the privilege of freedom of speech. The House has always enjoyed the right to probihit altogether any publication of its debates and proceedings, and, although this right is now continually waived in practice, action by the House may still be taken against persons who have been alleged to have misrepresented its proceedings.
In the present instance, however, the advertisement complained of does not state that the expressions which it attributes to the hon. Gentleman were taken from a speech in the House. In the Adjournment debate of Tuesday, 28th June, in which the hon. Gentleman drew attention to the existence of what he holds to be an obscene book, he did not name
1224
the book which is now advertised, nor did he at any time, in the course of his speech, use the word "degrading".
It is difficult, therefore, to uphold the contention that the words complained of constitute either publication or misrepresentation of debates in Parliament. In these circumstances, I cannot find that a prima facie case of privilege arises which would enable me to give the matter priority over the Orders of the Day.
My Ruling this afternoon does not, of course, prevent the hon. Gentleman from taking such other courses as may seem to him to be appropriate.

BILL PRESENTED
  INDUSTRIAL REORGANISATION CORPORATION
  Bill to provide for the establishment of a public corporation with the functions of promoting or assisting the reorganisation or development of any industry or section of an industry and establishing or developing, or promoting the establishment or development of, any industrial enterprise, and for matters relating to the corporation and its functions, presented by Mr. G. Brown; supported by the Prime Minister, the Chancellor of the Exchequer, Mr. Wm. Ross, Mr. Douglas Jay, Mr. Anthony Wedgwood Benn, Mrs. Barbara Castle, Mr. Cledwyn Hughes, Mr. Reginald Prentice, and Mr. Austen Albu; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 77.]

MANORIAL WASTES
Mr. John Cordle: I beg to move,
That leave be given to bring in a Bill to provide for the better use of manorial and other waste land.
Mr. Speaker, with your permission, as is customary, I confine myself to my notes in order that I shall not overrun the allotment of 10 minutes in asking leave of the House to present my small Bill.
The problem of manorial wastes has been with us for many years. It is not a great and important matter that will excite fierce passions. However, it is one in a series of tidying-up operations to make this country a more agreeable place to live in. It falls into logical sequence with the Bill that I introduced two weeks ago, concerned with the better use of derelict graveyards, and the Bill which the right hon. Member for Streatham (Mr. Sandys) introduced last Friday, to clear our countryside and streets of unwanted rubbish and to preserve amenities.
It might be helpful if I explained what a manorial waste is, since the paths of legal mumbo-jumbo which criss-cross the whole problem of common lands are extremely difficult to follow to anyone who is not a lawyer.
The Royal Commission on Common Land which reported in 1958 defined manorial waste as
"part of the demesne of a manor left uncultivated and unenclosed, over which the freehold and customary tenant might have rights of common."
The "demesne" is that part of a manor which the lord did not grant out but normally retained for his own occupation and use or that of his servants, as distinct from the manorial land farmed by the villagers.
In halcyon days gone by, when manorial lords had manors to lord over, a lord would have a substantial property in his manor and grounds, and, consequently, it was in his own interests to take an active part in its case and management.
Hon Members may be interested to note, for example, that 100 years ago the Wilson family held the manor of Hampstead of which Hampstead Heath
1226
was the waste. The Royal Commission, alas, does not tell us at what stage the manorial lord of Hampstead moved to the lusher pastures of Huddersfield.
To come more up to date, lords of the manor are a nearly extinct race, and many of the manors have been pulled down or taken over by large companies as hostels and offices. The consequence is that the manorial wastes still exist, while the manor does not.
To arrive at accurate figures of areas is an extremely difficult problem which baffled even the Royal Commission, but in England and Wales there are probably about 1½ million acres of common land, and there can be little doubt that manorial wastes, to which the Bill refers, must amount to well over 15,000 to 20,000 acres.
In practical terms, this means that in many of our villages, and in a few of our towns, there are rather small strips of land, sometimes only a quarter or half an acre, but often a much larger area, which are effectively sterilised from any use whatsoever. They are, by definition, usually untended and uncared for. Often they are not properly drained, they are overgrown, and they become a longstanding eyesore and a nuisance. The lord-ship of the manor has probably lapsed. No one knows whose responsibility these wastes really are, and in the meantime the local community is denied the proper and fitting use of the land.
My interest in the matter was sparked off in my village, when such an area as this was found to be in a derelict condition. It was the receiver of the effluent of two local farms, which created a horrible smell and brought about many of the epidemics in the village. After protracted litigation it was found that the rightful owner of this small plot of land was the lord of the manor, and subsequent to that the Church Commissioners took over the responsibility and released the land to the village.
The Bill would propose to provide the ways and means whereby such bits and pieces of land can be taken over by the appropriate local authority, parish, rural district, or county council, so that it can develop and maintain the land for the benefit of the community, especially having regard to the young. Playgrounds, recreation grounds, parking lots, gardens,

1227
and swimming pools, are all examples of the sort of development which I have in mind.
The problem of tracking down such manorial wastes is a formidable one, which I do not underestimate. However,
I think that the Commons Registration Act of 1965, which provided for the registration of common land, and of town and village greens, will help, while, of course, many active parish and rural district councillors are already aware of such wastes in their districts, and, I believe, would welcome legislation to help them to help themselves.
There is in Britain a growing awareness that the beauty of our countryside is a great natural heritage which is constantly threatened from one direction or another, and civilisation and technology march on. I believe that the House is alive to the dangers which threaten our countryside, and is prepared to give support to any Measure which will enable us to make the best of our countryside, while preserving and even enhancing its unique charm and beauty. It is in this spirit that I commend my Bill to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Cordle, Mr. John M. Temple, Sir Eric Bullus, Mr. Harry Randall, Sir Clive Bossom, Mr. Robert Cooke, Mr. Ian Percival, Mr. John Hall, Mr. Jeremy Thorpe, Mr. Donnelly, Mr. Dodds-Parker, and Dr. Reginald Bennett.

MANORIAL WASTES
Bill to provide for the better use of manorial and other waste land, presented accordingly, and read the First time; to be read a Second time upon Friday, 22nd July, and to be printed. [Bill 75.]
ORDERS OF THE DAY

  FINANCE BILL
  As amended, considered.
  New Clause.—(INFORMATION RELATING TO STOCK JOBBERS' TRANSACTIONS.)
  (1) The Board may exercise the powers conferred by this section as respects, and in connection with, any business which is, or has been, carried on by a jobber or dealing broker whose liability to tax in respect of the business is determined on the footing that any excess of his payments in respect of interest on securities over his receipts in respect thereof, being payments made or receipts accrued in pursuance of a contract for the sale or purchase of the securities, is to be treated for all the purposes of the Income Tax Acts or the Corporation Tax Acts as an annual payment made by him.
  (2) With a view to obtaining information about transactions in the course of a business within subsection (1) above, the Board may serve on the jobber or dealing broker by whom the business is or has been carried on a notice requiring him to make available within a time specified in the notice, for inspection by an inspector or other officer of the Board. all such books, accounts and other documents in his possession or power as may be specified or described in the notice, being books, accounts or other documents which in the opinion of the Board contain or may contain information directly or indirectly relating to any such transactions.
  (3) The Board may serve on any broker a notice requiring him to make available within a time specified in the notice, for inspection by an inspector or other officer of the Board, all such books, accounts or other documents in his possession or power as may be specified or described in the notice, being books, accounts or other documents which in the opinion of the Board contain or may contain information relating directly or indirectly to transactions in the course of a business within subsection (1) above.
  (4) The Board may by notice in writing require—

  (a) a person, other than a broker, who has directly or indirectly received from a jobber or dealing broker any payment made by the jobber or dealing broker in the course of a business within subsection (1) above, being a payment treated by the jobber or dealing broker as made in respect of interest on securities, to state within a time specified in the notice whether the amount received is in whole or in part received on behalf of, or for payment on to, any other person and, if so, to furnish the name and address of that other person, or

  (b) a person who has directly or indirectly paid to a jobber or dealing broker any sum constituting a receipt by him in the course of a business within subsection (1) above, being a receipt treated by the jobber or

  1229
  dealing broker as accruing in respect of interest on securities, to state within a time specified in the notice whether the amount paid is in whole or in part received from, or pad on account of, any other person and, if so, to furnish the name and address of that other person.

  (5) Section 250(4) of the Income Tax Act 1952 (power to obtain information from nominee shareholders) shall apply for the purpose of obtaining (from any persons to whom that section applies, whether brokers or jobbers or not) information directly or indirectly relating to any transactions in the course of a business within subsection (1) above, and shall so apply as if for references to shares in a company there were substituted references to securities.
  (6) The Board may not exercise their powers under the foregoing provisions of this section for the purpose of obtaining information relating to transactions in any income tax year of assessment ending more than six years before the service of the notice, but, subject to the foregoing provisions of this subsection, the transactions in respect of which they may exercise those powers shall include transactions before the passing of this Act.
  (7) Part III of the Finance Act 1960 (penalties) shall have effect as if subsections (2), (3) and (4) of this section were included in the second column of Schedule 6 to that Act.
  (8) In this section—

  "the Board" means the Commissioners of Inland Revenue,

  "broker" means a member of a stock exchange in the United Kingdom other than a jobber,

  "dealing broker", in relation to any sale of securities, means a member of a stock exchange in the United Kingdom, other than the London Stock Exchange, who is recognised by the committee of his exchange as carrying on the business of a dealer and authorised by them to deal in those securities,

  "jobber" means a member of the London Stock Exchange who is recognised by the committee thereof as carrying on the business of a jobber,

  "securities" includes shares and "shares", except where the context otherwise requires, includes stock, and references to interest include references to dividends.—[Mr. Callaghan.]

  Brought up, and read the First time.
  3.35 p.m.
  The Chancellor of the Exchequer (Mr. James Callaghan): I beg to move, That the Clause be read a Second time.
  The House will recollect that towards the end of last year the Stock Exchange conducted an inquiry into certain bond-washing transactions which had been brought to its notice. The inquiry showed that there had been serious
  1230
  irregularities, and a number of jobbers and brokers were suspended from dealing on the Stock Exchange for various periods. Subsequently, I said in the House on 15th February that the Stock Exchange Council had been good enough to put its report at the disposal of the Inland Revenue, and that I had authorised an inquiry into the taxation aspects of the matter.
  I should like to pay tribute to the cooperation which I have had from the Stock Exchange Council. The arrangements which it is making for discouraging irregular transactions in future bear witness to the Council's desire to ensure that the Stock Exchange maintains a reputation for honest and straightforward dealing.
  To explain the need for the new Clause it is necessary to enter into certain technicalities. Nothing can be more technical than the detailed operation of the Stock Exchange, so I hope that the House will bear with me if I stick rather closely to the material which has been prepared for me.
  We are concerned primarily with the operation of the gilt-edged market, and as compared with other securities the attraction of gilt-edged to large investors such as pension funds, insurance companies, and the like, lies in its easy marketability. One can buy or sell at any time at very short notice. For tax and other purposes the interest payment belongs to the holder of the stock at the time when it is paid, irrespective of the period for which he has held it. The capital cost of the stock rises as the ex-dividend date approaches, and then falls when the stock goes ex-dividend. Other things being equal, the difference between the cum-dividend and the ex-dividend price is a little above the amount of the net dividend.
  The market has long found it useful to have an arrangement under which, for three weeks prior to the ex-dividend date, certain gilt-edged stock can be sold either cum-dividend or ex-dividend. A pension fund which found itself in need of cash would be reluctant to sell stock cum-dividend just before the ex-dividend date because it would lose the interest payments, and the price which it would receive cum-dividend would not compensate it entirely for the gross amount of interest which it would receive because of

  1231
  its exemption from tax. It is, accordingly, an advantage to such funds and to other institutions exempt from tax to be able to sell ex-dividend in the three week period before the stock goes officially ex-dividend.
  The mechanism by which exempt institutions can sell ex-dividend before the ex-dividend date and receive the gross amount of interest is as follows. If the stock is transferred to the new holder before the dividend date so that he in fact receives the dividend, he has to pass on an amount equivalent to the net dividend to the seller. When paying to the seller the net amount of the dividend, the seller's broker gives the seller a tax voucher: the jobber enters this amount in what was known as his "bull" and "bear" dividend account, and, if he does not have certain compensating amounts, he is expected to account to the Revenue for the tax.
  The "bull" and "bear" arrangement, which was put into final form in 1933, provides that if a jobber has "bear" dividends from which he purports to have deducted tax in pursuance of the certificate given to a seller, he has either to pay this amount over to the Revenue, or show that it is matched by "bull" dividends which he has received on which tax has been paid, or that he has profits in his trading account which can be set against the "bear" dividends.
  In effect, the "bear" dividends are treated as a charge on the jobber's income which can be offset against other tax liabilities of the kind I have indicated. Experience has shown that these arrangements admit of substantial tax avoidance unless they are hedged about by strict rules; and between 1933 and 1960 a number of devices came to light which had to be countered either by changes in the Stock Exchange rules or by legislation.
  As institutions which are exempt from tax are in the market to buy Government stock cum-dividend, the price—as I have already mentioned—is usually somewhat higher than the price of the stock plus the net dividend. Speculators outside the Stock Exchange can make a profit by buying ex-dividend and selling cum-dividend during the 21 days before the stock goes ex-dividend. There are infinite variations of this type of transaction.
  1232
  The Stock Exchange inquiry which resulted in the censure and suspension last January shows that the "bull" and "bear" arrangement has not been working as it should. The arrangement allows the repayment of tax on the "manufactured" interest payment which is made under the "bull" and "bear" arrangement, as well as a reduction of tax on the true interest payment on the same stock. It is very important that in such cases two amounts of tax reach the Revenue—unless the "manufactured" interest payment is legitimately offset against other tax payments. The borrowing of stock by jobbers from large holders of Government stock has increased the occasions on which "manufactured" dividends may be created.
  The Stock Exchange inquiry and the investigation subsequently made by the Revenue have shown that substantial liabilities to tax through the existence of "bear" dividends on which tax was due can be offset by means which the House could not be expected to accept. Speculators outside the Stock Exchange could, by operations of the kind to which I have referred, purport for the selling the stockcum-dividend to jobbers through brokers in ways which deprive the Revenue of tax which it ought to receive. Options can be used in transactions which have no commercial justification. Because jobbers have different accounting dates, transactions can take place between jobbers which result in tax liabilities being postponed for substantial periods or possibly being eventually eliminated by avoidance devices.
  Much of this concerns Stock Exchange practice and is undoubtedly best handled by changes in the rules of the Stock Exchange itself. The Stock Exchange has under consideration changes in the rules which should make impossible a repetition of the transactions which led to this inquiry. In relation to gilt-edged stock it may also prohibit options which have no commercial or financial justification. It also has it in mind to tighten up the procedures under which certificates are given indicating that individual transactions are not part of wider bondwashing operations. The Stock Exchange Council itself has taken in hand the main task of preventing future irregularities, and, as I

  1233
  have said, I am grateful for its cooperation in this respect.
  There remains one aspect which lies outside its powers. After considerable discussions between the Inland Revenue and the Stock Exchange Council it has become clear that it is necessary to introduce legislation to cover it. Parliament has been dealing with bondwashing, off and on, for more than 30 years. The question is whether we can now get rid of it for good. No one who studies the subject can fail to be impressed by the fertility of resource of those who engage in these practices.
  The Stock Exchange rules and the relevant legislation are complicated. Many transactions in which brokers and jobbers quite properly engage are complicated in character, and in this situation the clever speculator is ever at work to see if he can gain a financial advantage at the expense of the Revenue.
  To enable these devices to be uncovered and dealt with it is important that the Revenue should have power to inspect the books of jobbers who have been given the special facility of the "bull" and "bear" arrangement. This arrangement is a special tax concession which has been given to facilitate the operation of the stock market. There is a corresponding obligation on those who enjoy the facility to play fair by the State. I am bound to say that in some quarters there seems to have been insufficient realisation of the need to match this concession made by the Revenue by fair dealing with it.
  We must, therefore, for the future—and I ask the House to do this—give powers to the Revenue to examine, when need arises, the books of jobbers. That could probably be arranged as a condition of the "bull" and "bear" arrangement, but in itself that is not enough.
  To understand many of these transactions it is necessary to look at the brokers' books, and to find, through the brokers' clients, who the beneficial owners of stock are. I am recommending that these powers should be given to the Board of Inland Revenue not because I want to see an inquisitorial system of inspection of Stock Exchange transactions, but to enable the operation of the "bull" and
  "bear" arrangement to be supervised. I am sure that with this
  1234
  condition we should countenance the continuance of the "bull" and "bear" arrangement, which, I know, the City regards as essential for the continued healthy operation of the market.
  It is in those circumstances, and after very long and considerable discussion, that I commend the Clause to the House.
  Mr. Iain Macleod: I say straight away that in my view the Chancellor should have this Clause. I must also say that I am profoundly unhappy that it should be thought necessary. I do not speak for the Stock Exchange, although I think that I know its views on the matter. As the Chancellor has told us, this provision arose out of an inquiry into bondwashing transactions, and it should be emphasised that the inquiry was initiated by the Stock Exchange Council; that its report was made available to the Inland Revenue, and that it has at all times been most anxious that the matter should be cleared up. In fairness, particularly to the Stock Exchange Council, we should record that fact.
  I do not wish to go into the complexities of evasion. All Chancellors for the last 30 years have tried to stop up various loopholes, and have often found that as they have succeeded in stopping up one another has been discovered. As I understand, the inquiries are by no means complete. The Stock Exchange Council is introducing new rules, in particular covering the conduct of the jobbers' "bull" and "bear" accounts and the lodging of ex-dividend transfers within the 21-day period which the Chancellor has told us about.
  The Chancellor holds the view—and I do not dispute it—that this is not enough and that this new Clause is needed. Because of my general approach to the Clause I have not sought to put down Amendments to it, but I should like the Chancellor to consider one point, and the possibility of inserting a certain form of words in another place. It has been represented to me that if a notice in writing under subsection (4) is served any person who feels himself aggrieved by that should have an appeal to the Special Commissioners, and that previous enactments relating to appeals against assessments to Income Tax or Corporation Tax should have effect in

  1235
  respect of any such appeal. I leave that to the Chancellor to study in HANSARD, and to think over.
  It is important not to oppose the new Clause because no one on either side of the House wishes to give comfort to those with whom the Stock Exchange Council wishes to deal. All the same, it would be better by far if these matters could be dealt with by the ordinary rules of the Stock Exchange. These discussions have reached a fairly advanced stage, and perhaps in any peaceful moments he may have beween now and the next Finance Bill the Chancellor would consider whether we really need the Clause for all time, or whether, when we have had, and can study, the rules that the Stock Exchange Council will propose, we might feel that those in themselves would suffice.
  At the moment, however, in the circumstances as they are, I consider that the Chancellor has made out a case for the Clause.
  Mr. John Nott: This is a very long Clause and the Chancellor has given a very long explanation of it. I have no idea of the views of the Stock Exchange, and I have not discussed it with the Council, but having heard the Chancellor's explanation I should like to make one "off-the-cuff" suggestion. Would not exactly the same objective be achieved, without all the fuss and bother and interference by tax inspectors looking into the books of jobbers and brokers, merely by asking the Council of the Stock Exchange not to deal with any stock cum accrued interest?
  For years we have had bondwashing legislation going through the House, but the point to remember is that on the Stock Exchange bonds and stocks are dealt with cum accrued interest, and that if this did not take place none of these problems would arise.
  4.0 p.m.
  Mr. Peter Tapsell: I apologise to the Chancellor for having missed his opening words and I hope, therefore, that nothing I say will be the result of my having misunderstood him. I should also declare an interest in that I am a member of the London Stock Exchange, although I do not, of course,
  1236
  in any way speak for the Stock Exchange, but as a Member of Parliament.
  I agree with my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) that this is a Clause which we should accept, although, like him, I regret that it should be necessary. I accept what the Chancellor says, that if, after 30 years of most stringent efforts by the Council of the Stock Exchange to stop bond-washing it has not been possible to do so by the regulations of the Stock Exchange, it is inevitable that the Chancellor of the day should step in and take powers in this respect.
  The Clause goes rather broader than that part of the Chancellor's speech which I heard. In subsection (4, a) we read that
  "The Board may by notice in writing require—a person …"
  "A person" is a very broad term and I assume that this paragraph means that power will be given to investigate the books not only of jobbers and brokers but of anybody else, bankers and chartered accountants, and so on, who may, directly or indirectly, be involved in such dealings. That is, of course, a very wide additional power. I accept that this has to be done, but I think—
  Mr. Harold Lever: Where does the hon. Gentleman find the power to inspect the books of a person in subsection (4, a)?
  Mr. Tapsell: I do not want to take up the time of the House by reading the whole Clause, but the phrase is:
  "… a person, other than the broker, who has directly or indirectly …"
  "A person", I understand, is a wide term. I hope that the Chancellor of the Exchequer will correct me if I am wrong, but I gathered from the way that he nodded that I am right and that "a person" is a broad term—
  Mr. Harold Lever: What I cannot follow is the hon. Gentleman's reference to the power to inspect the books of a person. Where does he find that, as opposed to the power to require information from a person, which is rather different?
  Mr. Tapsell: This is something which the Chancellor could perhaps clear up, but I do not see how the Inland Revenue will be able to carry out the obligations being laid upon it in this legislation without examining the books of those concerned.

  1237
  There is a price to be paid for this extension of Government power and it is the price of a further encroachment on individual privacy. The loss of confidentiality in the dealings between jobbers and particularly brokers and their clients will be unfortunate. There is no doubt that the Swiss banking system gains considerably from the reliance on the con-confidentiality of its arrangements and that it attracts a great deal of foreign money in Switzerland as a result. It would be unfortunate if the London Stock Exchange ceased to attract some business from overseas on the grounds that confidentiality had been sacrificed.
  Is the right hon. Gentleman satisfied that this legislation would also cover dealings outside the Stock Exchange? One can envisage that, as a result of this legislation, people who wished to indulge on these thoroughly deplorable practices of bondwashing would do so, for instance, in Dublin, or the Bahamas, or elsewhere. Even within the United Kingdom, dealers in securities who are not members of the Stock Exchange could perhaps carry them out. Will this legislation cover dealings outside member firms of the Stock Exchange? If not, has the Inland Revenue powers already to deal with this?
  When the Chancellor talks about having to countenance the continuation of the "hull" and "bear" market, it is important that he should remember—I am sure that he will accept this—that the continuation of that market is an essential element in the working of the market in British Government securities. The state of the gilt-edged market is very unhappy at present. The Government's credit has never been so low as it is now, with Government long-term credit rates at 7 per cent. Turnover in British Government securities has fallen to the lowest ebb in recent years. Therefore, when he talks about countenancing the continuation of the "bull" and "bear" market, what the right hon. Gentleman should be saying is that he wants to do everything to encourage the efficient working of the market in British Government securities on which the credit of the British Government depends.
  Mr. Harold Lever: The Chancellor has shown considerable respect for the needs of the market in the drafting of this Clause. He has not asked for a power
  1238
  which he could reasonably require and he may be assured that the alternative solution offered by the other side of the House would be gravely to the detriment of the Stock Exchange and the market, if the Chancellor were to attempt to forbid any dealings in dividends with accrued interest. I do not know how that could be arranged. There is no unjust loss of confidentiality involved in this Clause, as is feared by hon. Members opposite. The minimum requirement here is what the Chancellor seeks.
  So far as residents of this country are concerned, it is easy to exaggerate the amount of confidentiality we enjoy in respect of our financial transactions. It has long been the law that every transaction of a British resident which gives rise or may give rise to a tax liability is open to investigation by the Inland Revenue. Those who like to have a decent reticence over their financial affairs ought to have arranged to be born in a different century. In the present century, that does not exist.
  There is nothing which in the least prejudices the position of foreigners who invest in this country and deal in the British gilt-edged market. In these circumstances, my right hon. Friend has shown quite rightly a tender concern for the necessary legitimate actions of the Stock Exchange. The Clause is acceptable, in spite of its drastically incomprehensible nature.
  Mr. Raymond Gower: The Chancellor will have received the impression that the House is unanimous in supporting him in his object of closing any gap which encourages these practices. On the other hand, he may also have got the impression that there is some anxiety about the need for permanent powers of this kind, which is a fair distinction. Could he give a promise to the House that he will keep in the closest touch with the London Stock Exchange with the object, probably with his advisers and the help of his advisers, of framing long-term rules which might be sufficiently watertight to enable the Revenue in due course to dispense with these powers?
  I agree with my hon. Friend the Member for Horncastle (Mr. Tapsell) that we should not underestimate the great benefits that have accrued to Switzerland from the element of impartiality. I hope

  1239
  that the Chancellor will consider this, because the House is absolutely united in wanting to stop the practice about which which we have been speaking. We are only anxious about whether or not this will be a long-term method.
  Mr. Callaghan: If I may be permitted a personal allusion, I was brought up in the Revenue and I assure the House that it has always been, and still is, the case that the officers of the Revenue are instructed to hold the balance evenly between the requirements of the Revenue and the rights of the taxpayer. That instruction has never deserted me and I assure the House that the reason why the new Clause has been brought forward at this time—has not appeared before Report and has, therefore, meant some inconvenience to the House—is that we wanted to be completely satisfied that it was necessary.
  As the right hon. Member for Enfield, West (Mr. Iain Macleod) said, inquiries by the Revenue have been going on and they are not yet complete. The Revenue has reached a full stop. It cannot carry on its inquiries without the powers, for which we are asking in the Clause, to investigate practices that have been universally condemned in succeeding years on both sides of the House. I thought it right, therefore, even at this late stage, with the co-operation of the House, to ask for the powers contained in the Clause. These inquiries are not complete, but these powers will enable them to be completed.
  In stressing that the information had come to light as a result of the activities of the Stock Exchange Council, the right Hon. Member for Enfield, West said, and I readily acknowledge, that I have kept in close personal touch with the Council and wish to continue to do so in this matter.
  The right hon. Member for Enfield, West raised the question of a right of appeal to the Special Commissioners. I will, of course, consider this for another year; but I say at once that I can see certain difficulties precisely because it is not until the Revenue has a lead which it wants to follow up, and then look at the books, that it will know that there is something which needs to be probed. I do not say that it should be entirely re-
  1240
  lieved of such an obligation, but I think that proof would be difficult if there were only suspicions arising, perhaps, out of transactions which the Revenue had seen take place elsewhere. As I say, there might be difficulties.
  I agree that it would be better to deal with this matter by the ordinary rules drawn up by the Stock Exchange Council, if it were possible to draw up close and watertight rules. Thus, the question which arises is this: do we need these powers for all time? In justification of them, as I see it at the moment, the first thing to remember is that the Revenue cannot continue its investigations of the irregularities—and I use the word advisedly—that have already occurred. Secondly, experience shows that the Stock Exchange rules are flouted and that the best drawn-up rules and the best intentions of the Council are not always observed. The Revenue is, therefore, asking for means of ensuring that members of the Stock Exchange do not just ignore the rules which have been worked out by the Stock Exchange, the Revenue and the House in conjunction for the protection of the Revenue.
  Thirdly, 30 years' experience has shown that although new rules may be drawn up in view of evasions which have been discovered, such is the ingenuity of those who engage in these practices that they have little difficulty, within a matter of months, in opening up fresh channels. Although I agree, therefore, that I would far sooner see this dealt with by ordinary rules, I am not sure that it would be possible to do so. Thus, this legislation, although it should be kept under review, is probably permanent.
  4.15 p.m.
  The hon. Member for St. Ives (Mr. Nott) asked whether we could not withdraw the right to deal in stocks with accrued interest and I agree that that would be convenient if it could be done. But there is the case of people who may need cash at relatively short notice. If they did not have this facility, which has been advantageous to them, it could put them in difficulties which should not be put in their way.
  From the point of view of the Revenue, it would be welcome if the hon. Gentleman's suggestion was adopted, but—and

  1241
  I come to the remarks of the hon. Member for Horncastle (Mr. Tapsell)—we have had respect for the needs of the working of the market. The Revenue would not come forward with this suggestion if it could not be worked except by damaging the market. I hope that that answers the question of the hon. Member for Horncastle about the workings of the market.
  >The hon. Member for Horncastle also referred to "persons" as mentioned in the Clause and I think that the only difference between him and my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) is that the persons are required to give information. They are required to answer certain questions if a transaction in the books examined by the Revenue shows that something may have taken place. Then the Revenue will be entitled to go to such persons and ask, "What was the result of that transaction?"—but the Revenue would not have the power to inspect their books.
  It is important, from the Stock Exchange point of view—this was represented to me—to say that the Stock Exchange would feel it intolerably hard if, because special rules or legislation was passed in relation to the Stock Exchange, business was diverted elsewhere. That is one reason for the way in which the Clause was drawn up.
  I hope that I have already answered the question asked by the hon. Member for Barry (Mr. Gower). Certainly, this matter will be kept under review. I will want to follow it as closely as I can. I am satisfied, however, from my contacts with the Revenue, that it in no way desires to be overbearing on this issue. The Revenue should be given the right to follow these transactions through, where there may be evasion or avoidance, but no one can tell at the moment until these powers are available.
  I am obliged to hon. Members for the manner in which they have received the new Clause.
  Question put and agreed to.
  Clause added to the Bill.
  New Clause.—(ASSIGNMENT OF COPY RIGHT IN ESTABLISHED WORKS.)
  (1) Where—

  (a) an author of a literary dramatic musical or artistic work assigns or grants the copyright therein to the whole extent of the copyright remaining vested in him at the time of such assignment or grant; and

  (b) the whole or part of the consideration for the assignment consists of a lump sum payment; and

  (c) the said work was first published or performed in public not less than ten years before the date of such assignment; and

  (d) the author of the said work has attained the age of 50 at the date of such assignment, the consideration for such assignment or grant insofar as it consists of a lump sum shall be regarded as a receipt from the sale of a capital asset and shall not be subject in the hands of the author to income tax or surtax whether or not the author's profession or trade has in the meantime been discontinued.

  (2) A grant or assignment of copyright which complies with the conditions set forth in subsection (1) of this section shall not be liable to any capital gains tax.
  (3) An assignment or grant of copyright for the purpose of this section includes an assignment or grant subject to and with the benefit of prior dispositions of the copyright.
  (4) In this section "author" includes a joint author and "lump sum payment" includes an advance on account of royalties which is not returnable.—[Sir E. Boyle.]
  Brought up, and read the First time.
  Sir Edward Boyle: I beg to move, That the Clause be read a Second time.
  The object of this new Clause is, under certain clearly circumscribed conditions, to free from liability to tax an outright sale by an author, assigning the copyright in an existing work. My presence on the back benches this afternoon does not indicate that, on the principle of the Clause, there is any disagreement between my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and myself. I am moving it as a measure of justice to authors, dramatists and composers and in the full knowledge, and with the encouragement, of the Chairman of the Arts Council, of which I am a member. I am pleased on this occasion to have obtained supporters from both sides of the House.
  I believe that a literary, dramatic, musical or artistic work which has been established for say, 10 years, is in the nature of a capital asset producing income

  1243
  and that it should be treated, therefore, from the author's point of view, as a capital asset. At present there is a notable gap between what I believe justice demands and the state of the law. At present, subject only to a slight concession contained in Section 471 of the Income Tax Act, 1952—which is limited to allowing an author to spread back lump sum payments over two or, in some cases, three years—the whole of a lump sum is treated as income for the year in which it is received.
  Thus, the law at present treats authors very harshly. Even if the author has ceased to carry on his profession, such a payment will attract tax under Section 32 of the Finance Act, 1960, unless the author has died, when his personal representatives are given relief under Section 32(3, b) of the Finance Act, 1960, that long and elaborate Statute which I well remember.
  As drafted, this Clause gives a limited relief where the author parts with the whole remaining copyright in a work established for 10 years for a lump sum. I emphasise the point about the 10 years. It means that for a period of at least 10 years after the work has come into existence there is no alternative to the public, quite rightly, receiving, through the tax system, its share of the income from that work.
  This is a moderately drafted Clause, and it is confined to those who have reached the age of 50. Some hon. Members may feel that this is an unnecessary refinement, but, quite deliberately, and not wishing to pitch my claims too high, I have confined the Clause to older established authors, those who have been earning an income for a number of years and who are entitled to think of their established works becoming a capital asset capable of being sold so as to ensure them security as they move towards old age.
  Subsection (2)—and here again I refer to a refinement—makes it clear that an assignment by the author would not attract Capital Gains Tax in the circumstances contemplated by the subsection, but this would not exempt from Capital Gains Tax a third party who acquired copyright and resold it at a profit. At some point there must be liability. I
  1244
  might add that I do not regard this subsection as the essence of the Clause. I have put in what I believe to be a just arrangement, but if, as I hope, the Government can give a reasonably encouraging reply, this is a subsection on which I would be open to argument and persuasion.
  Subsection (3) makes it clear that the assignment contemplated can include an assignment of future royalties under existing dispositions of copyright and, as the Financial Secretary no doubt recognises, subsection (4) repeats subsection (8) of Section 471 of the Income Tax Act, 1952, which contains the concession I already mentioned.
  From what are now to me somewhat hazy memories of past Finance Bills, I believe that the House is usually tolerant about a completely new subject being raised from time to time, or one which we have not discussed as often as we have some others. In this matter of the assignment of copyright, I think that the present state of the law is harsh to authors and dramatists and to those who might wish quite reasonably to build up a capital asset as a result of many years of work. I was encouraged to find the support which I know that the Clause has in principle from the right hon. Gentleman the Member for Vauxhall (Mr. Strauss) whose name is attached to it, and also from the hon. Member for Coventry, North (Mr. Edelman), who particularly regrets that he is unable to be here today to support it in person. Even if the Government feel that there may be a fault in the drafting, I believe that the Clause should be taken seriously by the Government and the House. I trust that we can hope for favourable words from the Financial Secretary.
  Mr. Harold Lever: I support this new Clause. It is only by error that my name is not attached to it, and I heartily endorse its spirit. The only sentence I would add to the very cogent arguments advanced by the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) is that while a man in business is building it up as a capital asset he draws an income from it, and an author should also, after 10 years, be able to look to his work as a capital asset capable of supporting him in his middle age or old age. I do not see why we should treat the creative

  1245
  artist rather worse than we treat business people. I hope that my hon. and learned Friend the Financial Secretary will give the most sympathetic consideration to the spirit of this Clause, if not to every detailed ward of it.
  Mr. Gower: I hope that the Financial Secretary will accept the broad principle contained in this Clause. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) has compared what is proposed here with the position of the business man. I respectfully suggest that the person who publishes a literally work or a musical work of the nature we are considering has in many cases performed a much more arduous task than has the business man. In terms of money, the creative artist's reward in a minority of cases is sensational, but that is not so in most cases. It seems astonishing that until this year of grace our system of taxation should still be so designed that it should operate with such penal effect on the artist who disposes of his copyright. I trust that the hon. and learned Gentleman will feel disposed to accept the principle of the Clause.
  The Financial Secretary to the Treasury (Mr. Niall MacDermot): I have listened to three short and most persuasive speeches, and I am asked not to be too negative in my attitude to them. I must say at once that all the advice I have received on the matter has been exceedingly negative but, if I may express a personal opinion, I think that there is here an underlying idea which merits further investigation and consideration. I certainly do not feel able to recommend the House to accept the new Clause as it stands, and perhaps I may be allowed to make just a few comments to show what some of the difficulties are, and what might be a possible alternative line of solution.
  The first major argument of principle against the Clause is that it is said that a creative artist is conducting a profession in which his activity is to produce works of art, and that therefore the remuneration he earns in doing that is income and ought to be taxed as such; and that, if it be the case that his income fluctuates, and may fluctuate considerably from year to year, that is something which happens to people in many other walks of life and they do not get special tax
  1246
  concessions on that account. Indeed, the creative artist and author already enjoys—
  Mr. Arthur Lewis: And lawyers.
  Mr. MacDermot: Lawyers, too. I assure my hon. Friend that this applies to lawyers just as much. To take the case of barristers, about whom my hon. Friend has views, virtually all barristers are taxed on a receipts basis, and very often one will receive fees several years after the event, when one is earning in a much higher tax bracket, and so gets taxed more heavily on those fees than if they had been taxed promptly—
  Mr. Harold Lever rose—
  Mr. MacDermot: No, I cannot give way. I must not be diverted. I have already been led astray from the point, and must come back to it.
  As I say, incomes already fluctuate widely, and people do not get special tax concessions on that account. Some provisions for spreading back for a period of three years are already available to authors and not to other people. If we were to accept this proposal, we would have to face the fact that we would be producing what would be regarded as anomalies and unequal effects as between, first of all, different kinds of artists—creative and performing artists—and as between different kinds of creative artists—those who create in a form that produces what the right hon. Member for Handsworth (Sir E. Boyle) calls a capital asset—that is to say, something that has a copyright value and can be looked on as an income-producing asset—and those creative artists who do not, such as sculptors, and painters of pictures, who sell the works of art they produce, the receipts being treated as income.
  By this Clause we should be giving to a particular category of artist a special advantage which we do not give to others. Within the class of artist who benefited we should, in particular, be benefiting, on the whole, the most successful authors and producers of the kind of work that goes on producing income over a continuous period of years—obviously, in fact, over a period exceeding 10 years. One thinks particularly

  1247
  of authors of successful children's books, authors of successful crime novels, popular artists of one kind and another, whereas the more serious artistic creative writer, with rare exceptions, would probably benefit very little.
  4.30 p.m.
  If the object is to give assistance to the sort of struggling creative artist, I do not think the Clause would do a great deal to achieve that. In order precisely to limit the scope of it, as the right hon. Gentleman made clear, limitations have been written into the Clause which themselves would produce objectionable features in the scheme. There is the 10-year period to which I have referred and then the limitation that it should apply only to people after the age of 50. This would introduce a sort of element of old-age relief beginning at an age somewhat earlier than we usually adopt for old-age relief.
  Hon. Members who were in the Committee will remember that we were discussing principles of old-age relief on one occasion and I resisted the proposal that people on small incomes should have their National Insurance contributions exempt from tax. One looks at the totality of the income, not at the particular sources. That also arises here. In trying to cast around for analogies one has the example of the builder who builds a house. If he does not sell it, it becomes an income-producing asset, but if he sells it—in other words, if he is a developer as well as a builder—he will be taxed on the income as income and not as a capital asset.
  It seems, and this is a personal thought, that there is a closer analogy in the case of the scientific inventor who produces an invention and obtains patent rights. That seems more analogous to the copyright with which we are concerned here. He has certain tax concessions which are more helpful than those which are available for writers and other creative artists. I think there are spread provisions over a period of about six years.
  I am expressing a personal opinion, but it seems that if we were to look further into the field and were prepared to swallow the principle of treating copyright as an income-producing asset one should perhaps look at the analogy of
  1248
  the treatment of patent rights. If it is to be treated as a capital asset, I cannot see any reason in principle why one should then exclude it from Capital Gains Tax. The right hon. Member perhaps anticipated that I might say this. It would be another approach to regard it altogether as a capital asset. It would then by nature be a wasting asset, because the copyright would expire after the 10-year period. One would have to look carefully to see what the effect of these provisions would be if one sought to apply the capital assets principle and made it subject to Capital Gains Tax.
  If the general feeling of the House is that it is right to look upon copyright as a capital asset, I certainly undertake to look at this further and to discuss it further with any interested persons, but for the reasons I have indicated I do not think that the proposal put forward at the moment is an acceptable one.
  Mr. Iain Macleod: I am sure that the House will be grateful to the Financial Secretary for the sympathetic response he has given to this short debate and I am sure that my right hon. Friend the Member for Birmingham, Handsworth (Sir E. Boyle) would not want this discussion to end in a Division.
  I would gladly take up the Financial Secretary on what he has said. I think it would be the feeling of the House that such a copyright should be a capital asset if we could get over the difficulties, and of course there are difficulties. We would encourage him in the discussions which he has said he would be prepared to undertake. I suppose that there are a number of interests which I should declare as I have been writing for more than 10 years and I am over 50, although I do not think there is a copyright to the works to which I have put my hand.
  The Financial Secretary said that not only authors' but other people's income varies greatly from year to year. That is true, but there is a special consideration which applies to authors or artists. They may go on for years writing normally what one might almost call "pot-boiler" works and then suddenly, for no particular reason, they hit a mood and find something which the whole country wants to see. An illustration comes straight into mind. I think R. C. Sherriff was an

  1249
  excellent playwright, but I do not think any of Hs plays was enormously successful, with the single exception of "Journey's End", in which he suddenly found what everyone wanted to say about the First World War just at the moment when everyone wanted to say it.
  There are difficulties about spreading, but in a particular instance—I am sure hon. Members can think of others—it is possible for someone to freeze in a work—perhaps a work of art, perhaps a book—the historical sense of the people of this or some other country. When that happens there should be provision for special treatment which goes beyond the ordinary spread of the three years to which authors are entitled and which brings some relief to them. I therefore think that artists—using the word in the widest sense—are in a different category from business men whose incomes may vary for entirely different reasons. I was encouraged by what the Financial Secretary said. If my right hon. Friend is willing to withdraw the Clause, I hope that such discussions may be undertaken.
  Sir E. Boyle: If I may have the leave of the House I wish briefly to thank the House for the way—
  Mr. Deputy Speaker (Sir Eric Fletcher): Order. The right hon. Member cannot speak twice. He may ask for leave to withdraw the Motion.

  Principal value of estate £

  £

  Rate per cent. of duty

  Not exceeding

  6,000

  …

  …

  …

  Nil

  Exceeding 6,000 and not exceeding

  7,000

  …

  …

  …

  1

  Exceeding 7,000 and not exceeding

  8,000

  …

  …

  …

  2

  Exceeding 8,000 and not exceeding

  9,000

  …

  …

  …

  3

  Exceeding 9,000 and not exceeding

  10,000

  …

  …

  …

  4

  —[Mrs. Thatcher.]
  Brought up, and read the First time.
  Mrs. Margaret Thatcher: I beg to move, That the Clause be read a Second time.
  I am glad that the Financial Secretary is in a sympathetic mood and I hope that he will not have exhausted his sympathy at this early stage. This is a very modest proposal. Had it not been for the economic situation, I should like to have proposed a much more far-reaching Amendment on Estate Duty. We cannot alter the entire structure of Estate Duty or alter the rates to a great extent, but I hope that we shall be able to bring
  Sir E. Boyle: I was asking for the leave of the House very briefly to thank the House for the way in which it has received this new Clause and for the obvious width of support there is for the idea that we should look upon the possibility of treating copyright as a capital asset. I join with my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) in thanking the Financial Secretary for the tone of his reply, and express the hope that we shall have discussions between now and the introduction of the next Finance Bill and perhaps make progress on the lines the hon. and learned Gentleman suggested when he quoted the case of a scientific inventor.
  With these words I willingly beg to ask leave to withdraw the Motion.
  Motion and Clause, by leave, withdrawn.
  New Clause.—(REVISED RATES OF ESTATE DUTIES FOR SMALL ESTATES.)
  As respects deaths occurring on or after 3rd May 1966, the scale of rates of estate duty set out in the Seventh Schedule to the Finance Act 1949, as amended by section 32(1) of the Finance Act 1954, section 27(1) of the Finance Act 1962 and section 52 of the Finance Act 1963 shall have effect with the substitution for the entries relating to estates of a principal value not exceeding ten thousand pounds of the following entries:—
  some small measure of relief in respect of those who when they die will leave comparatively small estates.
  At present if a man or woman dies leaving an estate which has a total value of less than £5,000 no Estate Duty is payable. Above £5,000 Estate Duty is attracted in increasing amounts. From time to time the exemption limit has been changed, and it has been changed on a number of occasions since the war. It was brought up to £2,000 in April, 1946, when other considerable changes were also made to Estate Duty rates. In looking back, it is noteworthy that

  1251
  the top rate of Estate Duty was increased after the end of the war. During the war it was only 65 per cent. In 1946 the top rate was increased to 75 per cent.
  Other changes were made in 1949, but the exemption limit was not changed. The changes then made only increased the Estate Duty payable on larger estates. It was left to successive Conservative Governments to raise the exemption limit further. In 1954 it was raised to £3,000; in 1962 to £4,000; and in 1963 to £5,000.
  That was some three years ago, and I note that between May, 1963, and May of this year the retail prices index rose by about 13 points. That is, perhaps, not always material in considering the value of estates. What is more significant is that during this period the value of houses in built-up areas went up at a very much faster rate even than the retail prices index.
  The value of the owner-occupied house is often the major component of the value of these smaller estates. It is to that aspect that I shall now address my remarks. Many hon. Members will be aware of the sharp rises that have taken place in house prices in constituencies in built-up areas, and of the difficulty in which the widow is often placed if she wants to go on living in the house but has to find a small amount of Estate Duty in ready cash, when the estate may not have any ready cash available.
  The Amendment is modest. It raises the exemption limit only from £5,000 to £6,000, but in a constituency such as my own that would take in quite a large number of houses, where small, three-bed-roomed houses, without even a garage now sell for about £6,000. If that is the only asset of the estate, it is often difficult for those left behind to find even a small amount of Estate Duty at a time when their great need is for ready cash.
  In addition to raising the exemption limit to £6,000, the Clause would modify the rates chargeable on estates up to a value of £10,000. From £10,000 onwards, they would be left as they are under existing legislation. I should like to have had a crack at rates of Estate Duty on estates of higher value, but I would not try to extend the Financial Secretary's sympathy too far this year.
  The changes proposed should help all the dependants of those who die leaving less than £10,000.
  I am not aware of the cost of the Amendment, but, as the Financial Secretary knows, if he had taken the advice of my right hon. and hon. Friends about the premiums for manufacturers under the Selective Employment Tax, he would have plenty of money to play about with. One would hope and suggest that this is the kind of Amendment that he might usefully accept, thereby helping a large number of widows and other dependents of those who die leaving small estates.
  A final point is that on marriage a man usually says "With all my worldly goods I thee endow". That is not strictly true, because during his life the Chancellor will have the first crack, and after he dies the Chancellor will not have finished with the person but will also have the first slice. I should like to see Estate Duty changed in such a way that the widow had priority over the Chancellor. A man should be able to make adequate provision for his wife before the Treasury comes in for its own cut. I cannot achieve that today, but I hope that the Financial Secretary will agree that what I have suggested is possible, and that it is possible this year.
  4.45 p.m.
  Mr. Joel Barnett: First, I apologise for not having heard the start of the speech of the hon. Member for Finchley (Mrs. Thatcher). One point arising out of what she said towards the end of her speech about widows is that there are opportunities under existing legislation to help widows. The insurance policies written under the Married Women's Property Act help considerably. However, I have some sympathy for the idea of helping small Estate Duty payers, if only for the reason that they pay, whereas many owners of larger estates do not.
  We all know that many owners of the larger estates are able to avoid paying Estate Duty through devices, which I do not in any way deplore, but it does mean that, for these people, it is a sort of voluntary tax. This is open to owners of the larger estates to a very much greater extent than it is to owners of the smaller ones, largely because very often the

  1253
  smaller estate owners do not have the sort of advice that is available to owners of larger estates.
  I have no complaint against the taxpayers who own those larger estates so organising their affairs as to pay the least possible amount of Estate Duty. Indeed, I do no. apologise for the fact that I have at times advised on the best methods to adopt, but in giving relief one must look at the whole range of taxpayers and of non-taxpayers.
  I did not understand the objections voiced at another stage in our debate on the Bill when there were great objections from hon. Members opposite to my right hon. Friend the Chief Secretary having said that when we gave reliefs we should also take into account those who are not paying tax at all. One can see a great deal of worthiness in the Clause, when one considers price rises that are affecting old-age pensioners without any offset through the Bill; when one looks at the increase in house building that was mentioned today at Question Time, and when one looks at the increase in mortgage increase rates, without any compensation in the Bill. In a year like this, when we are contemplating any reliefs, no matter how worthy they might be on another occasion, all these things must be taken into account.
  I shall be interested to hear how much the Clause would cost. I cannot imagine that the cost would be very great, but, even if it were very small, this is hardly the time to be thinking of giving relief to one section as opposed to giving nothing to the rest of the people.
  Mr. Percy Grieve: I am very grateful for the opportunity of supporting my hon. Friend the Member for Finchley (Mrs. Thatcher). I do so on a slightly different basis from that which she adopted. The new Clause would give some very slight mitigation of the catastrophic effect which present levels of Estate Duty have on families when the breadwinner dies in middle life. One of the worst effects of present levels of Estate Duty is felt not when people die when their families are emancipated and provided for but when the breadwinner dies in middle age. Then not only do the family find themselves cut off from his earning power but, at the very time of worst possible crisis for them, the Revenue
  1254
  comes along and takes a very substantial cut.
  I agree with my hon. Friend in saying that this is a modest proposal, almost too modest, but I concede that, in the present state of this country's affairs it may be difficult to make any greater concession. But Britain is probably the country where estate duties are higher and more penal than anywhere else in the world, and we are certainly the country in which the family is most sharply affected. In France, for instance, where not Estate Duty but a form of legacy duty prevails, the needs of the family are protected by law. The first 100,000 francs, nearly £7,500, out of the estate which is left by a deceased person to, or which goes under the law to, each of his heirs, when these are his widow or children, is free of any duty, and it is only after each of these has received his or her share amounting to approximately £7,500 for each of them that the Revenue comes in at all.
  In my submission, the French order these things very much better than we do and much more fairly, with far greater justice. To use a cliché sometimes heard nowadays, it is time we took a long, cool look at our own law on the taxation of inheritances and the estates of deceased persons with a view to protecting the integrity of the family and protecting it in the hour of its greatest need. Because the Clause would go a small way towards this end, I strongly support it.
  The hon. Member for Heywood and Royton (Mr. Barnett) said, and everyone knows it, that there are many ways by which a man can provide for his family, by insurance policies and so forth in separate estates, overcoming the difficulties which families often have. But not all do. Not all, perhaps, can afford the hon. Gentleman's fees when he is consulted about it.
  One comes back to the plain fact that, when a man dies in his 40s or 50s, having set aside a small capital but leaving a widow and young children to be provided for, the greater part of that capital, as my hon. Friend the Member for Finchley said, is represented by the family house. The widow and children are deprived of the resources of the breadwinner while at the same time his small savings are cut away by the Revenue. I want the Financial Secretary to give this proposal earnest consideration. It would

  1255
  be a small measure to mitigate the lot of many unfortunate people.
  Mr. Gower: Far from overstating the case, my hon. Friend the Member for Finchley (Mrs. Thatcher) put it with studied moderation. It is a very strong case. One knows that estates of this kind are, roughly speaking, of two kinds, and it must be the experience of many of us that in an enormous number of instances most of the estate is comprised of the family dwelling-house, that being virtually the only asset. There are some estates in which, in addition to the house, there are other assets, but this other element, so far as there has been any appreciation, will have been looked after by some form of Capital Gains Tax, so that our case on this new Clause is, in fact, strengthened.
  The hon. Member for Heywood and Royton (Mr. Barnett) said that there are methods of insuring against these difficulties, but it is my experience and, I am sure, that of most others that widows and children are usually the last people in the world likely to have entered into such arrangements. The hon. Gentleman said also that, in considering giving relief, we must look at the whole range of taxpayers and bear in mind those who do not pay tax. Surely, the better principle is that, in giving relief, we should try to find the most deserving persons in the range of taxpayers and—
  Mr. Barnett: The hon. Gentleman will accept that we ought to look at the whole range of people whom we should be helping, whether they pay tax or not.
  Mr. Gower: Let me take the first point, that we should look at the whole range of people whom we should be helping. Within the limit of tax concessions, it is extraordinarily difficult to help those who do not pay tax at all.
  Mr. Barnett: Increases or decreases in the Purchase Tax affect people who do not pay Income Tax.
  Mr. Gower: But I am talking about a particular form of tax. If someone does not pay any form of tax, he is jolly lucky. [Interruption.] If there is any form of tax that somebody does not pay, he is either lucky or he has opted out, as in the case of the tobacco duty. But I must not be diverted too far from the point at issue.
  1256
  Far better than the hon. Gentleman's proposal is the principle that we should look for deserving cases for relief. There are few better cases for relief of this modest kind than the one proposed in the Clause. The hon. Member for Heywood and Royton himself accepted that it would not be an extravagantly expensive concession, and I agree.
  The proposal has another merit. If it was reasonable some years ago to exempt estates of up to £5,000, according to the value of money now there is a case for exemption up to £6,000. If it was right then to make an exemption up to a limit more or less equivalent to what we are now proposing, the case we make is further substantiated.
  Mr. Robert Sheldon: I am not altogether happy about the rôle of Estate Duty and, in particular, its incidence on small estates. The general principle is that taxation is or should be levied according to the ability of the person to pay. Unfortunately, it is not quite as simple as that in Estate Duty. The incidence of Estate Duty depends very much on the circumstances of those who have left estates. It depends on whether they die when young, having made no prior arrangement, or whether they were old and had an opportunity to anticipate their demise, using some of the opportunities open to them under the law. It varies also according to the type of family left behind, whether the children are grown up and making their own way in the world or are young, still having to be looked after by the widowed mother. It varies also according to the kind of plans which were made, insurance plans and so forth, and on whether the family were able to take advantage of the various trust arrangements which can be of help it such circumstances.
  Because of all these varying factors, Estate Duty strikes people in very different ways, and it is manifestly not as straightforward as is Income Tax and other forms of taxation which bear rather more in proportion to the ability of the person to pay. There is a great variation between, on the one hand, those who regard a deceased's estate as a bonus, as a lump sum which they receive, caring little as to the amount which has to be paid in tax, to those who, at the other extreme, have great difficulty and who

  1257
  have to use the residue to bring up a family for a number of years after the death of the salary or wage earner.
  Most important of all, it depends on the type of avoiding action taken. Because of this, I agree with the hon. and learned Member for Solihull (Mr. Grieve) that it is time for a cool look at this to see if we can get some measure of equity in these arrangements for small estates. However, this is hardly the time for such concessions. Because of this, I cannot support the Clause.
  5.0 p.m.
  Mr. Geoffrey Hirst: I have sat through the debates on many Finance Bills and, even when the conditions were right, I have heard the argument that it is not the right time for amendments to the law advanced on countless occasions. It is one of the standard arguments put forward by Governments. It is one of the ways in which a Government back bencher, with friendly feelings towards a proposition made by the Opposition, gets himself out the quandary of supporting it, as I and other hon. Members know only too well.
  The root of the problem, as my hon. and learned Friend the Member for Solihull (Mr. Grieve) pointed out, is that this country should long ago have introduced a legacy duty system on the lines of the French system. Both sides of the House bear some responsibility for not having introduced such a system before. Such a system would probably have obviated the necessity of people conniving and finding ways of avoiding duty, because under such a system family connections would be considered and the rate would be reasonable and would be seen to be fair. I have always argued that, given those conditions, people will pay—not readily, I admit, but they will pay their taxes and dues. When a duty decomes monstrously high and disproportionately high in relation to small estates, people will do all they can to avoid paying it.
  The force of the argument advanced by my hon. Friend the Member for Finchley (Mrs. Thatcher) is that the option is not available to most people. The various arrangements of resort to the Married Women's Property Act and insurance schemes involve pretty large premiums over a fairly long time if any
  1258
  real value is to be derived from them. They are not applicable in the case of smaller estates, especially where the estate largely consists of property, namely, one dwellinghouse.
  My constituency is no different from any other in this regard, in that a large number of people have houses of the sort of value which is represented by the slightly increased exemption rate provided in the Clause. This is the main virtue of the Clause. I look upon this as a reasonable step forward. It does not satisfy me. I must inform the Financial Secretary that the Clause does not go far enough for me. I must also tell him that I am a gunner and, even though I have moved my position in the House, I can predict the range from here to the Treasury bench as well as I predicted the distance from the position I previously occupied to the Treasury bench. In short, I am telling the hon. and learned Gentleman that he will not gain anything from my transfer.
  The Clause does not go far enough. However, it is a worthy step forward. The argument that this concession cannot be met revenue-wise in view of all the other things happening in the Finance Bill is nonsense. It is about time that Government back benchers sided with us in our efforts to ensure that small estates are given some alleviation in view of the inflation which is growing all the time.
  Sir Gerald Nabarro: I rise to support the Clause. I congratulate my hon. Friend the Member for Finchley (Mrs. Thatcher) on the very moderate terms in which she proposed it. I thought that she was rather less strong in her advocacy than I would have been in similar circumstances, for I have always regarded Estate Duty as a curse, an affliction, and a brake upon enterprise throughout the normal working lives of men and women.
  I want to put to the House the position of Estate Duty in relation to our total revenues.
  Mr. Sheldon Mr. Sheldon rose—
  Sir G. Nabarro: I will give way in a moment.
  Mr. Barnett: The hon. Gentleman should give way now.
  Sir G. Nabarro: The hon. Member for Heywood and Royton (Mr. Barnett) should not interrupt from a sedentary position. It is against the rules of order. I will give way, if only to get some peace and quietness and to stop the hon. Member for Heywood and Royton from "yapping".
  Mr. Sheldon: The hon. Gentleman said that Estate Duty was a brake on enterprise. Will he give the House some instances of people who do not work quite so hard because they are frightened of the Estate Duty which will have to be paid when they die?
  Sir G. Nabarro: In due course. So far I have uttered only a few sentences. The hon. Gentleman is so premature in his interruption. I will give an example in due course. I am at present embarking on the task of putting the yield of Estate Duty into its proper context against the yield of the whole of our revenues. This year we raised approximately £10,000 million. In 1965–66 the Treasury estimated that the yield from Estate Duty in total would be £280 million. In the event, the yield in 1965–66 was £293 million. The Treasury made an error of £13 million. For 1966–67 the Treasury has increased its estimate to £310 million. There is an increase of £17 million anticipated in the yield from Estate Duty.
  I do not believe that this is on account of a Treasury's supposition that a greater number of men and women will die this year than died last year, or that a greater number of rich people had their deaths anticipated by the Treasury in this year than last year. It is an expression of the dedication of the Treasury estimators to the principle of continuous inflation. The rise in the yield from Estate Duty from £293 million last year to £310 million this year—an increase of £17 million—is of the order of 5 per cent. That is the level of inflation expected by the Treasury. This inflationary process has been going on, though under Tory Governments to a much lesser extent, for many years past. The alleviation of duty on small estates has not kept pace with the rate of inflation. I believe that to be the objective of the Clause. It is to create a proper relationship between the erosion in the value of money, and therefore in the value of estates, on the
  1260
  one hand, and rates of Estate Duty on the other hand.
  My hon. Friend the Member for Finchley sits for an urban constituency of London which, she has kindly informed me, has about 25,000 houses in it. That is a much greater number of houses than in a rural constituency, because my hon. Friend's constituency is an urban constituency. I have nothing like that number of houses in my constituency, because there are thousands and thousands of acres of open farmland and horticultural land.
  That raises the question which is the parallel of what my hon. Friend the Member for Finchley said. It raises the question of the liability to Estate Duty of the small farmer and the horticultural grower. Although the Financial Secretary would respond to my point straight away and say that benevolent Tory Administrations of earlier years alleviated Estate Duty on agricultural and horticultural holdings and on woodland by 45 per cent.—and the hon. and learned Gentleman would be correct in paying a tribute to my Tory predecessors in the House—still the effect of Estate Duty on a small farm or on a smallholding may be devastating at the present rates and may cause the break-up of that small farm or smallholding or a grave loss of viability due to the necessity of the heir to sell a part of the farm to meet Estate Duty. This is aggravated by the very high price of farmland and horticultural holdings. Grade A farmland today commands the astronomical figure of £300 an acre.
  Mr. W. R. Rees-Davies: More.
  Sir G. Nabarro: My hon. Friend says "more". It may indeed be valued more highly in the Isle of Thanet and in the lush pastures of Worcestershire. The inflation since the war has been steady and has been reflected in the price of farmland.
  I want to reinforce the point put by my hon. Friend the Member for Finchley about the difficult position in which a widow finds herself, with Estate Duty to pay, when her sole asset is very often her house. I give the parallel case of a small farmer or horticulturist who has to break up the holding, left to him, on account of liability to Estate Duty, which must

  1261
  be paid in cash. A certain amount has been done about this over the years, but the principle I plead for today is that there should be greater relief on a scale, increasing year by year, commensurate to the erosion in the value of money caused by inflation.
  Now I turn to the intervention of the hon. Member for Ashton-under-Lyne (Mr. Sheldon). Of course there is great diminution of effort during working life on account of the prospects of liability to Estate Duty.
  Mr. Barnett: That is what I said.
  Sir G. Nabarro: The hon. Member for Ashton-under-Lyne contested it. Evidently there is another split on the benches opposite. The fact is that every person faced with any substantial prospective liability for Estate Duty spends hundreds of hours during his working life calculating for himself how to avoid paying Estate Duties.
  Mr. Barnett: Oh.
  Sir G. Nabarro: It is no good scoffing at it. Practically every—
  Mr. Barnett: Will the hon. Gentleman give way?
  Sir G. Nabarro: At the end of my sentence. Practically all small investors in unit trusts, linked perhaps with life assurance, in the type of bonds we were discussing earlier in the Finance Bill—M and G bonds and Tyndall bonds were called in aid then—have liability not only to taxation during their working life but to assessment of their estates to death duties and this is a cogent and it is always an important factor in assessing the accumulation of money today. There are hundreds of thousands of such investors.
  Mr. Barnett: The hon. Gentleman's sentence was rather long. He has given an example. He has conjured up the picture of millions of workers at the factory bench, who are not paying Estate Duty at all. He said that he would give examples. He gave examples not of workers who will be affected by the tax on incentives but of small investors. But the small investors are not the sort of people paying this kind of Estate Duty.
  Sir G. Nabarro: This is incredible. The hon. Gentleman—
  Mr. Barnett: The small investor—
  Sir G. Nabarro: We are not in Committee.
  Mr. Barnett: The small investor the hon. Gentleman is talking about would not be paying it.
  Sir G. Nabarro: The hon. Member sits for Heywood and Royton, an industrial constituency. His abysmal ignorance of the habits, knowledge and earning capacity of the men on the shop floor should be demonstrated to his constituents at the next General Election. He knows so little about the habits of industrial workers that he is unfit to represent them. There are about 4 million small investors in this country and the overwhelming majority are industrial workers. Hundreds of thousands of small estates are assessed to Estate Duty every year and a high percentage of them are industrial workers. The hon. Member belongs to the Keir Hardie era of Socialism.
  I believe that this would be a valuable Clause. It will be a precursor of requests for larger, and more substantial, concessions next year if an advance is not conceded this year. I hope that the Financial Secretary, in replying to what has been in the last few moments a somewhat ragged debate—caused by the irrelevant interventions of his hon. Friend the Member for Heywood and Royton—will have some special regard to the importance of the small farmer and the small horticulturist and the impact that Estate Duty is making on their affairs.
  Mr. J. M. L. Prior: Hear, hear.
  Sir G. Nabarro: I am glad to see my hon. Friend the Member for Lowestoft (Mr. Prior) here giving me powerful support from the back benches, for he has great knowledge of agricultural matters.
  5.15 p.m.
  Mr. MacDermot: Perhaps I should begin by congratulating the hon. Member for Shipley (Mr. Hirst) upon his maiden speech from below the Gangway. As one who has always listened to him with great pleasure for many years in these debates, it is surprising to think that he

  1263
  has not been sitting below the Gangway all the time. I think that he has found his spiritual home. We all look forward to hearing what salvoes he has to fire from his artillery in many debates to come.
  This has been what is politely called a wide-ranging debate, although the Clause is fairly narrow in its objective. I congratulate the hon. Lady the Member for Finchley (Mrs. Thatcher) on the moderate way in which she moved its Second Reading. Obviously, the proposal in itself has attractions, but I have the difficult task of advising the House not to accept it, not on grounds which reject the idea, but because, as was made plain by my right hon. Friend in his Budget speech, this is not a year in which he is able to grant reliefs and concessions.
  The hon. Lady pointed out, quite fairly, that if we accepted the Opposition's proposal to abolish the premium provisions in the Selective Employment Tax, we would have what she described as plenty of money to play about with. As she knows, my right hon. Friend is not disposed to accept that advice and I, unfortunately, find myself in the position of not having plenty of money to play about with.
  My hon. Friend the Member for Heywood and Royton (Mr. Barnett) made the very fair point that, when one is considering proposals of this kind which attract sympathy, one has to compare them with many other similar proposals which could be made. In Committee, we discussed, for example, a proposal for raising the limit of the old-age exemption reliefs. That was another thing I had to advise the Committee to reject while having no objection in principle to what was proposed.
  The hon. Lady correctly told the House the history since the war of this exemption, as it is, for the smallest estates. The surprising fact—it certainly surprised me—is that, from 1894 until 1946, there was no change in the figure, which was as small as £100.
  Mrs. Thatcher: The value of money was different.
  Mr. MacDermot: It was not that different. The value of money was stable when the Labour Government, after the war, raised the level to £2,000. That was
  1264
  a real increase in every sense over 1894. The hon. Lady correctly told the House of the changes made since 1946.
  The proposal contained in this Clause is deserving and must be considered and take its turn with other claims for tax relief when my right hon. Friend is in a position to direct his mind to them.
  A number of hon. Members supported their argument for the new Clause by reference to the example where the whole, or almost the whole, of the estate was a dwelling house, perhaps a dwelling house in which the widow continued to live. The existing exemption will still cover that kind of example in nearly all cases. Hon. Members may have seen some interesting figures recently published by the Co-operative Permanent Building Society showing the results of regional analysis of the cost of houses today. Whereas, on average, the cost is approaching the £5,000 mark in the South-East, in other parts of the country the price is very much lower. I cannot remember the precise figure, but I think that the average for the whole of the country was about £3,800.
  If that is the sole asset, the widow would be completely exempt. If there were other assets and the value of the estate went a little above the £5,000 figure, a small amount of duty would be payable; but with land or property, including, of course, the dwelling house, there are considerable spreading provisions, so that the payments could be spread over eight years forward. This would also apply to smallholders to whom the hon. Member for Worcestershire, South (Sir. G. Naharro) referred.
  Mr. Gower: I appreciate what the hon. and learned Gentleman has said, but does he not agree that it may be misleading in this connection to refer to average figures? It is true that house prices in the South-East may average about £5,000 and about £3,800 in other parts of the country, but these days there are many dwellings which have now topped £5,000 and which were formerly worth perhaps only £1,500.
  Mr. MacDermot: I accept that and I was not trying to suggest anything to the contrary.
  A number of hon. Members, led by the hon. and learned Member for

  1265
  Solihull (Mr. Grieve), urged us to take a long, cool look at the whole subject of Estate Duty. This is something which my right hon. Friend was urged to do by a number of hon. Members last year. I said then that no doubt in the fullness of time this was a subject to which my right hon. Friend would be able to turn his reforming zeal. I think that there is a general feeling throughout the House that when time can be found to do it, this is a part of our tax system in which great improvements could be made. But that is not something which can be done this year.
  The estimated cost of the new Clause would be £1 million in the first year and £2 mill on in a full year.
  Mr. John Peyton: I was extremely disappointed when the Financial Secretary rose to speak before I had been able to catch your eye, Mr. Deputy Speaker, but I am now exceedingly glad, because I now have the opportunity to comment on what he has had to say.
  I was impressed, although not at all surprised, by the modesty of the proposal of my hon. Friend the Member for Finchley (Mrs. Thatcher) and the moderation with which she put it forward, which is not to say that my hon. Friends and I would not like to see the proposal accepted. I am very disappointed by the arid nature of the Financial Secretary's reply. He did his best to dress it up and he put it in the most courteous and pleasant manner, but nothing was offered to the House on this important proposal.
  I am always interested in interventions by members of the accountancy profession, particularly from the Government back benches, on Finance Bill matters, and when the two rôles coincide, they become even more interesting, because Government back benchers are particularly concerned to build up a certain amount of good will by supporting their Government, bad as they may be. They relieve their consciences and make way for their subsequent very polite criticism of the Government by every now and again giving them a harmless pat on the hack and saying that they are quite right, and then we have a wishy-washy argument about looking over the whole field and not thinking too much about one item.
  1266
  I was interested, therefore, in the speech of the hon. Member for Heywood and Royton (Mr. Barnett), who seemed to be speaking not so much to the brief on the Clause, as to the brief of the accountancy profession. In other words, he was saying that nobody who did not have enough money to avail himself of expensive advice was worth any consideration. I cannot help suspecting that there are many people with estates greater than—
  Mr. Barnett rose—
  Mr. Peyton: No, I will not give way; the hon. Gentleman's intervention earlier was very long.
  Mr. R. T. Paget: Give way.
  Mr. Peyton: I am in the middle of a sentence. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) was very patient and his patience was ill-rewarded by the length of the hon. Gentleman's intervention.
  I was in the middle of asking how many people in the hon. Gentleman's constituency left with an estate of £5,000 were intimately acquainted with the provisions of the Married Womens Property Acts and the advantages to be gained from a knowledge thereof. I suspect that there are very few.
  I have long thought death duties to be a particularly cruel form of taxation. They come at a time of grief and unhappiness and with small estates, when provision has not been made for a widow, they come at a very bad time, indeed. Those people covered by the new Clause are particularly deserving of more serious treatment than was suggested by the hon. Member for Heywood and Royton, or the hon. Member for Ashton-under-Lyne (Mr. Sheldon).
  The Financial Secretary commented that this has been a wide-ranging debate. I am sure that he did not intend that as any criticism of you, Mr. Deputy Speaker, But this is a subject which is bound to range very widely. I am surprised at the shortness of the debate and the fact that it has not gone a good deal wider than it has. My hon. Friend the Member for Worcestershire, South was perfectly right and well within the terms of the

  1267
  new Clause to raise the issue of small businesses, smallholdings, horticultural or otherwise, which are very much affected and which we should now be carefully considering.
  This is a matter which must always be pressed on a Government of a party many of whose supporters believe taxation to be a good thing with useful social functions to perform. What my hon. Friend the Member for Shipley (Mr. Hirst) said about taxation being fair is something of which particularly a Socialist Government must be constantly reminded.
  I am sorry that the debate did not draw anything very much from the Financial Secretary. The hon. and learned Gentleman ended with a promise at least to the extent of being able to have a long, cool look. As far as I am concerned, a long, cool look from the present Government must be like a stare from the Medusa and almost certain to have a petrifying effect. I am sure that my right hon. Friend the Member for Enfield, West (Mr. fain Macleod) will do so with all his customary force and ability, but in the limited and lame vocabulary with which I am endowed, I express my profound disappointment that the Financial Secretary found his hands so tied by his absent master that he was unable to make any more friendlier noises.
  The cause of small people was one which the Labour Party affected to fight from these benches for many years, but, given the chance to make a minor concession, it has turned it down in the most vapid way as though it were a matter of no importance. I look forward to hearing my right hon. Friend expressing his disappointment and I hope that we shall be able to follow him into the Lobby in the face of the Government's rejection of the Clause.
  5.30 p.m.
  Mr. Iain Macleod: My hon. Friend the Member for Yeovil (Mr. Peyton) has ex

  Division No. 102.]

  AYES

  [5.32 p.m.

  Alison, Michael (Barkston Ash)

  Batsford, Brian

  Birch, Rt. Hn. Nigel

  Allason, James (Hemel Hempstead)

  Beamish, Col. Sir Tufton

  Black, Sir Cyril

  Astor, John

  Bell, Ronald

  Blaker, Peter

  Atkins, Humphrey (M't'n& M'd'n)

  Bennett, Sir Frederic (Torquay)

  Bossom, Sir Clive

  Awdry, Daniel

  Bennett, Dr. Reginald (Gos. & Fhm)

  Boyd-Carpenter, Rt. Hn. John

  Baker, W. H. K.

  Bessell, Peter

  Boyle, Rt. Hn. Sir Edward

  Balniel, Lord

  Biffen, John

  Braine, Bernard

  pressed what I feel. We have received a very arid answer from the Financial Secretary. If there is one doctrine which is intellectually disreputable it is because we cannot help everyone we should help no one. I do not care whether such an argument comes from the Front Benches or the back benches, from the opposite side of the House or from this side, it is not a doctrine to which the House should pay any heed.
  The position is quite simple. We have a useful minor new Clause. The cost is £1 million this year and £2 million in a full year. The Financial Secretary says that the Chancellor, in his wisdom, feels that this is not a year in which this sort of money can be found. That is a question of how one judges priorities. At the beginning of public business today the First Secretary presented the Industrial Reorganisation Corporation Bill—involving £150 million worth of public money. This is the merest fraction of that.
  It is a question of judgment of priorities between the opposite side, of the House and this side, and whether the priorities which my hon. Friend the Member for Finchley (Mrs. Thatcher) has advocated in this and a number of other new Clauses and Amendments should prevail, or whether we should spend money on such things as the I.R.C., the Land Commission, or allow the Civil Service to multiply like rabbits, as it is doing under this present Administration.
  There is a clear distinction on priorities in this matter. This Clause would bring help to comparatively few people but it is something that I feel sure we ought to agree to and because of the answer that we have been given by the Financial Secretary I hope that my hon. and right hon. Friends will join me in the Division Lobby.
  Question put, That the Clause be read a Second time:—
  The House divided: Ayes 155, Noes 217.

  Brewis, John

  Hawkins, Paul

  Osborn, John (Hallam)

  Brinton, Sir Tatton

  Heald, Rt. Hn. Sir Lionel

  Osborne, Sir Cyril (Louth)

  Bromley-Davenport, Lt. Col. Sir Walter

  Heath, Rt. Hn. Edward

  Page, Graham (Crosby)

  Brown, Sir Edward (Bath)

  Heseltine, Michael

  Page, John (Harrow, W.)

  Bruce-Gardyne, J.

  Higgins, Terence L.

  Pardoe, John

  Bryan, Paul

  Hiley, Joseph

  Pearson, Sir Frank (Clitheroe)

  Buchanan-Smith, Alick (Angus, N & M)

  Hill, J. E. B.

  Peel, John

  Buck, Antony (Colchester)

  Hirst, Geoffrey

  Peyton, John

  Burden, F. A.

  Holland, Philip

  Pike, Miss Mervyn

  Campbell, Gordon

  Hordern, Peter

  Prior, J. M. L.

  Carr, Rt. Hn. Robert

  Hunt, John

  Rees-Davies, W. R.

  Clegg, Walter

  Hutchison, Michael Clark

  Renton, Rt. Hn. Sir David

  Corfield, F. V.

  Irvine, Bryant Godman (Rye)

  Ridley, Hn. Nicholas

  Costain, A. P.

  Jenkin, Patrick (Woodford)

  Russell Sir Ronald

  Craddock, Sir Beresford (Spelthorne)

  Johnston, Russell (Inverness)

  Sharples, Richard

  Crawley, Aidan

  Jopling, Michael

  Shaw, Michael (Sc'b'gh & Whitby)

  Crouch, David

  Kimball, Marcus

  Stodart, Anthony

  Dance, James

  Knight, Mrs. Jill

  Stoddart-Scott Col. Sir M. (Ripon)

  Dean, Paul (Somerset, N.)

  Lambton, Viscount

  Summers, Sir Spencer

  Dodds-Parker, Douglas

  Langford-Holt, Sir John

  Talbot, John E.

  Drayson, G. B.

  Lewis, Kenneth (Rutland)

  Taylor, Sir Charles (Eastbourne)

  Eden, Sir John

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

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

  Elliot, Capt. Walter (Carshalton)

  Lloyd, Rt. Hn. Selwyn (Wirral)

  Temple, John M.

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

  Lubbock, Eric

  Thatcher, Mrs. Margaret

  Errington, Sir Eric

  McAdden, Sir Stephen

  Thorpe, Jeremy

  Eyre, Reginald

  MacArthur, Ian

  Turton, Rt. Hn. R. H.

  Fletcher-Cooke, Charles

  Maclean, Sir Fitzroy

  van Straubenzee, W. R.

  Fortescue, Tim

  Macleod, Rt. Hn. Iain

  Vickers, Dame Joan

  Giles, Rear-Adm. Morgan

  Marten, Neil

  Wainwright, Richard (Colne Valley)

  Gilmour, Ian (Norfolk, C.)

  Maude, Angus

  Walker, Peter (Worcester)

  Gilmour, Sir John (Fife, E.)

  Maudling, Rt. Hn. Reginald

  Walker-Smith, Rt. Hn. Sir Derek

  Glover, Sir Douglas

  Maxwell-Hyslop, R. J.

  Walters, Denis

  Goodhew, Victor

  Mills, Peter (Torrington)

  Ward, Dame Irene

  Gower, Raymond

  Mills, Stratton (Belfast, N.)

  Weatherill, Bernard

  Grant-Ferris, R.

  Mitchell, David (Basingstoke)

  Webster, David

  Gresham Cooke, R.

  Monro, Hector

  Wells, John (Maidstone)

  Grieve, Percy

  More, Jasper

  Whitelaw, William

  Gurden, Harold

  Morgan, W. G. (Denbigh)

  Wills, Sir Gerald (Bridgwater)

  Hall, John (Wycombe)

  Morrison, Charles (Devizes)

  Wilson, Geoffrey (Truro)

  Hamilton, Michael (Salisbury)

  Munro-Lucas-Tooth, Sir Hugh

  Winstanley, Dr. M. P.

  Harris, Frederic (Croydon, N.W.)

  Murton, Oscar

  Wood, Rt. Hn. Richard

  Harris, Reader (Heston)

  Nabarro, Sir Gerald

  Younger, Hn. George

  Harrison, Brian (Maldon)

  Nicholls, Sir Harmar

  Harrison, Col. Sir Harwood (Eye)

  Noble, Rt. Hn. Michael

  TELLERS FOR THE AYES

  Harvey, Sir Arthur Vera

  Nott, John

  Mr. Pyni and Mr. Grant.

  Harvie Anderson, Miss

  Onslow, Cranley

  NOES

  Albu, Austen

  Chapman, Donald

  Forrester, John

  Allaun, Frank (Salford, E.)

  Coe, Denis

  Fowler, Gerry

  Alldritt, Walter

  Cousins, Rt. Hn. Frank

  Fraser, John (Norwood)

  Allen, Scholefield

  Crawshaw, Richard

  Fraser, Rt. Hn. Tom (Hamilton)

  Archer, Peter

  Crosland, Rt. Hn. Anthony

  Freeson, Reginald

  Armstrong, Ernest

  Dalyell, Tam

  Galpern, Sir Myer

  Ashley, Jack

  Darling, Rt. Hn. George

  Gardner, A. J.

  Atkins, Ronald (Preston, N.)

  Davidson, Arthur (Accrington)

  Garrow, Alex

  Atkinson, Norman (Tottenham)

  Davies, Dr. Ernest (Stretford)

  Ginsburg, David

  Bartlett, Joel

  Davies, G. Elfed (Rhondda, E.)

  Gourlay, Harry

  Barter, William

  Davies, Robert (Cambridge)

  Gregory, Arnold

  Beaney, Alan

  Dempsey, James

  Grey, Charles (Durham)

  Bence, Cyril

  Dewar, Donald

  Griffiths, David (Rother Valley)

  Bennett, James (G'gow, Bridgeton)

  Diamond, Rt. Hn. John

  Griffiths, Rt. Hn. James (Llanelly)

  Bidwell, Sydney

  Dickens, James

  Griffiths, Will (Exchange)

  Binns, John

  Dobson, Ray

  Hamilton, James (Bothwell)

  Bishop, E. S.

  Doig, Peter

  Hamilton, William (Fife, W.)

  Blackburn, F.

  Driberg, Tom

  Hannan, William

  Boardman, H.

  Dunn, James A.

  Henig, Stanley

  Booth, Albert

  Dunnett, Jack

  Herbison, Rt. Hn. Margaret

  Bottomley, Rt. Hn. Arthur

  Dunwoody, Mrs. Gwyneth (Exeter)

  Hilton, W. S.

  Bowden, Rt. Hn. Herbert

  Dunwoody, Dr. John (F'th & C'b'e)

  Hooley, Frank

  Braddock, Mrs. E. M.

  Eadie, Alex

  Horner, John

  Bradley, Tom

  Edwards, Rt. Hn. Ness (Caerphilly)

  Houghton, Rt. Hn. Douglas

  Brooks, Edwin

  Edwards, Robert (Bilston)

  Howarth, Harry (Wellingborough)

  Brown, Hugh D. (G'gow, Provan)

  Ellis, John

  Howarth, Robert (Bolton, E.)

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Evans, Albert (Islington, S.W.)

  Howie, W.

  Brown, R. W. (Shoreditch & F'hury)

  Evans, Ioan L. (Birm'h'm, Yardley)

  Hoy, James

  Buchan, Norman

  Fernyhough, E.

  Hughes, Roy (Newport)

  Butler, Herbert (Hackney, C.)

  Finch, Harold

  Hunter, Adam

  Butler, Mrs. Joyce (Wood Green)

  Fitch, Alan (Wigan)

  Irvine, A. J. (Edge Hill)

  Callaghan, Rt. Hn. James

  Fletcher, Raymond (Ilkeston)

  Jackson, Colin (B'h'se & Spenb'gh)

  Cant, R. B.

  Fletcher, Ted (Darlington)

  Jenkins, Hugh (Putney)

  Carmichael, Neil

  Foot, Sir Dingle (Ipswich)

  Jenkins, Rt. Hn. Roy (Stechford)

  Carter-Jones, Lewis

  Ford, Ben

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

  Jones, Dan (Burnley)

  Morgan, Elystan (Cardiganshire)

  Sheldon, Robert

  Jones, J. Idwal (Wrexham)

  Morris, Alfred (Wythenshawe)

  Shinwell, Rt. Hn. E.

  Kelley, Richard

  Morris, John (Aberavon)

  Shore, Peter (Stepney)

  Kenyon, Clifford

  Moyle, Roland

  Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

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

  Mulley, Rt. Hn. Frederick

  Silkin, John (Deptford)

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

  Newens, Stan

  Silverman, Julius (Aston)

  Kerr, Russell (Feltham)

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

  Silverman, Sydney (Nelson)

  Lawson, George

  Norwood, Christopher

  Slater, Joseph

  Ledger, Ron

  Oakes, Gordon

  Small, William

  Lee, John (Reading)

  Ogden, Eric

  Spriggs, Leslie

  Lestor, Miss Joan

  O'Malley, Brian

  Steele, Thomas (Dunbartonshire, W.)

  Lever, Harold (Cheetham)

  Orbach, Maurice

  Swain, Thomas

  Lever, L. M. (Ardwick)

  Orme, Stanley

  Thornton, Ernest

  Lewis, Ron (Carlisle)

  Oswald, Thomas

  Tinn, James

  Lomas, Kenneth

  Owen, Dr. David (Plymouth, S'tn)

  Tomney, Frank

  Luard, Evan

  Owen, Will (Morpeth)

  Tuck, Raphael

  Lyons, Edward (Bradford, E.)

  Page, Derek (King's Lynn)

  Urwin, T. W.

  Mabon, Dr. J. Dickson

  Paget, R. T.

  Varley, Eric G.

  McCann, John

  Palmer, Arthur

  Wainwright, Edwin (Dearne Valley)

  MacColl, James

  Pannell, Rt. Hn. Charles

  Watkins, David (Consett)

  MacDermot, Niall

  Park, Trevor

  Weitzman, David

  Macdonald, A. H.

  Pearson, Arthur (Pontypridd)

  Wellbeloved, James

  McGuire, Michael

  Pentland, Noman

  Wells, William (Walsall, N.)

  Mackenzie, Gregor (Rutherglen)

  Perry, Ernest G. (Battersea, S.)

  Whitaker, Ben

  Mackintosh, John P.

  Price, Thomas (Westhoughton)

  Whitlock, William

  Maclennan, Robert

  Price, William (Rugby)

  Willey, Rt. Hn. Frederick

  McNamara, J. Kevin

  Probert, Arthur

  Williams, Alan Lee (Hornchurch)

  MacPherson, Malcolm

  Randall, Harry

  Williams, Clifford (Abertillery)

  Mahon, Peter (Preston, S.)

  Rankin, John

  Williams, W. T. (Warrington)

  Mahon, Simon (Bootle)

  Rees, Merlyn

  Willis George (Edinburgh, E.)

  Mallalieu, E. L. (Brigg)

  Rhodes, Geoffrey

  Winterbottom, R. E.

  Manuel, Archie

  Roberts, Albert (Normanton)

  Woodburn, Rt. Hn. A.

  Mapp, Charles

  Roberts, Goronwy (Caernarvon)

  Yates, Victor

  Marquand, David

  Robertson, John (Paisley)

  Zilliacus, K.

  Mayhew, Christopher

  Robinson, Rt. Hn. Kenneth (St. P'c'as)

  Mellish, Robert

  Robinson, W. O. J. (Walth'stow, E.)

  TELLERS FOR THE NOES:

  Milian, Bruce

  Ross, Rt. Hn. William

  Mr. Charles R. Morris and

  Miller, Dr. M. S.

  Rowland, Christopher (Meriden)

  Mr. Harper.

  Mitchell, R. C. (S'th'pton, Test)

  Rowlands, E. (Cardiff, N.)

  New Clause.—(STAMP DUTY ON FOREIGN BEARER BONDS.)
  In Schedule 1 to the Stamp Act 1891, there shall be added to the exemptions under the heading "Bearer Instrument" the following further exemption:—
  "4. Overseas bearer instruments denominated in currencies other than sterling and issued after the day of 1966 by or on behalf of any foreign state or government, or any foreign municipal body, or any company which is neither resident in the United Kingdom nor controlled directly or indirectly by a company which is so resident".—[Mr. Nott.]
  Brought up, and read the First time.
  Mr. Nott: I beg to move, That the Clause be read a Second time.
  The Chairman: We can discuss, at the same time, new Clause No. 22 entitled "Exemptions relating to stamp duty on foreign bearer bonds":
  In Schedule 1 to the Stamp Act 1891, there shall be added to the exemptions under the heading "Bearer Instrument" the following further exemption:—
  "4. Overseas bearer instruments denominated in currencies other than sterling and issued after the day of 1966 by or on behalf of any foreign state or government, or any foreign municipal body, or any company which is not resident in the United Kingdom".
  Mr. Nott: During the Committee stage, when we were discussing a new Clause which was almost the same as this one, the Financial Secretary conceded that this Stamp Duty yielded practically no revenue and that our proposal would facilitate markets in the earning of foreign exchange. But in giving his two principal objections he claimed that these bearer securities, if exempted, would compete with internal securities. He was implying that they would compete to the detriment of sterling. Secondly, the hon. and learned Gentleman objected to the new Clause because the exemption, he said, would lead to pressure to give similar treatment to other securities.
  The first of the hon. and learned Gentleman's objections was inaccurate unless he was referring to a very special category of overseas bearer bonds denominated in sterling. Frankly, I have never heard of such bonds being handled by London. Nevertheless, the hon. Member for Manchester, Cheetham (Mr. Harold Lever) made this useful and valuable point, and we have included it in the Clause. However, if the Financial Secretary was suggesting that these overseas bearer bonds would compete,

  1273
  as it were, level pegging with internal securities, he is wrong, because residents subscribing for these bonds would have to do so through the premium dollar market and therefore they would have to pay an additional 25 per cent. premium, or whatever it might be. There is, therefore, no competition in that sense between these bonds and what the hon. and learned Gentleman described as internal securities.
  There is therefore only one possible objection, the Financial Secretary's second objection, to be disposed of. If we can dispose of it, I think that the Treasury will accept these Clauses with alacrity. The second objection was that the exemption would lead to pressure to exempt other securities from Stamp Duty. This is a quite extraordinary argument. Is the Treasury Bench saying that because, for instance, the E.C.G.D. enables money to be borrowed at 5½ per cent. for the sake of encouraging our exports of manufactured goods the Chancellor of the Exchequer must give in to demands for cheaper interest rates right across the board? Is the hon. and learned Gentleman arguing that export rebates granted by the Government lead to an obligation to grant similar rebates in all other cases?
  5.45 p.m.
  I repeat the argument which I was trying to make in Committee, that the exemption of this duty would be a great help to London in enabling it to compete with New York and other centres in earning foreign exchange through our invisible earnings. My hon. Friends and I are asking not for a special privilege but for recognition of the obstacles which stand in the way of foreign currency earnings. We also ask that the Chancellor of the Exchequer should get rid of all those anomalies in our Stamp Duty laws which yield practically no revenue. The Financial Secretary admitted that this one yielded no revenue.
  Since the Committee stage, one further point has been made to me. I said then that the City had earned about 1½ per cent. in commissions on half a billion dollars worth of international loans and a further ¼per cent. on another half a billion dollars worth on loans from other centres. But if those overseas bearer bonds were exempted from the 2 per
  1274
  cent. Stamp Duty the foreign exchange earned by banks in Luxembourg would accrue to banks in the United Kingdom. This is another important point, because not only is this Stamp Duty getting in the way of our general business, but it is preventing United Kingdom banks from carrying on a perfectly routine business in the handling of bonds.
  I would draw the Financial Secretary's attention to the statement made while new Clauses similar to these were being discussed in Committee, namely, that United Kingdom companies issue registered stock on which there is a duty of one-eighth per cent. United Kingdom bearer bonds have a Stamp Duty of 3 per cent., and overseas bearer bonds 2 per cent. There is, therefore, no uniformity across the board. I suggest that no one in this country would object to this exemption which would have the effect of increasing our invisible earnings in this country.
  The difference which has been made since we discussed this Clause in Committee is to add, at the suggestion of the hon. Member for Cheetham, the words
  "Overseas bearer instruments denominated in currencies other than sterling".
  This would not affect external sterling bond issues. This is a most important point in the sense that a large number of international loans are denominated in external sterling and United Kingdom residents subscribe for external currency through the premium dollar market. We are referring to what one might describe as ordinary sterling which the United Kingdom resident would use to subscribe for bonds.
  I hope that the Treasury will concede this point. It would give no advantage to one section of the community as against another. The Clause has been tabled merely to help this country with its invisible earnings.
  Mr. Harold Lever: I hope that the House will bear with me while I express some views about this matter. When it came up in Committee I expressed sympathy with the spirit of the Clause, although I could not accept its wording because it left the door open to £ sterling bearer bonds being issued in this country from other countries in the sterling area. I accepted the spirit of the Clause.

  1275
  It is touching to see that the hon. Member for St. Ives (Mr. Nott) has attempted to meet my objection, which was a reasonable one, but I doubt whether he has done so in the drafting—I hope it will be clear that I had no hand in the drafting—because I am not at all sure that the words "other than sterling" have the effect of making it impossible for a sterling area borrower to come to this country and express his bearer bond in Australian currency, for example. As the Clause is worded, he might still be able to do so. I suggest that "sterling" is the wrong expression and that it would be better to specify dollars, deutschmarks, and so on, thus having a comprehensive wording which would exclude a sterling area currency. I am not sure that the drafting has excluded it.
  At this stage of debate on the Bill, a mere expression of opinion will carry no weight until next year, because the exact wording of a Clause has to be accepted by the Treasury, but they cannot accept the Clause as it is drawn.
  I cannot, therefore, vote for the Clause, but I do not say that as a let-out. It contains an error of drafting and there might be legitimate objections because, even if it is not the practice as yet, we would be allowing competition at a discount by Australian bonds. We would induce bearer bonds from Australian borrowers, for example, at a discount because they would be able to issue their bonds without paying the 3 per cent. Stamp Duty on bearer bonds that normally applies in this country.
  Having said that on the technicalities, I say at once that I entirely endorse the intention of the hon. Member for St. Ives that the Revenue would lose nothing and would gain a good deal if it were to exempt overseas bearer bonds couched in dollars, deutschmarks and the like which could be subscribed only in external sterling from the dollar pool. To allow such bonds to come here without bearing Stamp Duty is something to which there could be no objection and which would cost the Revenue nothing in Stamp Duty. If the Revenue does not allow them, all that happens is that the elaborate mechanism of going through Luxembourg is utilised and no Stamp Duty is obtained by the Revenue.
  1276
  It falls into the category of what I call a dog-in-the-manger tax. In other words, it is always possible for the Revenue to produce taxes which inconvenience people and do not bring the Revenue anything. This is one such tax. On considering it, the Revenue should feel that on a proper Amendment which completely ensured that the only bonds to get the benefit were dollar bonds and the like which had to be subscribed from the dollar pool, there would be no objection on grounds of revenue loss because no revenue would be coming in.
  I hope that my hon. and learned Friend the Financial Secretary will not repeat a point which he made in Committee and which does not bear examination. He stated that this was the last point of time when we should encourage further investment in the dollar area and that by facilitating these bearer bonds we would be giving an extra inducement to people to invest in the dollar area, thereby imposing, however small, an additional strain upon our resources. In fact, the reverse is the truth.
  If we allow a new dollar bearer bond into this country and if, for example, we were to lure the hon. Member for St. Ives thereby to subscribe to it, he could do so only by acquiring dollars from the dollar pool. He could only acquire dollars from the dollar pool if he were to induce somebody already holding a dollar security to realise it.
  In the course of such realisation, far from there being any outflow of currency from this country, one-quarter of the realised fund must come into the net that the Chancellor has before it could go into the hon. Member's hands. So that every new dollar bearer bond which became popular on the British market would be a source of dollars to the Chancellor and not a strain upon the reserves. The dollars used to buy it would already have been expended in dollar bonds, but, in addition, one-quarter must come into the Chancellor's net before these bonds could be purchased. If, therefore, the Chancellor wants to take this factor into account, he should be encouraging a tempting choice of bearer bonds of new issue to come here and induce existing holders to sell their existing stocks and thereby produce one-quarter of their realised dollars for the Chancellor of the Exchequer.

  1277
  I wish to make two further short points. The loss of business through these mechanical transactions to avoid the Stamp Duty in Luxembourg is not the main factor. Once people get into the habit of arranging their financial transactions not in the great City of London with normal freedom, convenience and ordinary good sense, but have to go through these convolutions and tortuous exercises to avoid a little Stamp Duty, people begin to wonder whether they should use the City of London at all for these bearer bonds, which produce a not insubstantial revenue for the Exchequer. I cannot think why, for no good reason, we should add to the inconvenience of people dealing in these securities in this country. It is a valuable market.
  My right hon. Friend the Chancellor should not forget that he is a partner in the business that is being transacted. Some might think of him as a senior partner. As to his share of the net profits, he is throwing away good profits which he might have earned, casting aside good business from the country's viewpoint and discouraging useful and convenient connections in the famed areas of the City of London, whose people are still the world's experts in this kind of business. The Chancellor is running the risk of minor damage—I do not want to exaggerate it—for no good reason.
  Although I understand that there will be objection to the Clause as drafted—not with my intervention, but in an attempt to gratify my intervention in Committee—I hope that my hon. and learned Friend the Financial Secretary will make an encouraging sound as to the possibility of our seeing an end to this unnecessary and trivial burden.
  Mr. MacDermot: The new Clause is seriously defective in a number of technical respects. That would of itself at this stage be sufficient reason for me to advise the House to reject it, but the House will, no doubt, wish me also to deal shortly with the questions of principle involved.
  We are dealing here with two classes of business, the issuing business and the dealing business. As to the former, it has not been argued at any stage in our debates that business is actually being lost. The argument is that the practice of delivering the bonds in Luxembourg
  1278
  is an undignified one, and the hon. Member for St. Ives (Mr. Nott) suggested that there was a marginal loss owing to the charges of the Luxembourg banks. In fact, the total of foreign bearer bonds issued on the London market has grown considerably in recent years. The total, I understand, since July, 1963 is 775 million dollars, the figure having grown at the steady rate of 250 million dollars a year.
  As to the dealing business, as I pointed out in Committee, London still remains more attractive than other centres, partly because our Stock Exchange permits quotations in the currency of the borrower's choice and partly because dealings in other countries attract taxes which cannot be avoided.
  If we were to accept the proposal which is now before us, there would, I suppose, be a marginal increase in our earnings of foreign exchange in the dealings on foreign bearer bonds, but I agree with my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) that one should not seek to exaggerate that. I thought for a moment that my hon. Friend was doing so, but then he reined himself in and put it fairly and moderately.
  6.0 p.m.
  Let us see what is on the other side of the balance. One starts off with the principle that dealings in bearer securities in the United Kingdom ought to bear and attract Stamp Duty like transfers of registered stocks and shares. The hon. Member for St. Ives criticised the differences in rates and suggested that they were illogical, but the duty on bearers is a different thing from the duty at the time of issue on registered stocks because, of necessity, the duty on bearers is a sort of composition for the ad valorem duty which is chargeable on subsequent transfers in the case of registered stocks. That is why there is that difference.
  The differences between inland and foreign bearers—and at present it is three times the rate of transfer duty for inland bearer bonds and twice the rate for foreign bearer bonds—exist because, on the whole, one would expect the inland bearer bonds to be transferred more frequently in this country than foreign bearer bonds.
  Mr. Nott: The Stamp Duty which I was mentioning was, in every case, the duty

  1279
  on issues. When I mentioned the one-eighth per cent. on registered securities, I was referring to the Stamp Duty on issues, not on transfers.
  Mr. MacDermot: What the hon. Gentleman overlooked is that the Stamp Duty on issue, in the case of a bearer bond, is at the same time a composition of the duty for all future transfers, because the duty cannot be levied on the transfer of a bearer bond. This does not arise in the case of registered stock.
  It is true that, as the law stands, British Stamp Duty can be avoided in practice by the method which we discussed earlier of keeping the bond itself abroad and transferring it, usually, in Luxembourg. But the point then arises which I made previously and was criticised today for making, that if this exemption were given, foreign bearer bond issuing and transferring freely here would be competing with stampable securities as investments for internal investors.
  I repeat that point, and it is still valid in respect of sterling area transactions. It is rightly pointed out that, if they are dollar bonds, the British purchaser would have to acquire the dollars through the premium market. In the case of the sterling area, there is no such prohibition and, whilst we have a voluntary programme in force, it would seem rather anomalous to be granting what in effect is an exemption from duty here in the case of loans raised on the London capital market for borrowers within the sterling area.
  The point that my hon. Friend the Member for Manchester, Cheetham has made about the drafting is right. It was the intention to exclude the Sterling Area, but I am afraid that it does not achieve that because there are many other currencies in the sterling area which are not sterling; for example, Australian currency is not sterling. What the hon. Member for St. Ives is asking is something more narrow than this Clause, and I do not want to shut the door for all time to considering that. Apart from the general difficulties that we feel about the danger of eroding the basis of the duty in general, this would not be an opportune moment to introduce the Clause as it stands, even if it was thought to be right and acceptable otherwise.
  1280
  I have not worried the House with the technical defects in the Clause. If any hon. Member wishes me to explain them, I can do so.
  Mr. Peter Hordern: The Financial Secretary has produced no new argument at all in principle in dealing with the arguments so cogently produced by my hon. Friend the Member for St. Ives (Mr. Nott) and the hon. Member for Manchester, Cheetham (Mr. Harold Lever) during Committee stage. The hon. Member for Manchester, Cheetham pronounced his objections to the form in which the new Clause is framed and, in particular, the reference to sterling. The Financial Secretary has made some comments on that. The practical point which one would like to put is that, in practice, due to the presence of the dollar premium, there are no sterling issues coming on to the London market at all.
  Mr. Harold Lever: The hon. Gentleman has missed the point which I made and which my hon. and learned Friend made. We are saying that, as the Clause is now drafted, sterling bonds other than those subscribable from the dollar pool could come within the exemption, if it were granted.
  Mr. Hordern: I have taken that point and I will come later to the practical difficulties of subscribing for such sterling or Australian bonds. I take the point that the Clause is not well drafted, but I will come later to deal with the practical difficulties of issuing any loans under the system which has been suggested.
  In view of the Government's refusal or inability to produce any reasonable arguments in principle against the Clause, it is important to establish what must be common ground on both sides. The first is that, under the existing situation, these dollar and Deutschmark bonds are being issued in Luxembourg with the full knowledge and approval of the Bank of England. On that, we are completely agreed. We further agree, or should do, that there could be no loss to the Revenue if the bonds were to be issued here, for the simple reason that there can be no yield to the Revenue in any case as matters stand now.
  The third point on which there should be agreement is that there can be no question of evading the exchange control regulations. Anyone who wishes to

  1281
  subscribe to these bonds from this country as a resident of the United Kingdom has to pay the dollar premium to do so.
  I want to revert to the argument which deals with the substantive point that the hon. Member for Cheetham raised, and that is the practical difficulty of anyone in this country subscribing for these bonds, anyway. Generally speaking, these bonds are issued at fixed interest rates, and all of them have a final date of redemption. They are, therefore, thoroughly and fully comparable with other Government bonds and other fixed interest securities.
  The Financial Secretary will and must appreciate that anyone in this country applying for these bonds and having to pay the dollar premium would be acting in a very strange way if he were to accept a flat yield or a redemption yield which was so fully below what was available on comparable bonds issued in this country. Indeed, the only possible reason one can foresee for United Kingdom investors investing in such bonds is because of a feeling of a risk to sterling.
  Mr. Harold Lever: We have gained the dollars.
  Mr. Hordern: That is right. Furthermore, it cannot be argued that if this type of bond were exempted from Stamp Duty it would lead to pressure to exempt other sterling bonds from the duty. It is possible for a United Kingdom resident, having paid the dollar premium, to subscribe for these bonds without the payment of Stamp Duty in other countries. So there can be no pressure from that point of view on other issues of the sterling bonds. That argument cannot be produced, either.
  All the arguments of principle which the Financial Secretary has produced have been carefully shot down on both sides and were entirely anticipated by my hon. Friend the Member for St. Ives when he originally put the Clause both in Committee stage and now.
  On the question of principle, the Government must make up their mind about how valuable invisible earnings are to the country. Certainly I am in no position to lecture the hon. and learned Gentleman opposite, but if this is the scale and
  1282
  standard of the arguments produced by the Government to reject what are very sensible new Clauses, one must seriously ask them to look again at the standard of advice which they are getting.
  No one with any real knowledge of market conditions or of the existing state of the bond market could have produced the kind of arguments in principle which have been put forward by the Government, unless they were based on sheer ignorance, and this is the case with the argument produced today. What advice has been received from the Bank of England as opposed to the Treasury? I cannot conceive that serious advice has been either sought or received from the Bank of England on these questions.
  The Government should stop fussing about what other countries are doing about taxing their issues of dollar bonds or securities. Incidentally, not all are doing so. Only the other day the French, in response to pressure from the Bourse, decided to reduce the tax discrimination against foreign holders of French shares and debentures. Instead of being concerned about what other countries are doing with their duty on issues and on bonds, the Government should recognise the usefulness of invisible earnings, and in particular the City of London's contribution to these invisible earnings.
  During the last 10 years invisible earnings have increased from £350 million to £650 million, and the particular value of them is that there is virtually no import content in these contributions as opposed to the export of manufactures. During the last 18 months we have seen invisible earnings threatened by the Corporation Tax, by the Chancellor's request to the Bank of England to regard carefully the level of investment in overseas countries, and indeed they have been weakened by the weakness of our capital market due to the lack of confidence in the Government.
  The Government's credit yesterday was at its lowest level ever, when War Loan stood at 49.
  Mr. Deputy Speaker: Order. The hon. Gentleman is going very wide of the subject matter of the new Clause.
  Mr. Hordern: I shall come rapidly to the main point.

  1283
  There is, in addition, a large queue of industrial debentures. But the growing capital market of the world is the Euro-dollar market and the purpose of the Clause is to help the City of London to play a greater part in this market. Because of this growing Euro-dollar market, it is essential that we should have as free a hand as possible.
  Since 1963 the number of loans raised on the Euro-dollar market has risen from only 75 million dollars to 775 million dollars. Of this amount, in 1964 and 1965 London produced 600 million dollars, on which it earned 1½ per cent. of commission, and this is a very tidy sum indeed.
  It is clear to those who are experienced in these matters that competition in the Euro-dollar market is increasing, and it is therefore desirable that the City and those banking houses which are experts in these markets should have every possible facility for competing in them. We cannot help but feel that in suggesting that these new Clauses should be rejected the Government have not only refused to adduce any reasonable reason why
  they should be turned down, but that this is consistent with their general attitude towards savings, and their general prejudice against invisible earnings.
  It is this attitude on the part of the Government which will do more harm in the long run, not only to invisible earnings, but to the ability of the City of London to compete against the harsh and sharp competition from other financial centres abroad. The case has been clearly and cogently put by my hon. Friend, and supported by the hon. Member for Cheetham. They have put forward an irrefutable case, and the Financial Secretary has made no attempt to deal with the points of principle. If this Clause is rejected, we shall certainly return to it at the earliest possible opportunity, and meanwhile I must advise my right hon. and hon. Friends to divide the House on these new Clauses.
  Question put, That the Clause be read a Second time:—
  The House divided: Ayes 141, Noes 207.

  Shaw, Michael (Sc'b'gh & Whitby)

  Turton, Rt. Hn. R. H.

  Wells, John (Maidstone)

  Stodart, Anthony

  van Straubenzee, W. R.

  Whitelaw, William

  Stoddart-Scott, Col. Sir M. (Ripon)

  Vickers, Dame Joan

  Wills, Sir Gerald (Bridgwater)

  Summers, Sir Spencer

  Wainwright, Richard (Colne Valley)

  Wilson, Geoffrey (Truro)

  Talbot, Joan E.

  Walker, Peter (Worcester)

  Winstanley, Dr. M. P.

  Taylor, Sir Charles (Eastbourne)

  Walker-Smith, Rt. Hn. Sir Derek

  Wood, Rt. Hn. Richard

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

  Ward, Dame Irene

  Temple, John M.

  Weatherill, Bernard

  TELLERS FOR THE AYES:

  Thatcher, Mrs. Margaret

  Webster, David

  Mr. Younger and Mr. Maker.

  NOES

  Albu, Austen

  Fraser, John (Norwood)

  Morris, John (Aberavon)

  Alldritt, Walter

  Fraser, Rt. Hn. Tom (Hamilton)

  Moyle, Roland

  Allen, Scholefield

  Freeson, Reginald

  Mulley, Rt. Hn. Frederick

  Archer, Peter

  Galpern, Sir Myer

  Newens, Stan

  Armstrong, Ernest

  Gardner, A. J.

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

  Ashley, Jack

  Garrow, Alex

  Norwood, Christopher

  Atkins, Ronald (Preston, N.)

  Ginsburg, David

  Oakes, Gordon

  Atkinson, Norman (Tottenham)

  Gourley, Harry

  Ogden, Eric

  Bacon, Rt. Hn. Alice

  Grey, Charles (Durham)

  O'Malley, Brian

  Barnett, Joel

  Griffiths, David (Rother Valley)

  Orbach, Maurice

  Baxter, William

  Griffiths, Rt. Hn. James (Llanelly)

  Orme, Stanley

  Beaney, Alan

  Griffiths, Will (Exchange)

  Oswald, Thomas

  Bence, Cyril

  Hamilton, James (Bothwell)

  Owen, Dr. David (Plymouth, S'tn)

  Bennett, James (G'gow, Bridgeton)

  Hamilton, William (Fife, W.)

  Page, Derek (King's Lynn)

  Binns, John

  Hannan, William

  Paget, R. T.

  Bishop, E. S.

  Harper, Joseph

  Palmer, Arthur

  Blackburn, F.

  Harrison, Walter (Wakefield)

  Pannell, Rt. Hn. Charles

  Boardman, H.

  Herbison, Rt. Hn. Margaret

  Park, Trevor

  Booth, Albert

  Hilton, W. S.

  Pearson, Arthur (Pontypridd)

  Bottomley, Rt. Hn. Arthur

  Hooley, Frank

  Pentland, Norman

  Bowden, Rt. Hn. Herbert

  Horner, John

  Price, Thomas (Westhoughton)

  Braddock, Mrs. E. M.

  Houghton, Rt. Hn. Douglas

  Price, William (Rugby)

  Bradley, Tom

  Howarth, Harry (Wellingborough)

  Probert, Arthur

  Brooks, Edwin

  Howarth, Robert (Bolton, E.)

  Randall, Harry

  Brown, Hugh D. (G'gow, Provan)

  Howie, W.

  Rees, Merlyn

  Brown, Bob (N'c'tle-upon-Tyne, W)

  Hoy, James

  Rhodes, Geoffrey

  Brown, R. W. (Shoreditch & F'bury)

  Hughes, Hector (Aberdeen, N.)

  Roberts, Goronwy (Caernarvon)

  Buchan, Norman

  Hughes, Roy (Newport)

  Robertson, John (Paisley)

  Butler, Harbert (Hackney, C.)

  Hunter, Adam

  Robinson, W. O. J. (Walth'stow, E.)

  Butler, Mrs. Joyce (Wood Green)

  Irvine, A. J. (Edge Hill)

  Ross, Rt. Hn. William

  Callaghan, Rt. Hn. James

  Jackson, Colin (B'h'se & Spenb'gh)

  Rowland, Christopher (Meriden)

  Cant, R. B.

  Jenkins, Rt. Hn. Roy (Stechford)

  Rowlands, E. (Cardiff, N.)

  Carmichael, Neil

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

  Sheldon, Robert

  Carter-Jones, Lewis

  Jones, Dan (Burnley)

  Shore, Peter (Stepney)

  Chapman, Donald

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

  Silkin, John (Deptford)

  Coe, Denis

  Jones, J. Idwal (Wrexham)

  Silverman, Julius (Aston)

  Cousins, Rt. Hn. Frank

  Kelley, Richard

  Silverman, Sydney (Nelson)

  Crawshaw, Richard

  Kenyon, Clifford

  Slater, Joseph

  Crosland, Rt. Hn. Anthony

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

  Small, William

  Dalyell, Tam

  Kerr, Russell (Feltham)

  Spriggs, Leslie

  Davidson, Arthur (Accrington)

  Lawson, George

  Steele, Thomas (Dunbartonshire, W.)

  Davies, Dr. Ernest (Stretford)

  Ledger, Ron

  Swain, Thomas

  Davies, G. Elfed (Rhondda, E.)

  Lee, John (Reading)

  Symonds, J. B.

  Davies, Robert (Cambridge)

  Lestor, Miss Joan

  Thomas, Iorwerth (Rhondda, W.)

  Dempsey, James

  Lever, L. M. (Ardwick)

  Thornton, Ernest

  Dewar, Donald

  Lewis, Ron (Carlisle)

  Tinn, James

  Diamond, Rt. Hn. John

  Lomas, Kenneth

  Tomney, Frank

  Dickens, James

  Luard, Evan

  Tuck, Raphael

  Dobson, Ray

  Lyons, Edward (Bradford, E.)

  Varley, Eric G.

  Doig, Peter

  McCann, John

  Wainwright, Edwin (Dearne Valley)

  Driberg, Tom

  MacColl, James

  Walden, Brian (All Saints)

  Dunn, James A.

  MacDermot, Niall

  Watkins, David (Consett)

  Dunnett, Jack

  Macdonald, A. H.

  Weitzman, David

  Dunwoody, Mrs. Gwyneth (Exeter)

  Mackenzie, Gregor (Rutherglen)

  Wellbeloved, James

  Dunwoody, Dr. John (F'th & C'b'e)

  Mackintosh, John P.

  Wells, William (Walsall, N.)

  Eadie, Alex

  Maclennan, Robert

  Whitaker, Ben

  Edwards, Rt. Hn. Ness (Caerphilly)

  McNamara, J. Kevin

  Whitlock, William

  Edwards, Robert (Bilston)

  MacPherson, Malcolm

  Willey, Rt. Hn. Frederick

  Ellis, John

  Mahon, Peter (Preston, S.)

  Williams, Alan Lee (Hornchurch)

  Evans, Albert (Islington, S.W.)

  Mahon, Simon (Bootle)

  Williams, Clifford (Abertillery)

  Fernyhough, E.

  Mallalieu, E. L. (Brigg)

  Williams, W. T. (Warrington)

  Finch, Harold

  Manuel, Archie

  Willis, George (Edinburgh, E.)

  Fitch, Alan (Wigan)

  Mapp, Charles

  Winterbottom, R. E.

  Fletcher, Raymond (Ilkeston)

  Marquand, David

  Woodburn, Rt. Hn. A.

  Fletcher, Ted (Darlington)

  Mayhew, Christopher

  Yates, Victor

  Floud, Bernard

  Mellish, Robert

  Zilliacus, K.

  Foot, Sir Dingle (Ipswich)

  Milian, Bruce

  TELLERS FOR THE NOES:

  Ford, Ben

  Miller, Dr. M. S.

  Mr. Charles R. Morris and

  Forrester, John

  Mitchell, R. C. (S'th'pton, Test)

  Mr. Ioan L. Evans.

  Fowler, Gerry

  Morgan, Elystan (Cardiganshire)

  Morris, Alfred (Wythenshawe)

  New Clause.—(UNIT TRUST SAVINGS PLANS.)
  (1) Subject to the provisions of this section a gain shall not be a chargeable gain for the purposes of Part III of the Finance Act 1965 if accruing to a subscriber to a savings plan approved for the purposes of this section during the period of his membership and the gain results from making the subscriptions required by the plan.
  (2) The Commissioners may for the purposes of this section approve a savings plan (not being a life insurance policy) operated by or on behalf of the Manager of an authorised unit trust scheme but shall not approve such a plan unless it is shown to their satisfaction that the plan complies with the following conditions:—

  (a) the subscriptions to the plan are required to be made by payments to the Manager of the plan of equal amounts at regular intervals of not more than three months and the period during which the subscriptions may be made does not exceed twenty years.

  (b) every subscription to the plan is to be applied on the date next available for investment in the purchase of units of an authorised unit trust scheme in the name of the person making the subscription; and

  (c) every net income distribution in respect of any unit so purchased is also applied in the purchase of further such units.

  (3) The aggregate amount of the payments made by a subscriber to a savings plan approved for the purposes of this section or, if he is a subscriber to more than one such plan, to all the plans to which he subscribes in respect of which relief may be claimed under subsection (1) of this section shall not in any year of assessment exceed £250 and in any case where there is such an excess the gains in respect of which relief may be claimed under this section shall be those accruing to the units in the order in which they were purchased (commencing with the first) and the person claiming the relief is a subscriber to more than one plan according to the order of the plans (commencing with the first) but if two or more such plans were commenced at the same time the order in which the plans are to be treated shall be at the option of the subscriber.
  (4) No claims for relief under subsection (1) of this section shall be allowed unless all the subscriptions required by the savings plan have been duly made by the person making the claim for a period of not less than twelve months commencing with the date on which the first such subscription was made.
  (5) On the date on which a subscriber ceases for any reason to subscribe to a savings plan approved for the purposes of this section (being a date which in any event is not more than twenty years after that on which his first subscription was made to the plan) the units of the authorised unit trust scheme which have been purchased with or as a result of his subscriptions to that plan shall for the purpose of calculating the amount of the chargeable gains for which he is liable as from that date
  1288
  be deemed to have been acquired by the subscriber on that date at the selling price quoted on that date by the Manager of the said scheme.
  (6) If in any accounting period the total net gains of a unit trust are apportioned in accordance with section 67 of the Finance Act 1965 any amount so apportioned to any units purchased under a savings plan approved for the purposes of this section shall not be treated under section 37 of that Act as if it were allowable expenditure.
  7. (a) In this section "authorised unit trust scheme" has the same meaning as in section 71 of the Finance Act 1960.
  (b) References in this section to the Manager of an authorised unit trust scheme and to a subscriber to a plan approved for the purposes of this section shall be construed as including references to his nominee and references to units shall in any case where the rules of a savings plan approved for the purposes of this section so permit include references to fractions of units.—[Mr. John Hall.]
  Brought up, and read the First time.
  Mr. John Hall: I beg to move, That the Clause be read a Second time.
  This is a long Clause, but it is rather less complicated than it looks. To understand it and the purpose that lies behind it it is necessary to have a brief review of the impact of the Capital Gains Tax upon unit trusts under existing legislation. At the moment, the Capital Gains Tax arising on a unit trust investment is collected at two points—first, from the gains arising from the transactions of the unit trust itself, subject only to relief from tax on gains arising from the sale of securities to meet the redemptions of units, and, secondly, from the unit holder on the disposal of his shares, subject again to the apportionment of the net gains realised by the unit trust during the appropriate accounting periods which offset the unit holder's net gain on disposal.
  The apportionment procedure was designed to avoid double taxation. It does not do that entirely because the unit trust pays 30 per cent. on its gain, whereas the individual holder may be subject to a lower liability under the alternative computation. One inescapable result of this legislation is that the unit trust managers are required to distribute about 1½ million extra pieces of paper twice a year. This total of about 3 million pieces of paper each year has to be processed by these unit trust managers, the unit holder himself, and by the Inland Revenue, at

  1289
  the expense of a considerable loss of time and money.
  The simple answer would be to levy the Capital Gains Tax at one point only, namely, on the unit holder on the disposal of his shares. This would remove any element of double taxation; it would avoid the present cumbersome and costly method of collection, and it has everything to commend it—which is probably one of the reasons why it has not been accepted by the Treasury. But if the Treasury is not prepared to accept this solution it might be prepared to accept the Clause, which makes some contribution both to a reduction of work and a simplification of the tax system and has, in addition, the great merit of encouraging the small saver.
  Most unit trusts run regular savings plans under which subscribers contribute small regular sums which are automatically invested in unit trusts at the current prices. The half-yearly income which arises from these investments is also reinvested. Unit trusts are unique in their ability to provide this savings service and this type of regular saving which should be encouraged, especially in view of the very great interest which the Chancellor has shown in encouraging small savings of all kinds.
  What faces the small unit holder at the end of 10 years' membership of a plan? To arrive at his Capital Gains liability he must make the following calculations: first, he must calculate the cost of his 120 monthly contributions—assuming that it is a 10-year plan—then he has to calculate the cost of 20 reinvestment additions and the addition of the "franking-on" certificates which he will have received. He then has to calculate, where relevant, and separate, the long-term gains from the short-term gains.
  These are complicated matters and I suggest that in many cases this task is likely to be beyond the capabilities of the average small investor, who is not very sophisticated in tax matters. Indeed, the task of comprehending Capital Gains legislation has proved beyond the ability not only of the accounting and legal professions, but also, in certain cases, the Inland Revenue itself.
  The proposal outlined in the Clause is that the taxpayer should be exempt from
  1290
  Capital Gains Tax in respect of units sold after being accumulated by him under a regular savings plan. The exemption would operate as follows: first, the regular savings plan should be approved by the Inland Revenue. That is important. Subscriptions would have to be made al regular intervals—say, not longer than quarterly—and the period of each plan should be limited in duration to, say, not more than 20 years.
  Secondly, the managers of approved savings plans would issue contributors with an initial certificate and would accept contributions for purposes of this exemption no more than the amount shown on the certificate. Thirdly, the taxpayers would declare their approved savings plans on annual tax returns as they do now for life assurance policies and the total amount of exempted contributions would be limited, I suggest, to £250 per annum, though I would be prepared to accept other suggestions, either up, or, more reluctantly, down.
  6.30 p.m.
  Fourthly, the taxpayers would not be subject to Capital Gains Tax on units realised from the savings plans, but would be required to declare the number of units disposed of. They would not be entitled, naturally, to reclaim Capital Gains Tax paid by the unit trusts and franked-on to taxpayers. Fifthly, on the maturity of the plan or earlier termination, the managers would issue the unit holder, if his units are not then realised, with a certificate of the value of his holding on that date, which would represent his initial cost for the purposes of calculating his ultimate liability for Capital Gains Tax.
  Of course, there is nothing new in proposals to exempt small savers from the effect of taxation. It has been done many times and was done, of course, in the case of certain holdings exempted from normal tax. There are some which are exempted from Capital Gains Tax. Examples are the Savings Certificates and non-marketable securities issued under the National Loans Act, 1939. The latest example is the National Development Bonds the capital gains accretion of which is free of Capital Gains Tax. The price at which Premium Bonds are realised is another example. There is nothing new in the principle of making

  1291
  special tax allowances to encourage small savers.
  I do not know the cost of the new Clause, but against the background of the estimated total yield from Capital Gains Tax as a whole, which is comparatively small, I do not believe that the cost of this concession will be very great. I commend the Clause as a way of reducing the appalling complication, in part, of Capital Gains Tax as it now exists, of reducing the amount of paperwork not only for individual taxpayers but for the Inland Revenue and, above all, of considerably encouraging the small saver.
  Mr. Barnett: Before the hon. Member for Wycombe (Mr. John Hall) started, I was broadly sympathetic to this idea as one which would encourage savings, but I found some of his remarks a little difficult to accept. He made a great deal of the difficulties and complexities of the Capital Gains Tax and its administration and anyone with a little experience would agree that it is somewhat difficult to deal with. But he is wrong to suggest that this Clause, in his words, "will help to reduce the appalling complications". If the Clause is accepted, it would do the exact opposite.
  I do not wish to speak for my own profession, but I am sure that Income Tax inspectors would be appalled if the Clause were accepted, because the administrative problems and anomalies created would be even greater than they are at present. If we are to have Amendments to help along these lines, I would prefer to exempt, say, the first £1,000 of transactions in any given year, rather than this very cumbersome and complicated Clause.
  Mr. Anthony Grant: If that is the hon. Member's view, I am very surprised that he did not support in the Lobby the Clause which I moved to exempt the first £1,000.
  Mr. Barnett: The hon. Gentleman should learn not to be surprised at these things. He has been in the House of Commons a little longer than I have and no doubt he was not as surprised as he says he was.
  Any plan which encouraged the growth of savings—particularly small savings
  1292
  I am delighted to support, but I do not think that the Clause would help. I would prefer the Chancellor to look at the whole question of savings before we have another Budget to see whether he could not bring forward a new and comprehensive proposal for encouraging savings. I cannot accept that this Clause will help in any way.
  Mr. Hirst: The hon. Member for Heywood and Royton (Mr. Barnett) can hardly expect us not to be surprised. We have been surprised at least three times already by him and no doubt he will surprise us further.
  I support the new Clause. Amongst all the talking about a review, we tried hard in Committee to get something on these lines and something ought to be moving. If the right hon. Gentleman cannot help savings as we are trying to do by accepting the Clause, he ought to produce something himself. The Chancellor intimated—although he has done nothing more—that he prefers savings to taxation. Exactly the opposite is his habit. This is a possibility of encouraging the savings movement generally.
  It is no use right hon. and hon. Members opposite imagining that the Capital Gains Tax does not put people off. If it goes on for all time, we might get used to it. I do not readily get used to such things, but some people do. There is no doubt that it is an irritant and that there is some worry and muddle about it. If one could produce a modest scheme for people regularly saving relatively small sums which removed this worry and fear; it would do something essential for the economy, which every Minister on the Treasury Bench has always said is desirable.
  I am grateful to my right hon. and hon. Friends—they are still my right hon. and hon. Friends—for bringing forward this idea. It is certainly ingenious and well-thought-out. If it is not quite right, then, as usual, another suggestion can be made. It is very fortunate that it looks as if the Chief Secretary will reply. He is one up on the Financial Secretary—not in everything but in one thing, which is that he does not trot out the argument that he has to answer a new Clause in detail, because he knows that all Oppositions have to put down new Clauses

  1293
  which are not necessarily perfect to give opportunity to the Government, under the rules of order, to advance their own solutions.
  I hope that the Minister will address himself to the theme behind this proposition. It is a good one. If he cannot meet it, he should say what the Government propose to do to provide something which the nation clearly requires and desires and which the economy needs—an additional attraction for savings and particularly savings in the quarter which this Clause is designed to affect. We do not want the sort of answers which we have had all down the line. Most people cannot be bothered with these small sums once a month. The Clause is designed to try to attract this sort of saver who worries about the Capital Gains Tax.
  Someone has said that the Capital Gains "fax is designed to meet the fees of hon. Gentlemen opposite in the accounting profession. We want to feel that we would avoid that and that we are not to be affected by their bad interpretations of their almost unintelligible law. I hope that we may be helped in our desire to give some attractive conditions to savers generally.
  Mr. Gower: I must, first, declare an interest. I am a director of a management company associated with unit trusts. One of the worst aspects of last year's Capital Gains Tax was the obligation it introduced in relation to the smaller investor, and in saying that I do not limit my reference to those who have invested in unit trusts.
  As my hon. Friend the Member for Wycombe (Mr. John Hall) said, this tax has had a particular impact on unit trusts, not only in the sense of the element paid by the unit trust management company, but also, as the hon. Member for Heywood and Royton (Mr. Barnett) is well aware, by reason of the rather pettifogging sort of record that has to be kept by the unit holder. It may be that, as the hon. Member has constanly asserted, to do that is not difficult for the person who has specialised advice, but I beg him to consider, and I hope the Government will consider—
  Mr. Barnett: I never said it.
  Mr. Gower: If the hon. Gentleman has never said that it is not difficult he has
  1294
  implied that it is easy because everyone can have expert advice—
  Mr. Barnett: No. My hon. Friend, in another context and about another tax, referred to the fact that it was simplicity itself.
  Mr. Gower: I have been present when the hon. Gentleman has intervened in that respect on many occasions. Indeed, in speaking to one new Clause today he said that the effect of Estate Duty could be modified by the skilled advice available to those seeking it.
  Many of the people of whom we are now thinking have perhaps very recently invested in unit trusts. Unit trust development in this country is recent, and it is still small compared with its potential. We wish to encourage this type of investment to a far greater degree than ever before. The lesson to be learned from the first impact of the Capital Gains Tax in its present form is that it tends to be a disincentive to the very smallest and least experienced type of investor. This is the nub of the problem.
  The Chief Secretary to the Treasury (Mr. John Diamond)indicated dissent.
  Mr. Gower: The Chief Secretary may disagree with me, but many unit trust people with whom I have spoken are very anxious about the future development of this movement. Other things have encouraged investment in this field—countervailing causes; it has not necessarily been by the small investors, but rather the more sophisticated investors who have been in unit trusts for a number of years. There is a great deal of evidence to suggest that the tempo of new investment is not increasing at the same rate as it was a year ago. That is the position with which we have to deal.
  This new Clause is a most praiseworthy attempt to provide a remedy. The Government may well say that they can find defects in this proposal, but the Government have been negligent in not coming forward with proposals of their own in this Bill. In the Bill there should have been attempts to iron out the imperfections of the Capital Gains Tax, particularly as those imperfections affect unit trusts. My hon. and right hon. Friends have attempted to frame something to do, that.

  1295
  Hon. Members opposite often say that they are interested in the small investor, and I am willing to give them the benefit of the doubt. I hope that they are genuinely interested in the smaller investor, but I want them to prove it by their actions. This Clause gives them an opportunity to do so. The hon. Member for Heywood and Royton spoke a little while ago like a man who says that he is opposed to sin, but will do nothing to deal with its manifestations, or like a man who says that he is in favour of virtue but does nothing to promote it. Let the Government take the opportunity provided by the Clause.
  6.45 p.m.
  Sir G. Nabarro: I was very cross with the Government when they introduced the massive deterrent to the small savings by ending the friendly society movement which encouraged large subscriptions of the M. and G. and Tyndall type. I said at the time that it might have been a twisting of the friendly society rules originating in the Statute of 1896, but it was a perfectly legitimate twisting in order to attune those rules to contemporary circumstances.
  My hon. Friend the Member for Barry (Mr. Gower) spoke of the unit trust movement as being something quite new. In fact, there were unit trusts before the last war, but they were small and not very numerous. We can thank my right hon. Friend the Member for Taunton (Mr. du Cann) for the tremendous upsurge that has occurred in the movement over the last 10 years. He founded and promoted the Unicorn Trust, which is the precursor of all the trusts that have come into being in recent years.
  The unit trust movement is a massive factor in the accumulation of small savings, and it is one of which Her Majesty's Government are today exceedingly envious. They would like to start a State unit trust in competition, if they could—
  Mr. Grant: Would my hon. Friend agree that it is also a means of saving which is very attractive, as far as we can gather, to the Labour Party itself?
  Sir G. Nabarro: I am most grateful to my hon. Friend. That is so.
  I observed a moment ago that the unit trust accumulations are now reaching
  1296
  massive proportions. I give the House the most recent figure. The aggregation is today approaching £600 million. It would be wrong to say that there has been any slowing-up in the rate of subscription. In fact, in the last few months there has been a golden period for unit trusts. In every Sunday newspaper one opens one finds two, three or four advertisements for unit trusts, all dealing with different aspects of investment, but all attractive in their respective fashions.
  I declare my interest at once. I am chairman of the advisory board to the Midlander Unit Trust. I have a very large interest in these matters, because this is a highly competitive field. From my study in the last few years of the growth of the unit trust movement, and the impact of legislation upon it—notably, the 1965 Finance Bill, with which this new Clause is primarily concerned—I have been made aware of two deterrents to further subscriptions to unit trusts, or brakes on their continuing progress—and I believe that their continuing progress and success is a non-party political matter.
  It is just as much in the interests of a Socialist Chancellor of the Exchequer as it is of a Tory Chancellor of the Exchequer to secure small savings, as a hedge against inflation, for investment purposes, to underpin public investment expenditure—and the remainder of the reasons which hon. Members will know so well—
  Mr. Gower: Before my hon. Friend leaves that particular part of his speech I should like to clear up one thing. I did not suggest that this had not been a time when there had not been much investment in unit trusts, but I suggested that the investment was not coming particularly from the small investor.
  Sir G. Nabarro: I am not sure about that. The last published figure I saw for an average holding in a unit trust was slightly less than £400. I do not believe that large investors with expertise of the stock market and detailed knowledge of equities—which I do not myself claim and, therefore, I rely on unit trusts to do the work for me—seek a shelter or refuge for his funds in unit trusts. It is a fact that the average individual holding in a unit trust today is slightly less than £400.

  1297
  I return to the two deterrents. First, there is the fear in the minds of small investors in regard to a future assessment for Capital Gains Tax. When this point was made by my hon. Friend the Member for Barry, the First Secretary shook his head in vigorous dissent. If he dissents from this, will he go away and look at the book which went out with the Income Tax demand for 1966–67? There were pages and pages of yellow paper demanding that every one of our 19 mil ion Income Tax payers should declare all assets acquired during the preceding chargeable accounting period, the year ended 5th April, 1966.
  Of course any purchaser of unit trust units has to fill those in. Even if one buys unit trust units for one's child those forms have to be filled in. All those subscribers and supporters of the unit trust movement are fearful and apprehensive for a future assessment to capital gains.
  I personally support relief on capital gains in any one year up to an agreed figure of, say, £500 or £1,000, which would serve the purpose which many of us have in mind, but I realise that there are practical difficulties in that. But in the case of unit trust subscriptions those difficulties do not exist. Where there is a recognised savings claim of a unit trust, the terms and conditions of such a trust having been approved by the Board of Trade, it is relatively easy administratively between the Treasury and the Board of Trade to enshrine a savings scheme the proceeds of which up to a given limit should be free of capital gains duty.
  That is the reference in this Clause—the Clause is confined, of course, to Capital Gains Tax—to Part III of the Finance Act, 1965. I say that fear and apprehension of future assessment to capital gains is one of the major deterrents to unit trust subscriptions.
  Now I come to the other deterrent. As we are on Second Reading of a new Clause, Mr. Speaker, I am, of course, well within the rules of order if I talk about exclusions from the Clause, what is not in the Clause but ought to be in the Clause. There should be included in this Clause a reference to the Income Tax position of minors, those under 21
  1298
  years of age, when units in a unit trust have been bought for them by their parents.
  The local policeman in my village, Broadway, Worcestershire, came to me a few months ago—
  Mr. Diamond: I did not want to interrupt the hon. Member but I did not catch the full address.
  Sir G. Nabarro: It is in my constituency. I am speaking here on behalf of my constituents. I do vote for myself at a General Election, which appears to be an important factor in this argument.
  The local policeman came to me with this inquiry, which illustrates the point I am endeavouring to put to the House. He said, "Sir Gerald, I understand that you are chairman of a board of a unit trust." I said, "That is so." He said, "I have bought units in the unit trust for my child and the income is taxed at source, but my child has no other income other than the income from this unit trust and my child is not liable to pay Income Tax. How do I get the Income Tax refunded?" My answer was that I did not know, but I would find out.
  I wrote to the unit trust concerned and this was the answer. A record should be kept by the parent of all sums deducted from Income Tax at source during the minority of the child, but on reaching 21 years of age the child should apply to the revenue for the recovery of the sums paid during the preceding period of 19 years.
  Does anyone argue with me that that is a deterrent to buying units in a unit trust on behalf of a minor? Of course it is a deterrent. Investors will seek other forms of investment which do not involve them in those difficulties and all the administrative work entailed in claiming back that Income Tax deducted over a period of 17, 18, or 20 years. That is an exclusion from this Clause and I am glad to be considered in order in raising it.
  Mr. Speaker: Order. The hon. Member must not trespass too much on my generosity. He has gone as far as he can go on this point.
  Sir G. Nabarro: I am most grateful, as always, to you, Mr. Speaker for your guidance. I have made my point, one inclusion and one exclusion.

  1299
  I say to the First Secretary with the utmost seriousness that we want unit trusts to be promoted successfully and enlarged because of their great impact on small savings. They are a relatively new manifestation in our social system. In recognising those two factors could not the Treasury now remove those obstacles to which I have alluded? It would be a major step forward in removing such obstacles if they accepted the Clause.
  Mr. Peyton: I want to make only a very few short observations. I agree with my hon. Friend in the arguments they have put forward. I was sorry that the only hon. Member who spoke from the other side of the House so cursorily dismissed the very clear arguments made by my hon. Friend the Member for Wycombe (Mr. John Hall).
  I rather wondered why the hon. Member for Heywood and Royton (Mr. Barnett) spoke until it suddenly dawned on me—I am a little slow at grasping these things—that the real point of the operation was to give the Chief Secretary an opportunity of nodding instead of shaking his head and also to give us some warning, as if we needed it, that we were in danger of witnessing once again the shabby performance of a sensible new Clause being rejected by the Government.
  I hope that common sense, fairness and justice, which, I know, are very prominent in the Government's councils, will be allowed to assert themselves and that even if the Chief Secretary may not accept this ingenious Clause nevertheless he may be ready to say something a little more encouraging than we sometimes hear from him. It is simply not good enough for Chancellor after Chancellor to say that he is in favour of savings rather than taxation. How can he get savings? If he can only get savings, the tax bill will be that much lower, but when opportunity offers, as I believe that it manifestly does, in unit trusts, no encouragement is given.
  7.0 p.m.
  The right hon. Gentleman can recall the occasions on which he has taken part in Finance Bill debates from this side of the House, and no doubt he will recollect that on the rare occasions when Conservative Treasury Ministers were obliged, very reasonably, to be negative he felt a
  1300
  little vexed and irritated. Here we find a constant stream of negatives. One has the feeling that the Government are standing over the Bill like a precocious child that has built a rather tall castle of bricks and is alarmed at being asked suddenly to take a brick out of this very precarious and quiet unnecessary edifice, in case the whole thing should crumble in disarray and ruin on the floor.
  I have reached the position where I am utterly indifferent to whether or not the Government enjoy their afternoon, or whether their castle of bricks stands. But here is an opportunity for the Chief Secretary to convince us of his good intentions, even though he may, for some reason which I cannot follow, find it difficult to accept the Clause.
  I fear that he will say that it would impose a too complicated process upon inspectors of taxes. That may be, but if that is his argument I hope that it will add to his absolute determination to produce a better and more satisfactory alternative.
  Mr. Diamond: The whole debate has been based on an assumption that I cannot accept, the assumption that Capital Gains Tax has exercised a major deterrent effect on savings within unit trusts, a form of savings which, I do not need to repeat to the House, for I have said it so many times, the Government are anxious to support, as they are anxious to support all other savings.
  The best argument was that produced by the hon. Member for Worcestershire, South (Sir G. Nabarro), who said that the period since the introduction of Capital Gains Tax had been a golden period for the unit trust movement. He was ably supported by his hon. Friend the Member for Barry (Mr. Gower), who went on to add to our information, which I accept, that savers in the unit trusts included a number of larger as well as smaller savers. Both these are facts which we need not argue about.
  Therefore, I come to the key question addressed to me by the hon. Member for Shipley (Mr. Hirst), when he asked what the Government would do about the problem of the deterrent effect and whether the taxpayer would get used to it. This was a serious question. It would be ridiculous for me to attempt to maintain that all the fuss of it, the need to fill in forms and the need to pay tax, quite

  1301
  apart from the payment of tax itself, were a pleasure for every unit or investment trust holder.
  I should not dream of saying that. Nevertheless, the Government believe that there is nothing in the structure of Capital Gains Tax or in the form in which it is applied that will have a long-term deterrent effect on savings of this kind. The Government want to encourage them, and they believe that the taxpayer will get used to it, just as he gets used to ever other kind of form filling.
  We have had many complaints, including professional complaints and complaints from industrialists, about the nuisance of Capital Gains Tax, but not one about the old taxes to which they are accustomed. The complaints have been only about the new taxes to which they are not accustomed.
  The assumption on which the whole case is based, namely, that Capital Gains Tax is a deterrent to small savings in unit trusts, is shown to be not sustained at present, because far from there being any falling off there has been a tremendous growth, and we do not believe that it will be sustained in the long run because people will get used to what they have to do.
  Mr. Gower: The right hon. Gentleman is making his assertion with great confidence because it is one that can never be disproved. Whatever level future investment reaches, we shall never be able to demonstrate that it might not have been even larger had these deterrent effects not been present.
  Mr. Diamond: I invite the hon. Gentleman to remember the very anxious speeches that he made a year ago, in which he was quite excited about the trouble that there would be for the managers of unit trusts, of which he is one, because of the damaging effect of the Capital Gains Tax. I invite him to recollect those speeches and to recognise that up to now he has not been proved right. Let me put the matter at its minimum terms. Would the hon. Gentleman, please, not worry himself unduly with unnecessary anxiety? It will make him thin over the years ahead. "Wait for it is" what I would say, in other terms.
  For the moment, I cannot accept that there is any real trouble about Capital Gains Tax having to be collected, as it
  1302
  has to be collected from unit trust holders and from any other kind of investor.
  Sir G. Nabarro: It is the fact, established during the last few years, that demand for unit trust units is high when the market is high. That has been the condition during the last few months But the stock markets are now slipping very badly.
  Mr. Donald Chapman: Only yesterday.
  Mr. G. Nabarro: Much more than that. They are slipping very badly. The hon. Gentleman was not here during my speech, otherwise he would have learned a lot about unit trusts. The stock markets have slipped very badly, and as they slip the demand for unit trust units will no doubt slip as well. That is the point that my hon. Friend the Member for Barry (Mr. Gower) was making.
  Mr. Diamond: The hon. Gentleman is further establishing my case by demonstrating that investment in unit trusts goes with investment in the market generally and has nothing to do with the special difficulties of Capital Gains Tax.. We are at one on this.
  Having dealt with the general principle, I now come to the application of this interesting proposal. I thank my hon. Friend the Member for Heywood and Royton (Mr. Barnett), who spoke shortly but absolutely on the point. He made clear that the proposal had been put forward with a view to saving complication but could not be said to save any. One might almost say that it added to the complexity. All it could be said to save was Capital Gains Tax. It could be said to remove Capital Gains Tax from the investor in a small savings scheme as here defined.
  I repeat that the Government are anxious to encourage small savings, but there is nothing in the definition of small saving here which would be particularly attractive. For example, there is no compulsion on the small saver to continue small saving. He could enter a scheme, but there is no contract under which he would be compelled to continue paying year by year the instalments to which the hon. Member for Wycombe (Mr. John Hall) referred. He spoke about a maximum period of 20 years. It could be a maximum of 20

  1303
  years, but it could be a minimum of six months or a year. The unit trust holder could enter a scheme and then withdraw as often as he wanted.
  It is a system where one cannot lose, although one may win. Supposing that the taxpayer were a substantial investor and transferred investment from another source and entered a savings scheme. Under the new Clause, he would win on that, because he would not pay Capital Gains Tax. Then, at any moment when it suited him, he could withdraw from it. From that point on, admittedly he would start to pay Capital Gains Tax, but there is nothing here to compel him and nothing in anything we have heard proposed to compel him to carry on saving.
  I am not concentrating only on the form of words used in the Clause. There is nothing in the spirit of it to compel a saver to continue saving. Therefore, there is no case whatever for saying that Capital Gains Tax is a deterrent to further investment in unit trusts, and there is nothing here proposed to help in the complications. I have admitted that there is an element of complication in the present system, and I should be glad to get rid of it, but we have reached what we think is the least complicated method for collecting Capital Gains Tax in relation to unit trusts. There is nothing here to save that complication.
  There would be an immediate outcry from competing bodies such as building societies and investment trusts which would not be able to run this kind of scheme. They would protest that a competitor in the savings market was being given an advantage denied to them.
  For all those reasons, as there is no need for anxiety and there is nothing here to remove complexities, I can see no argument for recommending the Clause to the House.
  Mr. John Hall: I did not expect the right hon. Gentleman—
  Mr. Speaker: Order. The hon. may not speak again without the leave of the House. He may ask for leave.
  Mr. Hall: If I may have the leave of the House, Mr. Speaker, I should like to

  Division No. 104.]

  AYES

  [7.13 p.m.

  Allason, James (Hemel Hempstead)

  Awdry, Daniel

  Batsford, Brian

  Atkins, Humphrey (M't'n & M'd'n)

  Baker, W. H. K.

  Bell, Ronald

  comment briefly on what the Chief Secretary has said.
  We did not expect the right hon. Gentleman to find any argument to support the new Clause. After all, it is his job to find all the arguments against it. But it is plain that the Clause has received unanimous support from this side of the House in some very well argued speeches, and I fancy that the principle of it is supported also by the hon. Member for Heywood and Royton (Mr. Barnett). He picked on one point only in the Clause and spoke about complications, but I am sure that the principle of encouraging small savings which is enshrined in it has his approval.
  The right hon. Gentleman has said that the system we propose would lead to greater complications. He has not said what the complications would be. It would certainly do away with a tremendous amount of paper, the 3 million pieces of paper floating round the country under the present system. He said also that the Clause is based on the assumption that the Capital Gains Tax acts as a deterrent, claiming, in the light of some of the speeches from this side, that the unit trust movement has been going through was described by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) as a golden period, the Capital Gains Tax not having acted as a deterrent at all. In fact, of course, we have not yet had time to assess the effect of the Capital Gains Tax on small savers. and this effect will be felt very much more as time goes on.
  I am very sorry that the right hon. Gentleman has reacted in this way. I should have liked to deal with many more if his arguments, but I am speaking again only with the leave of the House and I shall not abuse the privilege. We are very disappointed, and I know that my right hon. and hon. Friends will wish to express their disappointment in the appropriate way.
  Question put, That the Clause be read a Second time:—
  The House divided: Ayes 129, Noes 205.

  Bennett, Dr. Reginald (Gos. & Fhm)

  Harris, Frederic (Croydon, N.W.)

  Nott, John

  Biffen, John

  Harrison, Brian (Maldon)

  Onslow, Cranley

  Birch, Rt. Hn. Nigel

  Harrison, Col. Sir Harwood (Eye)

  Osborn, John (Hallam)

  Black, Sir Cyril

  Harvey, Sir Arthur Vere

  Osborne, Sir Cyril (Louth)

  Blaker, Peter

  Harvie Anderson, Miss

  Page, Graham (Crosby)

  Bossom, Sir Clive

  Hawkins, Paul

  Page, John (Harrow, W.)

  Boyle, Rt. Hn. Sir Edward

  Heald, Rt. Hn. Sir Lionel

  Pearson, Sir Frank (Clitheroe)

  Braine, Bernard

  Heaeltine, Michael

  Peel, John

  Brinton, Sir Tatton

  Higgins, Terence L.

  Percival, Ian

  Bromley Davenport, Lt. Col. Sir Walter

  Hiley, Joseph

  Peyton, John

  Brown, Sir Edward (Bath)

  Hill, J. E. B.

  Pym, Francis

  Bruce-Gardyne, J.

  Hirst, Geoffrey

  Rees-Davies, W. R.

  Bryan, Paul

  Holland, Philip

  Renton, Rt. Hn. Sir David

  Buck, Antony (Colchester)

  Hordern, Peter

  Rossi, Hugh (Hornsey)

  Bullus, Sir Eric

  Hornby, Richard

  Russell, Sir Ronald

  Burden, F. A.

  Hunt, John

  Sharples, Richard

  Carr, Rt. Hn. Robert

  Hutchison, Michael Clark

  Shaw, Michael (Sc'b'gh & Whitby)

  Clegg, Walter

  Irvine, Bryant Godman (Rye)

  Stodart, Anthony

  Cooke, Robert

  Jenkin, Patrick (Woodford)

  Stoddart-Scott, Col. Sir M. (Ripon)

  Corfield, F. V.

  Jopling, Michael

  Summers, Sir Spencer

  Contain, A. P.

  Kimball, Marcus

  Talbot, John E.

  Craddock, Sir Beresford (Spelthorne)

  Knight, Mrs. Jill

  Taylor, Sir Charles (Eastbourne)

  Crawley, Aidan

  Langford-Holt, Sir John

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

  Crouch, David

  Lewis, Kenneth (Rutland)

  Temple, John M.

  Dance, James

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

  Thatcher, Mrs. Margaret

  Dean, Paul (Somerset, N.)

  McAdden, Sir Stephen

  Turton, Rt. Hn. R. H.

  Deedes, Rt. Hn. W. F. (Ashford)

  MacArthur, Ian

  van Straubenzee, W. R.

  Dodds-Parker, Douglas

  Maclean, Sir Fitzroy

  Vickers, Dame Joan

  Eden, Sir John

  Macleod, Rt. Hn. Iain

  Walker, Peter (Worcester)

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

  Marten, Neil

  Walker-Smith, Rt. Hn. Sir Derek

  Errington, Sir Eric

  Maude, Angus

  Walters, Denis

  Eyre, Reginald

  Maxwell-Hyslop, R. J.

  Ward, Dame Irene

  Giles, Rear-Adm. Morgan

  Mills, Peter (Torrington)

  Weatherill, Bernard

  Gilmour, Ian (Norfolk, C.)

  Mills, Stratton (Belfast, N.)

  Webster, David

  Gilmour, Sir John (Fife, E.)

  Monrc, Hector

  Wells, John (Maidstone)

  Glover, Sir Douglas

  More, Jasper

  Whitelaw, William

  Cower, Raymond

  Morgan, W. C. (Denbigh)

  Wilson, Geoffrey (Truro)

  Grant-Ferris, R.

  Morrison, Charles (Devizes)

  Wolrige-Gordon, Patrick

  Gresham Cooke, R.

  Munro-Lucas-Tooth, Sir Hugh

  Younger, Hn. George

  Grieve, Percy

  Murton. Oscar

  Gurden, Harold

  Nabarro, Sir Gerald

  TELLERS FOR THE AYES:

  Hall, John (Wycombe)

  Noble, Rt. Hn. Michael

  Mr. David Mitchell and Mr. Grant.

  NOES

  Albu, Austen

  Crawshaw, Richard

  Griffiths, Rt. Hn. James (Llanelly)

  Alldritt, Walter

  Crosland, Rt. Anthony

  Griffiths, Will (Exchange)

  Allen, Scholefield

  Dalyell, Tam

  Hamilton, James (Bothwell)

  Archer, Peter

  Davidson, Arthur (Accrington)

  Hamilton, William (Fife, W.)

  Armstrong, Ernest

  Davidson, James (Aberdeenshire, W.)

  Hannan, William

  Ashley, Jack

  Davies, Dr. Ernest (Stretford)

  Harper, Joseph

  Atkins, Ronald (Preston, N.)

  Davies, G. Elfed (Rhondda, E.)

  Harrison, Walter (Wakefield)

  Atkinson, Norman (Tottenham)

  Davies, Robert (Cambridge)

  Herbison, Rt. Hn. Margaret

  Bacon, Rt. Hn. Alice

  Dempsey, James

  Hilton, W. S.

  Barnett, Joel

  Dewar, Donald

  Hooley, Frank

  Baxter, William

  Diamond, Rt. Hn. John

  Horner, John

  Eleaney, Alan

  Dickens, James

  Houghton, Rt. Hn. Douglas

  Bence, Cyril

  Dobson, Ray

  Howarth, Harry (Wellingborough)

  Bennett, James (G'gow, Bridgeton)

  Doig, Peter

  Howarth, Robert (Bolton, E.)

  Bessell, Peter

  Dunn, James A.

  Howie, W.

  Binns, John

  Dunnett, Jack

  Hoy, James

  Bishop, E. S.

  Dunwoody, Mrs. Gwyneth (Exeter)

  Hughes, Hector (Aberdeen, N.)

  Blackburn, F.

  Dunwoody, Dr. John (F'th & C'b'e)

  Hughes, Roy (Newport)

  Boardman, H.

  Eadie, Alex

  Hunter, Adam

  Booth, Albert

  Edwards, Rt. Hn. Ness (Caerphilly)

  Irvine, A. J. (Edge Hill)

  Bottomley, Rt. Hn. Arthur

  Edwards, Robert (Bilston)

  Jackson, Colin (B'h'se & Spenb'gh)

  Bowden, Rt. Hn. Herbert

  Ellis, John

  Jenkins, Rt. Hn. Roy (Stechford)

  Braddock, Mrs. E. M.

  Evans, Albert (Islington, S. W.)

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

  Bradley, Tom

  Evans, Ioan L. (Birm'h'm, Yardley)

  Johnston, Russell (Inverness)

  Brooks, Edwin

  Fernyhough, E.

  Jones, Dan (Burnley)

  Brown, Hugh D. (G'gow, Provan)

  Finch, Harold

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

  Brown, Bob (N'c'tle-upon-Tyne, W)

  Fletcher, Ted (Darlington)

  Jones, J. Idwal (Wrexham)

  Brown, R. W. (Shoreditch & F'bury)

  Ford, Ben

  Kelley, Richard

  Buchan, Norman

  Forrester, John

  Kenyon, Clifford

  Butler, Mrs. Joyce (Wood Green)

  Fowler, Gerry

  Kerr, Russell (Feltham)

  Callaghan, Rt. Hn. James

  Fraser, John (Norwood)

  Lawson, George

  Cant, R. B.

  Fraser, Rt. Hn. Tom (Hamilton)

  Ledger, Ron

  Carmichael, Neil

  Galpern, Sir Myer

  Lee, John (Reading)

  Carter-Jones, Lewis

  Gardner, A. J.

  Lestor, Miss Joan

  Chapman, Donald

  Garrow, Alex

  Lever, L. M. (Ardwick)

  Coe, Denis

  Gourlay, Harry

  Lewis, Ron (Carlisle)

  Concannon, J. D.

  Grey, Charles (Durham)

  Lomas, Kenneth

  Cousins, Rt. Hn. Frank

  Griffiths, David (Rather Valley)

  Lubbock, Eric

  Lyons, Edward (Bradford, E.)

  Oakes, Gordon

  Slater, Joseph

  McCann, John

  Ogden, Eric

  Small, William

  MacColl, James

  O'Malley, Brian

  Spriggs, Leslie

  MacDermot, Niall

  Orbach, Maurice

  Steele, Thomas (Dunbartonshire, W,)

  Macdonald, A. H.

  Orme, Stanley

  Swain, Thomas

  Mackenzie, Gregor (Rutherglen)

  Oswald, Thomas

  Symonds, J. B.

  Mackintosh, John P.

  Owen, Dr. David (Plymouth, S'tn)

  Thomas, Iorwerth (Rhondda, W.)

  Maclennan, Robert

  Page, Derek (King's Lynn)

  Thornton, Ernest

  McNamara, J. Kevin

  Paget, R. T.

  Tinn, James

  MacPherson, Malcolm

  Palmer, Arthur

  Tomney, Frank

  Mahon, Peter (Preston, S.)

  Pannell, Rt. Hn. Charles

  Tuck, Raphael

  Mahon, Simon (Bootle)

  Park, Trevor

  Varley, Ere G.

  Mallalieu, E. L. (Brigg)

  Pearson, Arthur (Pontypridd)

  Wainwright, Edwin (Dearne Valley)

  Manuel, Archie

  Pentland, Norman

  Wainwright, Richard (Colne Valley)

  Mapp, Charles

  Price, Thomas (Westhoughton)

  Walden, Brian (All Saints)

  Marquand, David

  Price, William (Rugby)

  Watkins, David (Consett)

  Marsh, Rt. Hn. Richard

  Probert, Arthur

  Weitzman, David

  Mason, Roy

  Randall, Harry

  Wellbeloved, James

  Mayhew, Christopher

  Rees, Merlyn

  Wells, William (Walsall, N.)

  Mellish, Robert

  Rhodes, Geoffrey

  Whitaker, Ben

  Milian, Bruce

  Roberts, Goronwy (Caernarvon)

  Willey, Rt. Hn. Frederick

  Miller, Dr. M. S.

  Robertson, John (Paisley)

  Williams, Alan Lee (Hornchurch)

  Mitchell, R. C. (S'th'pton, Test)

  Robinson, W. O. J. (Walth'stow, E.)

  Williams, Clifford (Abertillery)

  Molloy, William

  Ross, Rt. Hn. William

  Williams, W. T. (Warrington)

  Morgan, Elystan (Cardiganshire)

  Rowland, Christopher (Meriden)

  Willis, George (Edinburgh, E.)

  Morris, Charles R. (Openshaw)

  Rowlands, E. (Cardiff, N.)

  Winstanley, Dr. M. P.

  Morris, John (Aberavon)

  Sheldon, Robert

  Winterbottom, R. E.

  Moyle, Roland

  Silkin, John (Deptford)

  Woodburn, Rt. Hn. A.

  Newens, Stan

  Silkin, S. C. (Dulwich)

  Yates, Victor

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

  Silverman, Julius (Aston)

  Norwood, Christopher

  Silverman, Sydney (Nelson)

  TELLERS FOR THE NOES:

  Mr. Whitlock and Mr. Fitch.

  New Clause.—(SMALL MAINTENANCE PAYMENTS.)
  (1) In section 212 of the Income Tax Act 1952 at the end of subsection (1A) there shall be inserted the following:—
  "(1B) If a claimant proves that he is in receipt of any small maintenance payments as defined by section 205 of this Act, or of any payments which. but for their amount, would be such small maintenance payments, in respect of any child living with him at any time within the year of assessment he shall be entitled in respect of each child to a deduction from the amount of income tax with which he is chargeable equal to tax at the standard rate on the appropriate amount for each child."
  (2) In subsection (2) of section 525 (meaning of "earned income") of the Income Tax Act 1952, at the end of paragraph (c) there shall be inserted the following:—
  "(cc) any small maintenance payments, as defined by section 205 of this Act, and any payments which, but for their amount, would be such small payments; and".
  (3) Section 207 of the Income Tax Act 1952 (duty of court to give information as to small maintenance orders) shall have effect in relation to any payments mentioned in subsections (7) and (8) of this section as it has in relation to small maintenance payments and the expression "small maintenance payments" shall, for the purposes of subsections (7) and (8) of this section be construed accordingly.—[Mr. Sharpies.]
  Brought up, and read the First time.
  Mr. Richard Sharples: I beg to move, That the Clause be read a Second time.
  1308
  The purpose of the Clause is to give to any woman living apart from her husband, divorced or undivorced, benefit of earned income relief on the maintenance allowance she receives in respect of herself or her children. I take no credit for the drafting of the Clause, which is extremely complex. I took the best advice I could.
  At present, a woman who is receiving maintenance allowance from her husband gets no earned income relief on that allowance, even though it is paid wholly out of her husband's earned income. Even if the husband is able to claim the allowance as earned income and set off the maintenance payment against that earned income, the wife is not able to claim earned income relief on the maintenance payment she receives.
  For the majority of women faced with the problem of separation it is a very difficult period indeed. Basically, the reason why the woman is in receipt of the maintenance allowance is that she is trying to keep a home going. She receives the maintenance allowance to enable her to keep the home going. I suspect that usually, when a woman gets a maintenance payment allowed by a court, she is under the impression that it will not be taxed and that her husband, against whom the order is made, will be responsible for paying the tax on the

  1309
  allowance. This is not so. To add insult to injury, the woman finds, not only that she has to pay tax upon the allowance, but that she has to pay it at the full rate of unearned income.
  I cannot do better in describing the position in which such a woman finds herself than to quote words used by the Chief Secretary in 1960 when referring to arguments adduced against accepting a new Clause on these lines by the then Solicitor-General:
  "Will he" —
  that is, the Solicitor-General—
  "consider an aspect which must be resting heavily on his conscience? At the moment. perhaps, unwittingly, he is taking an unfair tax advantage from women in these circumstances. I do not suppose that that is his intention. He is getting that unfair advantage in that this money, which is supposed to he a simple transfer from husband to wife, would have attracted tax at a certain rate if the two had been living together—the standard rate, say, less earned income relief. Yet when the money is transferred as a matter of administrative machinery the wife pays tax at the higher rate, namely, the standard rate, for example, or the highest possible rate under the provisions, without deduction of earned income relief."—[OFFICIAL REPORT, 6th July, 1960; Vol. 626, c. 512–13.]
  This is exactly the position which the Clause seeks to remedy. I greatly hope that I shall have the Chief Secretary's support in his new position.
  I illustrate my argument by taking the case of one of my constituents, who drew this matter to my attention. This person, living apart from her husband, is trying to support three children. They are all at the very difficult stage for a family of just leaving school and starting to earn money; but, because they are carrying on with training of one form or another, they are unable to support themselves. This is probably the most difficult stage of all for any family; it is a time when a home is of greater importance than at any other time, because it is a firm base to return to.
  This lady, under a magistrates court's order, has a maintenance allowance of £360 a year. This is wholly set off against her husband's earned income of about £2,000 a year. He is able to claim the £360 as a deduction when he pays his tax. She, on the other hand, has to pay the full rate of tax at the unearned rate on the amount she receives. I see the Chief Secretary shaking his head. I am
  1310
  prepared to let him have details of this case. The Inland Revenue's assessment is that this lady pays £74 in tax out of the maintenance payment of £360.
  It goes without saying that this is a case which genuinely requires remedy. Since the publication of Margaret Wynn's book "Fatherless Families" we know much more about the extent of the problem than we did. We are able to estimate that there are probably 300,000 families in this position. Four hundred and fifty thousand children are affected in this way.
  7.30 p.m.
  This is not the first time the subject has been raised. It was raised in 1960 by the present Minister of Transport, who moved a new Clause to the Finance Bill of that year in very similar terms to this Clause. She said:
  "Surely, this situation is quite wrong. Why should a slice of the man's income not be entitled to the normal tax relief that everyone else would get? Why should the benefit of it go to the Chancellor instead of to a woman who has to face life's struggle under additional difficulties? Clearly, the point of principle is that somebody should get legitimate earned income relief on this slice of the man's earned income."—[OFFICIAL, REPORT, 6th July, 1960; Vol. 626, c. 501.]
  The subject was raised again last year by Mr. Geoffrey Howe, at that time Member for Bebington. He received no reply whatever from the Financial Secretary, who said that it was too late. It was 9.30 in the evening. One can anticipate the kind of argument which the Chief Secretary will put forward tonight if he intends not to accept the Clause.
  The right hon. Gentleman will probably say that the court takes into account the amount in making assessment of maintenance. In his own words, however, this is a bad point—he told us so in 1960. I can let him have the reference if he wishes. He may say that this is not earned income, but I refer him to the point put in 1960 by the present Minister without Portfolio, whom we are delighted to have with us in order to lend support to our case, just as he supported the present Minister of Transport in 1960.
  The Minister without Portfolio said then:
  "In asking what is earned income, the reply is: what this House says is earned income is earned income. Already, in the past, the

  1311
  House has departed from the strict interpretation of earned income is being by the exertions of the individual by conceding earned income relief to such income as pensions."—[OFFICIAL REPORT, 6th July, 1960; Vol. 626, c. 508.]
  The Minister without Portfolio (Mr. Douglas Houghton): Why was not such a convincing argument successful on that occasion? What happened?
  Mr. Sharples: We have all learned a great deal since that time. Both the right hon. Gentleman the present Minister without Portfolio and the right hon. Gentleman the present Chief Secretary, supported by virtually the whole of the present Cabinet, including the Prime Minister, went into the Lobby in 1960 in support of a Clause which was in similar terms to this Clause.
  Mr. Diamond: The hon. Gentleman has HANSARD with him and I have not. Can he refresh my memory and tell us how the hon. Member for Sutton and Cheam (Mr. Sharpies) voted in that Division?
  Mr. Sharpies: I will be frank. I supported the then Government on that occasion. But I have learned a great deal since those days—unlike the right hon. Gentleman, perhaps.
  Finally, an argument upon which the Treasury always falls back is that a Clause or Amendment may have a good objective but would be too expensive this year. Let us hear from the Chief Secretary what would be the cost of this proposal and let the House judge whether or not that is a valid reason for rejecting a proposal which we all know should, in equity, be accepted.
  The arguments in favour of this Clause are unanswerable, and I hope that the right hon. Gentleman will tell us that he accepts it.
  Mr. Paget: I must say that, as a rather desultory attender of these debates, I was surprised by the speech of the hon. Member for Sutton and Cheam (Mr. Sharpies). I have always held the theory that, if I were to divorce my wife and live with her in sin, it would be much cheaper because then we would get two personal allowances, and that, if we could get the children declared to be illegitimate, there would be a whole set of
  1312
  further allowances. I held the view that this made the Income Tax law somewhat immoral.
  My wife, however, assured me that there was no real risk, as wives do not trust their husbands that much. Now I am told that this is a frightful grievance because, if the sum at issue here were paid while the husband and wife were together, and was a housekeeping allowance, then the husband would get earned income allowance, which is something the wife does not get. But surely the personal allowances which she does get greatly exceed any earned income allowance which she does not get on an income that is not earned.
  Mr. Daniel Awdry: support the Clause. From my experience in domestic courts I know of the very great hardship that wives who bring up children on their own suffer. I am sure that all hon. Members, from their experiences in their "surgeries", know this to be true. This is a branch of the law crying out for reform. The Clause would be a useful step in the right direction, if only a small one. It may not go very far, but it would be deeply appreciated by thousands of deserted wives.
  My hon. Friend the Member for Sutton and Cheam (Mr. Sharples) quoted a case and I will briefly quote another. Assume a case where the wife has the care and control of two little children aged 3 years and 1 year and receives £400 maintenance. Let us assume that she also has £10 a week in investment income of her own. Her total income for tax purposes immediately becomes £900, but she is entitled to no reliefs, child allowances or income relief. It is illogical and inhuman that the £400 allowance in respect of the babies should be treated as unearned income. Goodness knows, the wife really does earn it.
  The present Minister without Portfolio put this so much better than I when he went into the argument in great depth in 1960, pointing out that the wife would have to bring up two children without help from her husband and that it is a terrible struggle in many cases. Earned income relief in cases of this kind would be of very great help to the wife and it would be a heartless Government who voted this proposal down. It would also be a somewhat hypocritical Government

  1313
  since, as has been pointed out, no fewer than four members of the Government took part in that debate in 1960 in favour of the Clause moved by the present Minister of Transport. I did not vote on that occasion, because I was not a Member of the House. They made powerful speeches and put forward convincing arguments, and divided the House. It makes a mockery of our proceedings if hon. Members change their views simply because they change their seats. I hope that the Minister without Portfolio and the Chief Secretary to the Treasury will re-read the speeches they made on that occasion and meet us tonight by accepting this Clause.
  Mr. Diamond: I think that the simplest way in which I can deal with the speeches which have been made is to say that it has been clearly and well established that when we were on the other side of the House my right hon. Friend and I produced arguments in favour of this new Clause in the most clear and powerful manner, as would be expected. But they were not sufficient to persuade hon. and right hon. Gentlemen who were then in the Government, and who proceeded to vote them down, as the hon. Member for Sutton and Cheam (Mr. Sharpies) has just confirmed that he did.
  The use of the term "hyprocrite" is perhaps a little out of place. It was used no: by the hon. Member for Sutton and Cheam, but by the hon. Member for Chippenham (Mr. Awdry), who was not then a Member of the House, and who seemed to think that he could call everybody a hyprocrite. Perhaps he will learn a little more.
  It is my duty to explain to the House why, having taken the view that this was an argument well worth putting forward, my right hon. Friend and I now feel on second thoughts that the view expressed by the then Attorney-General and the whole of the then Government Front Bench was more powerful. Let me explain why it is that I feel reasonably happy about putting forward my present argument.
  I shall not deal with the cost issue at all. If it were a good case and it simply could not be afforded this year, this would be an occasion for saying that this
  1314
  was not the year for making such a concession. I am sorry, but I do not put on the basis of being temporarily unsatisfactory. But I put it on the basis of being permanently unsatisfactory, because it is a bad principle.
  The whole of the case depends upon an assumption which is quite invalid, namely, that the income of the spouses when partners is the same now that they are separated and that, therefore, the tax payable should be the same and that, because income is transferred from the divorced husband to the wife, the income should bear the same burden of taxability which it bore in the hands of the husband. That assumption is invalid because, in tax terms, we deal not with a situation which might have been, but with a situation which is.
  It is because we deal with the situation which is and not with the situation which might have been if the divorce had not taken place that these individuals are given the allowances and treatment appropriate to them. One does not deny, as would be only consistent with the logic of the argument for the new Clause, the divorced wife the full allowance, the greater allowance, attributable to a single person.
  Mr. Sharples: The Clause would apply not only to a divorced person, but to a separated family.
  Mr. Diamond: That is the same point in law, if I may put it that way, that is to say, it is only when a separated wife is being maintained by the husband that the husband can claim the married man's allowance, and if they are separated they can be treated—I think that the term is femme-sole—as two separate individuals, the husband and the separated wife, which is the same situation as that of the divorced wife.
  The first point which I am making, which must go to the root of the argument and which discloses the illogicality in the case put forward by my right hon. Friend and myself and which nobody on the then Opposition Front Bench had the power to perceive, is that the basis of the claim, namely, that the whole of the personal tax assessment of the two individuals should be treated as if they had continued to be a married couple living together, does not rest on any secure

  1315
  foundation. Therefore, each individual is treated as a separate individual.
  It is true that the husband does not get earned income relief on that amount of income on which he pays no tax. It is treated as a charge on his income and it is only on the balance of his income that he pays tax. There is no dispute about that and nor is there any dispute that one would want to help, or that in appropriate cases there is possibly need for the social services to step in.
  7.45 p.m.
  But the wife living apart from her husband is not earning income and it cannot be pretended that earned income should bear the same burden of tax as unearned income. It has always been accepted that there is no case in equity for saying that earned income and unearned income should bear the same level of taxation, quite apart from the good social and economic reasons for encouraging the earning of income. One must accept that these are two separate individuals and should be treated as individuals.
  One then gets the position which automatically flows from that. I am sure that nobody will suggest that we have merely to pick out one kind of income which a divorced wife happens to have, alimony, and say that that should be treated as earned income and all other sources of income should not be treated as earned income.
  Mr. A. P. Costain: Would not the right hon. Gentleman agree that if this woman were single and acting as a nursemaid to the children, that would be earned income? What is the difference?
  Mr. Diamond: Because she would not be supporting the children. If the hon. Gentleman is saying that a single person looking after someone else's children is in the same position as the wife looking after her own children, I do not follow his argument.
  That enables me to deal with what was said by the hon. Member for Chippenham, who said that he was aware of a case in which an allowance had been granted to the wife in respect of the children and that she could not claim child allowance. That does not neces-
  1316
  sarily follow. If the wife is maintaining the two children, notwithstanding that payment may have been calculated by reference to the needs of the wife plus children, and if the two children are living with her and nobody else is claiming the children's allowance, as the husband in this case could not, she would be entitled to claim children's allowance, other things being equal.
  Mr. Awdry: The case which I was quoting was where the husband was granted custody but care and control were given to the wife and the husband was paying money to the wife in respect of the two children.
  Mr. Diamond: That is a different situation and that explains the hon Gentleman's case.
  The whole of the Clause deals with small maintenance payments. The hon. Member for Sutton and Cheam has referred to this lady who was in receipt of £360 a year and who was paying the full rate of tax. When he said that, I shook my head in disagreement. If she was in receipt of £360 a year, that would be within the level of income at which she would get the additional two-ninths earned income relief, or, rather, the equivalent of earned income relief on her income, notwithstanding that it came from an unearned source. I can only assume from what the hon. Gentleman subsequently said that this was not her only income and that she was in receipt of other income which brought it well above the £450 limit.
  Mr. Sharpies: I did not say that this was her sole income. Of course, she could not keep home with three children on £360 a year. I do not see how the Chief Secretary pretends that she could. She has to earn money to do so.
  Mr. Diamond: I am only making the simple point that the Clause deals with small maintenance payments and that when people have very small incomes below £9 a week, below £450 a year, although the whole of that income is derived from unearned sources, it is treated as earned income and the two-ninths allowance is given, which meets the point, quite apart from the case of a person who may be getting on in life and may be in receipt of the age allowance.

  1317
  I can only repeat what the Attorney-General of the day said—that in making payments of this kind the courts take into account the taxability of the various parties, so that this situation is already taken into account in arriving at the sum in question.
  I come back to the first point I made, which is my main point, that two people living together as man and wife with a certain income are assessed as man and wife. Once they are separated they become two individuals and a whole lot of consequences flow. Some of them may result in the burden of tax being much reduced, and it is for that reason that the arguments put forward by the Government of the day are still the most powerful ones.
  Mrs. Thatcher: It is always difficult when a back bencher presses an Amendment upon a Government and then finds himself in the position of having to reject a similar Amendment when he becomes a member of the Government. Equally, the reverse is true and it is obviously difficult for a person who supported a former Government to press an Amendment against a sitting Government. The only thing to do under those circumstances is to attempt to look at the new Clause afresh on merit to see if there are any other arguments not previously adduced which could now be adduced.
  The arguments about this Clause fall quite naturally under two heads. One has already been used by the Chief Secretary, in that he said that it is not the earned income, but the unearned income. Perhaps we can examine that in a moment. As the right hon. Gentleman said in a previous debate, we can do what we like with earned income. We can define earned income in any particular way. Let us see what has been deemed to be earned income which would not have been earned income other than for the deeming provisions. A large number of things have been so deemed.
  For example, a pension paid to a widow or daughter in respect of the services of the deceased husband or father was deemed to be earned income. There one has the widow or daughter, a feme-sole, living on her own and yet the income still retains its characteristic as earned income because the father or husband would have received this as
  1318
  earned income. That seems to be a case very similar to the one which we are now discussing. There is an even stronger case which the Chief Secretary has put and this is where his logic will depart from mine, a not unknown occurrence in this House.
  This is the case concerning family allowance. I do not know how any man can stand at that Dispatch Box and recognise that family allowances on a man attract earned income relief yet say in the same breath that a woman who looks after her children does not deserve earned income relief on maintenance payments. He must be a very curious creature indeed. The Chief Secretary, assuming that he still has has family allowances, or had them one time or another, would have received earned income relief on them. They are not necessarily earned income but they come from a Government and they have the quality of earned income and we have made them eligible for earned income relief.
  Similarly and by analogy we should make these maintenance payments earn income relief. I do not see the enormous stumbling blocks which the Chief Secretary sees. We have made many stranger things than this attract the quality of earned income. For example, compensation for loss of office in excess of the permitted amount is taxed as unearned income but gets earned income relief. I do not think that the Chief Secretary is quite right on this particular limb of his argument.
  There is another way of regarding this Clause on merit, and it is in this second way that there is a very strong case. As the House knows, from time to time we decide that we wish to give help to certain groups of people by giving them tax relief. We think that, because there are certain circumstances attached either to their age or way of life, they ought to pay less tax than other people. It is for this reason that we give special tax relief to the aged. We should consider this Clause not only as attributing earned income to what the Chief Secretary thinks is unearned income but we should also consider the Clause as a way of giving help to deserted wives and enabling them to pay less tax than they would otherwise have to pay.
  Once one puts the argument on to that basis there is an excellent case for giving

  1319
  earned income relief upon these maintenance payments which go only to divorced or deserted wives who are specially deserving of help. One of the characteristic methods of giving help is to give it by attributing to certain income the quality of being earned income. We do this in Section 211 of the Income Tax Act in respect of old people who receive earned income relief on what is patently investment income up to the limit of £900.
  Obviously, when looking at the Clause, one tries to find arguments which have not previously been answered. I do not believe that either of these arguments has been answered before. If one is looking at the Clause one can say, first, that there is an argument that these payments should be earned income by analogy with family allowances, and secondly, even if that fails, there is the argument that we should help deserted, separated or divorced wives who are maintaining their own families. If the first ground fails, I believe that we should further and support this new Clause on the second. If we do go into the Division Lobby tonight and make it clear to the Chief Secretary that this is what we want, I hope that he will look at it afresh next year, when he would have to find some very different arguments from those that he has adduced today if he were to refuse it again.
  I hope that the House will support my hon. Friend the Member for Sutton and Cheam (Mr. Sharpies), who proposed the Clause, in the Division Lobby.
  Mr. Frederic Harris: I shall detain the House for only

  Division No. 105.]

  AYES

  [7.58 p.m.

  Alison, Michael (Barkston Ash)

  Bruce-Gardyne, J.

  Eden, Sir John

  Allason, James (Hemel Hempstead)

  Bryan, Paul

  Errington, Sir Eric

  Atkins, Humphrey (M't'n & M'd'n)

  Buck, Antony (Colchester)

  Eyre, Reginald

  Awdry, Daniel

  Bullus, Sir Eric

  Giles, Rear-Adm. Morgan

  Baker, W. H. K.

  Burden, F. A.

  Gilmour, Ian (Norfolk, C.)

  Batsford, Brian

  Campbell, Gordon

  Gilmour, Sir John (Fife, E.)

  Bell, Ronald

  Carlisle, Mark

  Clover, Sir Douglas

  Bennett, Sir Frederic (Torquay)

  Carr, Rt. Hn. Robert

  Goodhew, Victor

  Biffen, John

  Clegg, Walter

  Cower, Raymond

  Birch, Rt. Hn. Nigel

  Cooke, Robert

  Grant, Anthony

  Black, Sir Cyril

  Corfield, F. V.

  Grant-Ferris, R.

  Blaker, Peter

  Costain, A. P.

  Gresham Cooke, R.

  Bossom, Sir Clive

  Craddock, Sir Beresford (Spelthome)

  Grieve, Percy

  Boyd-Carpenter, Rt. Hn. John

  Crawley, Aidan

  Gurden, Harold

  Boyle, Rt. Hn. Sir Edward

  Crouch, David

  Hall, John (Wycombe)

  Brame, Bernard

  Dance, James

  Harris, Frederic (Croydon, N.W.)

  Brinton, Sir Tatton

  Dean, Paul (Somerset, N.)

  Harrison, Brian (Maldon)

  Bromley-Davenport, Lt. Col. Sir Walter

  Dodds-Parker, Douglas

  Harrison, Col. Sir Harwood (Eye)

  Brown, Sir Edward (Bath)

  Drayson, G. B.

  Harvey, Sir Arthur Vere

  a few moments. I strongly support my hon. Friend the Member for Sutton and Cheam (Mr. Sharpies) in the new Clause which he has put forward so well. I realise how embarrasing it must have been for the Chief Secretary to have to work out his argument against it. We all realise the difficulty arising in this case but it struck me that such an able accountant as the Chief Secretary would have seen all of these arguments in 1960, when he was putting the case forward in the other direction.
  It is very encouraging to have the Minister without Portfolio present during the whole of our discussions. We much appreciate his presence. I suppose that he has a bit of a conscience about this Clause. The obvious point to anyone who has listened to the debate is that my hon. Friend the Member for Finchley (Mrs. Thatcher) has completely destroyed the arguments put forward. If one was a bit doubtful about what the true answer was, she had all the answers, as she invariably does.
  Does not that mean that the Minister without Portfolio must now be urged to come to the Dispatch Box and give his version of why this should not be accepted? He must be sitting there feeling even more embarrassed that he has not had a chance to put forward any sort of argument. If there is time, should we not encourage the Minister without Portfolio to come forward and give us his version of why the arguments of my hon. Friend the Member for Finchley should not be sustained in the Division Lobby?
  Question put, That the Clause be read a Second time:
  The House divided: Ayes 137, Noes 211.

  Harvie Anderson, Miss

  Mills, Peter (Torrington)

  Shaw, Michael (Sc'b' & Whitby)

  Hastings, Stephen

  Mills, Stratton (Belfast, N.)

  Stodart, Anthony

  Hawkins, Paul

  Monro, Hector

  Stoddart-Scott, Col. Sir M. (Ripon)

  Heald, Rt. Hn. Sir Lionel

  More, Jasper

  Summers, Sir Spencer

  Heseltine, Michael

  Morgan, W. G. (Denbigh)

  Talbot, John E.

  Higgins, Terence L.

  Morrison, Charles (Devizes)

  Taylor, Sir Charles (Eastbourne)

  Hiley, Joseph

  Mott-Radclyffe, Sir Charles

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

  Hill, J. E. B.

  Munro-Lucas-Tooth, Sir Hugh

  Taylor, Frank (Moss Side)

  Hirst, Geoffrey

  Murton, Oscar

  Temple, John M.

  Holland, Philip

  Naharro, Sir Gerald

  Thatcher, Mrs. Margaret

  Hordern, Peter

  Noble, Rt. Hn. Michael

  Turton, Rt. Hn. R. H.

  Hornby, Richard

  Nott, John

  van Straubenzee, W. R.

  Hunt, John

  Onslow, Cranley

  Vickers, Dame Joan

  Hutchison, Michael Clark

  Osborn, John (Hallam)

  Walker, Peter (Worcester)

  Irvine, Bryant Godman (Rye)

  Osborne, Sir Cyril (Louth)

  Walker-Smith, Rt. Hn. Sir Derek

  Jenkin, Patrick (Woodford)

  Page, Graham (Crosby)

  Waters, Denis

  Jopling, Michael

  Page, John (Harrow, W.)

  Ward, Dame Irene

  Kimball, Marcus

  Pearson, Sir Frank (Clitheroe)

  Weatherill, Bernard

  Knight, Mrs. Jill

  Peel, John

  Webster, David

  Langford-Holt, Sir John

  Percival, Ian

  Wells, John (Maidstone)

  Lewis, Kenneth (Rutland)

  Peyton, John

  Whitelaw, William

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

  Pym, Francis

  Wilson, Geoffrey (Truro)

  McAdden, Sir Stephen

  Rees-Davies, W. R.

  Wolrige-Gordon, Patrick

  MacArthur, Ian

  Renton, Rt. Hn. Sir David

  Younger, Hn. George

  Macleod, Rt. Hn. Iain

  Rossi, Hugh (Hornsey)

  Marten, Neil

  Russell, Sir Ronald

  TELLERS FOR THE AYES:

  Maude, Angus

  Scott, Nicholas

  Mr. R. W. Elliott and

  Maxwell-Hyslop, R. J.

  Sharples, Richard

  Mr. David Mitchell.

  NOES

  Abse, Leo

  Dunwoody, Dr. John (F'th & C'b'e)

  Ledger, Ron

  Alldritt, Walter

  Eadie, Alex

  Lee, John (Reading)

  Allen, Scholefield

  Edwards, Rt. Hn. Ness (Caerphilly)

  Lestor, Miss Joan

  Archer, Peter

  Edwards, Robert (Bilston)

  Lever, L. M. (Ardwick)

  Armstrong, Ernest

  Ellis, John

  Lewis, Arthur (W. Ham, N.)

  Ashley, Jack

  Evans, Albert (Islington, S. W.)

  Lewis, Ron (Carlisle)

  Atkins, Ronald (Preston, N.)

  Finch, Harold

  Lomas, Kenneth

  Atkinson, Norman (Tottenham)

  Fitch, Alan (Wigan)

  Lubbock, Eric

  Bacon, Rt. Hn. Alice

  Fletcher, Ted (Darlington)

  Lyons, Edward (Bradford, E.)

  Barnett, Joel

  Floud, Bernard

  McCann, John

  Baxter, William

  Foot, Sir Dingle (Ipswich)

  MacColl, James

  Beaney, Alan

  Ford, Ben

  MacDermot, Niall

  Bence, Cyril

  Forrester, John

  Macdonald, A. H.

  Bennett, James (G'gow, Bridgeton)

  Fowler, Gerry

  McGuire, Michael

  Hassell, Peter

  Fraser, John (Norwood)

  Mackenzie, Gregor (Rutherglen)

  Binns, John

  Fraser, Rt. Hn. Tom (Hamilton)

  Mackintosh, John P.

  Bishop, E. S.

  Galpern, Sir Myer

  Maclennan, Robert

  Blackburn, F.

  Gardner, A. J.

  McNamara, J. Kevin

  Boardman, H.

  Garrow, Alex

  MacPherson, Malcolm

  Booth, Albert

  Gourlay, Harry

  Mahon, Peter (Preston, S.)

  Bottomley, Rt. Hn. Arthur

  Gray, Dr. Hugh (Yarmouth)

  Mahon, Simon (Bootle)

  Bowden, Rt. Hn. Herbert

  Grey, Charles (Durham)

  Mallalieu, E. L. (Brigg)

  Braddock, Mrs. E. M.

  Griffiths, David (Rother Valley)

  Manuel, Archie

  Bradley, Tom

  Griffiths, Rt. Hn. James (Llanelly)

  Mapp, Charles

  Brooks, Edwin

  Griffiths, Will (Exchange)

  Marquand, David

  Brown, Hugh D. (G'gow, Provan)

  Hamilton, James (Bothwell)

  Mason, Roy

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Hamilton, William (Fife, W.)

  Maxwell, Robert

  Brown, R. W. (Shoreditch & F'bury)

  Hannan, William

  Mayhew, Christopher

  Buchan, Norman

  Harper, Joseph

  Mellish, Robert

  Butler, Mrs. Joyce (Wood Green)

  Harrison, Walter (Wakefield)

  Milian, Bruce

  Cant, R. B.

  Henig, Stanley

  Miller, Dr. M. S.

  Carmichael, Neil

  Herbison, Rt. Hn. Margaret

  Mitchell, R. C. (S'th'pton, Test)

  Carter-Jones, Lewis

  Hilton, W. S.

  Molloy, William

  Chapman, Donald

  Hooley, Frank

  Morgan, Elystan (Cardiganshire)

  Coe, Denis

  Horner, John

  Morris, Charles R. (Openshaw)

  Concannon, J. D.

  Houghton, Rt. Hn. Douglas

  Moyle, Roland

  Crawshaw, Richard

  Howarth, Harry (Wellingborough)

  Mulley, Rt. Hn. Frederick

  Crosland, Rt. Hn. Anthony

  Howarth, Robert (Bolton, E.)

  Newens, Stan

  Dalyell, Tam

  Howie, W.

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

  Davidson, Arthur (Accrington)

  Hughes, Roy (Newport)

  Norwood, Christopher

  Davidson, James (Aberdeenshire, W.)

  Hunter, Adam

  Oakes, Gordon

  Davies, Dr. Ernest (Stretford)

  Irvine, A. J. (Edge Hill)

  Ogden, Eric

  Davies, G. Elfed (Rhondda, E.)

  Jackson, Colin (B'h'se & Spenb'gh)

  O'Malley, Brian

  Davies, Robert (Cambridge)

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

  Orbach, Maurice

  Dempsey, James

  Johnston, Russell (Inverness)

  Orme, Stanley

  Dewar, Donald

  Jones, Dan (Burnley)

  Oswald, Thomas

  Diamond, Rt. Hn. John

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

  Owen, Dr. David (Plymouth, S'tn)

  Dickens, James

  Jones, J. Idwal (Wrexham)

  Page, Derek (King's Lynn)

  Dobson, Ray

  Kelley, Richard

  Paget, R. T.

  Doig, Peter

  Kenyon, Clifford

  Palmer, Arthur

  Dunn, James A.

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

  Pannell, Rt. Hn. Charles

  Dunnett, Jack

  Kerr, Russell (Feltham)

  Park, Trevor

  Dunwoody, Mrs. Gwyneth (Exeter)

  Lawson, George

  Parker, John (Dagenham)

  Pearson, Arthur (Pontypridd)

  Silverman, Julius (Aston)

  Watkins, David (Concett)

  Pentland, Norman

  Silverman, Sydney (Nelson)

  Weitzman, David

  Price, Thomas (Westhoughton)

  Slater, Joseph

  Wellbeloved, James

  Price, William (Rugby)

  Small, William

  Wells, William (Walsall, N.)

  Probert, Arthur

  Spriggs, Leslie

  Whitaker, Ben

  Randall, Harry

  Steele, Thomas (Dunbartonshire, W.)

  Willey, Rt. Hn. Frederick

  Rankin, John

  Swain, Thomas

  Williams, Alan Lee (Hornchurch)

  Rees, Merlyn

  Swingler, Stephen

  Williams, Clifford (Abertillery)

  Rhodes, Geoffrey

  Symonds, J. B.

  Williams, W. T. (Warrington)

  Roberts, Albert (Normanton)

  Thomas, Iorwerth (Rhondda, W.)

  Willis, George (Edinburgh, E.)

  Roberts, Goronwy (Caernarvon)

  Thornton, Ernest

  Winstanley, Dr. M. P.

  Robertson, John (Paisley)

  Thorpe, Jeremy

  Winterbottom, R. E.

  Robinson, W. O. J. (Walth'stow, E.)

  Tinn, James

  Woodburn, Rt. Hn. A.

  Rose, Paul

  Tomney, Frank

  Yates, Victor

  Ross, Rt. Hn. William

  Tuck, Raphael

  Rowland, Christopher (Meriden)

  Varley, Eric G.

  TELLERS FOR THE NOES:

  Rowlands, E. (Cardiff, N.)

  Wainwright, Edwin (Dearne Valley)

  Mr. Whitlock and

  Sheldon, Robert

  Wainwright, Richard (Colne Valley)

  Mr. Ioan L. Evans.

  Silkin, S. C. (Dulwich)

  Walden, Brian (Alt Saints)

  New Clause.—(CAPITAL LOSSES.)
  In section 20(5) of the Finance Act 1965 there shall be omitted the words "year of assessment to the other" at the end of the first paragraph. and substituted "or any subsequent year of assessment to the other but so that each person's allowable losses shall be deducted first from that person's chargeable gains and he used in an earlier rather than a later year".—[Mr. John Hall.]
  Brought up, and read the First time.
  Mr. John Hall: I beg to move, That the Clause be read a Second time.
  It seems to me that the tax system tends to take too literally that part of the marriage service which goes:
  "Those whom God bath joined together let no man put asunder".
  This part of the marriage service is not intended to apply to the Inland Revenue man—at least, not in his official capacity. For Income Tax and Surtax, the Treasury insists on regarding a man and wife as one and indivisible. No doubt morally and socially that is admirable.
  But let us consider the husband and wife as the left hand and right hand of the same individual. Though I agree that there is a small concession for income earned by the wife, I warn the Treasury Bench—the hon. and learned Member for Northampton (Mr. Paget) drew attention to this in an earlier speech—that this might have the opposite effect to that intended. It may well find in this increasingly unconventional world that these tax laws encourage more and more irregular associations. People will be persuaded by the penal effects of combined Income Tax and Surtax to divorce and live together afterwards. We may find even greater force being given to the old advice that one should be a bachelor and bring up one's children to be bachelors. From the tax which one
  1324
  might save by that method of association one could undoubtedly set up trusts for one's children. However, we have not reached the point at which irregular unions of that kind are very common.
  I should have thought that the Treasury would have followed in the case of capital gains the logical arguments which inspired its tax legislation in the respects that I have been describing. In part, of course, it has done so. But then it suddenly departs from it and becomes wildly illogical. But let us consider the situation which applies under the capital gains legislation. A married woman living with her husband has first to offset her capital losses against her own capital gains. That is straightforward. If there is an excess of losses, it can be offset against the capital gains, if any, of the husband. If, however, the capital gains of the husband are not sufficient to absorb those losses they have to be carried forward and—this is the rub—they are only available to be offset against the future capital gains of the married woman.
  It seems to me that, in view of the way in which not only the married woman but the partners are treated for Income Tax and Surtax, the excess of capital losses of either spouse should be available to be carried forward and set off against the capital gains of either spouse arising in future years. That would be a logical development.
  Apparently the Treasury assumes that the husband is a more intelligent investor and has sufficient gains to offset the capital losses which his wife makes, but that is by no means always true. Very often the wife is better at it. Nevertheless, the fact remains that if she has losses which cannot be absorbed, they cannot be carried forward except against her own losses for a future year.

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  Our Amendment provides for that situation. It is simple, easily understood and has no complications. It cannot be faulted on the basis that it adds complications to an already complicated tax. I can only assume that the existing legislation of the Finance Act, 1965, means that the Government intend, perhaps in the next Finance Bill, to change the position of husband and wife concerning Income Tax and Surtax, otherwise there could be no logic in the present position, which allows the losses to be offset for one year against the husband's gains but will not allow them to be carried forward against the husband's gains for the following year.
  If it is the intention of the Government in the next Finance Bill to introduce an Amendment to existing tax legislation, which has been pressed on the Government from both sides over many years, to treat husband and wife separately for tax purposes, I am sure that my hon. Friends would be willing to withdraw the Clause. If, however, as I strongly suspect, the Government have no such intention, then on grounds of equity, logic and justice the House should press the Clause to a Division if we do not get a satisfactory answer.
  I suggest to both sides that the Members who are most interested in the Clause and should give it their utmost support, on whatever side they sit, are the married men. They will be the ones who will be called upon to pay the tax when it arises. If my experience is anything to go by, in normal matters between my wife and myself any gains of any kind which my wife makes she keeps for herself, and any losses or taxes which arise are paid by the husband. I suggest, therefore, to married men on both sides of the House that they have a vested interest in seeing that the Clause is accepted by the Treasury Bench.
  In the confident anticipation that we on this side will get support from the benches opposite, I move the Clause believing, as I am sure that I am justified in believing, that the Financial Secretary is just about to get up and say that he accepts it.
  Mr. MacDermot: I cannot help feeling that if the new Clause had been moved by the hon. Member for Finchley (Mrs. Thatcher), we would have had rather different arguments in support of
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  it. The hon. Member for Wycombe (Mr. John Hall) says that it is only a second best and that what he regards as the first best would be if we were to separate the tax treatment of husband and wife and, presumably, tax each of them as if they were single persons. I do not know whether the hon. Member is aware that that proposal would bring a lot of additional revenue to the Exchequer. It is the Revenue, not taxpayers, who would gain from that proposal. At least, we need not discuss that now because the hon. Member is asking us to discuss a much more limited proposal.
  It is a somewhat abstruse point but an interesting one that the hon. Member raises. I doubt whether it is one that, in practice, would be likely to lead to any great hardship. Certainly there would not have been time for it to have done so yet, as the Capital Gains Tax has been in force for only a year.
  8.15 p.m.
  What the hon. Member overlooked to remind the House of in his accurate summary of the law was the provision, passed in last year's Finance Act, by which disposals from one spouse to another, except on death, are disregarded for purposes of Capital Gains Tax. There is no charge to tax at that time.
  Mr. John Hall: It is not quite the same thing.
  Mr. MacDermot: I agree, but I am pointing out its implications. Thereafter, all the gain which has accumulated during the period of joint ownership is then charged to the person who disposes ultimately.
  Therefore, in a case of husband and wife and the kind of circumstances with which we are here concerned, which could arise where there would be an unrelieved loss, no doubt by transfer of assets they could arrange matters so as to be able to relieve the loss. I agree, however, that there is no requirement that we should build into our tax system the need for people to adopt measures of that kind.
  We should like to look at the suggestion which is contained in the Clause. It is a new proposal which has been introduced at this stage. There was, I believe, a new Clause or Amendment relating to this topic in Committee which was not

  1327
  called. I ask the hon. Member not to press the Clause to a Division at this stage on the assurance that we will, without any commitment but with sympathy, look at this proposal during the coming year.
  If we decided to accept the spirit of what is proposed, probably it could be achieved in a more satisfactory way by amending Section 20(5) of the 1965 Act to provide that the losses of one spouse which may be set against the gains of the other might include unrelieved losses of earlier years. It is a somewhat technical point. In any event, we would want to consider the drafting closely and to consider the matter rather more fully than we have had time to do up till now before deciding whether we could accept it. I hope that with that assurance that we will consider his proposal, the hon. Member will withdraw it.
  Mr. Frederic Harris: What would be the position concerning timing if the Government looked favourably upon the proposal? Would there be any suggestion of backdating it to meet the point which has been made? Otherwise, unless the matter is pressed we will lose a year. I appreciate the important point made by the Financial Secretary, but I should like him to explain what the timing would likely to be.
  Mr. MacDermot: Without any commitment, if we are talking about unrelived losses of earlier years I do not think that there would be difficulty if we decided to accept the proposal, in deciding to make it operate in respect of losses incurred since the introduction of the tax.
  Mr. John Hall: In view of those assurances, accepting that the Treasury intends to consider the matter seriously and anticipating that we will have something satisfactory presented to us next year, I beg to ask leave to withdraw the Motion.
  Motion and Clause, by leave, withdrawn.
  Clause 1.—(RELIEF FROM DUTY ON IMPORTED GOODS.)
  Mr. Patrick Jenkin: I beg to move Amendment No. 1, in page 2, line 16, at the end to insert:
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  "and where it appears to the Board that the interests of such producers could be prejudicially affected by any exercise of the power contained in this subsection, the Board shall consult with such persons or bodies as appear to the Board to be representative of such producers".
  We now come to the first Amendment to the Bill proper. As happens so often on these occasions when I am at the Dispatch Box, we have moved to some of the more obscure parts of the legislation which we are considering. As the Minister of State, Board of Trade will recollect, when he dealt with the Clause in Committee he was not alone in finding Clause 1, which introduces the new concept of equivalence, hard to understand.
  It is because on that occasion we did not get as clear answers as we would have liked to the points that were raised from this side that we have found it necessary to return the Clause and to deal with it by way of Amendment. For future reference, it might be remembered that the reason why difficulty was experienced was perhaps because, in introducing the Second Reading of the Finance Bill, the Chief Secretary expressly departed from normal precedent and said that he was not proposing to introduce any of the more detailed Clauses amending the law either of taxation or of Customs and Excise. For that reason, we approached it for the first time at the Committee stage, and I made it clear in the debate that, if we found the explanations unsatisfactory, we should want to return to them on Report. That is what we are now doing.
  The purpose of the Clause, which the Minister of State went some way to explain to the Committee on that occasion, is to help exporters by allowing for the first time what I called a departure from the golden thread that, as a matter of principle, has hitherto underlain all legislation dealing with the repayment or remission of duty and the allowance of drawback.
  The House will recollect that the golden thread was the principle that it is only if the goods which have been imported are themselves exported, either in their original form or having been manufactured into something else which is exported, that duty has been allowed hitherto.

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  By introducing the concept of equivalence, the Clause departs from that principle, and goods may be imported effectively tariff-free on the basis of the export of other and different goods. Thus the point is reached that, on one interpretation of the Clause, this could amount to a quite substantial breach in the protective tariff. I have no doubt that that is why the words are added at the end of subsection (1) in exactly the same form as they were added in the comparable section of the Import Duties Act, 1958:
  "… the Board of Trade shall have regard to the interests of those producing in the United Kingdom goods comparable with those articles."
  I raised the question in Committee at column 1475, as to how the Board of Trade was going to apply that provision, and I asked if it was going to take steps to consult with domestic manufacturers to see if they had any views on the granting of relief in any particular case. As the Minister of State will acknowledge, he did riot attempt to deal with the point in his first reply. Therefore the matter was raised again by my hon. Friend the Member for Worthing (Mr. Higgins), who spoke later in the debate, at column 1505, and the Minister of State made some effort to deal with the point. However, I am sure that he will recognise that we got no answer at all. What he said on that occasion was:
  "Another point concerned domestic producers. One or two may be concerned about the situation, but there is no real cause for anxiety. The interests of these producers will be constantly watched."
  It is interesting to note that he went on:
  "Some cases have come forward during recent operations which have illustrated that there is some worry about the matter, and we have now introduced the principle of equivalence to help them, to the extent of £500,000 a year."—[OFFICIAL REPORT, 15th June, 1966; Vol. 729, c. 1505.]
  I am sure that the House will realise that what the Minister did in those two consecutive sentences was to slide over from the concern of the domestic producer to the concern of the people who wanted extra help for exporting. They are not the same people at all. Therefore, I suggest that my assertion that the Minister of State made no answer is justified.
  The effect of the Amendment is to impose on the Board of Trade an obligation to consult with domestic producers
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  in certain circumstances, though not all. The circumstances are where it appears to the Board that the interests of such producers could be prejudicially affected by any exercise of the power contained in the subsection.
  That obligation would be a very important safeguard. There is often a clear conflict of interest between those who are producing, let us say, an intermediate or raw material in this country, and those who are producing finished products which are derived from that raw material. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) is not here, and, in deference to him, I shall not return to the same example that I gave previously. The manufacturer of the finished product, naturally enough, would like any relief that he could get in the cost of the raw material which he has to buy, whether by way of reduction of duty on the imported material or reduction of the price of the domestic material. From his point of view, any relaxation of a protective duty would be desirable.
  Then one has to look at the contrasting interest of the raw material producer, which is in diametrically the opposite direction. As he sees it, he is fighting international competition, often on the basis of unequal tariffs. The Minister of State knows the desire in the plastics field, for example, for tariff parity. He is facing higher energy costs and a scale of production in this country which is not comparable with that of his competitors. Any threat of a duty free import of such a material, however much it might be for the benefit of the final product fabricator, could amount to a serious breach in his own protection. In those circumstances, surely he is entitled to expect that the Board of Trade will not only have regard to his interests but will take the trouble to consult with him to find out to what extent his interests are likely to be affected. That is why we believe that the Amendment would produce a useful safeguard.
  The precedent, which is not in statutory form anywhere else but which is regularly followed, is that, whenever the Board of Trade proposes to grant a temporary exemption from duty under Section 3(6) of the Import Duties Act, 1958, it invariably consults with domestic manufacturers to make sure that none of them

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  has any serious objections. In many cases, there is no domestic manufacturer, and the question goes by default. In other cases, the domestic manufacturer may say, "I am trying to build up production. Give me another year of duty protection and if I still have not done it, I cannot honestly resist the reduction in the duty." Such consultation is of great value to industry, and it would be unthinkable under Section 3(6) of the 1958 Act that there should be any modification. It gives the industry an opportunity not only to know what is intended, but also, in suitable cases, to protest. I believe that that practice applies all the more strongly here. This is a new power which the Board of Trade is taking, which makes a significant break with the past in getting away from the original concept of what I have called hitherto the golden thread. It could undermine the protection which is available by the protective tariff for domestic industry, and for this reason safeguards, perhaps additional to those in the 1958 Act, would be appropriate.
  I believe that this is a reasonable Amendment. I hope that the Minister of State, having heard the arguments spelt out rather more fully than we were able to do in Committee when dealing with the whole Clause, has appreciated that there is a point of some substance, and that he will be able to give some undertaking, if he cannot actually accept the Amendment.
  Mr. Sheldon: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) spoke about the need and the obligation to consult. I consider that this is an unnecessary injunction to the Board of Trade. In fact, in the past, as the hon. Gentleman must know, consultations have been prolonged and thorough, in fact some might say too prolonged and too thorough. The consequence of this has been that where a temporary reduction in import duty is sought, it has frequently been imposed too late to be of benefit to the person concerned.
  There is no problem about consultation. It is extremely thorough. As soon as the idea is mooted there immediately falls on the Board of Trade large quantities of literature, there are huge delegations, and there is the whole parapher-
  1332
  nalia that we are accustomed to seeing. The problem here is the lack of speed in dealing with these matters, and it is because the Clause can give this speed of action that I particularly welcome it.
  8.30 p.m.
  The Minister of State, Board of Trade (Mr. Roy Mason): I am obliged to my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for that interjection. He seems to have put his finger on the point. I appreciate the reason why the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has put down what I term a probing Amendment. It is to clarify thinking. It deals mainly with the interests of the domestic producer who may be worried that an import is being recognised as going into an export product.
  I hope that I can assist the House and prove to the hon. Gentleman that it is not necessary to press this Amendment. The Board of Trade is required by the Clause to recommend to Customs that "equivalence" relief should be granted if in their opinion it is expedient in the national interest, and in arriving at that opinion the Board is required to have regard of the interests of those producing in the United Kingdom goods comparable to the imported articles. The Amendment would require the Board of Trade, in any case where it seemed that those interests could be "prejudicially affected", to consult representatives of the producers concerned. The Amendment uses the word "shall," which means that in every case there will be consultations with every local producer.
  As my right hon. Friend the President of the Board of Trade promised during the debate on the Budget Resolution in 1965, the Board of Trade has discussed with representatives of industry the detailed way in which duty relief and drawback policy is carried out in practice. My right hon. Friend said:
  "Drawback is designed to relieve the exporter of paying duty on materials which he needs to import although without necessarily stimulating imports. In future, it will be administered on the assumption that promotion of exports is always in the national interest, unless it can be shown that some other damage to the economy will result."—[OFFICIAL REPORT, 8th April, 1965; Vol. 710, c. 687.]
  That sentence in part covers what the hon. Gentleman had in mind.

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  It is incumbent on the Board of Trade by virtue of the last words of subsection (1) that it shall have regard to the interests of those producing in the United Kingdom goods comparable to those which are to be the subject of duty relief. It is our practice to take the views of production departments on every application, and production departments consult industry where they are in any doubt as to the facts. To make consultation with industry legally obligatory in every case—which would be the effect of the Amendment—would mean delay which would often be prejudicial to the interests of the applicant. It would also create unnecessary work, and might delay an order. It could even lose an export order, and, as my hon. Friend said, speed is essential.
  The present arrangements have been worked out with industry, which is satisfied with them. In any case, where an industry expresses the wish to see a modification in the existing arrangements, the Board of Trade arranges to meet its wishes wherever possible.
  I have tried to explain fully that consultation takes place, and that we are always willing to modify any arrangement if any of the industrialists feel concerned about it. I think that this goes some way to meet the wishes of the Opposition, and I hope, therefore, that the House will say that it is not necessary to accept the Amendment in this form, as consultations take place, and because industry, especially the C.B.I., has agreed to the procedures adopted.
  Mr. Patrick Jenkin: I appreciate what the Minister has said. He has gone to great pains to explain to the House the sort of consultation that now takes place. The language of the Clause without the Amendment is the same as that in Section 7 of the Import Duties Act. Can he give the House an undertaking that consultation under this Clause, in respect of claims for relief, will be no less than it has been under Section 7 of that Act?
  Mr. Mason: I think that I can give that assurance, but we do not have to consult every producer who may be slightly affected, or every case, because producers have agreed, through their organisation—the C.B.I.—that the present consultative procedure is fairly satisfactory.
  Mr. Patrick Jenkin: Having heard what the Minister of State has said I am quite happy, on behalf of my hon. and right hon. Friends, to accept his assurances. I merely say that we might not have needed to put down the Amendment if the Minister had explained the situation in Committee. However, in the circumstances, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Patrick Jenkin: I beg to move Amendment No. 2, in page 2, line 40, at the end, to insert:
  "or
  (iv) for ensuring that the relief does not operate so as to amount to an export subsidy contrary to any international treaty of which the United Kingdom is a signatory; or
  (v) for ensuring that the relief does not operate so as to reduce or destroy the effectiveness of any protective duty which may he leviable on any goods imported into the United Kingdom".
  This, again, is a probing Amendment. We did not get what we regarded as a wholly satisfactory answer in Committee. Everything depends upon the interpretation of the Clause. By that I do not refer to what the Clause means; I refer to the way in which the Board of Trade and the Customs and Excise authorities propose to interpret and work it.
  The point made very forcibly by my hon. Friend the Member for Yeovil (Mr. Peyton) in our previous debate was that the Clause was riddled—perhaps inevitably—with administrative discretions. Government Departments have complete freedom to do what they wish within its terms. It is, therefore, very important that we should have some indication as to the way in which the Board of Trade and the Commissioners propose to exercise these discretions.
  The House will remember that in Committee I posed, perhaps rather too elaborately, some hypothetical cases showing how, on one interpretation, the Clause could operate so as to provide an export subsidy whereas, on a different interpretation, in different circumstances, it could undermine the protective duties which Parliament has placed round our shores. In Committee, the Minister of State said that it was not the intention of the Board of Trade that the Clause should provide a subsidy, but he did not say anything about the converse case,

  1335
  dealing with loss of protection. I am prepared to accept that it is not the Government's intention that the Clause should provide anything in the nature of a subsidy for exports.
  I do not need to remind the House of the arguments that we had on what is now Clause 9, on the removal of the export rebate scheme from goods destined for E.F.T.A. countries because those countries had argued that that amounted to an export subsidy and was contrary to the Stockholm Convention. The world is very sensitive to these matters, and, therefore, it behoves the Government, in considering the Clause in all its discretion, to make sure that there is no possibility of its being operated in such a way as to amount to an export subsidy.
  There seems to be some doubt on that matter. Subsection (4, b) defines "equivalent articles" as goods of such a wide description that in certain circumstances, which I referred to in Committee, the Clause could be operated as an export subsidy. I direct the attention of the House in particular to the words in brackets, namely,
  "having regard to such matters, and in particular to such of the following matters, namely, the description, quantity, quality, value and function of those goods and the imported articles respectively, as appear to the Commissioner's to be relevant in the particular circumstances."
  That is to say, the extent to which they take account of the various characteristics of the goods and the imported articles depends entirely on their own discretion. It depends on how they interpret the Clause and on how they apply it to the facts.
  It is not good enough. We ought, when giving these powers to Government Departments, to specify rather more clearly what we intend the Clause to cover and how we mean it to work and make it clear that it is only to have the somewhat limited function which the Minister of State outlined in Committee, a function designed to help exporters in certain circumstances.
  The amendment is intended to ensure that the Commissioners shall impose conditions when they grant relief in the first case, to ensure that the relief does not operate so as to amount to a subsidy contrary to any international treaty and,
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  in the second case, to ensure that it does not operate so as to reduce or destroy the effectiveness of any protective duty.
  I believe that these are important provisions. It is right that we should circumscribe the power by putting clearly into the Bill the fact that there is no intention whatever that the Clause should be used to achieve either of these effects. We entirely accept that it is not the Government's intention that it should, but the fact remains that the Clause as drafted—particularly the words I read out from subsection (4, b)—leaves it wholly within the discretion of the Commissioners, who are rightly an independent body, to interpret it in this way if they think that the particular case with which they are dealing could have that result.
  I do not believe that we should. We should circumscribe it. I hope that, if the Government cannot accept the Amendment they will at any rate give some parameters—I believe that that is the present "okay" word—as to how the Clause is intended to operate.
  Mr. Sheldon: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) made two points. First, he was a little worried about the administrative discretion being given to the Board of Trade by this Clause. But he is, possibly, now accepting the necessity for speed, which is the essence of the Clause. Perhaps there is no other way than giving a certain amount of discretion to get these decisions as quickly as industry requires them.
  The hon. Gentleman's other point related to his concern about the possible subsidy which might be given to exports by making use of imported goods on the home market and using the equivalent articles for exports. He has made far too much of this point. In so far as there may be the odd case in which this might apply, he should be well satisfied with subsection (2, b,ii), which allows for the protection of the Revenue. This would cover almost every conceivable case which he is likely to think up.
  If this is so, he is just trying to bring greater adornment to a Clause which can manage without it.
  Mr. Mason: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is probing very well on this stage

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  of the Bill. I always found this to be a delightful operation when I was in opposition—if one got no satisfaction at an earlier stage, one could always come back to the subject on Report. I will again try to help the House.
  The hon. Gentleman raised similar points when we were discussing the question, "That Clause 1 stand part of the Bill". He was concerned that the imported raw material might be cheaper than the domestic material, that it might depress the general price level of the material in the domestic product, that it might mean a loss for the domestic product and he questioned whether it was an export subsidy. It appears that he wants general clarification.
  First, the Commissioners will take into consideration the differences in value between the imported and the domestic component. Secondly, there is no attempt in the Clause to effect an export subsidy. If there were, it would contravene both G.A.T.T. and E.F.T.A. This practice of equivalence which we are introducing is new here, but is used in other countries. I pointed out in our earlier discussion that France, Sweden, Italy and America are already operating a similar system.
  There will be only a few cases, and I made the rough estimate that it might cost, depending on what use were made of this particular equivalence section, about £½ million a year. Our own producers know of the equivalence method we have in mind and have not expressed concern—indeed, this is being done after consultation with industry.
  8.45 p.m.
  It is intended that the new power should be used in the way suggested by the Amendment but, with respect—and my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) also jumped on this—I would point out that subsection (2, a) covers this point, in so far as relief can be given only be remission or repayment in whole or in part of the duty paid on imported goods or by the payment of the average national rate of drawback appropriate to goods which are subject to the national drawback scheme.
  Subsection (3) goes further, and provides against all possible forms of duplicate payment of relief. Under these existing conditions no payment could be made
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  which amounted to an export subsidy. I can repeat here the assurance given in Committee that both Departments will operate their new powers in a way that does not and does not appear to constitute any form of undesirable export subsidy.
  As to subsection (v) of the Amendment, the present wording of subsection (1, a) requires that, before the relief is given, the Board of Trade shall have notified the Commissioners that in its opinion the grants of relief will be expedient in the national interest and that, in considering the case, they shall have regard to the interests of home producers of comparable goods. I hope that hon. Members will recognise that there is no chance of this provision operating a hidden subsidy or causing harm to home producers. It is our intention to operate as the Amendment suggests, but it is not necessary to accept the Amendment, as the position is already covered by the various safeguards in the Clause.
  Mr. Terence L. Higgins: I want to press the Minister of State a little further in this matter, because what is worrying us on this side is not whether or not the Commissioners will actually interpret this Clause in such a way that it is contrary to E.F.T.A. or G.A.T.T., but whether it is possible for them so to Interpret the Clause, as it would be undesirable to have on the Statute Book a Section which could be contrary to E.F.T.A. and G.A.T.T. if the Commissioners made the wrong decision.
  We felt it necessary to table this Amendment, which seems eminently reasonable, so as to make the point abundantly clear. We do not, at the moment, accept the Minister's argument that the present wording of the Clause completely eliminates any question of so interpreting the Clause that an export subsidy might be thought to be given.
  I thought that in Committee my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) quite reasonably interpreted the Clause as it stood in such a way that it would be possible for an export subsidy to be given. On the other hand, the Minister explained the Clause in a very much narrower sense. In fact, he covered only two points. He said, first, that where a particular raw material had been imported and had

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  become so mixed up with the raw materials produced at home that it was not possible to distinguish the one from the other, this equivalence provision would ensure that drawback was given even though the particular individual item or quantity of the raw material could not be identified.
  The Minister's second point referred to what one might call the delay position. It supposed that a manufacturer intended to import some raw material which was delayed. He then used domestic raw material, and subsequently imported the raw material he had first intended to use. He would be allowed drawback on the raw material even though it was imported after the actual goods concerned had been exported. Those two very narrow points give a very restrictive interpretation to the Clause.
  It appears to us that the wider interpretation is quite feasible. I therefore ask the Minister of State to agree that it is undesirable to have on the Statute Book a Clause which could be interpreted in such a way as to be contrary to the E.F.T.A. and G.A.T.T. agreements. If so, ought he not to accept the Amendment?
  The second matter I raised refers to the Minister's answer in Committee. He has repeated the point this evening. He said that the amount of revenue involved would be about £½ million. In Committee, it was not entirely clear whether he meant that the amount of goods concerned in the operation was valued at £½ million, or whether that would be the loss to the Revenue. If it is the second, which is the interpretation which he appeared to give just now, we could have a situation where there would be such a loss and an equivalent export subsidy in the arrangements. I should be grateful if he would clarify that point.
  The hon. Gentleman said, on the question whether the goods are equivalent, that the Commissioners will take into account the difference in the price, but we are not clear what he means by "take into account". Does this mean that traders will get the drawback on the imported price or the home price? He went on to say that producers in this country know of the basis of equivalence which the Board of Trade has in mind. In that
  1340
  case, the producers seem to be in a rather better position than Members of the House, because the hon. Gentleman has not made clear what he regards as an equivalent. If he is to eliminate the query we are raising he should say what equivalence means in regard to the question of price and of quality. Will the Commissioners take into account quality, and what will this mean in terms of drawback allowed?
  I do not think that we could accept the view put forward by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) that the protection of the Revenue is sufficient to cover the points we have raised. It seems that this Amendment would put the matter beyond all shadow of doubt. It seems that the points the Minister of State has so far made do not put it beyond such a shadow of doubt. I therefore ask him to accept the Amendment on these grounds.
  Mr. Mason: Perhaps I may have permission of the House to speak again, in view of the fact that the Opposition are now opening and winding up in discussion of Amendments, which seems to be an unusual practice.
  I am sure that some of the fears which the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has about export subsidies will have been closely examined by our E.F.T.A. colleagues. This matter has been on the Order Paper for some time. If there had been a breach we would have had representations about it. I am not satisfied that it could lead to export subsidies, but, if the Opposition are extremely worried, I shall make sure that the attention of the Commissioners is drawn to what has been said today. I am not satisfied that this will lead to any hidden export subsidy.
  The £½ million is a highly speculative figure, because we do not know the number of firms which will make application under equivalence. As drawback operates so will equivalence operate. This is similar to what is happening in E.F.T.A. now. The hon. Member for Worthing (Mr. Higgins) spoke about a loss of £½ million, but we already have drawback on imported components which go into export goods. This is exactly the same. Because an imported component may have been delayed or lost on the high

  1341
  seas we shall now permit a domestic component to go in its place and allow the exporter his drawback of duty, but he must bring in that imported component.
  The hon. Member talks about the difference in raw material prices. The Commissioners will be obliged to examine the difference between the imported component and the domestic component in the case of equivalence, particularly to make sure that no export subsidy arises.
  Mr. Higgins: I should like to speak again, with the leave of the House. I am sorry to do so, but we cannot accept the arguments which have been put forward by the Minister of State. He has not clarified the point, and he has given us no indication as to why the Amendment, which would put the matter beyond all shadow of doubt, should not be accepted. We cannot accept the argu-

  Division No. 106.]

  AYES

  [8.57 p.m.

  Alison, Michael (Barkston Ash)

  Grant, Anthony

  Munro-Lucas-Tooth, Sir Hugh

  Allason, James (Hemel Hempstead)

  Grant-Ferris, R.

  Murton, Oscar

  Atkins, Humphrey (M't'n & M'd'n)

  Gresham Cooke, R.

  Naharro, Sir Gerald

  Awdry, Daniel

  Grieve, Percy

  Noble, Rt. Hn. Michael

  Baker, W. H. K.

  Gurden, Harold

  Nott, John

  Balniel, Lord

  Hall, John (Wycombe)

  Onslow, Cranley

  Batsford, Brian

  Harris, Frederic (Croydon, N.W.)

  Osborne, Sir Cyril (Louth)

  Bell, Ronald

  Harris, Reader (Heston)

  Page, Graham (Crosby)

  Bennett, Sir Frederic (Torquay)

  Harrison, Col. Sir Harwood (Eye)

  Page, John (Harrow, W.)

  Bennett, Dr. Reginald (Gos. & Fhm)

  Harvie Anderson, Miss

  Pearson, Sir Frank (Clitheroe)

  Biffen, John

  Hastings, Stephen

  Peel, John

  Birch, Rt. Hn. Nigel

  Hawkins, Paul

  Percival, Ian

  Black, Sir Cyril

  Heald, Rt. Hn. Sir Lionel

  Peyton, John

  Blaker, Peter

  Heseltine, Michael

  Prior, J. M. L.

  Boyd-Carpenter, Rt. Hn. John

  Higgins, Terence L.

  Pym, Francis

  Boyle, Rt. Hn. Sir Edward

  Hiley, Joseph

  Renton, Rt. Hn. Sir David

  Braine, Barnard

  Hill, J. E. B.

  Rossi, Hugh (Hornsey)

  Brunton, Tatton

  Hirst, Geoffrey

  Russell, Sir Ronald

  Bromley-Davenport, Lt. Col. Sir Walter

  Holland, Philip

  Scott, Nicholas

  Brown, Sir Edward (Bath)

  Hordern, Peter

  Sharples, Richard

  Bruce-Gardyne, J.

  Hornby, Richard

  Shaw, Michael (Sc'b'gh & Whitby)

  Bryan, Paul

  Hunt, John

  Smith, John

  Buck, Antony (Colchester)

  Hutchison, Michael Clark

  Stodart, Anthony

  Bullus, Sir Eric

  Irvine, Bryant Godman (Rye)

  Stoddart-Scott, Col. Sir M. (Ripon)

  Burden, F. A.

  Jenkin, Patrick (Woodford)

  Summers, Sir Spencer

  Campbell, Gordon

  Jopling, Michael

  Talbot, John E.

  Carlisle, Mark

  Joseph, Rt. Hn. Sir Keith

  Taylor, Sir Charles (Eastbourne)

  Carr, Rt. Hn. Robert

  Kimball, Marcus

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

  Clegg, Walter

  Knight, Mrs. Jill

  Taylor, Frank (Moss Side)

  Cooke, Robert

  Langford-Holt, Sir John

  Temple, John M.

  Corfield, F. V.

  Lewis, Kenneth (Rutland)

  Thatcher, Mrs. Margaret

  Costain, A. P.

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

  Turton, Rt. Hn. R. H.

  Craddock, Sir Beresford (Spelthorne)

  McAdden, Sir Stephen

  van Straubenzee, W. R.

  Crouch, David

  MacArthur, Ian

  Vickers, Dame Joan

  Dance, James

  Macleod, Rt. Hn. Iain

  Walker, Peter (Worcester)

  Dean, Paul (Somerset, N.)

  Marten, Neil

  Walker-Smith, Rt. Hn. Sir Derek

  Dodds-Parker, Douglas

  Maude, Angus

  Walters, Denis

  Eden, Sir John

  Mawby, Ray

  Ward, Dame Irene

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

  Maxwell-Hyslop, R. J.

  Weatherill, Bernard

  Errington, Sir Eric

  Mills, Peter (Torrington)

  Webster, David

  Eyre, Reginald

  Mills, Stratton (Belfast, N.)

  Wells, John (Maidstone)

  Giles, Rear-Adm. Morgan

  Mitchell, David (Basingstoke)

  Whitelaw, William

  Gilmour, Ian (Norfolk, C.)

  Monro, Hector

  Wilson, Geoffrey (Truro)

  Gilmour, Sir John (Fife, E.)

  Morgan, W. G. (Denbigh)

  Wolrige-Gordon, Patrick

  Glover, Sir Douglas

  Morrison, Charles (Devizes)

  TELLERS FOR THE AYES:

  Gower, Raymond

  Mott-Radclyffe, Sir Charles

  Mr. More and Mr. Younger.

  ment that simply because there have been no representations so far on behalf of E.F.T.A. and G.A.T.T. the Clause cannot be interpreted as being a possible export subsidy. As the matter has not been clarified and as our Amendment would clarify the situation, I hope that my right hon. and hon. Friends will divide in favour of the Amendment.
  Mr. Gower: Cannot the Minister of State regard this as a sort of long stop, a long-term protection, something that would put the matter beyond reasonable doubt? I appeal to him to treat the matter in that light. Although he says that the position is all right and beyond all reasonable doubt, there could be no harm in having these protective words.
  Question put, That those words be there inserted in the Bill.
  The House divided: Ayes 136, Noes 207.

  NOES

  Abse, Leo

  Galpern, Sir Myer

  Morgan, Elystan (Cardiganshire)

  Albu, Austen

  Gardner, A. J.

  Morris, Charles R. (Openshaw)

  Alldritt, Walter

  Garrett, W. E.

  Moyle, Roland

  Allen, Scholefield

  Garrow, Alex

  Mulley, Rt. Hn. Frederick

  Archer, Peter

  Gourlay, Harry

  Newens, Stan

  Armstrong, Ernest

  Gray, Dr. Hugh (Yarmouth)

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

  Ashley, Jack

  Gregory, Arnold

  Norwood, Christopher

  Atkins, Ronald (Preston, N.)

  Grey, Charles (Durham)

  Oakes, Gordon

  Atkinson, Norman (Tottenham)

  Griffiths, David (Rother Valley)

  Ogden, Eric

  Bacon, Rt. Hn. Alice

  Griffiths, Rt. Hn. James (Llanelly)

  O'Malley, Brian

  Barnett, Joel

  Griffiths, Will (Exchange)

  Orbach, Maurice

  Baxter, William

  Hamilton, James (Bothwell)

  Orme, Stanley

  Beaney, Alan

  Hamilton, William (Fife, W.)

  Oswald, Thomas

  Bence, Cyril

  Hannan, William

  Owen, Dr. David (Plymouth, S'tn)

  Bennett, James (G'gow, Bridgeton)

  Harrison, Walter (Wakefield)

  Owen, Will (Morpeth)

  Binns, John

  Henig, Stanley

  Page, Derek (King's Lynn)

  Bishop, E. S.

  Herbison, Rt. Hn. Margaret

  Pannell, Rt. Hn. Charles

  Blackburn, F.

  Hilton, W. S.

  Park, Trevor

  Boardman, H.

  Hooley, Frank

  Parker, John (Dagenham)

  Booth, Albert

  Homer, John

  Pearson, Arthur (Pontypridd)

  Bottomley, Rt. Hn. Arthur

  Houghton, Rt. Hn. Douglas

  Pentland, Norman

  Braddock, Mrs. E. M.

  Howarth, Harry (Wellingborough)

  Price, Thomas (Westhoughton)

  Bradley, Tom

  Howarth, Robert (Bolton, E.)

  Price, William (Rugby)

  Brooks, Edwin

  Howie, W.

  Probert, Arthur

  Brown, Hugh D. (G'gow, Provan)

  Hughes, Roy (Newport)

  Rankin, John

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Hunter, Adam

  Rees, Merlyn

  Brown, R. W. (Shoreditch & F'bury)

  Irvine, A. J. (Edge Hill)

  Rhodes, Geoffrey

  Buchan, Norman

  Jackson, Colin (B'h'se & Spenb'gh)

  Roberts, Albert (Normanton)

  Butler, Mrs. Joyce (Wood Green)

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

  Roberts, Goronwy (Caernarvon)

  Cant, R. B.

  Johnston, Russell (Inverness)

  Robertson, John (Paisley)

  Carmichael, Neil

  Jones, Dan (Burnley)

  Robinson, W. O. J. (Walth'stow, E.)

  Carter-Jones, Lewis

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

  Rose, Paul

  Chapman, Donald

  Jones, J. Idwal (Wrexham)

  Ross, Rt. Hn. William

  Coe, Denis

  Kelley, Richard

  Rowland, Christopher (Meriden)

  Concannon, J. D.

  Kenyon, Clifford

  Rowlands, E. (Cardiff, N.)

  Crawshaw, Richard

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

  Sheldon, Robert

  Crosland, Rt. Hn. Anthony

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

  Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

  Dalyell, Tam

  Kerr, Russell (Feltham)

  Silkin, S. C. (Dulwich)

  Davidson, Arthur (Accrington)

  Lawson, George

  Silverman, Julius (Aston)

  Davidson, James (Aberdeenshire, W.)

  Ledger, Ron

  Slater, Joseph

  Davies, Dr. Ernest (Stretford)

  Lee, John (Reading)

  Small, William

  Davies, C. Elfed (Rhondda, E.)

  Lestor, Miss Joan

  Spriggs, Leslie

  Davies, Robert (Cambridge)

  Lever, L. M. (Ardwick)

  Steele, Thomas (Dunbartonshire, W.)

  Dempsey, James

  Lewis, Arthur (W. Ham, N.)

  Swain, Thomas

  Dewar, Donald

  Lewis, Ron (Carlisle)

  Swingler, Stephen

  Diamond, Rt. Hn. John

  Lomas, Kenneth

  Symonds, J. B.

  Dickens, James

  Lubbock, Eric

  Thomas, Iorwerth (Rhondda, W.)

  Dobson, Ray

  Lyons, Edward (Bradford, E.)

  Thornton, Ernest

  Doig, Peter

  McCann, John

  Tinn, James

  Dunn, James A.

  MacColl, James

  Tomney, Frank

  Dunnett, Jack

  MacDermot, Niall

  Varley, Eric G.

  Dunwoody, Mrs. Gwynoth (Exeter)

  Macdonald, A. H.

  Wainwright, Edwin (Dearne Valley)

  Dunwoody, Dr. John (F'th & C'b'e)

  McGuire, Michael

  Wainwright, Richard (Colne Valley)

  Eadie, Alex

  Mackenzie, Gregor (Rutherglen)

  Walden, Brian (All Saints)

  Edwards, Rt. Hn. Ness (Caerphilly)

  Mackintosh, John P.

  Walker, Harold (Doncaster)

  Edwards, Robert (Bilston)

  Maclennan, Robert

  Watkins, David (Consett)

  Ellis, John

  McNamara, J. Kevin

  Wellbeloved, James

  Ensor, David

  MacPherson, Malcolm

  Wells, William (Walsall, N.)

  Evans, Albert (Islington, S.W.)

  Mahon, Peter (Preston, S.)

  Whitaker, Ben

  Finch, Harold

  Mahon, Simon (Bootle)

  Whitlock, William

  Fitch, Alan (Wigan)

  Mallalieu, E. L. (Brigg)

  Willey, Rt. Hn. Frederick

  Fletcher, Raymond (Ilkeston)

  Manuel, Archie

  Williams, Alan Lee (Hornchurch)

  Fletcher, Ted (Darlington)

  Mapp, Charles

  Williams, Clifford (Abertillery)

  Floud, Bernard

  Marquand, David

  Williams, W. T. (Warrington)

  Foot, Sir Dingle (Ipswich)

  Mason, Roy

  Willis, George (Edinburgh, E.)

  Ford, Ben

  Milian, Bruce

  Winstanley, Dr. M. P.

  Forrester, John

  Miller, Dr. M. S.

  Woodburn, Rt. Hn. A.

  Fowler, Gerry

  Mitchell, R. C. (S'th'pton, Test)

  Yates, Victor

  Fraser, John (Norwood)

  Molloy, William

  TELLERS FOR THE NOES:

  Fraser, Rt. Hn. Tom (Hamilton)

  Mr. Harper and Mr. Ioan L. Evans.

  Mr. Patrick Jenkin: I beg to move Amendment No. 3, in page 4, line 3, at the end to insert:
  "(c) the granting of relief under subsection (1) of this section shall be deemed to conduce to the exportation of other goods if it is shown to the satisfaction of the Board that it will encourage or contribute to such exportation,
  1344
  and, without prejudice to the generality of the foregoing, if the Board is satisfied that the granting of such relief will increase the profitability of the exportation of other goods, it may accept that as evidence of such encouragement or contribution as aforesaid."
  The fact that I move the Amendment briefly should not lead the Government

  1345
  to think that this is not an important point. This is another point which we raised in Committee and to which we got no satisfactory answer. Subsection (1, a) provides that the granting of relief must
  "conduce to the exportation of other goods".
  This is a departure from what I have called the golden thread under which hitherto relief has been available only if the same goods, either in their original form or converted, have been exported. The Clause raises the question of different goods.
  The question now arises, as it has never arisen before, of establishing a nexus between the goods which are imported and those which are exported. The Minister of State, Board of Trade, made this perfectly clear in Committee when he used these words:
  "it is essential that there should be a connection between the import and export of goods." [OFFICIAL REPORT, 15th June, 1966; Vol. 729, c. 1505.]
  What I do not think the Minister of State appreciated was that inevitably there are two aspects. There is, first, what might be called the linking by intention; that is, that the imports and exports are connected, in the sense that they are linked transactions and that the imports are made with a view to the exports, or some similar connection. The second element of the nexus is that there should be a linking by incentive. This is what I understand is meant by the term "conduce to"; in other words, that the granting of relief will actually help to promote on encourage the exports.
  The Minister of State, in the passage I have quoted, dealt with the former aspect of the nexus—that is, the linking by intention. The Amendment deals, as the Minister of State did not deal, with the linking by incentive. On this point, the Minister of State gave in Committee what I can only describe as a most unsatisfactory reply. I put to the hon. Gentleman, as appears from the foot of column 1492 of HANSARD, the various meanings which could be given to a phrase as vague as "conduce to". I suggested that it might mean, first, that the exports must be encouraged, in the sense that they would not take place at all if the relief were not granted—that is the most extreme case—or, alternatively, that it would merely be an assistance to the
  1346
  exports; or, thirdly, that the exports would be more remunerative—in each case a diminishing burden of proof. I then said:
  "These are three very different degrees of the extent to which ' conducing to ' can be interpreted".
  The Minister of State intervened and said:
  "I will not get involved in the argument between the hon. Gentleman and his hon. Friend."
  I replied:
  "This is not an argument between my hon. Friend and myself. It is a question of how far one must go to satisfy the Board of Trade that exports will be 'encouraged', to use a neutral word."
  The hon. Gentleman responded:
  "How far one must go to satisfy the Board of Trade that exports will be encouraged? We have introduced a whole range of exports assistance and encouragement. This is just another one."—[OFFICIAL REPORT, 15th June. 1966; Vol. 729, c. 1493.]
  The hon. Gentleman did what I accused him of doing half an hour ago. He slid off the point and moved on to something quite different, saying that, in some way, the burden of proof was satisfied merely by stating that the Board of Trade was actively encouraging exports. I am sure that the Committee realised that this was not the point of my intervention, but it is the point of this Amendment. I can only assume that the hon. Gentleman did not understand what I was putting to him or was unwilling to answer.
  The upshot is that the position is still obscure. The hon. Gentleman cannot rely on existing practice under the Import Duties Act, 1958, because there, with the connection which had hitherto existed between imports and exports, the connection was pretty obvious. Here we have to establish some other interpretation of the nexus between imports and exports.
  Different views can be taken on the question of incentives to exports. We must have some measure of the evidence that would satisfy the Board of Trade and on which it would give a certificate under Clause 1, saying that the granting of the relief would conduce to exports. I believe it right that, on a matter of this kind, the Board of Trade should take the most liberal view of the interpretation of the Clause. Anything which encourages exports should qualify for the relief and this should be so even if the

  1347
  only effect would be to increase the profits of the exporter—for instance, if he were unable to say that he would increase exports as a result of the relief but might be in a position to say that he would nevertheless make a bigger profit.
  Let us be clear that the Board of Trade should interpret the Clause in this way. That is why we propose this definition. It would show that the relief would
  "… encourage or contribute to such exportation, and, without prejudice to the generality of the foregoing, if the Board is satisfied that the granting of such relief will increase the profitability of the exportation of other goods, it may accept that as evidence of such encouragement or contribution …"
  This Amendment would strengthen the Clause, make it more effective and give the Board of Trade the widest power to use the Clause to achieve the avowed purpose of encouraging exports. I hope that the Minister of State will be able to accept it.
  Mr. Mason: The first half of the Amendment is a quibble about words. The meaning of the phrase "conduce to" really includes "encouraged" or "contributed to". The Clause already covers encouragement or contribution. The Amendment does nothing to the meaning of the Clause. The selection of the particular form of "conduce to", might be held to cast a doubt on the validity of any other form, which might be, for example "leading directly to" or "making possible". It would be undesirable to cast any doubt on transactions where such words rather than "encourage" or "contributing" were used. "Conduce to" therefore covers most of the terms. That is more helpful than wanting to lay down a strict terminology. The term already covers widely what the hon. Gentleman seeks.
  The second half of the Amendment refers to increased profitability as being clearly an "encouragement or contribution" to exports. The phrase is also unnecessary. The Board of Trade already takes into account profitability as a factor in deciding whether or not the national interest justifies a drawback or duty relief. It will continue to take account of such a factor in making its decisions.
  1348
  This is an argument about one set of words as against another and our form of words seems to be so widely drawn that it covers all the terms which the hon. Gentleman used. I hope that, without my wearying it further, the Committee will agree that we have covered the requirements of the Opposition.
  Mr. Gower: Surely we are here to argue about the meaning of words and there is nothing reprehensible in doing so. We think that a more precise definition is desirable. I do not think that what the hon. Gentleman has said in any way lessens the force of my hon. Friend's argument.
  9.15 p.m.
  Mr. Patrick Jenkin: By leave of the House; I regard the Minister's reply as very unsatisfactory. He cannot have read the Amendment and his arguments were totally irrelevant to what the Amendment was intended to do.
  Be that as it may, to use a neutral phrase, we are prepared to let the Clause go through and see how it operates over the next year. But I am bound to give notice that if there is any evidence that the Board of Trade is not operating the Clause as liberally as it should be operated, with particular reference to profitability and conducing, we shall return to the matter next year and hope to press the case with all the vigour which we can command.
  I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Clause 9.—(RESTRICTION ON EXPORT REBATES FOR GOODS CONSIGNED TO CONVENTION AREA.)
  Mr. Sheldon: I beg to move Amendment No. 4, in page 9, line 19, to leave out "or becomes".
  The Clause deals with the case when the export rebate is not allowed when the Convention rate of duty is claimed in exporting to E.F.T.A. countries. I have not been happy about the export rebate and the provisions which govern its use. I think that there is some force in the argument that the export rebate is either right or wrong; that if it is right we should not be in a position to refuse to use it to Convention countries, and that if it is wrong it should not be introduced, or that at any rate we should possibly try to

  1349
  brazen it out and not make these concessions.
  The rebate scheme is not an added value scheme, of course, but because of this any goods imported, say, from Commonwealth countries, where the import duty might be very low, might then be subject to some minor processing and then be re-exported and an export rebate consequently made. If that were so, it could mean a very valuable rebate being claimed, which would be unfair to our partners in E.F.T.A. But I would have thought that that would be covered by our rules about origin and the rules which have been accepted by E.F.T.A. countries about the origin of goods and the definition of origin. If there is a loophole here, it would be worth trying to plug it and consequently to save the £9 million which British exporters will be losing because of the changes being made.
  The case with which I want to deal concerns that when goods are sold and then possibly trans-shipped, or in some way moved, in ways which the shipper himself knows nothing about. As the Clause is drafted, a person who has received a rebate for which he is or becomes disentitled in consequence of the Clause is to be liable to repay the amour: of that rebate. If he is disentitled, that is fair enough and he knows his position at that time. But when he becomes disentitled, there might be some contingency which he could not take into account at the time. For instance, if he sold the goods f.o.b. to be shipped to some destination of which he might not be sure and at some subsequent stage, a year or two years later, the goods were consigned to an E.F.T.A. country, the rebate for which he had claimed would be deducted from him. These are matters about which the shipper cannot know in advance.
  There is also the frequent case when goods go to some neutral port, there to be trans-shipped on the orders of the customer. These are also matters about which the shipper cannot know. I mentioned in Committee that this could be easily amended by a note or certificate of origin or some other shipping document whereby it could be stated whether an export rebate had been claimed. This would limit the liability of the shipper and notify the customer, wherever he may be, of the position concerning the goods.
  1350
  I hope that my hon. Friend might accept the Amendment.
  Mr. MacDermot: We had an interesting debate in Committee on the point raised in this Amendment and I agreed to look at it again. I am grateful to my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for putting his Amendment down again and giving me an opportunity to tell the House of the result of my further consideration.
  The problem which we are discussing arises when an exporter, having exercised his option—and it is an option—to claim the rebate after the goods have been exported with the intentions on his part that E.F.T.A. tariff treatment would not be claimed, loses control of the goods. The situation might arise at a later stage when E.F.T.A. tariff treatment was claimed. In those circumstances, when this came to his knowledge he would have to inform the Customs, and to refund the rebate he had received.
  To overcome this problem is was said that it might be provided and required by law that there should be written on to the certificate of origin or one of the other documents a statement that E.F.T.A. tariff treatment had been claimed, the implication being that the recipient of the goods would in some way be prohibited from claiming the E.F.T.A. tariff treatment.
  It is here that we come up against the real difficulty, because there could be no such prohibition. Under the agreement that we have with the E.F.T.A. countries it is for us to enforce this limitation that the rebate cannot be claimed where the E.F.T.A. tariff treatment is claimed by the importer. It is entirely a matter for us. It would not be right, therefore, for us to try to legislate in a way that seemed to be or by implication was imposing some legal duty or restriction upon the importer. The obvious practical solution to all this as I indicated when we discussed this in Committee is that this is something which should be the subject of negotiation between the exporter and importer.
  In the case where he is exporting say to a mercantile agent who may then pass the goods on to another purchaser it is up to the exporter, if he has claimed rebate, to make the matter plain so that

  1351
  the importer will, in turn, pass on the information to the person who ultimately buys the goods.
  For the reasons that I have given we do not think that this is a matter which can be dealt with by legislation, but we do realise the importance of trying to see that this works smoothly in practice so that we do not have problems arising which lead to ill-feeling and recriminations. What I have done is to ask the Customs to consult the Association of British Chambers of Commerce and similar bodies with a view to persuading them to use their best offices with the trading community to achieve what we have in mind on a voluntary basis.
  I hope and believe that we can find a solution to the problem that way and to do it more effectively than by legislation, and certainly do it with more propriety.
  Mr. Ronald Bell: There is not much good in saying anything more on this matter at this stage. The Financial Secretary will remember that I moved a series of Amendments to the same effect in Committee. All that it is profitable now to say is that these difficulties arise because this is being done the wrong way round. If we had left it, as we should have left it, to the other member countries of E.F.T.A. to enforce this principle—which they feel is valid and which we, for bad reasons, as I think, have agreed that they should treat as valid—these practical difficulties, which have been the subject of a number of Amendments, would not have arisen.
  Mr. Sheldon: I thank my hon. and learned Friend the Financial Secretary for his reply. There is a great deal in what he says about leaving this matter to the chambers of commerce, with their vast experience. I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. MacDermot: I beg to move Amendment No. 5, in page 9, line 37, to leave out from "above" to the end of line 40.
  This Amendment meets a point raised by the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) in Committee. I am grateful to him for raising it. He suggested that the words in the Clause laying the onus of
  1352
  proof on the trader in cases where there was a dispute about whether he was entitled to retain the export rebate could operate unfairly against him. I thought that there was force in what he said and asked for an opportunity to look further into the matter.
  As I said in Committee, there is a fairly well established precedent that traders who claim drawback have the obligation to prove their case in any dispute with the Customs. That is soundly based, because usually the means of knowledge is peculiarly with them rather than with the Customs. But in the context of this Clause, where the requirement to repay a rebate will normally be decided by an event in another country or one of the E.F.T.A. countries, I can well appreciate that it might be thought unreasonable to say that the Customs demand for repayment should prevail unless the trader could produce proof to the contrary. The Commissioners do not demand repayment unless they have some firm evidence that the rebate is not justified, and we expect that disputes would rarely arise.
  But to avoid any suggestion that the law could operate unfairly against a trader who genuinely discharged his liability to repay, I am happy to agree with the hon. and learned Gentleman's suggestion, and, therefore, commend the Amendment to the House.
  Mr. Ronald Bell: I am grateful to the Financial Secretary for accepting the Amendment which I moved in Committee and then withdrew. Obviously, there are practical difficulties whichever way the burden of proof is left to lie. But there was, as the hon. and learned Gentleman said, a risk of real hardship arising in some cases if the burden had been imposed on a merchant rather than on the Commissioners. I am, therefore, glad that the hon. and learned Gentleman moved the Amendment and that the Government commend it to the House.
  I would only say again that this is yet another of those difficulties—I think that the difficulty has been solved in this case—which arise purely and simply from the fact that this operation is being carried out the wrong way round.
  Amendment agreed to.
  Clause 10.—(CUSTOMS PROCEDURES: HOVER VEHICLES AND RELATED MATTERS.)
  9.30 p.m.
  Mr. Peyton: I beg to move Amendment No. 6, in page 10, line 28, to leave out subsection (3).
  Subsection (3) starts with the words:
  "The Commissioners may by regulations impose conditions and restrictions as respects the movement of hover vehicles and the carriage of goods by hover vehicles …"
  I will riot weary the House with a recital of the rest of the Clause. I am extremely concerned, as the House should be, about the width of the powers which we are here asked to confer upon the Commissioners.
  Fairness demands that I should say one thing at the outset. Having made some rather stringent comments about certain aspects of the activities of the Commissioners of Customs and Excise, I wish to say that since the debates in Committee I have been informed by those who have consulted me that they have had great co-operation from one of the Commissioners of Customs and Excise. I hope that I would not be giving too much away if I were to say that she has been most helpful throughout. Those who have consulted me are extremely grateful for the courtesy and consideration which she has shown.
  I am, however, concerned with the wide, blanket powers which the House is being asked to confer upon the Commissioners. We have here a new form of transport. It should be our desire to stimulate, promote and encourage it in every way and not to shackle it with wholly unnecessary, arbitrary and onerous restrictions.
  I am glad that the Chief Secretary is to answer this debate, because it will give him the chance of withdrawing—we all make mistakes at times—a hideous gaffe, to put it as politely as I can, which he made in Committee. I refer to col. 1597, when he made a comment which, no doubt, has burned into his memory with the result that he hangs his head in shame every time he recollects his words when he said that the hovercraft
  "is a developing form of transportation and is the ideal smugglers' vehicle".—[OFFICIAL REPORT, 15th June, 1966; Vol 729, c. 1597.]
  1354
  I suffered at the time from a sense of shock and was unable to recover my power of speech to say what I thought of that remark. Even with the lapse of time, I am unable to comment adequately upon it. Nevertheless, it was extraordinary.
  I am sure that arrangements could be made for the right hon. Gentleman to have a trip on a hovercraft. I am certain that whatever size it was, whether it was full-scale or mini-scale, the right hon. Gentleman would on mature reflection come to the conclusion that this vehicle, from the point of view of a smuggler so far as I understand the art, would have certain serious disadvantages.
  I do not believe that all Excise officers are necessarily stone deaf. The capacity for making a noise is regarded by the constructors of hovercraft as being something of a disadvantage, although they do not look at it from the viewpoint of designing a smugglers' vehicle. Noise is, nevertheless, one of the factors of hovercraft which constitutes a disadvantage from other points of view.
  It is strange, therefore, to hear so learned a person as the right hon. Gentleman describe this vehicle as being ideal for smugglers. My understanding of the delicate art of smuggling is limited, but I have always understood that anyone who was smuggling did not wish to attract undue attention to himself. The use of a hovercraft might be slightly conspicuous and even in the hours of pitch darkness it would inevitably be heard making a certain amount of noise.
  If I may refer the right hon. Gentleman to his own words, he was really most reasonable. He said:
  "I can give him a precise assurance that there is no intention of putting commercial hover vehicle operators at a disadvantage compared with ships or aircraft. I give the assurance with pleasure."
  I recollect very well the feeling which the right hon. Gentleman put into that, and the sense of achievement which one seldom enjoys in the House of having extracted from the Government something which was wholly reasonable, sensible and up to date. It filled me with pleasure, and I was very grateful to the right hon. Gentleman. It was only afterwards that all my pleasure was dissipated, destroyed and dispersed when the right

  1355
  hon. Gentleman came out with his horrid remark about it being the ideal smuggler's vehicle.
  There was also the question of urgency and, if I may make the point to the House, to seek by the medium of a Finance Bill to make suitable arrangements for a new form of transport involving, as it does, many problems, seems to be utterly fantastic and stupid. I know that previous Administrations have done this sort of thing, and it has become the custom to handle matters in this way. However, as I pointed out in Committee, it seems quite foolish to have all the secrecy and mystique of a Finance Bill precluding adequate discussion.
  I know that the right hon. Gentleman said that there had been discussion with the operators, but I am not certain how adequate the discussion has been with manufacturers and producers who are also deeply involved. I want to make it clear that my constituents, Westland Aircraft, are closely and intimately interested. Since then, there have been most helpful discussions, and I have paid tribute to them, but nevertheless I am disturbed that such a Measure should be included in a Finance Bill with quite indecent haste.
  I do not accept what the Chief Secretary said in Committee:
  "There is an urgency inasmuch as passenger services are already operating. There are as yet no goods services."—[OFFICIAL REPORT, 15th June, 1966, Vol. 729, c. 1589–90.]
  That is quite right. That is a point in my favour. There is no urgency. The hovercraft which are operating are very well known, everyone knows what they are doing, and it is highly unlikely that anyone will take the risk of playing ducks and drakes in the way that the suspicious minds of some members of the Customs and Excise appear to indicate.
  I personally very much prefer the far more sound opinion expressed by a speaker whose name modesty forbids me to mention:
  "One prophecy I make is that there is most unlikely to be an ugly rush of hovercraft round our shores during the next 12 months."—[OFFICIAL REPORT, 15th June, 1966; Vol. 729, c. 1588.]
  I am certain that that is the case. In those circumstances, I find it difficult to accept that the Government, hurried along by the Customs and Excise who
  1356
  cannot be disappointed again, should foist upon us a crude and heavyweight solution to a problem which probably will never come.
  I am hopeful that the right hon. Gentleman tonight will, first of all, go outside and don a suit of sackcloth, and then stand at the Dispatch Box and withdraw the quite unfounded allegation that this new and very important form of transport is a ideal smuggler's vehicle. It does not make sense, but what it does do—and this is what worries me—is to give a clue to the shape and form of the Government's mind on this subject. It is fraught with every possible suspicion.
  Instead of rising in their places and saying, "Here is a successful private enterprise venture which"—with aid from the Government, I admit—"has produced a novel form of transport in which this country leads the world, what can we do to help?", they think that there are all sorts of sinister characters around the corner who will regard this vehicle as providing the ideal solution to the problems which they have previously found a little difficult to solve.
  I ask the House to apply its mind to the words in the subsection, which I quoted at the beginning:
  "The Commissioners may by regulations impose conditions and restrictions as respects the movement of hover vehicles and the carriage of goods by hover vehicles …".
  Those words confer immensely wide powers on the Commissioners. One accepts that there may be some justification for them, but if there is, it is for the Government to prove it. In my view a heavy onus lies on the Government to convince the House that it is right to ask for these powers at this stage.
  It may be that later, when the worst fears of the Customs and Excise look like being confirmed, the Government will be justified in saying, "All the indications are that we were right, and our fears have been confirmed. These vehicles are being used in a most improper manner, and we have to impose the most stringent regulations for their use", but that has not yet happened. It is way into the future that the right hon. Gentleman is looking, even if these sinister developments were ever to take place.
  There is, however, no possibility of that happening, and so I say to the House that

  1357
  before the Government get these powers they have a heavy onus of proof to discharge, and they also have the preliminary task of withdrawing the suggestion which has been made that somehow or other the hovercraft is an ideal smugglers' vehicle.
  I do not wish to remind the right hon. Gentleman again of his words, because they must be a very painful memory to him, but I ask him to accept from me that to place upon this new form of transport a heavy burden will, I am sure, make no sense at all, and I hope very much that the Government will have second thoughts about this matter.
  It would be wholly out of order for me to refer in detail to the policy which the Government are pursuing on the question of fuel.
  Mr. Deputy Speaker (Sir Eric Fletcher): The hon. Gentleman is right. It would be out of order.
  Mr. Peyton: Mr. Deputy Speaker, I accept your guidance with that admiration and respect which you always command, but the Government's reply on that occasion only confirmed one's worst suspicions that though they have professed sympathy and admiration for, and a willingness to support, this new form of transport, they nevertheless could not check their natural tendencies to inhibit, cramp, paralyse and hinder at every stage.
  I therefore hope that we shall hear from the right hon. Gentleman an altogether more satisfactory version of his present thinking on this important subject.
  9.45 p.m.
  Dr. Reginald Bennett: The Amendment so eloquently moved by my hon. Friend the Member for Yeovil (Mr. Peyton) brings us back to the subject of our discussions in Committee on 15th and 16th June, and to the highly unsatisfactory replies, courteously delivered as they were, given on that occasion by the Chief Secretary. Those replies certainly required further inquiry, because they put wholly unreasonable restrictions on the development of the hovercraft.
  On that occasion we tried repeatedly to obtain some expression of the intention to limit the restrictions implied in
  1358
  the Clause to foreign-going vessels. But no: never at any time was there the slightest concession on this point. A complete restriction has been imposed—a restriction unknown to ships or aircraft, between which categories these vessels may be classified. It is true that a hovercraft is a very manoeuvrable vessel, but it is very limited in scope; it is very easily obstructed, and it is restricted in range by the simplest obstacles. The fears of the Government spokesman must, in their calmer thoughts in the light of day, seem highly exaggerated in respect of the craftiness and subtlety with which these vessels could evade the protective network of the Customs radar and the rest of the panoply of power which the Customs authorities have. The Government were panicked into suggesting actions which were wholly excessive and far beyond what is required in the present state of development.
  My hon. Friend has dealt with the feeling that exists—and which is no more strongly held by anybody than by me—about the remarkable passage in the Chief Secretary's speech relating to the ideal smuggler's vehicle. The ideal smuggler's vehicle is so quiet that in my constituency, where a commercial hovercraft service operates from the coast, I am assailed by all sorts of complaints—I have a postbag of violent complaints—about the din of these things in their ordinary operation as a passenger service across the Solent.
  I invite the Chief Secretary to sample the joys of the noise in my constituency, if he would like to see a few hovercraft operating in a fairly restrained way. He will be surprised how remarkably noisy they are. I strongly object that restrictions are placed on hovercraft in spite of the fact that the Chief Secretary said, of the hovercraft:
  "If one is not to restrict its movement, one has to take steps to control the transporting vehicle itself. Otherwise, one would be compelled to restrict its movements so that the Customs could exercise the full responsibility which the House places on it with regard to dutiable goods."—[OFFICIAL REPORT, 15th June, 1966; Vol. 729, c. 1597.]
  In subsection (7) the Government restrict the vehicles, so that the Government are implementing both alternatives quoted by the Chief Secretary as alternatives. Therefore, the hovercraft gets the worst of both worlds. The restrictions

  1359
  imposed by the Clause are far more stringent than those imposed on ships. I would remind the Chief Secretary that my hon. Friend the Member for Yeovil referred to these grave discussions that went on upstairs on the Anchors and Chain Cables Bill, in which we had a ruling from the Government.
  The Minister then said:
  "It has not been tested in the courts at any time, but the view taken by the Customs for the purpose about which I was concerned was that it"—
  that is, the hovercraft—
  "is a ship."—[OFFICIAL REPORT, Standing Committee C. 26th May, 1965; c. 69.]
  If the hovercraft is, to all intents and purposes, under the present Government, a ship, it is grossly unfair that it should be restricted so much more than any other ship.
  I therefore feel—this is the nub of my case—that the subsection which we wish to remove restricts hovercraft in inland and coastal voyages, for which there is no excuse. I therefore find the contents of subsection (3) to be oppressive; I protest against them and ask that they be removed.
  Sir Douglas Glover: I hope that the Chief Secretary will accept the Amendment. The Clause exemplifies the reactionary—I use the word with great care—attitude of the present Government to all forms of innovation, inventions, and progress, yet officially they were returned to power to modernise and further the efficiency of the country. The hovercraft is a new invention which is inevitably at present in the formative stage. None of us can know whether the right hon. Gentleman was right when he said that it was the ideal smugglers' vehicle.
  Perhaps I might correct a wrong impression which apparently went out from the Committee when I last spoke about hovercraft. I received a great deal of correspondence from the producers of hovercraft and from the residents in the Solent because they thought that I was damning the hovercraft, whereas I was supporting it.
  I have been told that it is not true that the hovercraft can be heard by a stone-deaf man 10 miles away. I willingly with-
  1360
  draw that remark and say that it can be heard by a half-deaf man five miles away. I still think that this does not make it exactly the ideal smugglers' vehicle. But it is a vehicle which presents many new problems. I do not object to the Government wanting to consider the problems which are presented to any form of law enforcement by the introduction of this new vehicle.
  As my hon. Friend the Member for Yeovil (Mr. Peyton) pointed out so graphically, we will not be dealing in the next 12 months with a flood of hovercraft carrying contraband and brandy from France—the picture which the right hon. Gentleman painted for the House. He has been watching on television too many serials like "Just Jake". He has been carried away in a miasma of speculation about the Spanish Main and the smugglers of old.
  Only one or two of these vehicles will be in operation. We will not be dealing with a great flood, an armada invading British shores, bringing contraband and creating a massive balance of payments problem. I am not a technical expert, but I doubt whether the total carrying capacity of one of those vehicles at present plying across the English Channel amounts to much more than a ton of merchandise. The right hon. Gentleman may say that a ton of merchandise is very important. He talked in Committee about putting barbed wire around the country to keep out these pernicious vehicles and their nefarious activities.
  This might be necessary when there are 5,000 hovercraft chugging backwards and forwards across the Channel, but at present there are not 5,000 or 500: there are not 50. We are probably dealing with fewer than five of these vehicles. Under these conditions, surely any progressive Government worthy of the name, instead of bringing in inhibitions and prohibitions and stringent regulations, should be encouraging this new form of transport with every means in their power.
  What really would be the problem if a case of brandy was smuggled into this country as a result of the hovercraft being given advantages that the shipping industry enjoys at the present time? Why put this new vehicle into a position inferior to that of ships? At the least, it should

  1361
  be put in exactly the same position. If, in two, three, or five years' time, experience showed that some stringent regulations were required, any Government would have to bring proposals to the House. In any case, I do not think that this new form of locomotion should at this stage be dealt with in a Finance Bill.
  I want to know why we should do this at this time. We are dealing with a vehicle that is virtually in the future, yet we are building up inhibiting factors to its development and thereby removing the incentive for us to maintain our world lead with this vehicle. We are making it much less likely that there will be the development and advancement which we hope will come from this wonderful new creation. There is no argument in sense why this action should be taken in 1966, when any problem connected with the vehicle must be absolutely minimal.
  I therefore ask the right hon. Gentleman, even at this late stage of the Bill's progress, to realise that here we have one of the most exciting inventions of the twentieth century. It is something that could develop to a great earner of foreign exchange, but it will only do so if it is given the encouragement to prove itself in practice. All that the Finance Bill does is to make it that much more difficult for the pioneers of this invention to make a success of it. I accept that a lot of problems may be thrown up by that success, but there is no necessity for inhibiting action to be taken before those problems have been proved to exist.
  If it is not now a hollow mockery to say that the party opposite was returned to power to try to modernise Britain and make the country more efficient, I plead with the Chief Secretary to accept the Amendment. Otherwise, I am sure that his is painting a picture, not only here but abroad, of Britain as a country that does not believe in modernisation.
  Mr. Diamond: It might be for the convenience of the House if I were to intervene now, because the speeches so far have shown that there is, perhaps, a slight misunderstanding about what the subsection seeks to do.
  I start by thanking the hon. Member for Yeovil (Mr. Peyton) for his courteous remarks about a member of the Customs staff. I am glad that he feels that the
  1362
  Customs staff are anxious to help in every possible way. Secondly, I would confirm, as I said on an earlier occasion, that the Government have, as is well known, invested substantial funds in the development of the hovercraft. They are anxious to see it succeed in every possible way, and are determined not to put any unnecessary difficulty in the way of its expansion, usefulness and acceptability generally. I should be the last therefore to draw too much attention to its capacity to be heard. It can certainly be heard at some little distance shall we say? Therefore, it is perhaps to be compared with an aeroplane which can also be heard at some little distance and which was the subject matter of a recent case where there was a conviction for smuggling.
  10.0 p.m.
  It is inevitable that hon. and right hon. Members opposite should be unaware of the modern techniques of smuggling, because this is a field far removed from their activities. Clearly, the reference to "an ideal smuggler's vehicle" on a previous occasion was not a statement which pleased the Committee. It gave the hon. Member an opportunity for saying on 25 successive occasions that he thought the Chief Secretary had made a mistake. Clearly, it was not acceptable. I have not had an opportunity to go out to don the appropriate sackcloth, but I apologise for having used those words. I regret that they escaped the barrier of my teeth. They clearly should not have done so.
  Mr. Peyton: Courtesy demands that I should thank the Chief Secretary for the withdrawal of the words, but I hope that he will go a little further than saying that the words escaped the barrier of his teeth and should not have done so. I hope he will assure the House that he has cleansed his mind of any such foul thoughts.
  Mr. Diamond: I return to the reasons why the Customs require, and require now and it is appropriate for them to be provided with now, the powers contained in the subsection which the Opposition seek entirely to remove. It is a very simple point. If a hovercraft could do no more than a ship we would not dream of suggesting that the Customs should need greater powers than it has in relation to ships, but the hovercraft, to its credit

  1363
  and usefulness, can do more. We should do everything we can to broadcast the fact that it can do more than a ship can do. It can travel across land. Therefore, one has to have reasonable regard to its capacity and to what it is intended to do.
  If one does not want in any sense to put unnecessary difficulties in the way of the journeyings which this vehicle may make, one does not want to make a rule in practice that all dutiable goods on a hovercraft arriving from overseas should be dealt with at the port of entry. That is what one does with a ship, but if one has a vehicle which can go to a port across the sea and then proceed across dry land, it may be of convenience to the operators of the vehicle that the dutiable goods should not be wholly dealt with at the port of entry. Therefore, the Customs have to have the same powers—as in the case of land vehicles crossing the Irish land boundary—of seeing that the dutiable goods not yet cleared are carried to an agreed point where it is of convenience to the hovercraft operator that they should then be cleared.
  If the hovercraft, as is most unlikely, were to break down on that journey it is necessary for arrangements to be made to cover a case of accident of that kind. That is all that the Customs seek to take into account when dutiable goods are coming from abroad and being taken overland, and it is of convenience to the operators that the goods should be cleared not necessarily at the port of entry but at some inland point—a warehouse or something like that—and there should be arrangements for Customs to receive the vehicle at that point. There is nothing more complicated in it than that.
  Dr. Bennett: I should like to endorse that sentiment, but could it not have been better expressed than in the Clause as at present? There is no reference to vehicles going to or from abroad and carrying dutiable goods, but hovercraft are to move hither or thither at the behest of the Customs. That is what bothers me.
  Mr. Diamond: I am glad to be able to remove the unecessary anxieties of the hon. Member for Gosport and Fareham (Dr. Bennett). I know that he accepts what the Government have said many times, through me, that we are anxious
  1364
  to help, not to hinder. We are anxious to give the Customs only the minimum powers which the House puts upon it to collect duties and to carry out its other statutory obligations.
  If it helps to give this assurance. I can assure the hon. Gentleman that the Customs has no interest in controlling purely internal movement of hover vehicles where the goods carried have passed out of Customs control. I assure the hon. Gentleman that the Customs has neither the staff nor the inclination to try to regulate, for example, the Isle of Wight hover vehicle service. I gather from the hon. Gentleman's attitude that he recognises that there is a reasonable case in the circumstances which I have described. It is right that one should make full provision for the Customs powers with regard to hovercraft now.
  I have no doubt that this will work smoothly and happily, without undue embarrassment or difficulty for the hovercraft operators, who, as I firmly stated in Committee, are not having any difficulty put in their way by the Government. The Government are not putting in their way any difficulty greater than that which a ship, for example, has to undergo.
  Several Hon. Members Several Hon. Members rose—
  Mr. Diamond: It was the hon. Member for Shipley (Mr. Hirst) who caught eye.
  Mr. Speaker: Order. It is not for the hon Gentleman to decide who catches his eye.
  Mr. Diamond: I apologise, Mr. Speaker, for using that phrase. It was not an attempt to usurp your function in the Chair.
  Mr. Speaker: Perhaps the right hon. Gentleman has now decided to whom he is giving way.
  Mr. Diamond: The hon. Member for Shipley.
  Mr. Hirst: I am rising on a point which possibly some of my hon. Friends, perhaps those with legal knowledge, will develop at greater length. This is the old story which I have heard so often from the Treasury Bench, and I have been misled by it by my own side when I sat on the benches opposite and raised

  1365
  similar points. The right hon. Gentleman gives an assurance. Assurances do not matter a hoot. It is the interpretation of the law that matters, and in the subsection it distinctly says what my hon. Friend the Member for Gosport and Fareham (Dr. Bennett) said a few moments ago causes doubt. The right hon. Gentleman must clear that up if we are to be satisfied.
  Mr. Diamond: The words used in the subsection are necessary in order to give the powers. The House has asked me what kind of powers the Customs requires, what the Customs requires them for, and why it requires them now. I am trying to give the House that information. I do not know whether the hon. Member for Gosport and Fareham (Dr. Bennett) wants to intervene.
  Dr. Bennett: I am very grateful to the Chief Secretary for again giving way. I note with great pleasure the provisions that he seeks to incorporate in the Bill to facilitate the part discharge of cargoes at a port of entry and subsequently inland. This is a very good and proper provision. My only sadness is that it is in no way implied in writing. I should be most grateful if the Chief Secretary would incorporate this in the wording of the Clause. I think that, if this were done, we could not possibly object.
  Several Hon. Members Several Hon. Members rose—
  Mr. Speaker: Order. The right hon. Gentleman cannot give way to the whole of the Opposition.
  Mr. Diamond: I must apologise to you, Mr. Speaker, for having stimulated so many questions, but I thought that I had clarified rather than caused reason for question.
  As to the point of the words used in the subsection, I am advised and I confirm that they are necessary to give effect to what. I am saying. I am sure that the House must realise that one has to deal (a) with a vehicle coming in from abroad and (b) with it travelling inland, as a matter of mutual convenience. That is what the words provide.
  Mr. F. A. Burden: I am much obliged to the right hon. Gentleman for giving way. I foresee a certain difficulty here in regard to where the Customs powers are applied. The right
  1366
  hon. Gentleman probably knows that, when airfield authorities want Customs services, they must give an undertaking, or show that it is reasonably expected, that there will be 1,000 foreign sorties in and out in a year. The right hon. Gentleman said—
  Mr. Speaker: Order. We cannot have a speech on an intervention.
  Mr. Burden: I am just coming to the point, Mr. Speaker. The right hon. Gentleman has said that there is a shortage of Customs officials. Is he satisfied that the business of internal rather than port-entry Customs can be properly effected without great delays?
  Mr. Diamond: Yes. I am doing my best to assure the hon. Gentleman and the House that these arrangements are for the convenience of the operator of the vehicle. The alternative would be to say simply that the vehicle may not proceed beyond the port of entry without discharging all its dutiable goods. Certainly, one would not wish to do that. One wants to make it possible for the vehicle to use all its extensive and variable powers of travel by sea and land, its ideally suitable powers of travel. I carefully avoid any other forms of words.
  I hope that I have reasonably satisfied the House that this provision is essential. May I give you notice now, Mr. Speaker, that I am sitting down?
  Mr. Higgins: We are now in a rather extraordinary position. When we discussed the matter in Committee we all began in very good humour, under the impression that the Government's proposed measures were not in any way villainous. Then, as the debate proceeded, we pressed the Chief Secretary about the extent to which the Clause restricted the activities of hovercraft, and we wanted to know to what extent a hovercraft would be controlled in its routes within the country as opposed to its movements along the shore or over the Northern Ireland border. The more the debate went on, the more puzzled we became.
  I explicitly asked the right hon. Gentleman whether he could
  "confirm or deny that the Clause does not give the Commissioners powers about hover craft moving purely within the United Kingdom. Could he tell us whether it gives the Commissioners that power, or whether their

  1367
  powers are restricted to hovercraft moving from the United Kingdom outside territorial waters and coming back in the opposite direction."—[OFFICIAL REPORT, 15th June, 1966; Vol. 729, c. 1593.]
  We had no explicit answer from the right hon. Gentleman, but it became more and more apparent as he went on that it was possible that the Commissioners would use their power not only to control the movements of hovercraft across the borders but also within the country itself.
  This evening, we find ourselves in precisely the opposite situation, which, I admit, is a more favourable one. The House, incensed as it was by his reply to the Committee, now finds the right hon. Gentleman saying that we need not worry about all this because the Clause as it stands does not mean that the Commissioners would in any way interfere with the activities of hovercraft internally.
  Mr. Hirst: It does not say so.
  Mr. Higgins: It does not say so, and I have no doubt that my hon. Friend will wish to pursue that point further.
  We need to know whether the position taken by the right hon. Gentleman at the end of the Committee stage or the position he takes now is the right one. If this were a question, as he now suggests, merely of controlling points at which hovercraft could present themselves for Customs treatment, having been foreign-going and returned here or, perhaps, leaving with dutiable goods, the Clause would, no doubt, be quite acceptable to the House, but we are worried because, as it now stands, that is not all. It was for that reason that my hon. Friend the Member for Yeovil (Mr. Peyton) and others of my hon. Friends tabled the Amendment now before us.
  May I clarify a couple of points which arise from what the right hon. Gentleman has said so far? The Chief Secretary has made comparison all the way through with the position with regard to ships and aircraft. He will agree that the position with regard, for example, to a speedboat or a hydrofoil if it is not foreign-going will be very much less restricted than the restriction he now proposes to place upon hovercraft. The two vehicles are to be in quite different classes.
  10.15 p.m.
  We on this side find it difficult to understand why this is so. A hydrofoil is quite as uncontainable as a hovercraft in many cases. If a hydrofoil is to be allowed to go, say, from Liverpool to Glasgow without going through all this formality of having its route controlled, why should a hovercraft in the same circumstances have to do so?
  It is also true that an aircraft, as the Chief Secretary has suggested by quoting a recent example, is not containable. If an aircraft is merely to take off from, and land on, the same airfield, it is, presumably, not subject to control about its routes. Its routes may be controlled for reasons of safety and of air traffic control, but it is not subject to the same kind of onerous provisions which are now being laid on hovercraft.
  Therefore, on both these grounds we are not happy with the answer we have so far had from the Chief Secretary. The hovercraft is in no very different position from the other two forms of transport—aircraft and ships. With modern methods of radar, there is no reason why any hovercraft which was supposed to be travelling internally, but which suddenly crossed the coast unpredictably could not be detected by the Customs and Excise. Surely it would be detected by our normal radar protection service.
  What we are concerned about is not that the hovercraft is being placed in a position which is even comparable with ships and aircraft, but that it is being restricted in a way in which trains and lorries are not restricted; because there is no question of the Customs and Excise controlling their internal movements.
  I hope that we shall have clarification of what the present position is from the Chief Secretary, because he started by moving into a more and more restricted position in Committee and he now appears to be moving into a more and more liberal position. It is not clear from the Bill whether this is the intention. In the event of a clear undertaking not being forthcoming from the Chief Secretary, one which is absolutely explicit, this may well be an Amendment which the House should decide to accept.
  Sir Lionel Heald: I rather gather that one ought to ask the Chief

  1369
  Secretary's permission to speak in this debate. The Clause raises an important question from a legal and constitutional point of view, and also from the point of view of the drafting of statutes. I do not apologise for reading the words again:
  "The Commissioners may by regulations impose conditions and restrictions as respects the movement of hover vehicles and the carriage of goods by hover vehicles …"
  That means any regulation whatever. I was rather horrified when I heard the Chief Secretary, with his great experience in these matters, saying that he could give an assurance as to the way in which these regulations would be applied.
  Some of us have had the experience of arguing these matters before the Judicial Committee of the House of Lords in relation to matters of the Inland Revenue. The Judicial Committee of the House of Lords has criticised Parliament, very rightly so, for using language far wider than necessary or far wider than was intended or understood by the Members of Parliament who approved the Act in question. This is a classic example.
  We must fasten the Chief Secretary down firmly on this. If he would be good enough to listen to what is being said, I should be grateful. Here is clear language saying that the authorities can make any regulations. The right hon. Gentleman says, "We will only make regulations that I think proper". That is not good enough and it is time we said so. Time and again in recent years we have had these criticisms of the looseness of legislation and criticism of us in this House for not getting our wishes made clear. Here is an opportunity and we should insist upon it.
  I want to ask also whether there is any precedent for the Customs to prescribe not only the movement of aircraft or ships but also, according to subsection (7), the actual construction of vehicles. So far as one can see here, the Customs will be able to impose conditions as to how hovercraft should be manufactured and if he thinks that hovercraft could be used for smuggling purposes it could prevent modern improvements being put into them. That is what the Clause says.
  1370
  It is no good the right hon. Gentleman saying, "I know all about these things. I will tell you how to interpret these regulations". His evidence is not admissible in legal cases. We have to decide what we are going to allow the Government to do and I believe that we have a wonderful opportunity now to strike a blow on this subject.
  Imagine what may happen on future occasions. I wonder what the right hon. Gentleman will say when we come to the Channel Tunnel. He will say, "What an ideal vehicle for introducing smuggling."
  Mr. Speaker: Order.
  Sir L. Heald: Perhaps I should not go any further.
  Mr. Speaker: Order. I am sure that the right hon. and learned Gentleman should not go any further at all. Mr. Gower.
  Mr. Gower: Can the right hon. Gentleman the Chief Secretary appreciate the difficulty in which he has placed the House? It arises from the fact that he has said one thing while the Bill says another. He said that the Customs requires these powers because hovercraft can do things that a ship cannot do. He said that it might be convenient to an operator of hovercraft to have goods dealt with not at the port of entry but possibly at some inland port. I am sure that to my hon. Friend the Member for Yeovil (Mr. Peyton) this was a decided improvement on anything he had heard before about this from the Government. But there is nothing about it in the Bill. There is no such restriction in the Bill as it stands
  It is, as has been said, feasible that, in future, the Commissioners could go much further. Does the right hon. Gentleman expect the House to accept that wording as wide as this will produce a state of affairs relatively as narrow as that which he describes? That is our difficulty. I disagree with the suggestion that the right hon. Gentleman has been reading about the Spanish Main. I feel more certain that he is an avid reader of science fiction and envisages some kind of hovercraft going through the night unseen and unheard.

  1371
  The right hon. Gentleman has narrowed the gulf by withdrawing the ridiculous description of hovercraft as suitable for smuggling and by narrowing the definition of the circumstances under which he thought these powers might be used. But he has done nothing to change the wording of the Bill to represent in legal terms the narrow state of affairs which he has described.
  Several Hon. Members Several Hon. Members rose—
  Mr. Speaker: Mr. Peyton.
  Mr. Peyton: With the leave of the House, may I say that I, of course, have no power—
  Mr. Speaker: I remind the hon. Member that he has already spoken.
  Mr. Peyton: I did ask the leave of the House, Mr. Speaker.
  Mr. Speaker: I am sorry, I did not hear the hon. Member. I think, however, that I should call somebody who has not yet spoken. Mr. Costain.
  Mr. Costain: I wish to take up the point made by my right hon. and learned Fried the Member for Chertsey (Sir L. Heald) about clarity of wording. I am not a lawyer. and I have not fought these cases in the House of Lords, but I have some experience of building contracts.
  I draw attention to the following definition in subsection (9) of the Clause:
  "In this section and its Schedule 'hover vehicle' means a vehicle designed to be supported on a cushion of air."
  To show how absurd it is, I could go into a shop tomorrow and buy a lawn mower, which, under the definition of the Clause, is a hover vehicle. Is it intended that the Customs and Excise should have the same powers concerning lawn mowers as they are being given for hover vehicles? In my understanding of the definition, a lawn mower is a hover vehicle.
  Mr. Hirst: I do not wish to detain the House, because there are other important Amendments to be discussed and I have my name to a large number of them. I therefore have a personal interest in the matter. What is involved here is the point on which the Chief Secretary was kind enough to give way to me but which has been made far more effectively by my right hon. and learned Friend the Member
  1372
  for Chertsey (Sir L. Heald) from his great experience.
  I do not see how we can let the position go without a better statement from the Chief Secretary, for whom I have the greatest respect. We know that he takes a great deal of trouble in these matters. The right hon. Gentleman knows only too well, however—[Interruption.] I shall take a long time if hon. Members talk to themselves while I am speaking. The Chief Secretary knows perfectly well that an assurance from the Treasury Bench, unless it can be proved to fit the context of the text which we are passing, cannot have any meaning.
  Some of us have been at this business for many years. It is not the slightest bit of good the House being quietly "done" and pressure being applied to get on with business on the basis that any right hon. or hon. Member on the Treasury Bench says, "I can give you my assurance". Unless he can in that context satisfy the House at the same time that the assurance has meaning in law, it is meaningless.
  The Chief Secretary has brought this upon himself. The words which have been quoted are perfectly clear. I am not a lawyer, but at least I have enough knowledge of the texture of Bills to know what these simple terms and words mean. The right hon. Gentleman must give the House something which can have greater currency and competence in the minds of right hon. and hon. Members on this side than he has so far given.
  Assurance is not good enough. The right hon. Gentleman has to tell the House that something will be done. If it cannot be done now—we know the difficulties with the Bill at this stage and the impossibility of altering some of these things in another place—the right hon. Gentleman must give an undertaking that the matter will be looked at and something will be done at the earliest possible moment to meet the views which have been expressed and which have not been countered by argument. He must either give us something which has meaning or a basic assurance that the courts are likely to interpret the Clause in the manner in which, in all sincerity, he has said that he wishes them to do.
  10.30 p.m.
  Mr. Stephen Hastings: The longer I listen to this debate

  1373
  the more persuaded I am that my hon. Friend the Member for Yeovil (Mr. Peyton) is on a point of the very greatest importance. What we are talking about is probably the most important invention in this country in the last decade. Now that the present Government have gone so far in clobbering the aircraft industry, the prosperity which could arise from the furthering of this invention is of the very highest importance.
  Clause 10(3) says:
  "The Commissioners may by regulations impose conditions and restrictions as respects the movement of hover vehicles …"
  It adds that the goods which can be carried by these vehicles can be dictated entirely by the Customs. These are two major restrictions, and I want to ask the Chief Secretary to what extent has the Treasury really gone into the effect of these restrictions upon the advancement of this project? Is it simply a question of trying to trace the possible smuggling application of these craft? If this is so, it is a most worthless approach to something which is of great importance.
  Which of the two considerations is the most important—the hypothetical smuggling application of these craft or the advancement of the invention? If that question has not been gone into deeply by the Treasury then this is a miscarriage, and a gross mistake and we need to know more about it than we have so far heard.
  Mr. Geoffrey Wilson: It had not been my intention to speak on this Amendment until I heard the speech of the Chief Secretary explaining why this subsection was necessary. It made me doubt whether he or his advisers had ever travelled in a hovercraft. Many hon. Members of this House have done so and they know that the clearance of these vehicles is very small and depends upon its size. I have had that confirmed in conversations I have had with Mr. Cockrell, the inventor of the hovercraft.
  In the future hovercraft travelling across the sea to foreign countries will be so large that they would not have enough clearance to travel across land also without causing damage. In these circumstances, a hovercraft would not want to travel across land after a sea crossing, as the Chief Secretary suggested. It seems an entirely hypothetical point unless he
  1374
  has some information that it is possible or likely that a very small hovercraft would be built in future which would be capable of crossing the sea and travelling on land, and across roads without causing damage. As far as I know, these are two separate propositions and most unlikely.
  A small hovercraft would be unable to cross the sea and a large one would be unable to cross roads and cultivated land without causing damage. The whole proposition on which this subsection is based is founded on a fallacy. I should like a little more information as to whether this has been thought out, not only by the Customs, but in conjunction with those who are familiar with the development of the hovercraft and have information as to what contribution they are likely to make in future.
  Mr. Ian Lloyd: I would like to ask about Section 3(a), which says:
  "… and authorise the proper office to give directions as to their routes …"
  This power is not qualified in any sense at all. The Chief Secretary does not seek the power to give directions as to their routes within territorial waters. Had he put it in this way it might have been more acceptable. Is this not ultra vires and are not the Government seeking to do something which they have no power to do? How can they give directions as to the routes of the hovercraft if these take one outside of territorial waters?
  I can conceive of circumstances in which Customs dislikes the idea of a hovercraft approaching the shores of the country alongside an area where it would be possible for it to go ashore—
  [Interruption].—approach the white cliffs of Dover. Surely this is ultra vires. The Government must withdraw on this point.
  Mr. Peyton: By leave of the House, I should like briefly to say that the Chief Secretary has said one thing, and his assurances taken by themselves are satisfactory. However, the Bill says quite another and, unhappily, we know from experience that what is written into an Act of Parliament is far more lasting than any Ministerial career. I regard the very wide nature of the powers taken by the Bill as wholly intolerable. I moved the Amendment in moderate terms, but I made it clear that there was upon the

  1375
  shoulders of the Government and the right hon. Gentleman in particular a very heavy onus of proof to establish that the wide blanket powers were required. We have not heard a word from the Chief Secretary to justify them.
  He has explained that certain routine arrangements must be made, and he has stated clearly that the Customs intend to make convenient arrangements for the operation of these vehicles. I accept that. I believe that the House of Commons should always protest at having powers of this kind put into a Bill of this kind without any justification. The very moderation of the Chief Secretary's words mean that this sort of totalitarian language set into a Bill is done so gratuitously, unnecessarily and intolerably. In those circumstances, I hope that my right hon. and hon. Friends will join me in the Division Lobby.
  Sir Harmar Nicholls rose—
  Mr. Speaker: Order.
  Sir Harmar Nicholls: I wanted to put a question to the right hon. Gentleman.

  Division No. 107.]

  AYES

  [10.39 p.m.

  Albu, Austen

  Davies, G. Elfed (Rhondda, E.)

  Griffiths, Rt. Hn. James (Llanelly)

  Alldritt, Walter

  Davies, Robert (Cambridge)

  Griffiths, Will (Exchange)

  Allen, Scholefield

  Dempsey, James

  Hamilton, James (Bothwell)

  Archer, Peter

  Dewar, Donald

  Hamilton, William (Fife, W.)

  Armstrong, Ernest

  Diamond, Rt. Hn. John

  Hannan, William

  Ashley, Jack

  Dobson, Ray

  Harper, Joseph

  Atkins, Ronald (Preston, N.)

  Doig, Peter

  Harrison, Walter (Wakefield)

  Atkinson, Norman (Tottenham)

  Dunn, James A.

  Henig, Stanley

  Bagier, Gordon A. T.

  Dunnett, Jack

  Herbison, Rt. Hn. Margaret

  Barnett, Joel

  Dunwoody, Mrs. Gwyneth (Exeter)

  Hilton, W. S.

  Baxter, William

  Dunwoody, Dr. John (F'th & C'b'e)

  Hooley, Frank

  Beaney, Alan

  Eadie, Alex

  Horner, John

  Bence, Cyril

  Ellis, John

  Houghton, Rt. Hn. Douglas

  Bennett, James (G'gow, Bridgeton)

  Ensor, David

  Howarth, Harry (Wellingborough)

  Binns, John

  Evans, Albert (Islington, S.W.)

  Howarth, Robert (Bolton, E.)

  Blackburn, F.

  Evans, Ioan L. (Birm'h'm, Yardley)

  Howie, W.

  Boardman, H.

  Fernyhough, E.

  Hughes, Roy (Newport)

  Booth, Albert

  Finch, Harold

  Hunter, Adam

  Bowden, Rt. Hn. Herbert

  Fletcher, Raymond (Ilkeston)

  Irvine, A. J. (Edge Hill)

  Braddock, Mrs. E. M.

  Fletcher, Ted (Darlington)

  Jackson, Colin (B'h'se & Spenb'gh)

  Bradley, Tom

  Floud, Bernard

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

  Brooks, Edwin

  Foot, Sir Dingle (Ipswich)

  Jones, Dan (Burnley)

  Brown, Hugh D. (G'gow, Provan)

  Ford, Ben

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

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Fortescue, Tim

  Jones, J. Idwal (Wrexham)

  Brown, R. W. (Shoreditch & F'bury)

  Fowler, Gerry

  Kenyon, Clifford

  Buchan, Norman

  Fraser, John (Norwood)

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

  Cant, R. B.

  Fraser, Rt. Hn. Tom (Hamilton)

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

  Carmichael, Neil

  Freeson, Reginald

  Lawson, George

  Carter-Jones, Lewis

  Galpern, Sir Myer

  Ledger, Ron

  Chapman, Donald

  Gardner, A. J.

  Lee, John (Reading)

  Coe, Denis

  Garrett, W. E.

  Lestor, Miss Joan

  Concannon, J. D.

  Garrow, Alex

  Lever, L. M. (Ardwick)

  Conlan, Bernard

  Gourlay, Harry

  Lewis, Ron (Carlisle)

  Crawshaw, Richard

  Gray, Dr. Hugh (Yarmouth)

  Lomas, Kenneth

  Crosland, Rt. Hn. Anthony

  Greenwood, Rt. Hn. Anthony

  Lyons, Edward (Bradford, E.)

  Dalyell, Tam

  Gregory, Arnold

  McCann, John

  Davidson, Arthur (Accrington)

  Grey, Charles (Durham)

  MacColl, James

  Davies, Dr. Ernest (Stretford)

  Griffiths, David (Rother Valley)

  MacColl, James

  Mr. Speaker: Order. I am not preventing the hon. Gentleman from speaking, as is his right. We are on the Report stage of a Bill. I hope that, when the House gives leave to an hon. Member to speak a second time, that will be regarded to some extent as the winding up of the debate. Sir Harmar Nicholls.
  Sir Harmar Nicholls: In view of your comments, Mr. Speaker, I do not desire to address the House.
  Mr. Hirst: On a point of order, Mr. Speaker. I respect your wish and desire to get on with the business, but I am not aware of any Order—
  Mr. Speaker: Order. I am not suggesting any Order at all. I have only suggested that when, on the Report stage of a Bill, an hon. Member gets the leave of the House to speak again, there is usually some reason why he should be speaking a second time. I have no desire to cramp the desire of the House to debate at length the Amendment before us.
  Question put, That the words proposed to be left out stand part of the Bill:—
  The House divided: Ayes 196, Noes 143.

  MacDermot, Niall

  Orbach, Maurice

  Silverman, Julius (Aston)

  Macdonald, A. H.

  Orme, Stanley

  Small, William

  McGuire, Michael

  Oswald, Thomas

  Spriggs, Leslie

  Mackenzie, Gregor (Rutherglen)

  Owen, Dr. David (Plymouth, S'tn)

  Steele, Thomas (Dunbartonshire, W.)

  Mackintosh, John P.

  Owen, Will (Morpeth)

  Summerskill, Hn. Dr. Shirley

  Maclennan, Robert

  Page, Derek (King's Lynn)

  Swain, Thomas

  McNamara, J. Kevin

  Palmer, Arthur

  Swingler, Stephen

  MacPherson, Malcolm

  Park, Trevor

  Thomas, Iorwerth (Rhondda, W.)

  Mahon, Peter (Preston, S.)

  Parker, John (Dagenham)

  Tinn, James

  Mahon, Simon (Bootle)

  Perry, Ernest G. (Battersea, S.)

  Urwin, T. W.

  Manuel, Archie

  Price, Thomas (Westhoughton)

  Varley, Eric G.

  Mapp, Charles

  Price, William (Rugby)

  Wainwright, Edwin (Dearne Valley)

  Marquand, David

  Probert, Arthur

  Walden, Brian (All Saints)

  Mason, Roy

  Randall, Harry

  Walker, Harold (Doncaster)

  Mayhew, Christopher

  Rees, Merlyn

  Watkins, David (Consett)

  Milian, Bruce

  Rhodes, Geoffrey

  Weitzman, David

  Miller, Dr. M. S.

  Roberts, Albert (Normanton)

  Wells, William (Walsall, N.)

  Mitchell, R. C. (S'th'pton, Test)

  Roberts, Goronwy (Caernarvon)

  Whitaker, Ben

  Molloy, William

  Robertson, John (Paisley)

  Whitlock, William

  Morgan, Elystan (Cardiganshire)

  Robinson, W. O. J. (Walth'stow, E.)

  Willey, Rt. Hn. Frederick

  Morris, Charles R. (Openshaw)

  Rose, Paul

  Williams, Clifford (Abertillery)

  Moyle, Roland

  Ross, Rt. Hn. William

  Willis, George (Edinburgh, E.)

  Mulley, Rt. Hn. Frederick

  Rowland, Christopher (Meriden)

  Winterbottom, R. E.

  Newens, Stan

  Rowlands, E. (Cardiff, N.)

  Woodburn, Rt. Hn. A.

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

  Shaw, Arnold (Ilford, S.)

  Yates, Victor

  Norwood, Christopher

  Sheldon, Robert

  Oakes, Gordon

  Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

  TELLERS FOR THE AYES:

  Ogden, Eric

  Silkin, John (Deptford)

  Mr. Bishop and Mr. Fitch.

  O'Malley, Brian

  Silkin, S. C. (Dulwich)

  NOES

  Alison, Michael (Barkston Ash)

  Goodhew, Victor

  Nabarro, Sir Gerald

  Allason, James (Hemel Hempstead)

  Gower, Raymond

  Nicholls, Sir Harmar

  Atkins, Humphrey (M't'n & M'd'n)

  Grant, Anthony

  Noble, Rt. Hn. Michael

  Awdry, Daniel

  Grant-Ferris, R.

  Nott, John

  Baker, W. H. K.

  Gresham Cooke, R.

  Onslow, Cranley

  Balniel, Lord

  Gurden, Harold

  Osborn, John (Hallam)

  Batsford, Brian

  Hall, John (Wycombe)

  Page, Graham (Crosby)

  Bell, Ronald

  Harrison, Brian (Maldon)

  Peel, John

  Bennett, Sir Frederic (Torquay)

  Harvie Anderson, Miss

  Percival, Ian

  Biffen, John

  Hastings, Stephen

  Peyton, John

  Birch, Rt. Hn. Nigel

  Hawkins, Paul

  Prior, J. M. L.

  Black, Sir Cyril

  Heald, Rt. Hn. Sir Lionel

  Renton, Rt. Hn. Sir David

  Blaker, Peter

  Heseltine, Michael

  Rossi, Hugh (Hornsey)

  Bossom, Sir Clive

  Higgins, Terence L.

  Russell, Sir Ronald

  Boyd-Carpenter, Rt. Hn. John

  Hiley, Joseph

  Scott, Nicholas

  Boyle, Rt. Hn. Sir Edward

  Hill, J. E. B.

  Sharples, Richard

  Braine, Bernard

  Hirst, Geoffrey

  Shaw, Michael (Sc'b'gh & Whitby)

  Brewis, John

  Holland, Philip

  Smith, John

  Brinton, Sir Tatton

  Hordern, Peter

  Stodart, Anthony

  Bromley-Davenport, Lt. Col. Sir Walter

  Hornby, Richard

  Stoddart-Scott, Col. Sir M. (Ripon)

  Brown, Sir Edward (Bath)

  Howell, David (Guildford)

  Summers, Sir Spencer

  Bruce-Gardyne, J.

  Hunt, John

  Talbot, John E.

  Buck, Antony (Colchester)

  Hutchison, Michael Clark

  Taylor, Sir Charles (Eastbourne)

  Bullus, Sir Eric

  Irvine, Bryant Godman (Rye)

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

  Burden, F. A.

  Jenkin, Patrick (Woodford)

  Taylor, Frank (Moss Side)

  Carlisle, Mark

  Johnston, Russell (Inverness)

  Temple, John M.

  Carr, Rt. Hn. Robert

  Jopling, Michael

  Thatcher, Mrs. Margaret

  Clegg, Walter

  Kimball, Marcus

  Thorpe, Jeremy

  Cooke, Robert

  Knight, Mrs. Jill

  Turton, Rt. Hn. R. H.

  Corfieid, F. V.

  Langford-Holt, Sir John

  van Straubenzee, W. R.

  Costain, A. P.

  Lewis, Kenneth (Rutland)

  Vickers, Dame Joan

  Crawley, Aidan

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

  Wainwright, Richard (Colne Valley)

  Crouch, David

  Lubbock, Eric

  Walker, Peter (Worcester)

  Dance, James

  McAdden, Sir Stephen

  Walker-Smith, Rt. Hn. Sir Derek

  Davidson, James (Aberdeenshire, W.)

  MacArthur, Ian

  W alters, Denis

  Dean, Paul (Somerset, N.)

  Macleod, Rt. Hn. Iain

  Ward, Dame Irene

  Deedes, Rt. Hn. W. F. (Ashford)

  Marten, Neil

  Weatherill, Bernard

  Dodds-Parker, Douglas

  Maude, Angus

  Webster, David

  Eden, Sir John

  Mawby, Ray

  Wells, John (Maidstone)

  Elliot, Capt. Walter (Carshalton)

  Maxwell-Hyslop, R. J.

  Whitelaw, William

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

  Mills, Peter (Torrington)

  Wilson, Geoffrey (Truro)

  Errington, Sir Eric

  Mitchell, David (Basingstoke)

  Winstanley, Dr. M. P.

  Eyre, Reginald

  Monro, Hector

  Wolrige-Gordon, Patrick

  Fortescue, Tim

  Morgan, W. G. (Denbigh)

  Woodnutt, Mark

  Giles, Rear-Adm. Morgan

  Morrison, Charles (Devizes)

  Wylie, N. R.

  Gilmour, Ian (Norfolk, C.)

  Mott-Radclyffe, Sir Charles

  Younger, Hn. George

  Gilmour, Sir John (Fife, E.)

  Munro-Lucas-Tooth, Sir Hugh

  Glover, Sir Douglas

  Murton, Oscar

  TELLERS FOR THE NOES:

  Mr. Pym and Mr. More.

  Clause 12.—(GENERAL BETTING DUTY.)
  Mr. John M. Temple: I beg to move Amendment No. 91, in page 14, line 25, after "any", to insert "valid".
  Mr. Speaker: With this Amendment I suggest that we take Amendment No. 92, in Clause 15, page 22, line 6, at end insert:
  "valid bet' means a bet on a race or event which takes place".
  Mr. Temple: That selection is quite satisfactory, Mr. Speaker.
  Amendment No. 92 is really the operative Amendment. It provides that a valid bet means a bet on a race or event which takes place. The important thing in considering the new betting tax is to get precision and a proper understanding of that part of the tax. It is with a view to obtaining certainty that the Amendment had been tabled.
  This provision was proposed by me in Committee, in a debate in connection with void bets, a void bet being a bet on an event which ultimately did not take place. I submitted that bet would have attracted duty, but the Financial Secretary confirmed that the Customs and Excise authorities would not expect to collect that duty, because the event did not take place. There was some uncertainty within and without the House and the Financial Secretary took the view that the Customs and Excise would, in its determination, seek to discharge a void bet as not attracting any duty and that the duty would be repaid.
  But my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said:
  "… we must be careful about having ex cathedra statements about this. because, naturally, it will be for the courts in due course to decide any dispute which arise…."
  My right hon. Friend was wise to make that statement. To be absolutely fair, later on, the Financial Secretary said:
  "I cannot, of course, lay down the law from this Box—as the right hon. Gentleman has said, it would ultimately be for the courts to decide…"—[OFFICIAL REPORT, 16th June 1966; Vol. 729, c. 1714 and 1715.]
  No one would wish to deny lawyers the feast which they get from sloppily
  1380
  drafted legislation such as I have seen going through the House during the last 18 months. But it is the task of the House to be precise in its legislation, and particularly in respect of a new tax. That is why we have introduced the new terminology of a valid bet, to put beyond doubt that it is a bet on a race or event which takes place.
  We are wise to put this before the House in this form, because there has been a great deal of "Statute twisting" by various Governments. Assurances are given from the Dispatch Box and in Committee, reports of Committee stages are filed away and much later the Minister or those acting on his behalf twist the terminology of a Statute, not having regard to what was said in Committee, but saying, "What the Statute says is what guides us and not what was said in Standing Committee." I have heard this time after time, and I believe that it is, therefore, wise to be absolutely precise and accurate.
  We all realise that the one thing which is booming in the country is the practice of law. Production is stagnant, but lawyers are having a magnificent time. It must be a great hardship to the Financial Secretary to spend hours on the Treasury Brench, when, if he were released—we would be happy to release him at an early date—to return to practise at the Bar, because of the legislation being passed at present, he could enjoy the feast for the lawyers.
  When we discussed the Bill in Committee, everyone within and without the House, including the Financial Secretary before he took advice, thought that a void bet would attract the duty and it was only his advisers who convinced him otherwise. All members of the racing community thought that these void bets would attract the duty, so the only people who thought that it would not were the hon. and learned Gentleman and his advisers.
  When I wound up that debate, I said:
  "However, I hope that the Financial Secretary will have another look at the matter between now and Report just in case there is any loophole or possibility of the lawyers getting to work on it."—[OFFICIAL REPORT, 16th June, 1966, Vol. 729. c. 1717.]
  This is what we want to avoid. At the cost of adding a single line to the Bill,

  1381
  it would be wise if the House took the view that the words should be inserted.
  Mr. Rees-Davies: I support the Amendment. At least one of the legal alumni whom the hon. and learned Gentleman in his youthful days certainly used to hero worship would have been Lord Shawcross, and very recently Lord Shawcross drew attention to the appalling confusion and complexity of the financial legislation today. The Amendment raises this question once again. We have to face confusion and complexity at the present time as to what construction is to be placed upon the new tax. The sad thing is that all representations we made to the Government in Committee, and which we are now again making, have fallen on wholly deaf ears.
  Unfortunately, it will not be we in this House who will suffer from this state of things. The people who will suffer will be the community at large, and the principal sufferers will be those persons who will have to administer this tax from the Treasury. My statement is fully and totally informed and comes direct from those people and those advising them when T say that unfortunately the Government still do not understand the basis of the tax they hope to collect.
  There are three forms of betting, and only three. One is the bet to win, the second is the bet to a place, and the third is the bet "any to come." In effect, in describing whether or not there is a valid bet and what is the nature of the bet to be collected, the bet must come into one of these channels. The problem for the future is that unless the Customs and Excise has an army of officials, it will be quite impossible for it to collect the tax without a full inspection of the bookmakers' accounts in every betting office, and elsewhere.
  It does not matter whether or not we insert such words as "valid bet" or "void bet", because unless those inspectors have an opportunity to examine the books they will be quite unable to detect whether or not a bet is a valid bet. As the Customs and Excise people learn something of the difficulties which the Government intend to impose on them, they are beginning to realise that if a bet is struck, for example, to win, unless they examine the books of the licensed betting office they will not be
  1382
  able to decide whether the bet was won and collect the tax. Unless they are able to examine the "any to come" bets—which include doubles, trebles, "Yankees" and others—they will not be able to determine on the outcome whether or not the tax is payable.
  We are now seeking to have this small insertion made in the Clause, but the Amendment will probably be turned down because, unfortunately, the Government have failed in the whole of their betting legislation in one aspect and that is the aspect of efficiency. The way they propose to deal with this matter is inefficient—
  Mr. Speaker: Order. We cannot discuss the Government and their attitude to the betting tax in general. The hon. Member must discuss the Amendment, which seeks to insert the word "valid."
  Mr. Rees-Davies: I am arguing the general from the particular, Mr. Speaker. I say that in this matter our obvious intention is only to collect on the valid bet, yet instead of the Amendment being accepted immediately, and an indication that it would be accepted being given as soon as my hon. Friend the Member for the City of Chester (Mr. Temple) moved it, we are now debating it. As a result, I have had to get up to say that the hon. and learned Member fails to accept the advice tendered.
  It is well known, not only in the House but in the country, that those on this side of the House who move in these matters have considerably greater knowledge, if I may say so, on this subject than any of those hon. Members sitting on the Government benches, particularly the Front Bench. But nobody has paid any attention to the congregate wisdom which we have managed to get not only from our own knowledge but also from those in the racing industry who advise us.
  If the Financial Secretary pays heed to those who know this subject he will find that they will be proved right, but by not accepting this type of Amendment, as he has refused all others, he is heaping upon himself considerable trouble. He will find that it will come from the Welsh valleys where there are small "any to come" bets and there will be disputes as to whether a bet is valid

  1383
  or void and where they want opportunity to bet in the way they want to. It is from the valleys of Wales that this advice came. Unless there is an alteration to subsection (4) to provide a proper definition of contingencies to enable them to have this type of bet, the Financial Secretary will find that he will get heavy criticism from punters all over the country.
  11.0 p.m.
  We have debated these matters in no partisan sense and not on party lines and we have worked from the beginning on the basis of using the joint experience of both sides and those who seek to advise us so that we may arrive at a sensible tax which will work. But it will not work and the Government will have to come back next year to amend it. They will find that it fails, and they will find that it fails because they refused to listen.
  Mr. MacDermot: I have been criticised for not leaping to my feet the moment that the hon. Member for the City of Chester (Mr. Temple) sat down. I did not do so because I thought that we were going to have some helpful words of wisdom from the hon. Member for the Isle of Thanet (Mr. Rees-Davies). He gave us a speech which bore no relation to the Amendment and which excelled his own high standards of modesty. He announced that this tax was completely unworkable and he is fully satisfied that we cannot possibly control it.
  It would be out of order to pursue that, but I find it difficult to see how he can be convinced of that when we have not yet published the detailed procedures by which we propose to control this duty. As I made clear in Committee these are procedures which we are about to discuss in detail with the representatives of the bookmakers and others who are concerned. We want to make sure that this is workable from the start and we want to discuss the procedures in detail before promulgating them in regulations.
  I suspected that the intention of the Amendment was to achieve the same as the Amendment moved in Committee, namely, to make it clear that the levy would not be levied on void bets. I then assured the Committee that it was our
  1384
  view and advice that under the Clause as worded the duty would not be leviable on a bet which was void or became void.
  The hon. Member quoted some of my words but he did not complete the sentence. I said:
  "but I think that it is clear from what I have said that the matter never would, or could, arise before the courts."—[OFFICIAL REPORT, 16th June, 1966; Vol. 729, c. 1715.]
  The reason for that was that the Customs would never seek to levy or retain a duty in respect of a void bet. I understand that this Amendment is designed to deal with the same matter. The effect of the Amendment would be to exempt some bets which are not void and it might imply a charge on some bets which were void.
  The limitation of the general betting duty to valid bets, defined as proposed, would exclude from its scope any bets taken by a bookmaker on the basis that the punter loses even if the event to which his bet relates does not take place, regardless of the reason. Thus, for example, a bet might be taken which would not be a void bet even if the whole event were abandoned because of the weather. Obviously the hon. Member had in mind Tattersall's Rules, but they apply to horseracing only and, although they generally require all such bets to be void, bookmakers are free to make their own rules for betting on other events—or indeed on horseracing, in which case they may lose the use of Tattersall's Committee as a body for deciding any dispute between them and the punter on such a bet.
  There is no reason why such a bet if lost should not be dutiable like any other losing bet. It is possible to conceive a bet wagered that a specific event will not take place. It would still be a valid bet and the bookmaker would still have a valid stake and should pay duty on it. Under some bookmaker's rules there are bets which are void even if the event takes place, for example, if the horse selected is withdrawn before coming under starter's orders. Then the event takes place but the bet itself is void. In such a case as the provision is worded it would not be a bet in respect of which duty is leviable. If the Amendment were adopted this might by implication bring about the very thing of which

  1385
  hon. Members opposite are afraid—the suggestion that a charge would be imposed.
  The Amendment does not achieve what is intended, and what is intended is wholly unnecessary.
  Amendment negatived.
  Clause 14.—(GAMING MACHINE LICENCE DUTY.)
  Mr. J. Bruce-Gardyne: I beg to move Amendment No. 10, in page 19, line 40, at the end to insert:
  "for a full year's licence, or
  (c) eleven-twentieths of a full year's licence in the case of a gaming machine licence taken out for a period of six months;".
  Mr. Deputy Speaker: With this Amendment may be considered the following Amendments: No. 11, in line 42, after"licence" insert "for a full year".
  No. 12, in line 44, at end insert:
  (6) In the case of a gaming machine licence taken out for a period of six months, the licence shall expire at the end of a period of six months from the beginning of the month it which the licence first had effect.
  (7) Paragraphs 11 and 13 of Schedule 3 of this Act shall not apply to a gaming machine licence taken out for a period of six months.
  No. 52, in Schedule 3, page 68, line 30, after "or", insert "a full year's"; and No. 53, in page 69, line 15, after "or", insert "a full year's".
  Mr. Bruce-Gardyne: We now return to the question of gaming machine licences. I hope that I shall not be accused by the Chancellor or the Financial Secretary of being the chap who represents the "one-armed bandit", in the elegant phraseology which the Chancellor was using last summer. The purpose of these Amendments is to enable sporting clubs and others to operate on a seasonal basis and to take out a six-months' licence instead of a licence for a whole year. I do not want to bore the House by going over the ground which we covered in our discussions on a similar series of Amendments in Committee, but I remind the Financial Secretary that my original point arose from representations made to me by a bowling club in my constituency, at Monifieth, which found that the takings of the owner of a one-armed bandit on its premises were unlikely to exceed £65 a
  1386
  year, and hence, if the full licence fee of £75 a year had to be paid, the one-armed bandit would have to be removed.
  My hon. Friends and I pointed out to the Financial Secretary during those discussions that many different types of sporting club might be affected by this—rugger clubs, cricket clubs, perhaps skiing clubs in some parts of Scotland, and so on. It is only fair to say that the Financial Secretary was sympathetic to our arguments, and promised to look at the question again, although it is also fair to say of him that he was not particularly hopeful about his ability to meet the case which we were making.
  I was mightily unimpressed by the arguments which the Financial Secretary put forward in Committee against the provision of a six months' or seasonal licence for a gaming machine. He started by arguing that the £75 was a very low charge. We did not dispute that. We were not disputing the level of the charge for a full year's licence. He argued that some people were bound to be disappointed, and perhaps forced to remove their one-armed bandit, at whatever level one imposed the licence fee. We did not dispute that either, because the argument was not about the level of the annual tariff but about the possibility of having a six-months' licence.
  Then the Financial Secretary produced what seemed to me the most unreasonable argument of all. He pointed out that the takings of a one-armed bandit operated at a seaside resort might be far greater during the six months' season than those from another machine operated throughout the year at an area which was not a resort. But we have a Road Fund licence which can be taken out for four months or a year, and a motor car which is licensed for four months may be used during those four months far more extensively than a car which is licensed for the whole year and used throughout the year.
  There is also the game licence, which can be taken out, as the Financial Secretary knows, for £3 for a period of a year from 31st July, or for £2 for a period of three months from 31st July. The Financial Secretary may come to my constituency and shoot grouse.
  Mr. MacDermot Mr. MacDermot indicated dissent.
  Mr. Bruce-Gardyne: The Financial Secretary shakes his head, but I should not be surprised to see him there, and I am sure that he would be a successful grouse shot. I suggest to him that having taken out a three months' game licence for £2 he might very well shoot many more grouse during those three months than I would shoot during the whole year on a year's licence, shooting other things as well. But he could still have to pay only £2 and I would have to pay £3. Therefore, his argument on this does not stand up.
  Finally, the Financial Secretary referred to the liquor licences which had to be taken out by clubs, operating, perhaps, on a seasonal basis, and pubs. My hon. Friend the Member for Bristol, West (Mr. Robert Cooke) pointed out that the licences for clubs and pubs are not on all-fours, but the Financial Secretary went one further and referred to the beer duty. Of course, the amount of beer duty paid depends entirely on the amount consumed in the club or pub. So that is not comparable at all.
  11.15 p.m.
  The Financial Secretary presented only one argument which offered any aid and comfort to people like my constituents, and that was that under paragraph 10(b) of Schedule 3 the owner of a one-armed bandit could remove the machine from a club which operated during the winter, let us say, to one which operated during the summer, the cost of the year's licence being divided between the two clubs. I accept that that might work successfully in certain areas, in the big cities, for example, where there were a rugger club and a cricket club fairly close to one another in the same area. But it would not solve the problems of my constituents, and it would not solve the problems of many similar small clubs.
  We have tried to change our Amendments somewhat in form in order to meet the hon. and learned Gentleman's point that a one-armed bandit in operation for a season might be more heavily used than one in respect of which the licence was taken out for a year. We have drafted the Amendments following the terms of the Vehicles (Excise) Act, 1962, Section 2(2) of which provides that if a Road Fund licence is taken out for four months, the fee paid should he equal to eleven-thirtieths of the annual
  1388
  rate. A four months' licence would not serve any useful purpose for the clubs I have in mind because the season would be likely to be longer than that, so I have tried—I hope that the arithmetic is right—to adjust the proportion to a period of six months, making the six months' fee eleven twentieths of the year's fee. That puts it exactly on a par with the Road Fund licence. Similarly, Amendment No. 12 dealing with the date of operation of the six months' licence is drafted following the terms of Section 2(1, c) of the 1962 Act. We have thus tried to model these Amendments on the Road Fund licence system, which seems to be strictly on a par.
  I hope that we shall have a very much more satisfactory answer tonight from the Financial Secretary. I appeal to him not to repeat what he said in Committee, that the Government are anxious to keep the administration of the new measure simple. No one on this side of the House will believe that for a moment and I greatly doubt that there are many hon. Members opposite who believe it now, and even those who do will cease to do so by the time we have finished discussing the Selective Employment Tax.
  I look forward to hearing the hon. and learned Gentleman say that he is able to accept these Amendments in the spirit in which they are offered.
  Mr. Rees-Davies: I add only a brief addendum to the case so ably and lucidly put by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). The business here is split into two parts, and the Government are handing a benefit, so to speak, to the rich operator. I do not think that they realise this. First, there are the big companies which hire out fruit machines on a weekly or monthly basis to clubs or pubs. Secondly, there are those who own the machines and live in a different part of the country from their machines. This devolves into those which are purely seasonal and those which are used all the year round. [Interruption.] There seems to be an enormous barrage of talking behind me. There is a veritable party going on over here. If it could be taken to the Smoking Room, we could continue with the debate on fruit machines.
  As I was saying, it devolves into two parts. The really big operators are probably advising the Treasury that there is

  1389
  no need for the Amendment. That would be the advice of representative industry to the Treasury, by the only people who would have been able to advise it, but there are people who own machines and operate them only for some months in the year.
  In Margate, for example, there is one man who owns 12 machines. He operates them only from May to September and they are closed completely for the other six months of the year. As he has no business in London, he cannot reasonably transfer them. He is a retired trade unionist from Birmingham who bought the machines to give him something from which to make an income.
  It is perfectly right that he should he taxed. I have never seen people who more needed to be taxed than those operating these machines. But it would be very easy for him to have a six months' instead of a 12 months' licence, otherwise the large operators will hire the machines on a weekly or monthly basis. We should provide for two half-year licences, as in the case of the Road Fund licences.
  This is now developing into two classes of business. One is in clubs, but there is a large number of licences in public houses. We have special arrangements in the seaside resorts for the summer months and it is necessary for licences for gaming machines to be granted for the summer months only.
  It is only reasonabe to allow a person to take out a six months' licence. This is a practical approach and the Financial Secretary should bear in mind the case made by my hon. Friend the Member for South Angus. It should be possible to give what will cost nothing and will enable the Treasury to make more money, because the business will not be worth the candle for six months with a full licence, and those fees will be lost.
  Mr. Hector Monro: I want to support my hon. Friends the Members for South Angus (Mr. Bruce-Gardyne) and the Isle of Thanet (Mr. Rees-Davies) for the constructive way in which they have put forward this simple Amendment. I particularly support the points made by the hon. Member for South Angus about seasonal activities. Winter is typified by Rugby football and hockey and summer by bowling, cricket and
  1390
  tennis. This legislation is a serious blow to both sections. I have a lot of experience in administering amateur sports clubs. I declare an interest, a non-financial interest, as a member of the Scottish Rugby Union and I speak on behalf of most Rugby clubs in the United Kingdom.
  I do not think the Financial Secretary realises the difference between clubs in general, of all sports, run for profit, and the amateur clubs using the one-armed bandits or fruit machines solely as a way to help their revenue and to cover expenses. On the one hand, the Government are taking away money by this legislation and by the Selective Employment Tax. On the other hand, they give grants to sports clubs for development. This is illogical. We should remember the great work done for youth by amateur sports clubs in the provision of playing fields, in arranging matches on Saturdays, and in arranging training nights. Such clubs should receive every encouragement instead of being discouraged by this duty. At the moment they are to be taxed to the hilt. We all remember the great service done to amateur clubs when the Entertainment Duty was taken off gate money and they were able to retain some of their well-earned income.
  It is important to appreciate that these clubs will use one-armed bandits at the very most every Saturday, and more likely every other Saturday when the first 11 or the first 15 are playing at home. It is ridiculous to argue in this case that £75 for a whole year is a small sum to pay.
  It is ridiculous for the Financial Secretary to argue that football clubs can lend the machines to cricket clubs in the summer. If that happened, we should see the most frightful general post of fruit machines moving round the country on 1st April and again on 1st December. This would be a complete waste of productivity.
  It must also be remembered that most amateur clubs are run on a very narrow margin. Most run at a loss. If it were not for the great work done by the ladies in organising raffles, and so on, we should be in a very bad plight.
  The argument put forward by my hon. Friends the Members for South Angus; and the Isle of Thanet has indicated that

  1391
  a six-monthly licence or, better still, a monthly licence would go a long way towards being acceptable. No one on this side can understand where the difficulty lies. I hope that the Financial Secretary will give some convincing reasons.
  Mr. MacDermot: When we considered this matter in Committee, I said to the hon. Member for South Angus (Mr. Bruce-Gardyne) that I would gladly look at any proposal which he might bring forward to try to find a solution to this problem, but that I was not very sanguine that we should be able to overcome the difficulties. The hon. Gentleman has responded by tabling a proposal which differs in a material respect from that which we considered in Committee. As the hon. Gentleman has explained, what he is proposing is that there should be in effect a six months' licence and that his proposal is modelled on the Road Fund licence arrangements.
  I made clear at the very outset of my argument in Committee that our main concern here was to keep this administratively simple. The hon. Gentleman sneers at that, but I remind him that we have, in order to achieve that, in a sense sacrificed a good deal of revenue. This was why a low rate of duty was imposed. Hon. Members in all parts of the House will agree that they have had comments from people in their constituencies about how low the £75 is in relation to many fruit machines which are making very big takings indeed over the period of a year. This was essential if we were to have a simple scheme which at the same time would not knock out completely a great many of the machines which are used by such people as the clubs which we are discussing.
  11.30 p.m.
  To try to have introduced any kind of graduated scheme related to takings or other forms of graduated duty would have required a very large army of what hon. Members opposite call "snoopers" and a considerable administrative machinery if the thing was to work at all. When hon. Members opposite are not pleading on behalf of particular interests, as they are, quite properly, doing now, they tend to abuse the Government for inflating the number of civil servants.
  1392
  I hope that they will be ready, therefore, to give us credit when we model provisions deliberately designed to keep a simple administration which will not make a large demand on manpower.
  One of the difficulties the Amendment is designed to overcome is that of providing a disincentive to people who are going to have a twelve-month licence to take out two six-monthly licences. That is not our real administrative problem though. If we have six-month licences, we should be involved in checking and controlling to ensure that the person taking them out is in fact operating his machine only for six months in the year and is, as it were, putting it into cold storage for the other six months. This would involve an amount of supervision, intrusion, on-site inspection and investigation which we hope to avoid. That is the real weight of the administrative problem.
  As I have said before, the problem which hon. Members are concerned with is in small compass here when we consider how low the duty is pitched and the facilities available for transferring a licence. Most of these small clubs do not own their own machines. Most hire them, as has been pointed out by the hon. Member for the Isle of Thanet (Mr. Rees-Davies). There is no problem in their case, because the owner of the machine who hires it out pays the duty. He will pay the duty for the whole year and will presumably put an apportioned part of that duty into his normal hiring charge, so that the club which only hires it for three or four or six months will only pay indirectly through the hiring charge a proportionate part of the duty. The club will not have to pay the duty at all. It is the hirer who will do so and he will recoup it from those to whom he hires the machine.
  The club which owns its own machine may be in the position—as some will be, though not a great proportion—where it operates it for six months and does not recover in those six months enough to be able to pay the duty and thus make it worth while to retain a machine of its own for the full year. It will presumably, however, have to come to some arrangement with another club which operates in another season, whereby that club takes over the machine for that period.

  1393
  Hon. Members suggest that this will be a waste of resources. On the contrary. It will induce high productivity in the machines. No serious problem is really involved here. If it is true—and I accept that it is—that some clubs will only want to operate a machine in the summer season and others only in the winter, it will surely not be difficult for them to get in touch with each other and make mutual arrangements.
  But I stress that these will be exceptional cases, because most clubs hire their machines. Those clubs which do own them will get enough takings to enable them to bear the duty. I must advise the House that I do not feel that a problem of sufficient magnitude exists here to justify the very considerable administrative work which would be involved in accepting the Amendment.
  Mr. Iain Macleod: The hon. and learned Gentleman will not be surprised when I tell him, more in sorrow than in anger, that he has made a deplorable response to an excellent case. I do not think that, since the Committee stage, when he gave a sympathetic answer, he can have spent much time on trying to get round a real but small difficulty.
  The answer put forward by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) is that we should base our case on Road Fund licences but that we should have only a six-month period, so that it would be of no benefit to anyone in a year, because of the eleven-twentieths provision, to take out two six-month licences. The answer given to that by the Financial Secretary is, in effect, the difficulty of supervision, administration and the question, as he put it, fiat one cannot be sure that those who have taken out a six-month licence may not be making use of the machine in the other six months.
  That is a very odd conception. I cannot see my hon. Friend the Member for Dumfries (Mr. Monro) and the members of the Scottish Rugby Union sneaking off at dead of night in July to have a quick pull on the machine just because the six months' licence has run out. That is the most ludicrous answer
  1394
  to give. Enormous staffs are not required to supervise whether a car has on it a Road Fund licence, which can be recognised at sight. It is not necessary to check all the cars. The Financial Secretary knows well that even the existence of threat is quite sufficient in these cases.
  What I am concerned about, as was my hon. Friend the Member for Dumfries and everybody who has spoken, is basically the small sports club. I believe that the Financial Secretary is equally concerned. That is the problem to which I want to find an answer. With respect to my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies), I am not concerned with the seasonal problems in resorts, although I recognise that it is a difficulty.
  It is possible to define sports clubs. They were defined in the Licensing (Scotland) Act, 1959, for example, and the problems of sports clubs were thereby eased. Most sports are by nature seasonal, although not all of them. Swimming and some others go on the whole year round, but in that case there is clearly no problem. If that kind of club has a one-armed bandit, it will take out—or will have taken out for it if it hires the machine—a yearly licence.
  I recognise that at this stage of the Bill we can do no more than register our dissatisfaction. We on this side are concerned with the problem of the genuine sports club to which £75 is a lot of money and which has not the slightest intention of doing anything wrong. There is no question of difficulty of supervision being an argument that should weigh with us.
  The Financial Secretary has not used his time fruitfully since the Committee stage. We think that the Road Fund licence method is perfectly suitable and that my hon. Friend the Member for South Angus has devised a quite reasonable application of the six-month licence. I certainly suggest to him that we now divide the House on this issue.
  Question put, That those words be there inserted in the Bill:
  The House divided: Ayes 119, Noes 178.

  Division No. 108.]

  AYES

  [11.37 p.m.

  Alison, Michael (Barkston Ash)

  Glover, Sir Douglas

  Nicholls, Sir Harmar

  Allason, James (Hemel Hempstead)

  Goodhew, Victor

  Noble, Rt. Hn. Michael

  Atkins, Humphrey (M't'n & M'd'n)

  Gower, Raymond

  Nott, John

  Awdry, Daniel

  Grant, Anthony

  Onslow, Cranley

  Baker, W. H. K.

  Grant-Ferris, R.

  Osborn, John (Hallam)

  Balniel, Lord

  Gresham Cooke, R.

  Page, Graham (Crosby)

  Batsford, Brian

  Gurden, Harold

  Peel, John

  Bell, Ronald

  Hall, John (Wycombe)

  Percival, Ian

  Biffen, John

  Harrison, Brian (Maldon)

  Peyton, John

  Birch, Rt. Hn. Nigel

  Harvie Anderson, Miss

  Prior, J. M. L.

  Black, Sir Cyril

  Hastings, Stephen

  Pym, Francis

  Bossom, Sir Clive

  Hawkins, Paul

  Renton, Rt. Hn. Sir David

  Boyd-Carpenter, Rt. Hn. John

  Heseltine, Michael

  Rossi, Hugh (Hornsey)

  Boyle, Rt. Hn. Sir Edward

  Hill, J. E. B.

  Scott, Nicholas

  Brain, Bernard

  Hirst, Geoffrey

  Sharples, Richard

  Brewis, John

  Holland, Philip

  Shaw, Michael (Sc'h'gh & Whitby)

  Brinton, Sir Tatton

  Hordern, Peter

  Smith, John

  Bromley-Davenport, Lt. Col. Sir Walter

  Hornby, Richard

  Stodart, Anthony

  Brown, Sir Edward (Bath)

  Howell, David (Guildford)

  Stoddart-Scott, Col. Sir M. (Ripon)

  Bruce-Gardyne, J.

  Hunt, John

  Summers, Sir Spencer

  Bullus, Sir Eric

  Hutchison, Michael Clark

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

  Burden, F. A.

  Jenkin, Patrick (Woodford)

  Taylor, Frank (Moss Side)

  Carlisle, Mark

  Jopling, Michael

  Temple, John M.

  Carr, Rt. Hn. Robert

  Kimball, Marcus

  Thatcher, Mrs. Margaret

  Clegg, Walter

  Knight, Mrs. Jill

  van Straubenzee, W. R.

  Cooke, Robert

  Langford-Holt, Sir John

  Vickers, Dame Joan

  Corfield, F. V.

  Lewis, Kenneth (Rutland)

  Walker, Peter (Worcester)

  Crawley, Aidan

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

  Walters, Dennis

  Crouch, David

  MacArthur, Ian

  Ward, Dame Irene

  Dance, James

  Macleod, Rt. Hn. Iain

  Weatherill, Bernard

  Dean, Paul (Somerset, N.)

  Marten, Neil

  Webster, David

  Deedes, Rt. Hn. W. F. (Ashford)

  Maude, Angus

  Wells, John (Maidstone)

  Dodds-Parker, Douglas

  Maxwell-Hyslop, R. J.

  Whitelaw, William

  Eden, Sir John

  Mills, Peter (Torrington)

  Wilson, Geoffrey (Truro)

  Elliot, Capt. Walter (Carshalton)

  Mitchell, David (Basingstoke)

  Wolrige-Gordon, Patrick

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

  Monro, Hector

  Woodnutt, Mark

  Errington, Sir Eric

  More, Jasper

  Wylie, N. R.

  Fortescue, Tim

  Morrison, Charles (Devizes)

  Giles, Rear-Adm. Morgan

  Munro-Lucas-Tooth, Sir Hugh

  TELLERS FOR THE AYES:

  Gilmour, Ian (Norfolk, C.)

  Murton, Oscar

  Mr. Blaker and Mr. Eyre.

  Gilmour, Sir John (Fife, E.)

  Nabarro, Sir Gerald

  NOES

  Albu, Austen

  Diamond, Rt. Hn. John

  Herbison, Rt. Hn. Margaret

  Alldritt, Walter

  Dobson, Ray

  Hilton, W. S.

  Allen, Scholefield

  Doig, Peter

  Hooley, Frank

  Archer, Peter

  Dunn, James A.

  Horner, John

  Armstrong, Ernest

  Dunnett, Jack

  Howarth, Harry (Wellingborough)

  Ashley, Jack

  Dunwoody, Mrs. Gwyneth (Exeter)

  Howarth, Robert (Bolton, E.)

  Atkins, Ronald (Preston, N.)

  Dunwoody, Dr. John (F'th & C'b'e)

  Howie, W.

  Atkinson, Norman (Tottenham)

  Eadie, Alex

  Hoy, James

  Bagier, Gordon A. T.

  Ellis, John

  Hughes, Roy (Newport)

  Barnett, Joel

  Ensor, David

  Hunter, Adam

  Baxter, William

  Evans, Albert (Islington, S. W.)

  Jackson, Colin (B'h'se & Spenb'gh)

  Beaney, Alan

  Evans, Ioan L. (Birm'h'm, Yardley)

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

  Bence, Cyril

  Fernyhough, E.

  Jones, Dan (Burnley)

  Bennett, James (G'gow, Bridgeton)

  Finch, Harold

  Jones, J. Idwal (Wrexham)

  Binns, John

  Fletcher, Raymond (Ilkeston)

  Kenyon, Clifford

  Bishop, E. S.

  Fletcher, Ted (Darlington)

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

  Blackburn, F.

  Foot, Sir Dingle (Ipswich)

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

  Boardman, H.

  Forrester, John

  Lawson, George

  Booth, Albert

  Fowler, Gerry

  Ledger, Ron

  Braddock, Mrs. E. M.

  Fraser, John (Norwood)

  Lee, John (Reading)

  Brooks, Edwin

  Fraser, Rt. Hn. Tom (Hamilton)

  Lector, Miss Joan

  Brown, Hugh D. (G'gow, Provan)

  Freeson, Reginald

  Lever, L. M. (Ardwick)

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Galpern, Sir Myer

  Lewis, Ron (Carlisle)

  Brown, R. W. (Shoreditch & F'bury)

  Gardner, A. J.

  Lomas, Kenneth

  Cant, R. B.

  Garrett, W. E.

  Lubbock, Eric

  Carmichael, Neil

  Garrow, Alex

  Lyons, Edward (Bradford, E.)

  Carter-Jones, Lewis

  Gourlay, Harry

  McCann, John

  Coe, Denis

  Gray, Dr. Hugh (Yarmouth)

  MacColl, James

  Concannon, J. D.

  Greenwood, Rt. Hn. Anthony

  MacDermot, Niall

  Conlan, Bernard

  Gregory, Arnold

  Macdonald, A. H.

  Crawshaw, Richard

  Grey, Charles (Durham)

  McGuire, Michael

  Crosland, Rt. Hn. Anthony

  Griffiths, Will (Exchange)

  Mackenzie, Gregor (Rutherglen)

  Dalyell, Tam

  Hamilton, James (Bothwell)

  Mackintosh, John P.

  Davidson, Arthur (Accrington)

  Hamilton, William (Fife, W.)

  Maclennan, Robert

  Davies, Dr. Ernest (Stretford)

  Hannan, William

  McNamara, J. Kevin

  Davies, Robert (Cambridge)

  Harper, Joseph

  MacPherson, Malcolm

  Dempsey, James

  Harrison, Walter (Wakefield)

  Mahon, Peter (Preston, S.)

  Dewar, Donald

  Henig, Stanley

  Mahon, Simon (Bootle)

  Manuel, Archie

  Perry, Ernest G. (Battersea, S.)

  Thorpe, Jeremy

  Mapp, Charles

  Price, Thomas (Westhoughton)

  Tinn, James

  Marquand, David

  Probert, Arthur

  Urwin, T. W.

  Mayhew, Christopher

  Rees, Merlyn

  Varley, Eric G.

  Millan, Bruce

  Rhodes, Geoffrey

  Wainwright, Edwin (Dearne Valley)

  Miller, Dr. M. S.

  Roberts, Albert (Normanton)

  Walden, Brian (All Saints)

  Mitchell, R C. (S'th'pton, Test)

  Roberts, Goronwy (Caernarvon)

  Walker, Harold (Doncaster)

  Morgan, Elystan (Cardiganshire)

  Robertson, John (Paisley)

  Watkins, David (Consett)

  Moyle, Roland

  Robinson, W. O. J. (Walth'stow, E.)

  Weitzman, David

  Mulley, Rt. Hn. Frederick

  Rose, Paul

  Wells, William (Walsall, N.)

  Newens, Stan

  Ross. Rt. Hn. William

  Whitaker, Ben

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

  Rowland, Christopher (Meriden)

  Whitlock, William

  Norwood, Christopher

  Rowlands, E. (Cardiff, N.)

  Willey, Rt. Hn. Frederick

  Oakes, Gordon

  Shaw, Arnold (Ilford, S.)

  Williams, Clifford (Abertillery)

  Ogden, Eric

  Sheldon, Robert

  Wills, Sir Gerald (Bridgwater)

  O'Malley, Brian

  Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

  Winstanley, Dr. M. P.

  Orbach, Maurice

  Silkin, S. C. (Dulwich)

  Woodburn, Rt. Hn. A.

  Orme, Stanley

  Silverman, Julius (Aston)

  Yates, Victor

  Oswald, Thomas

  Small, William

  Owen, Dr. David (Plymouth, S'tn)

  Steele, Thomas (Dunbartonshire, W.)

  TELLERS FOR THE NOES:

  Page, Derek (King's Lynn)

  Summerskill, Hn. Dr. Shirley

  Mr. Fitch and

  Palmer, Arthur

  Swain, Thomas

  Mr. Charles R. Morris.

  Park, Trevor

  Swingier, Stephen

  Clause 23.—(SURTAX ON INCOME UNDER CERTAIN SETTLEMENTS: EXCEPTIONS TO S. 415(1) OF ACT OF 1952.)
  Mr. Diamond: I beg to move Amendment No. 15, in page 24, line 37, leave out "not" and insert "only".
  Perhaps it would be convenient to discuss at the same time Amendment No. 16.
  These Amendments refer to a relieving Clause, Clause 23, under which there was given the right to a succeeding partner to be substituted for a previous partner, thereby having the right to share in the payment under a deed of covenant to a previous partner, and for that payment under that deed of covenant exceptionally to be allowed for Surtax purposes.
  The words originally used, which said
  "made in substitution wholly or in part for other payments",
  might conceivably result in a situation in which, so long as part of the new partner's payments were in substitution, the whole of his payments could be taken as allowable for Surtax deduction as a payment under a deed of covenant, although in total the payments would be more than the amount which was being substituted. Therefore, these words are put in to make it clear that the amount in substitution is to be no more than the original amount, and that is why the words are used:
  "to the extent that they are made in substitution for".
  Amendment agreed to.
  Further Amendment made: In line 39, leave out from "subsection" to "excluded" in line 41 and insert:
  "if, and to the extent that, they are made in substitution for, or matched by reductions in, other payments which would themselves be"—[Mr. Diamond.]
  Clause 24.—(DIVIDEND INCREASES ETC. IN 1965–66; EXCLUSION OF SURTAX RELIEF UNDER S. 238 OF ACT OF 1952.)
  Mrs. Thatcher: I beg to move, Amendment No. 17, in page 25, line 29, at the end to insert:
  "or dividends which by virtue of section 83 of the Finance Act 1965 are treated as paid by the company on the first day of the year 1966–67".
  This is a comparatively short point. The Clause withdraws Surtax relief on bunched dividends. During his Budget speech the Chancellor gave the reason why he was withdrawing this Surtax relief, and a similar reason was given by the Chief Secretary when we debated a similar matter in Committee.
  The point is shortly that because a number of companies declared more dividends than usual last year, thereby escaping Schedule F tax, the Chancellor apparently thought that he ought not to give Surtax relief in respect of these same dividends when they came to be taxed in the hands of the shareholder.
  On 20th June the Chief Secretary reinforced this reasoning as being that behind the withdrawal of Surtax relief. He said:
  "A company is owned by its shareholders jointly and the shareholders jointly therefore enjoy the benefit in the form of 8s. 3d. in

  1399
  the £ for every £'s worth of dividend which was declared in the year 1965–66 as opposed to the following year."
  Later he said:
  "The shareholders of this company are benefiting to the extent of 8s. 3d. in the £ and the Chancellor sees no good reason why in addition they should get Surtax relief …" —[OFFICIAL REPORT, 20th June, 1966; Vol. 730, c. 164.]
  For reasons which I have expressed previously, I do not wholly go along with either the Chancellor's or the Chief Secretary's reasoning because a company and its shareholders are entirely different legal entities.
  The point that I wish to make is that if one accepts the reasoning that because the dividends have not borne Schedule F, Surtax relief should be withdrawn, it follows that the Chief Secretary must accept the Amendment, because it excludes from the operation of the Clause those dividends which have borne Schedule F tax, and from the right hon. Gentleman's own reasoning, therefore, it would seem that if a dividend has borne Schedule F tax, it should still rank for Surtax relief under the old Section 238 of the Income Tax Act, 1952.
  The Amendment is designed to see that such dividends are excluded from the operation of this Clause, that is to say, they will get Surtax relief, and I hope that the right hon. Gentleman will speedily accept it.
  Mr. Diamond: I can deal with this matter with the brevity with which I was asked to deal with it and explain to the House that the hon. Lady is right in saying that there is no case for claiming that those who saved 8s. 3d. in the £ by additional dividends should feel in any way hurt or unfairly treated if they have to incur possibly 6d. in the £, possibly 1s. in the £ Surtax which might not otherwise arise because they go from one rate into another.
  But with regard to those cases with which the hon. Lady is now dealing, where there has been an attempted forestalling of the dividend, and where it has been demonstrated that this has failed in the sense that clearly the dividend has been in excess of what could properly be paid out that year in order to avoid tax, and Schedule F tax is subsequently levied, it cannot possibly be said
  1400
  that one should go out of one's way to treat that category with any more sympathy than that with which it was treated when the hon. Lady moved her previous Amendment in Committee. The Amendment is a complete volte face as compared with the Amendments moved in Committee. That is one reason why we cannot accept it—because there is no justice behind it. The other reason is that it is not practicable because it is not possible to work the relieving Section so far as part of the income of an asset is concerned.
  As the hon. Lady will recollect, what is provided for in this forestalling provision is that the excess dividend is made liable to Schedule F tax, but the provision for spreading Surtax does not deal with excess income; it deals with the whole income of an asset, and that is the essential point. It cannot be worked out if only part of an asset is taken. Because there is neither justice nor practicability in the Amendment I am sorry to say that I cannot recommend the House to accept it.
  Mrs. Thatcher: if I may speak again with the leave of the House, Mr. Deputy Speaker, the Chief Secretary is talking absolute nonsense. I deliberately framed my Amendment on his reasoning.
  Mr. Deputy Speaker (Sir Eric Fletcher): I am sorry, but I am afraid that the rule is strict. Second speeches are not allowed.
  Sir D. Glover: On a point of order. Mr. Deputy Speaker. It is a long tradition in the House, particularly on Report, that if an hon. Member rises in his or her place and asks the leave of the House to address the House for a second time, if the House does not object leave is invariably granted.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. It may save time if I reply to the point of order which has been put to me. The position in this matter is quite clear. It is laid down in Erskine May, on page 445, that
  "Except on occasions when a reply is permitted, or in a committee, it is a rule, strictly observed in both Houses, that no Member shall speak twice to the same question, unless he speaks to explain some part of his speech which has been misunderstood."
  Sir Harmar Nicholls: It is within the recollection of the House that within the last hot r and a quarter Mr. Speaker, in the Chair, ruled that my hon. Friend the Member for Yeovil (Mr. Peyton) could speak for a second time with the permission of the House, and there were certainly no conditions attached—nor did he reply in a vein which would import any conditions being attached. I should have thought that as that Ruling has been given within the last hour and a quarter my hon. Friend, with the leave of the House, ought to be allowed to address the House for a second time.
  Mr. John Hall: There is a second example, also in that debate: I was allowed to speak for a second time with the permission of the House.
  Mr. Burden: There was a third occasion, when my hon. Friend the Member for Shipley (Mr. Hirst) was allowed to speak for a second time.
  Mr. Deputy Speaker: It may be that there have been departures from the rules of the House, as laid down quite authoritatively in Erskine May, but I am bound by the rules of the House. I will read the words of Erskine May again:
  "Except on occasions when a reply is permitted, or in a committee, it is a rule, strictly observed in both Houses, that no Member shall speak twice to the same question, unless he speaks to explain some part of his speech which has been misunderstood."
  I would add that I am a servant of the House in these matters. It is open to the House, if it wishes, to change the rule, but until the rule has been changed I conceive it to be my duty to observe the rules of the House, which are obviously for the convenience of the House.
  12 p.m.
  Several Hon. Members rose—
  Mr. Iain Macleod: Further to that point of order. While accepting entirely what you have said, Mr. Deputy Speaker, may I say that there have been half a dozen instances—I have done it twice myself in this Report stage—a number of them with the agreement of Mr. Speaker himself, of hon. Members asking leave of the House to speak again. I have always understood that the quotation from Erskine May is strict unless the House gives permission and the House is the final authority. It is for
  1402
  that reason that hon. Members sometimes rise, as my hon. Friend rose, and ask the leave of the House. If any hon. Member says, "No," that is the end of the matter. That is understood. But there have been many examples and I think that when leave is given by the House, it follows automatically that that provision is overruled, as it has been on many occasions.
  I think that my hon. Friend got out the second speech which she wished to make, that she found the answer unsatisfactory and advised that we should divide.
  Sir D. Glover: Further to that point of order. This is a very important matter. We may be reaching a Ruling which we shall all regret. When you read out that quotation from Erskine May, Mr. Deputy Speaker, did you not read out at the beginning,"… except with the permission of the House …"?—[HON. MEMBERS: "No."] With permission—
  Mr. Deputy Speaker: Order. On that point, there is nothing in the rules, as laid down in Erskine May, about entitling an hon. Member to speak again with the permission of the House. If I may say so, from my own experience, I agree that there have been a number of departures from the rule, but I thought it right, in the interests of order, to remind the House of what the strict rules of the House are in this respect.
  Sir D. Glover: Further to that point of order. In the time that I have been in the House, I have never yet known the House, when it wanted to hear an hon. Member, refuse permission: the House has always granted permission. There have been many occasions when I have risen and the House has objected. I do not blame them a bit: that is the end of the matter. The House has objected and the hon. Member who has risen, wishing to address the House, immediately resumes his seat, or he should. But when an hon. Member has risen with the permission of the House, I have never yet known the Chair to draw him to order and not allow him to speak.
  Mr. Ronald Bell: In everything except brevity, I found the reply of the Chief Secretary disappointing. A distinction between

  1403
  the members of a company and the company itself comes very ill from a Government who, in 1965, introduced the Corporation Tax, a tax which is based entirely upon the alleged and, I think, false distinction between a company and its members. The second reason why I found the reply disappointing—I see that the Chief Secretary himself finds it disappointing: he is looking very unhappy about it—is that this is a shameless example of retrospective legislation.
  It is true, of course, that the higher rates of Income Tax, as they are called in Finance Bills, are imposed one year later than the standard rate of tax, but the spreading provisions of Surtax are quite independent of the rate of higher charge of tax. They are a permanent feature. What the Chief Secretary and his Government are proposing in this Finance Bill and what my hon. Friend has been trying to remedy is in effect the suspension of the regularly established spreading provisions simply in respect of these payments which have been made in March of this year to take advantage of the Corporation Tax concessions. If the Chief Secretary wants to address himself to that point, I am quite sure that we on this side would be most willing to give him leave to reply more adequately to this Amendment.
  This is a vindictive, retrospective and wholly unjustified attempt to suspend the operation of the law, well established over many years, in respect of an entirely legitimate process which arises under the 1965 Finance Act. The right hon. Gentleman's reply was obfuscatory and absurd, and my hon. Friend when she was interrupted on the matter of order, was quite rightly saying that his reply was absolute nonsense.
  The existing provisions of the law have been applied successfully for years, and I am puzzled to know how the Chief Secretary could say without laughing that they could not be applied to the extra payment of dividends made primarily in March, 1966, to take advantage of a concession in the 1965 Finance Act. There is not the slightest difficulty about it at all. The one reason the Government have is to pacify some of their supporters by a rather mean, retrospective and envious provision, because they feel that some people who
  1404
  have received dividends will claim the established concession for separate Surtax.
  It is nothing more than playing to the gallery of the worst elements in the Government party, and I hope that the Chief Secretary will now be a little more worthy of his better self, make a generous reply to my hon. Friend, and bring the first night's proceedings on the Report stage of the Finance Bill to a much happier conclusion than otherwise might be the case by saying that he has the authority of the Chancellor of the Exchequer—who is not here—[HON. MEMBERS: "Where is he?"]—yes, where is the Chancellor of the Exchequer? What is the good of having this Amendment debated and argued if the Financial Secretary has no authority to do anything? It is quite useless to have him here—although we are glad to have him here, of course, and he at least has my leave to address the House again.
  Mr. R. J. Maxwell-Hyslop: There is another reason why the Chief Secretary should be more sympathetic about this Amendment. I understand that before he became a Minister he was a tax consultant—that is to say, someone to whom individuals or firms go who wish to reduce their tax liability to the minimum. It may well be because of the vicissitudes and fortunes of politics, the right hon. Gentleman will find himself at some future date back in the position of a professional tax consultant. It is well known that the job of being a tax consultant is particularly difficult if one is overtaken by retrospective legislation and the Chief Secretary may well be laying a snare for himself as a tax consultant when he ceases to be in office.
  There have been occasions when the Chief Secretary has appeared to be censorious about those who seek to so arrange their affairs that they attract the minimum tax liability, although this is presumably what he spent his time advising people to do when he was a tax consultant. I would have expected him to show greater objection to retrospective legislation of this kind, because if it becomes the order of the day there is little reason for anybody to employ either the Chief Secretary or anybody else as a tax consultant.
  Mr. Deputy Speaker: The Question is—mdash;
  Mr. Victor Goodhew: Before we vote, Mr. Deputy Speaker, I had hoped that the House would have heard the views of my hon. Friend the Member for Finchley (Mrs. Thatcher). It seems that a mistake has crept in here. I understand that you read from Erskine May a sentence which began "Except when permitted". Surely, in this case, it must be permitted by the House. This is what "leave of the House" means.
  I would have thought, in view of Mr. Speaker's previous Rulings on a number

  Division No. 109.]

  AYES

  [12.12 a.m.

  Alison, Michael (Barkston Ash)

  Goodhew, Victor

  Noble, Rt. Hn. Michael

  Allason, James (Hemel Hempstead)

  Cower, Raymond

  Nott, John

  Atkins, Humphrey (M't'n & M'd'n)

  Grant, Anthony

  Onslow, Cranley

  Awdry, Daniel

  Grant-Ferris, R.

  Osborn, John (Hallam)

  Baker, W. H. K.

  Gresham Cooke, R.

  Page, Graham (Crosby)

  Balniel, Lord

  Gurden, Harold

  Peel, John

  Botsford, Brian

  Hall, John (Wycombe)

  Percival, Ian

  Bell, Ronald

  Harrison, Brian (Maldon)

  Peyton, John

  Biffen, John

  Harvie Anderson, Miss

  Prior, J. M. L.

  Black, Sir Cyril

  Hastings, Stephen

  Renton, Rt. Hn. Sir David

  Bossom, Sir Clive

  Hawkins, Paul

  Rossi, Hugh (Hornsey)

  Boyd-Carpenter, Rt. Hn. John

  Heseltine, Michael

  Scott, Nicholas

  Boyle, Rt. Hn. Sir Edward

  Hill, J. E. B.

  Sharples, Richard

  Braine, Bernard

  Holland, Philip

  Shaw, Michael (Sc'b'gh & Whitby)

  Brewis, John

  Hordern, Peter

  Smith, John

  Brinton, Sir Tatton

  Hornby, Richard

  Stodart, Anthony

  Bromley-Davenport, Lt. Col. Sir Walter

  Howell, David (Guildford)

  Stoddart-Scott, Col. Sir M. (Ripon)

  Brown, Sir Edward (Bath)

  Hunt, John

  Summers, Sir Spencer

  Bruce-Gardyne, J.

  Hutchison, Michael Clark

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

  Bullus, Sir Eric

  Jenkin, Patrick (Woodford)

  Taylor, Frank (Moss Side)

  Burden, V. A.

  Kimball, Marcus

  Temple, John M.

  Carlisle, Mark

  Knight, Mrs. Jill

  Thatcher, Mrs. Margaret

  Carr, Rt. Hn. Robert

  Langford-Holt, Sir John

  van Straubenzee, W. R.

  Clegg, Walter

  Lewis, Kenneth (Rutland)

  Vickers, Dame Joan

  Cooke, Robert

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

  Walker, Peter (Worcester)

  Crawley, Aidan

  Lubbock, Eric

  Walters, Denis

  Crouch, David

  MacArthur, Ian

  Ward, Dame Irene

  Dance, James

  Macleod, Rt. Hn. Iain

  Weatherill, Bernard

  Dean, Paul (Somerset, N.)

  Marten, Neil

  Webster, David

  Deedes, Rt. Hn. W. F. (Ashford)

  Maude, Angus

  Wells, John (Maidstone)

  Dodds-Parker, Douglas

  Maxwell-Hyslop, R. J.

  Whitelaw, William

  Eden, Sir John

  Mills, Peter (Torrington)

  Wilson, Geoffrey (Truro)

  Elliot, Capt. Walter (Carshalton)

  Mitchell, David (Basingstoke)

  Wolrige-Gordon, Patrick

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

  Monro, Hector

  Woodnutt, Mark

  Errington, Sir Eric

  More, Jasper

  Wylie, N. R.

  Eyre, Reginald

  Morrison, Charles (Devizes)

  Fortescue, Tim

  Munro-Lucas-Tooth, Sir Hugh

  TELLERS FOR THE AYES:

  Gilmour, Ian (Norfolk, C.)

  Murton, Oscar

  Mr. Pym and Mr. Blaker.

  Gilmour, Sir John (Fife, E.)

  Naharro, Sir Gerald

  Glover, Sir Douglas

  Nicholls, Sir Harmar

  NOES

  Albu, Austen

  Booth, Albert

  Dalyell, Tam

  Alldritt, Walter

  Braddock, Mrs. E. M.

  Davidson, Arthur (Accrington)

  Allaun, Frank (Salford, E.)

  Brooks, Edwin

  Davies, Dr. Ernest (Stretford)

  Archer, Peter

  Brown, Hugh D. (G'gow, Provan)

  Davies, Robert (Cambridge)

  Armstrong, Ernest

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Dempsey, James

  Ashley, Jack

  Brown, R. W. (Shereditch & F'bury)

  Dewar, Donald

  Atkins, Ronald (Preston, N.)

  Buchan, Norman

  Diamond, Rt. Hn. John

  Atkinson, Norman (Tottenham)

  Cant, R. B.

  Dobson, Ray

  Bagier, Gordon A. T.

  Carmichael, Neil

  Doig, Peter

  Baxter, William

  Carter-Jones, Lewis

  Dunn, James A.

  Bence, Cyril

  Coe, Denis

  Dunnett, Jack

  Bennett, James, (G'gow, Bridgeton)

  Concannon, J. D.

  Dunwoody, Mrs. Gwyneth (Exeter)

  Binns, John

  Conlan, Bernard

  Dunwoody, Dr. John (F'th & C'b'e)

  Bishop, E. S.

  Crawshaw, Richard

  Eagle, Alex

  Blackburn, F.

  Crosland, Rt. Hn. Anthony

  Ellis, John

  of occasions this evening, that she would have been entitled to ask leave to speak again; that is to say, this was a case where it was permissible for her to make a second contribution. [HON. MEMBERS: "Order."] Despite the grumblings from hon. Members opposite, who no doubt are anxious to get to bed, I would very much like to hear her and I hope that you will rule that we can before we vote.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 115, Noes 167.

  Ensor, David

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

  Park, Trevor

  Evans, Albert (Islington, S.W.)

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

  Perry, Ernest G. (Battersea, S.)

  Evans, Ioan L. (Birm'h'm, Yardley)

  Lawson, George

  Price, William (Rugby)

  Fernyhough, E.

  Lee, John (Reading)

  Probert, Arthur

  Finch, Harold

  Lestor, Miss Joan

  Rees, Merlyn

  Fletcher, Raymond (Ilkeston)

  Lewis, Ron (Carlisle)

  Rhodes, Geoffrey

  Fletcher, Ted (Darlington)

  Lomas, Kenneth

  Roberts, Goronwy (Caernarvon)

  Foot, Sir Dingle (Ipswich)

  Lyons, Edward (Bradford, E.)

  Robertson, John (Paisley)

  Forrester, John

  McCann, John

  Robinson, W. O. J. (Walth'stow, E.)

  Fowler, Gerry

  MacColl, James

  Rose, Paul

  Fraser, John (Norwood)

  MacDermot, Niall

  Ross, Rt. Hn. William

  Fraser, Rt. Hn. Tom (Hamilton)

  Macdonald, A. H.

  Rowland, Christopher (Meriden)

  Freeson, Reginald

  McGuire, Michael

  Rowlands, E. (Cardiff, N.)

  Galpern, Sir Myer

  Mackenzie, Gregor (Rutherglen)

  Shaw, Arnold (Ilford, S.)

  Gardner, A. J.

  Mackintosh, John P.

  Sheldon, Robert

  Darrow, Alex

  Maclennan, Robert

  Silkin, John (Deptford)

  Courlay, Harry

  McNamara, J. Kevin

  Silkin, S. C. (Dulwich)

  Gray, Dr. Hugh (Yarmouth)

  MacPherson, Malcolm

  Silverman, Julius (Aston)

  Greenwood, Rt. Hn. Anthony

  Mahon, Peter (Preston, S.)

  Small, William

  Gregory, Arnold

  Mahon, Simon (Bootle)

  Steele, Thomas (Dunbartonshire, W.)

  Grey, Charles (Durham)

  Manuel, Archie

  Summerskill, Hn. Dr. Shirley

  Griffiths, Will (Exchange)

  Mapp, Charles

  Swain, Thomas

  Hamilton, James (Bothwell)

  Marquand, David

  Swingier, Stephen

  Hamilton, William (Fife, W.)

  Mayhew, Christopher

  Urwin, T. W.

  Hannan, William

  Milian, Bruce

  Varley, Eric G.

  Harper, Joseph

  Miller, Dr. M. S.

  Wainwright, Edwin (Dearne Valley)

  Harrison, Walter (Wakefield)

  Mitchell, R. C. (S'th'pton, Test)

  Walden, Brian (All Saints)

  Henig, Stanley

  Morgan, Elystan (Cardiganshire)

  Walker, Harold (Doncaster)

  Herbison, Rt. Hn. Margaret

  Moyle, Roland

  Watkins, David (Consett)

  Hilton, W. S.

  Mulley, Rt. Hn. Frederick

  Weitzman, David

  Hooley, Frank

  Newens, Stan

  Wells, William (Walsall, N.)

  Homer, John

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

  Whitaker, Ben

  Howarth, Harry (Wellingborough)

  Norwood, Christopher

  Whitlock, William

  Howarth, Robert (Bolton, E.)

  Oakes, Gordon

  Willey, Rt. Hn. Frederick

  Howie, W.

  Ogden, Eric

  Williams, Clifford (Abertillery)

  Hoy, James

  O'Malley, Brian

  Willis, George (Edinburgh, E.)

  Hughes, Roy (Newport)

  Orbach, Maurice

  Woodburn, Rt. Hn. A.

  Hunter, Adam

  Orme, Stanley

  Yates, Victor

  Jackson, Colin (B'h'se & Spenb'gh)

  Oswald, Thomas

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

  Owen, Dr. David (Plymouth, S'tn)

  TELLERS FOR THE NOES:

  Jones, J. Idwal (Wrexham)

  Page, Derek (King's Lynn)

  Mr. Charles R. Morris and Mr. Fitch.

  Kenyon, Clifford

  Palmer, Arthur

  Mr. Iain Macleod: On a point of order, Mr. Deputy Speaker. I am anxious for the future conduct of business, that we should be clear on a Ruling that you gave a short time ago. It will, for example, be within the recollection of the House that the Prime Minister, in an important debate on the seamen's strike very recently both opened and, by leave of the House, wound up. I understand that the First Secretary intends to open on Thursday and, by leave of the House, which I am sure will be given, to wind up. This is a very common practice. Obviously, I do not criticise the quotation from Erskine May, but I suggest that it is also an established fact that the House at its wish can over-ride that, and, when the House gives leave to somebody to speak again, which I agree is something which should rarely be done, that must over-ride the strict interpretation of Erskine May. I wonder, Mr. Deputy Speaker, whether you would agree with that interpretation.
  Mr. Deputy Speaker (Sir Eric Fletcher): I am very much obliged to the right hon. Gentleman. Perhaps I
  1408
  could quote another passage from Erskine May, which to some extent deals with the point which the right hon. Gentleman made with regard to debates in the House on other subjects. The sentence, which is at page 446, qualifies the earlier passage which I read:
  "A reply is only allowed to the Peer or Member who has proposed a substantive question to the House; and this privilege is accorded to the mover of a substantive motion for the adjournment of the House."
  Therefore, I think that different considerations would arise in the case to which the right hon. Gentleman has referred, where the Prime Minister spoke twice.
  With regard to the other point that the right hon. Gentleman raised, I thought it right to draw the attention of the House to the quotation from Erskine May which, in my experience, has been fairly strictly applied on the Report stage of a Bill. I have suffered under numerous Speakers when I have tried to make a second speech on the Report stage of Finance Bills. But I agree, with great respect, with what the right hon. Gentleman has said, that the House should be entirely

  1409
  the master of its own procedure, and if the House wishes to give leave on any occasion to an hon. Member to make a second speech, I suppose that it is entitled to do so.
  Mr. Ronald Bell: Further to that point of order, Mr. Deputy Speaker. I think that the passage of Eskine May to which you have just drawn our attention goes on to mention the moving of an Order of the Day. For example, the Second Reading of a Bill is one of those occasions which do not give rise to a right of reply. That will be precisely the case on Thursday, when the First Secretary will be moving the Bill and closing the debate.
  Would you agree, Mr. Deputy Speaker, that the passages which you have read to us have both related to the right of reply, that is to say, the right of a right hon. or hon. Member to make a reply regardless of the leave of the House? That is a separate matter from those other occasions when the hon. Member concerned has no right to reply, but is, on that special occasion, given leave of the House by the absence of any dissenting voice.
  Sir David Renton: Without questioning your interpretation of the passages in Erskine May, Mr. Deputy Speaker, may I ask you this? Has it not been the practice, within the time that you and I have been in the House—which is now a very long time—that if an hon. Member asks leave to speak again the Chair automatically gives that leave if the House remains silent?
  Mr. Deputy Speaker: It is true that a custom to that effect has tended to develop in recent years.
  Clause 27.—(AMENDMENTS OF CORPORATION TAX ACTS.)
  Mr. Patrick Jenkin: I beg to move Amendment No. 19, in page 29, line 4, at the end to insert:
  Subsidiary companies: Grouping notices
  (1) Where a company resident in the United Kingdom is a subsidiary of another company so resident (referred to as the "principal company" for purposes of this section) the principal company may if the subsidiary company agrees, by a grouping notice in writing given to the board within six months after the end of any accounting period of the sub-
  1410
  sidiary, or such longer period as the Board may in any case allow, elect that the provisions of subsections (2) and (3) of this section shall apply to the subsidiary for that period and all subsequent accounting periods throughout which it continues to be a subsidiary of the principal company and throughout which the election remains unrevoked.
  Such notice of election may be revoked at any time and the revocation shall have effect from the commencement of the accounting period of the subsidiary during which it was given.
  (2) Where such a grouping notice is given the profits or losses arising in any accounting period to which the notice relates from the trade or business carried on by the subsidiary or the gains or losses arising from the disposal of assets for the purposes of the capital gains tax shall be treated for the purpose of the provisions relating to the corporation tax as if they were profits or losses arising in the corresponding accounting period from the trade or business carried on by the principal company or gains or losses arising on the disposal of assets by the principal company.
  (3) Where such a grouping notice is given and an election has been made under section 48(3) of the Finance Act 1965 (which provides that inter-group dividends may be paid gross without deduction of income tax) any franked investment incomes arising in any accounting period to which the grouping notice relates from investments owned by the subsidiary shall he treated for the purposes of section 48 of and Schedule 12 to the Finance Act 1965 as if it were franked investment income of the principal company for the corresponding accounting period.
  (4) For the purposes of this section a company shall be deemed to be a subsidiary of another company if and so long as not less than three-quarters of its ordinary share capital is owned by that other company whether directly or through another company or companies or partly directly and partly through another company or companies and references to ownership and to ordinary share capital shall be construed in accordance with subsections (2) and (3) of section 42 of the Finance Act 1938.
  With this Amendment, we return to a point which was discussed at length last year. It was pressed from this side, but it was refused, and I hope that I am not guilty of any discourtesy when I say that it was refused rather briefly, our arguments being dismissed rather briefly. The speech from the Treasury Bench took less than two columns in the OFFICIAL REPORT, the debate itself covering 20 columns.
  At present, each company within a group of companies has to have a separate assessment to Corporation Tax. Although there is a limited grouping for dividends and interest, that is quite separate from the main assessment to

  1411
  Corporation Tax, in respect of which the assessments must be separate and distinct on each company in the group.
  The Amendment would give the parent company of the group, acting with the consent of the relevant subsidiary, an option to have its profits, or profits and losses as the case may be, grouped into one assessment made on the resulting figure. If one company has made profits and another had made losses, the assessment would be on the balance between the two. If one company has made profits and another company has charges, debenture interest or whatever it may be, the charges could be set against the profits. If one company has made profits and another has management expenses, those expenses could be deducted from the profits and the assessment made on the balance.
  There are four main arguments in favour of such treatment. First, it recognises the reality of grouping, namely, that the group is by definition under common control, that it works to a unified policy and is in all but legal form a single enterprise trading under one control.
  The second argument is that grouping would lead to a substantial simplification of the actual assessing of the profits of a group of companies. There would be one assessment which would lead to simplified administration and could well bring a swifter return to the Revenue. As evidence of the simplicity of grouping, one can call in aid the practice relating to the Profits Tax. Ever since 1937, until the Profits Tax was abolished, there was a provision for grouping which, so far as I am aware, never led to any difficulty at all in administration of the tax.
  The third argument—I do not attach great weight to this, but it is worth putting—is that such an arrangement could help the management of a group of companies. If there were a single assessment, groups would be able to trade as groups and not as separate divisions of a single company without incurring the penalty of separate tax assessments. This is very much in accordance with modern management thinking, which preaches over and over again, particularly in very large organisations, the
  1412
  decentralisation of the profit centres so as to make managers further and further down the line responsible for all facets of the operation of the enterprise, the manager in charge being responsible for making the profits.
  There is no easier way of doing that than by making a man manager of a company in a group, that company then making up its own separate accounts. It is obviously a single trading entity, and in that way the manager's responsibilities are clear and distinct. This is regarded as important by managers at that level. Then they have their own company and it is not the same thing to put them in charge of a division of a big company.
  The fourth point is that it would ensure equity, being able to set off charges in one company against profits earned in another, like management expenses.
  12.30 a.m.
  I will sum up by arguments by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) last year. He said:
  "It is a matter of simple business sense and good tax administration".—[OFFICIAL REPORT. 3rd June, 1965; Vol. 713, c. 2100.]
  It might be asked what arguments the Treasury put up against accepting the Amendment last year. So far as I can unravel them, there seem to be five.
  The first is that Profits Tax is not a valid precedent and is based on different principles. I am getting a little tired of hearing arguments based on the Profits Tax used both ways. If we propose abatement for a small company, we are told it is entirely new and nothing to do with Profits Tax, that they are not valid comparisons. But if the Government want to follow something in Profits Tax, they say that it was a valid precedent. But I claim these are exactly the same principles. Grouping for Profits Tax was not difficult administration. It was compulsory for the Excess Profits Tax and optional for Profits Tax. We should be given reasons if the Government are claiming that this is not a valid comparison.
  The second argument is that the Millard Tucker Committee on the Taxation of Trading Profits said that grouping could give rise to embarrassment and difficulty for minority shareholders and

  1413
  that it was unfair to them. I find that, in the mouths of right hon. and hon. Gentlemen opposite, very surprising, because they said over and over again that taxation of the company was separate from taxation of shareholders.
  But, when one tries to move an Amendment like this, concerned only with taxation of a company, we are confronted with the argument that it may be unfair to shareholders, so we find that the interests of company and shareholders are not so separate as it was always being suggested that they were.
  I do not believe that the argument is true. To draw this from the Tucker Report in this context is misleading because what Tucker was talking about was grouping for Income Tax purposes. The Report said, at paragraph 290:
  "… the legislation would, we are convinced, be very complicated, because for Income Tax, unlike Profits Tax or Excess Profits Tax, assessments are not made on profits of the actual year, and depreciation allowances are not deduction in arriving at the profits."
  Corporation Tax is on "actual" and the minority argument has little relevance in this case.
  We became very familiar with the third argument last year and we have had a certain amount of it this year, and that is avoidance. We are not told how it could lead to avoidance. We had this, based on the professional experience of the hon. Member for Heywood and Royton (Mr. Joel Barnett), who said:
  "There are much greater loopholes for avoidance by the use of separate accountancy procedures than by group accountancy."—[OFFICIAL REPORT, 3rd June, 1965; Vol. 713, c. 2108.]
  The hon. Member has impressed us because he has considerable experience in these matters and the Government might well want to listen to him.
  The fourth argument related to delays, it being contended that inevitably the grouping assessment would come in at the pace of the slowest. Why should this be so? We are told that, when the transitional period is over, the new system for Corporation Tax will be simplicity itself and will be a simple, streamlined system. There seems to be no reason why a group assessment should come in any more slowly than individual assessments.
  The fifth argument was that there is an adequate measure to achieve the same results in equity under Section 20 of the Finance Act, 1953, as applied to the Corporation Tax by the use of subvention payments. This argument has been shown, in practice, to be just not valid Subvention payments are not an adequate substitute for grouping in many cases.
  I draw the attention of the House to the recent case of Davies v. Davies, Jenkins and Co., in which the Court of Appeal held on 7th May of this year that the recipient company of the subvention payment must be a trading company both when it incurred the deficit in respect of which the subvention payment was made and when that payment was made. In this case the company had made losses for a number of years and had then ceased trading. Its subsidiary tried to make a subvention payment to it after it had ceased to trade. The Court of Appeal held that the subvention payment was not relevant in these circumstances.
  There may well be other cases where the subvention payment is not an adequate substitute. Therefore, I should have thought that this argument does not have a great deal of validity. There could be cases where it leads to genuine hardship.
  I have tried to deal fairly with the Treasury's arguments. I suggest that they were largely unfounded and certainly constituted poor reasons for rejecting the Amendment, in favour of which, as I have already said, there are strong reasons in equity, in administration and in principle. I hope that with the passage of time since last year fresh thoughts have wafted through the Inland Revenue on this point, helped, perhaps, by the representations made arising out of the one-year surplus and the three-year surplus in groups of companies which must be given the option of treating themselves as a single group with one assessment.
  I hope that the Chief Secretary will be rather more forthcoming than was the Treasury spokesman who replied to last year's debate.
  Mr. Diamond: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) posed the arguments before us in a most objective way. There were four arguments in support of his view

  1415
  which he regarded as just, profound and weighty. There were five arguments which apparently the Treasury spokesman adduced against this point of view last year. They were invalid, negligible and entirely to be overlooked. That is a way in which one assesses another's point of view. However, I agree that the hon. Gentleman referred to most of the points. Perhaps it would be worth while for me to go over some of the ground again, because I am not sure that I weigh all the arguments in exactly the same set of scales as the hon. Gentleman used.
  I agree that there was grouping for Profits Tax. The hon. Gentleman agrees that there was not grouping for Income Tax. Without stimulating too much discussion at this hour of the morning, I think that everyone will agree that for company profits Income Tax and Profits Tax have gone and the Corporation Tax have taken their place. While Income Tax held sway on the profits of a company, there were subvention payments which satisfied in most respects, but I will readily agree did not satisfy in one respect, the needs that grouping serves.
  It did not satisfy them in one respect that is perhaps a weighty respect—that one was liable, as in the case the hon. Gentleman mentioned, to miss both unless one anticipated how the company to receive the subvention was getting on and made one's subvention during the course of the year. Sometimes making the subvention after the end of the year was not all that satisfactory. Therefore, there is the difficulty in timing. Subject to that, I think that the subvention payments which are admitted for Corporation Tax purposes serve very much the purposes of grouping.
  There are other points to which I want to refer which the hon. Gentleman mentioned in some of his argument, but which are not mentioned in the Amendment—not that that is an important point. My job is to assist the House and not pick holes in the drafting of Amendments. I mention these points because they illustrate a number of things to which attention must be given—and they are many. This is not a simple issue and I am not toning it down.
  There is the question, first, of the non-trading income, which is left out of the
  1416
  Amendment and was omitted from the hon. Friend's speech. He referred to Case II, and there are Cases III, IV, V, VI and VI—all cases of non-trading income in which one must define the rules as far as grouping is concerned if grouping is intended. The Amendment does not mention the charges which the hon. Gentleman referred to and that is one of the elements of grouping. Presumably, they would have to follow in the grouping line that he was taking. There are several other points into which I need not go in detail, but which show the kind of problems one must turn one's attention to in deciding whether grouping is a practicable proposition.
  This matter has received some attention, but I am not in a position to make a recommendation to the House at the present time, other than that we cannot recommend acceptance of the Amendment for a variety of reasons. But I will say definitely that the Government propose to continue the study they have given this problem of grouping for Corporation Tax purposes. Many points have to be taken into account. The matter is not straightforward. There are more complications than there would be with Profits Tax and more is involved.
  Certainly, I can say that, if this course were adopted—and the hon. Gentleman will realise that I am not excluding its adoption—we would have to protect the Revenue by making some arrangement for interim payments. That is the case if one has to take into account four company profits instead of one. One would have to agree a date on which the payment was to be made. We would have to make arrangements for interim payments so that the normal flow of revenue would continue undisturbed.
  There have been a number of attempts to meet the problem of lack of groupings by dealing with it on an ad hoc basis. The hon. Gentleman mentioned two of them. Not only will the Government continue their study during the coming year with a view to making their conclusions—I cannot say what they will be, because, obviously, we must have the results of the study first—but we shall be happy to consult the interests which should be consulted before reaching our conclusions.

  1417
  We shall not omit the needs of good management which might derive from a certain form of company structure which might be less convenient to the company in question if grouping were not permitted. This is not a straightforward matter. Many of the points raised by the hors. Gentleman, although not in the Amendment, must be considered. There are many more. We undertake to consider them all during the year.
  We have already got some distance in our study and I hope, therefore, that, in the realisation of the way in which the Government are considering the matter and are proposing to continue to do so—although I make no commitment as to our conclusions in a year's time—the hon. Gentleman will not feel it necessary to press the Amendment to a Division.
  12.45 a.m.
  Mr. Patrick Jenkin: In view of what the Chief Secretary has said, and on what I recognise to be a helpful reply, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Diamond: I beg to move,
  That further consideration of the Bill, as amended, be adjourned.
  We have made considerable progress, with due co-operation from the Opposition, for which we are always grateful.
  Question put and agreed to.
  Bill, as amended, to be further considered this day.

EDUCATION (TRAINING OF TEACHERS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Whitlock.]
12.46 a.m.
Mr. Ernest Armstrong: I welcome, even at this late hour, the opportunity of raising the question of the training of teachers, which is so vital to the education service. Indeed, unless we can ensure an adequate supply of well-qualified, properly-trained teachers, all the various plans which we may have for improving educational opportunities, whether in the primary, secondary or further and higher fields, cannot be achieved.
The size of the problem that we are discussing in this brief Adjournment debate is indicated in the National Plan. Of the increase in the numbers expected to enter full-time education during the period covered by the Plan, no less than two in every five must become teachers if we are to meet our education targets.
Obviously, we dare not neglect any potential source of supply. I was, therefore, delighted when I heard my right hon. Friend the Secretary of State, in his Douglas speech at the Isle of Man, say that teacher training was to be introduced into technical colleges. Later, he announced the names of the five colleges where the experiment would be initiated My delight has turned rather sour since then because of the subsequent developments. My pleasure has gone, and that is the cause of tonight's debate.
The Secretary of State has talked about the legitimate and strong interests of the A.T.C.D.E. and others and, obviously, very strong representations have been made. Therefore, in his wisdom, he asked the colleges to make up their minds as to the validation of the course and how they would organise it.
As I see it, there are two main advantages in the proposals to have teacher training in the technical colleges. The first is that it offers a unique opportunity for teachers to be trained alongside students entering other occupations and professions. Secondly—and this is vital—it creates a wider field for recruitment to this important service.

1419
The House would, I think, agree that in the past far too many teachers have been trained in semi-isolation. The technical college, which caters for students pursuing full-time and part-time courses, with close and day-to-day contact with business and industry, presents a remarkable opportunity for a fresh approach to be made to the job of training teachers. I had hoped that the selective colleges, one of which happens to be in the Borough of Sunderland, where I was chairman of the Education Committee, would have chosen to be associated with the Council for National Academic Awards and would have left the institutes of education and the colleges associated with them to pursue the more traditional paths.
The Department of Education and Science has some responsibility in this matter. Teacher training is undoubtedly something that the Secretary of State cannot leave completely to the local authorities. All five colleges have played safe and chosen the Institutes of Education as their mentors and this indicates a need for the Department to become more directly involved. I am very anxious that the education departments in technical colleges must be more than replicas of colleges of education and I have been alarmed at some of the statements that I have seen about the aims and objectives of the authorities who are to run the new courses.
If it is the aim of the departments in the technical colleges merely to imitate what is happening in the colleges of education, then the Secretary of State would not be justified in allocating the very scarce resources of manpower and money that are available. I want to see the five colleges acting as pace-setters, and they would be freer to do so and more likely to achieve this by using the C.N.A.A. than by clinging to the known and traditional paths. Let me make it clear that I take second place to no one in my admiration for colleges and departments of education.
I have a great personal debt to what was once a teacher training college and what is now one of the leading colleges of education in the country—the City of Leeds Training College. It has made a tremendous contribution to solving the problem of the supply of teachers. It
1420
has responded to the call for expansion and it has coped with the spectacular increase in numbers, despite all of the difficulties of over-crowding and the like. I know that not only have standards been maintained, but have been improved.
One of the happiest associations that I have had with the local authorities has been the interviewing, year by year, of students about to take up their first teaching post. This year, the standard of those entering the profession is very high indeed and it is a great pleasure to see this. I am anxious about training in technical colleges, not because I think that they will do a better job, but because I know that they will do the job differently. In the teacher shortage crisis which we face, it is essential to try every method.
The technical colleges can be a powerful source of recruitment. This is the second reason why I raise this matter tonight. Many students come into technical colleges from various walks of life. They have had practical experience in the world of industry, business, administration and the social services. I hope that many who go to technical colleges will be attracted, because of their rubbing shoulders with those undertaking the teacher training course, and will opt for teacher training themselves.
One of the developments that I have noticed with great pleasure has been in the secondary schools, with which I am associated. I have seen boys and girls, who, in the normal course of events, would have left school at the earliest opportunity, at the statutory leaving age, finding a new enthusiasm for school because they have had a course with a strong vocational content. School has, remarkably, become relevant and vital to their lives. The teachers who have done their professional training after practical experience in the outside world have something vital to give these children. Some of them now find their way into colleges of education and I believe that many more would be attracted to the profession through the technical colleges.
That leads me to another criticism to which I hope the Minister of State will give careful consideration. I believe that the Secretary of State was wrong to insist that technical colleges should concentrate for the most part on training

1421
primary school teachers. The technical college has a distinct contribution to make to our comprehensive schools by training men and women who themselves are well aware of the value of the vocational element in education and who can stimulate the very response needed to enable the Newsom child to profit from the extra year at school.
There is no doubt that, with the help of the Schools Council and the very valuable suggestions in the pamphlet relating to the raising of the school-leaving age, we have to look at the traditional methods that we have used in the past. We ought not to be judging our secondary schools solely on the preparation which they give to pupils for the O and A level examinations in G.C.E. Certainly, the technical colleges, by the subjects that are taken and by their experience of and close contact with the workaday world, have a particular contribution in this respect which must be exploited to the full.
I am delighted that the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) has stayed for this Adjournment debate. I would willingly give him a few minutes in which to speak, if he cares to do so.
I would urge the Secretary of State to be bold and courageous so that this unique opportunity is not lost, and I urge three things upon him. First, the C.N.A.A. should make it abundantly clear now that it is ready to welcome technical colleges who seek validation of the teacher training course with the C.N.A.A., and that the necessary arrangements can be made by September, 1967. If that is done, even at this late hour, there may be colleges who would be willing to associate with the C.N.A.A.
Secondly, he should reconsider the instruction that the technical colleges should concentrate on training primary school teachers. I know the feelings of the A.T.C.D.E. I know its disappointment about the Robbins Report not being implemented as regards university integration, and so on. But I believe that this experiment would have a much better chance of success and make a bigger contribution if the stipulation about primary school teachers was not insisted upon. Let them use their vast industrial and commercial experience and contacts for the well-being of the schools.
1422
Finally, let him use his authority and plead with the colleges to think again and seek to tread new ground, so that the initiative which he has taken, which I am sure that the House welcomes, may be exploited to the full, to the mutual benefit of everyone in this vital service.
12.59 a.m.
Sir Edward Boyle: I am sure that the whole House is grateful to the hon. Member for Durham, North-West (Mr. Armstrong) for raising this matter. 1 am glad to have the opportunity to say a word or two in the debate, because, as the hon. Gentleman may recall, I first raised the matter of teachers being trained in technical colleges in the debate which we had on higher education in March of last year, when I tried to cover the whole field.
I must say that I agree with a very large part of what the hon. Gentleman has said. Like him, I am second to none in my admiration for what the colleges of education have achieved since the McNair Report, not just in numbers but also in terms of quality. They have been advancing more rapidly than any other part of the higher education system, and the nation owes them not only a debt but much more recognition than they have received.
I also pay full tribute to the universities for the part that they have played in validating the training course. All of us recognise this. During my years as Minister, I had the happiest relationship with the A.T.C.D.E., who have been a thrust-ful and successful body in pushing the claims and aspirations of the colleges of education on the Ministry.
None the less, I still hold the view, which I have previously expressed, that I do not believe that we in this House should accept the assumption that all teachers should be trained, as it were, within the university orbit. I am for a broad based supply of teachers, and it is for this reason that I tend to sympathise with the view of the hon. Gentleman. I for one would welcome the example of a technical college which sought the validation of its training courses with C.N.A.A. I think that this would be an interesting and valuable development.

1423
There is one other reason which I would mention in addition to those mentioned by the hon. Gentleman. He gave some important reasons, the need to increase the supply, the opportunity for teachers to be trained alongside students training for other occupations, and so on. I agree that those are important, but let us also remember—and I hope that the Minister will agree with me—the problems that are arising in some areas over the B.Ed degree.
We have the example of the difficulties that are arising at one of the ancient universities. For my part, I simply cannot see any reason, on educational grounds, why the prospect, which I believe has been mooted, of an external London degree for those at colleges of education in Cambridge should be thought a feasible and proper solution, while, at the same time, we ruled out the possibility of a first-class technical college within the orbit of the C.N.A.A. offering a course leading to a B.Ed. degree.
That would be absurd. I hope that it will go out from the House that without any prejudice to the admiration that we feel for what the colleges of education have achieved, for the work of these institutions, and for the part which the universities have played, none the less we would like to see the experience of at any rate one college seeking the validation of its training courses with C.N.A.A., and do not rule out the possibility of technical colleges within the orbit of the C.N.A.A. offering a course leading to a B.Ed. degree.
I am glad that the hon. Gentleman mentioned the raising of the school-leaving age. This is a very strong argument for wanting as broad a based supply of teachers as possible, for thinking in terms of the whole range of teachers which can be of use to those staying on for the fifth year for the first time. I deplore the immense amount of defeatism that is going on about the raising of the school-leaving age. We all realise that there are problems, and this is why I announced a date two years later than the Newsom Committee suggested, in retrospect with the approval of Members in all parts of the House.
Instead of this defeatism about the raising of the school-leaving age, let us
1424
devote ourselves to the measures that need to be taken between now and the date when the raising of the age comes into force. I consider that one of the most relevant considerations is how we can get the broadest based supply of suitably trained teachers.
1.3 a.m.
The Minister of State, Department of Education and Science (Mr. Goronwy Roberts): My hon. Friend the Member for Durham, North-West (Mr. Armstrong) paid a well-merited tribute to the colleges of education for the way in which they came to the aid of the country at a crucial time in expanding so as to provide the necessary number of teachers, and he was joined in this by the right hon. Member for Birmingham, Hands-worth (Sir E. Boyle). I should like to echo what they said. We owe the colleges of education a great debt of gratitude for the co-operation which they have accorded to us over the past few years, and which they continue to give.
My hon. Friend raised a number of very important and interesting points relating to this new development in which we hope to see a number of technical colleges setting up their own departments of education in the near future. Perhaps I might invite the House to look briefly at the background to this, and in so doing I shall try to deal with some of the points raised by my hon. Friend and by the right hon. Gentleman.
My right hon. Friend the Secretary of State announced last year his aim to establish some departments of education in suitably located technical colleges which are doing mainly advanced work. Earlier this year we consulted five local education authorities in different parts of the country—Inner London, Barking, Manchester, Nottingham and Sunderland—with a view to colleges in those areas taking part in the new development. All these authorities have expressed a desire to participate, and they are now preparing detailed proposals. It is hoped that the new departments of education will take their first students in the academic year 1967–68.
This important new development may be seen as part of the Government's plans for building up powerful vocationally-directed institutions of higher education concerned with the provision

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of studies for a variety of professions. While the new departments of education will to some extent play a rôle similar to that of day colleges of education, there should be advantages to be won from training some teachers alongside other students studying other disciplines and preparing for other careers.
The departments may also be expected to attract to teacher training a certain number of technical college students who would not otherwise have thought of taking up teaching. I want to emphasise that these new departments will in every way provide courses comparable and of equal status with the best offered by the traditional college of education and the university departments of education.
It is intended that initially the new departments should cater essentially for students taking a three-year certificate course leading to qualified teacher status, but the departments will no doubt wish in due course to introduce also four-year courses leading both to degree and to professional teaching qualification, which is the point which the right hon. Gentleman raised towards the end of his speech.
There may be a case, later, for the introduction of post-graduate courses of professional training in these new departments—or at least in some of them—and here there may be a strong case for research by some of these departments into teaching method as related to boys and girls coming from an industrial background and intended for industry. The size of the departments is of great importance. If these departments are to stand comparably with the departments of colleges of education they must be of a viable size, and the estimate is that they must start with about 100 students, working up to a total student body of 250 to 300.
My hon. Friend, who is deeply interested in the nature of the professional training to be provided in these departments, made a plea for innovation and experiment. I have great sympathy with what he said on that point, but I have to say that the main teacher supply need at present is for primary teachers, and in the new departments, as in the colleges of education, the main emphasis will be, for some time yet, on the training of teachers for the primary schools. I am sure that the right hon. Gentleman. representing as he does a Birmingham
1426
constituency, will appreciate that this need is a continuing one, and one which the departments must try to meet.
On the other hand, there will be some secondary training; indeed, a further proportion of students may follow a junior secondary course, covering the age range 7–13 years. A bigger proportion than that mentioned by my hon. Friend is likely to follow secondary courses in these new departments; and this matter can be reviewed in the light of the changing needs of various types of school. We should also remember that while the new education departments may be expected to draw some students from sources of recruitment not hitherto tapped they must be expected in the main to recruit from the same sources as do the colleges of education, and their students will, therefore, in general, have similar backgrounds.
We certainly believe—as my hon. Friend does—that the education departments of technical colleges will be able to make a very useful contribution to courses of initial training of teachers in secondary schools, including those who will teach the so-called "Newsom" pupils, and that they will be able to equip these teachers to give their teaching realistic application to the workaday world into which these children will go. But as the Newsom Report itself and, more recently, the Schools Council have said, realistic courses for the Newsom pupils will need to draw not only on a variety of occupational interests, but also on the humanities and modern social studies.
Both the colleges of education and the new departments in technical colleges clearly have a part to play in all this. The schools will need teachers whose training has been broadly based. It seems to us unwise to try to categorise too closely different types of teachers or of pupils. My hon. Friend and the right hon. Gentleman both know that the Schools Council is engaged now in radical rethinking of the whole secondary school curriculum and the outcome of its work will considerably influence the sort of training given to students in colleges of education and departments of technical colleges.
I come now to the validation of courses and qualifications. Technical

1427
colleges differ from colleges of education in that the usual degree avenue is provided by the C.N.A.A. Since the teacher training syllabuses at certificate level need to be tied in with those leading to a degree, it seemed that the technical colleges undertaking this work might prefer to look to the C.N.A.A. for the validation of both certificate and degree courses of their education departments rather than to seek membership of the local area training organisation.
The award of certificate at non-graduate level is certainly within the council's competence and the Secretary of State would be ready to receive from the council recommendations for the award of qualified teacher status. However, after much thought and full consultation with the various interests concerned, we concluded that it was right to leave it to the technical colleges concerned to choose whatever sort of validation best suited their circumstances.
It is clear that the education departments in technical colleges should establish contact with other teacher training establishments in the area, for example in arranging for teaching practice. But this can be done even though the C.N.A.A. might be the validating body. We are not disposed to dictate or to
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indicate over-persuasively to the five participating technical colleges where they should look for validation. We hope that they will weigh the advantages of both courses and decide for themselves.
This has been a difficult matter to decide. We have consulted everybody concerned, and my right hon. Friend's view is that the true solution is to leave it to the technical colleges to choose the validation which they believe suits their circumstances. Neither he nor I believes that either course will in any way prevent innovation or experimentation. It is possible for any of these new departments, whether it looks to an institute or to the C.N.A.A. for validation, to proceed with new thinking and new practice in arranging courses.
We will welcome such innovations, subject, of course, to the maintenance of proper standards. All who have spoken tonight welcome this promising new development in teacher training. I feel sure that those who will have the responsibilities of implementing these proposals will carefully consider all that has been said.
Question put and agreed to.
Adjourned accordingly at quarter-past One o'clock.

NATIONAL FINANCE
  Sport (Government Expenditure)
  Sport (Government Expenditure)
  Coast Preventive Officers (Cars)
  Coast Preventive Officers (Cars)
  Sterling
  Sterling
  Income Tax (Fabian Society Pamphlet)
  Income Tax (Fabian Society Pamphlet)
  Civil Servants (Medical Examinations)
  Civil Servants (Medical Examinations)
  Post-War Credits
  Post-War Credits
  Selective Employment Tax
  Selective Employment Tax
  War Loan 3½ Per Cent. Stock (Redemption)
  War Loan 3½ Per Cent. Stock (Redemption)
  Income Tax (Occupational Allowances)
  Income Tax (Occupational Allowances)
  Old-Age Pensioners (Tobacco Concession)
  Old-Age Pensioners (Tobacco Concession)
  Official Reserves
  Official Reserves
  Companies (Capital and Taxation)
  Companies (Capital and Taxation)
  Customs Clearance Points (Applications)
  Customs Clearance Points (Applications)
  Shop Premises (Annual Allowance)
  Shop Premises (Annual Allowance)
  TIR Carnets
  TIR Carnets
  World Liquidity (Report)
  World Liquidity (Report)
  British Industry (American Capital)
  British Industry (American Capital)
  Bankers' Credit Cards
  Bankers' Credit Cards
  Stamp Duty (Capital Gains Tax)
  Stamp Duty (Capital Gains Tax)
  Decimal Currency
  Decimal Currency
  Bank Rate
  Bank Rate
HOUSING
  National House-Builders Registration Council (Membership)
  National House-Builders Registration Council (Membership)
  Rent Assessment Committees
  Rent Assessment Committees
  Christchurch Council (Programme)
  Christchurch Council (Programme)
  Compulsory Acquisitions (Market Prices)
  Compulsory Acquisitions (Market Prices)
LOCAL GOVERNMENT
  Aylesford Forstal (Joint Sewerage Scheme)
  Aylesford Forstal (Joint Sewerage Scheme)
  Air Pollution
  Air Pollution
  Rate Rebate (Entitlement)
  Rate Rebate (Entitlement)
  Expanding Towns (Sporting and Cultural Amenities)
  Expanding Towns (Sporting and Cultural Amenities)
  Town and Country Planning (Use Classes) Order
  Town and Country Planning (Use Classes) Order
ZAMBIA
  Transmitting Station, Livingstone
  Transmitting Station, Livingstone
  Import Requirements (Assistance)
  Import Requirements (Assistance)
COAL
  Stocks (Scottish Mines)
  Stocks (Scottish Mines)
  National Coal Board (Mr. Cecil King)
  National Coal Board (Mr. Cecil King)
HOME DEPARTMENT
  Immigration Control (Legislation)
  Immigration Control (Legislation)
OVERSEAS DEVELOPMENT
  Virgin Islands (Airfields)
  Virgin Islands (Airfields)
BOARD OF TRADE
  Overseas Trade (Publication of Statistics)
  Overseas Trade (Publication of Statistics)
  Hotel Industry (Selective Employment Tax)
  Hotel Industry (Selective Employment Tax)
  Monopoly (Control)
  Monopoly (Control)
  Bills of Sale and Moneylenders Acts (Amendment)
  Bills of Sale and Moneylenders Acts (Amendment)
  Anglo-United States Air Agreement
  Anglo-United States Air Agreement
  New Zealand (Trade Talks)
  New Zealand (Trade Talks)
ECONOMIC AFFAIRS
  Unearned Income (Restriction)
  Unearned Income (Restriction)
  Carlisle and Solway Area (Study)
  Carlisle and Solway Area (Study)
EDUCATION AND SCIENCE
  Science Museum (Miss Scott's Aircraft)
  Science Museum (Miss Scott's Aircraft)
  Sports and Leisure Facilities (Grants)
  Sports and Leisure Facilities (Grants)
  St. Anthony's Development, Blackley (Loan Sanction)
  St. Anthony's Development, Blackley (Loan Sanction)
  School Building Programme (Primary Projects)
  School Building Programme (Primary Projects)
TRANSPORT
  Inland Container Depots
  Inland Container Depots
  London Transportation Study
  London Transportation Study
  Motor Vehicles (Look-Out Men)
  Motor Vehicles (Look-Out Men)
RAILWAYS
  Tram Services (Single-Man Crews)
  Tram Services (Single-Man Crews)
ROADS
  Eastern Road, Portsmouth (Accidents)
  Eastern Road, Portsmouth (Accidents)
MINISTRY OF HEALTH
  Home Help Medical Service
  Home Help Medical Service
  Rheumatism and Arthritis
  Rheumatism and Arthritis
  Artificial Limbs
  Artificial Limbs
HOSPITALS
  Maternity Beds, Leicester
  Maternity Beds, Leicester
MINISTRY OF AVIATION
  E.L.D.O. (Ministerial Conference)
  E.L.D.O. (Ministerial Conference)
  British European Airways (Aircraft)
  British European Airways (Aircraft)
  Concord Project
  Concord Project
  ANGLO-AMERICAN OFFSET AGREEMENT
  ANGLO-AMERICAN OFFSET AGREEMENT
  VISIT OF FRENCH PRIME MINISTER AND FOREIGN MINISTER (COMMUNIQUÉ).
  VISIT OF FRENCH PRIME MINISTER AND FOREIGN MINISTER (COMMUNIQUÉ).
  GOVERNMENT BOARDS (PART-TIME MEMBERS)
  GOVERNMENT BOARDS (PART-TIME MEMBERS)
  MINISTERS (BROADCAST FEES)
  MINISTERS (BROADCAST FEES)
  PRIME MINISTER (MEETING WITH CAPTAIN O'NEILL)
  PRIME MINISTER (MEETING WITH CAPTAIN O'NEILL)
  ARMS SALES
  ARMS SALES
AGRICULTURE, FISHERIES AND FOOD
  Brucellosis (Eradication)
  Brucellosis (Eradication)
BECHUANALAND
  Grant-in-Aid
  Grant-in-Aid
BRITISH HONDURAS
  Hooliganism (Use of British Troops)
  Hooliganism (Use of British Troops)
MINISTRY OF LABOUR
  Salaried Workers
  Salaried Workers
  T.G.W.U. (General Secretary's Salary Increase)
  T.G.W.U. (General Secretary's Salary Increase)
TELEPHONE SERVICE
  Automatic Exchanges, Essex
  Automatic Exchanges, Essex
SCOTLAND
  Solway Barrage Scheme (Report)
  Solway Barrage Scheme (Report)
  Drug Peddling (Prosecutions)
  Drug Peddling (Prosecutions)
  Drug Addiction
  Drug Addiction
  Electricity (Increased Charges)
  Electricity (Increased Charges)
  School Building (Limit of Cost)
  School Building (Limit of Cost)
MINISTRY OF DEFENCE
  Assault Tracking (Sale to America)
  Assault Tracking (Sale to America)
  Brancepeth Army Camp
  Brancepeth Army Camp

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

LORD MCFADZEAN
Sir William Hunter McFadzean, having been created Baron McFadzean, of Woldingham in the County of Surrey, for life—Was, in his robes, introduced between the Lord Nether Thorpe and the Lord Nelson of Stafford.
The Earl of Mar—Sat first in Parliament, pursuant to Section 4 of the Peerage Act 1963.

CLEANING OF HORSE GUARDS PARADE BUILDINGS
2.45 p.m.
LORD AMULREE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will now make arrangements for the cleaning of William Kent's building on the Horse Guards Parade.]
LORD HILTON OF UPTON: My Lords, the cleaning of the Whitehall front of the Horse Guards building is under consideration, but it is not proposed at present to undertake the cleaning of the Horse Guards Parade side of this building or of Kent's Treasury.
LORD AMULREE: My Lords, I should like to thank the noble Lord for his reply. Can he tell me whether the cleaning is not being proceeded with on the Horse Guards side because of difficulty of finding some method of cleaning it or because of the expense?
LORD HILTON OF UPTON: My Lords, it is neither, really. There are ways of dealing with it. It is not altogether a question of expense, but this would count very considerably because
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past experience has proved that it is an expensive operation. But it is intended to do this job gradually, beginning on the Whitehall side rather than the other side of the building. Already one or two buildings have been cleaned and consideration is being given to cleaning others as circumstances permit.
LORD AMULREE: My Lords, I should like to thank the noble Lord for that reply.
LORD BOWDEN: My Lords, is it not possible to speed up this process a little? We have for years been talking about cleaning London. Whitehall is beyond doubt squalid and filthy. I myself spent an unsuccessful year struggling to get part of it clean, and I think that the time has come to take a firm grip of the matter and clean the place up, lest it become a shabby poor relation of Paris which General de Gaulle cleaned so splendidly ten years ago.
LORD HILTON OF UPTON: My Lords, as I have already pointed out to the noble Lord, this operation of cleaning may be desirable but is not absolutely essential, and I repeat that consideration is now being given to the priority of other buildings to be cleaned.

MANPOWER IN LONDON NEWSPAPER INDUSTRY
2.48 p.m.
LORD CONESFORD: 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—

(1) whether they question the waste of manpower in the production of London newspapers revealed by the Royal Commission on the Press (Cmnd. 1811) and Report No. 2 of the National Board for Prices and Incomes (Cmnd. 2750);

(2) how many modern printing presses, each needing not more than 3 operators instead of the 14 previously employed, have been installed by proprietors of London Newspapers and have been in use for some years; and

(3) how many men are now being employed for each of the new presses.]

THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, the Government have no reason to dissent from the criticisms in the Report of the Royal Commission on the Press of wasteful use of manpower in the production of London newspapers. Report No. 2 of the National Board for Prices and Incomes is not concerned with the London newspaper industry, but with general printing and the provincial Press. The information asked for in the second and third parts of the Question is not available.
LORD CONESFORD: My Lords, may I thank the Minister for his Answer? While I regret that he cannot give the House the information for which I asked, may I ask him one question? Did the Government themselves make no inquiry to ascertain how many men were needlessly employed in this industry before deciding to give the employers a selective employment premium for every man they waste?
LORD CHAMPION: My Lords, the last time we had this matter before the House the noble Lord, Lord Conesford, virtually gave me notice of the question which he has now raised, so I am not surprised by it. Regrettable as it may be that some establishments in industry will profit more than they should from the selective employment tax, it would not be possible to discriminate against them in the Selective Employment Payments Bill, and it would not be right to penalise a whole industry because of the shortcomings of some of its member firms. Neither would it be right to set up an enormous force of inspectors of some kind to ensure that firms were in fact making the most economical use of their manpower. I am sure the noble Lord would not wish to add to the bureaucracy that would be necessary if we were going to make this selection between various firms in the same industry.
LORD CONESFORD: My Lords, is the Government's view of the state of our economy that we can afford to spend money in encouraging the waste of labour?
LORD CHAMPION: My Lords, this is the last thing that the Government would wish to do, but I think that the
72
considerations I mentioned in my last reply must count in this connection.
LORD BYERS: My Lords, may I ask what the noble Lord means by the "shortcomings" of member firms in the industry? Is it not a fact that the responsibility for this waste of manpower lies very largely with the trade unions concerned?
LORD CHAMPION: My Lords, I think that that is partly the answer, and of course that is what is being inquired into at this moment. But I am not here to answer for the trade unions but rather for the Government.
LORD DERWFNT: My Lords, if I understand the first answer correctly, is the noble Lord saying that the selective employment tax is in no way selective?
LORD CHAMPION: My Lords, I thought that this was quite clear. The selective employment tax is rather a blunt instrument. We recognise this. It is inevitable in legislation of this sort. But we shall be engaged in the year in front of us in trying to sharpen the whole thing up. And, of course, this is something that we shall be discussing when this Bill comes before your Lordships' House.
LORD CARRINGTON: My Lords, is the noble Lord aware that I do not think that anyone has ever heard a defence of a tax of this kind given with so many apologies?
LORD CHAMPION: My Lords, not with apologies but, I hope, answering sword thrust with sword thrust.

LABELLING OF DRUGS
2.54 p.m.
LORD FRASER OF LONSDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will take steps to ensure that all drugs when sold or dispensed be marked on the bottle or container with the name, whether to be applied externally or taken internally, and dosage.]
LORD CHAMPION: My Lords, legislation would be necessary to secure what the noble Lord proposes. The extent to which it is desirable to alter the existing law relating to the labelling of drugs is under consideration in the course of the Government's review of medicines legislation, but the Government's present view is that alteration of the current convention relating to the labelling of dispensed medicines is a matter on which it is most appropriate for the medical and pharmaceutical professions to agree among themselves. Both are currently considering the problems involved. It is highly unlikely that a preparation would be offered for counter-sale to the public without an indication of its purpose and dosage.
LORD FRASER OF LONSDALE: My Lords, is the noble Lord aware that in almost every medicine cupboard in the land, and, no doubt, in his and mine, there are medicines which are unidentifiable? It is not known whether they are for the head, the stomach or the chest. This is very dangerous. Moreover, is the noble Lord aware of this anomaly: that all medicines manufactured and sold as open sellers have to be labelled under an Act of Parliament of 25 years ago and the only secret remedies are those prescribed by doctors?
LORD CHAMPION: My Lords, on the first point may I say that I would not keep medicines hanging about in my cupboard when I had forgotten the use for which they were originally prescribed. I believe that that is a highly dangerous practice. In the case of tablets, they may well find themselves in the hands of children, where they would be very dangerous indeed. On the second point, I believe that already there is a certain degree of support within the medical profession for the desirability of giving information such as the noble Lord has mentioned. All doctors agree that there will be instances where it would not be appropriate for the patient to know the name of the prescribed drug, but many doctors, particularly the younger and less conservative, believe that the rule on naming should be the converse of that currently promulgated in the British National Formulary and that pharmacies should name the drug unless the doctor has instructed to the contrary.
BARONESS EMMET OF AMBERLEY: My Lords, I hope that the Minister will
74
go into this question very seriously. The women's organisations of both Parties have been worried about it for along time. I think it would be helpful if every medicine which was prescribed had a limit of time on it; that would help to have cupboards cleared after a period. Would the Minister really look into this matter and give it his urgent attention, as a lot of serious trouble arises because doctors' prescriptions are unintelligible? May I ask the Minister, if he had been given a prescription and had a forgetful nature like mine and saw on the label "T.D.: three times a day" what that would mean to him? I would ask the Minister to look at this as an urgent matter, because it would be helpful to housewives.
LORD CHAMPION: My Lords, I cannot hope to reply to the noble Lady's speech, but it will be carefully studied by those who will have to make decisions on this matter.
LORD SEGAL: My Lords, would my noble friend not agree that all matters affecting patients' drugs are best discussed in the doctor's consulting room rather than in his waiting room?
LORD CHAMPION: My Lords, I am afraid that I "do not get" that one.
BARONESS SUMMERSKILL: My Lords, as there are so many aspects of this question, could my noble friend tell us when the report on labelling and prescribing, which he has just mentioned, will be made?
LORD CHAMPION: No, my Lords, I am afraid I cannot give a date for that, but we recognise its importance and it will be done as soon as possible.

BOTSWANA INDEPENDENCE BILL [H.L.]
2.58 p.m.
Report of the Amendment received (according to Order).
Schedule [Amendments not affecting the law of Botswana]:
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD BESWICK)THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD BESWICK): moved to add to paragraph 8:
"(2) In section 78(2) of the Office and Shop Premises Act (Northern Ireland) 1966 (exclusion

75
of application to visiting forces) before the words 'and any country' there shall be inserted the word 'Botswana'.
(3) For the purposes of section 6 of the Government of Ireland Act 1920 (conflict of laws) the last preceding sub-paragraph shall be deemed to be contained in an Act passed before the day appointed for the purposes of that section."
The noble Lord said: My Lords, I beg to move that the words on the Order Paper be inserted in the Schedule. I cannot claim that this is a major Amendment, but it is proposed at the request of the Government of Northern Ireland. Noble Lords may properly ask why it was not moved before. The explanation is that it could not be moved before because the Northern Ireland Act, to which it refers, did not receive the Royal Assent until July 7. The sole purpose of the Amendment is to exclude from the provisions of the Office and Shop Premises Act (Northern Ireland), 1966, any visiting forces of Botswana, if such there be eventually. It is parallel to the provisions already contained in paragraph 8 of the Schedule to the Bill for the exclusion of the application of the United Kingdom Offices, Shops and Railway Premises Act 1963 to visiting forces from Botswana. The purpose of the new sub-paragraph (3) is to ensure that the Parliament of Northern Ireland can, if they so wish, alter or repeal the amendment which we are making, at their request, to Section 78(2) of the Northern Ireland Office and Shop Premises Act.
Amendment moved—
Page 8, line 10, at end insert the said new sub-paragraphs.—(Lord Beswick.)
LORD MITCHISON: My Lords, has Botswana got any forces?
LORD BESWICK: My Lords, the answer is in the negative.
On Question, Amendment agreed to.

LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL
3.0 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Hughes.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clauses 1 to 5 agreed to.
Clause 6[Amendment of Section 5 of Trusts (Scotland) Act, 1961]:
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES)THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES) moved to leave out subsection (2) and to insert instead:
"(2) The restrictions imposed by the said section 5 shall apply in relation to a power to accumulate income whether or not there is a duty to exercise that power, and they shall apply whether or not the power to accumulate extends to income produced by the investment of income previously accumulated."
The noble Lord said: The effect of this Amendment which I now move is that the restrictions on accumulation under Section 5 of the Trusts (Scotland) Act 1961—that is, what are sometimes called the Thellusson restrictions, shall apply not only where the relevant deed specifically directs accumulation, but also where it merely permits it. It follows a similar provision for England and Wales, in Section 13(2) of the Perpetuities and Accumulations Act 1964.
Your Lordships may recall that a provision to the same effect, which was, however, declaratory in form, was included in the earlier Bill which was before your Lordships' House earlier this year, and at that time the noble and learned Lord, Lord Guest, expressed misgivings about it. In the first place, he considered that it represented a change in the law rather than a declaratory provision: at that time this was stated as being a declaration of the law rather than a change of it. On the merits, he was apprehensive that its effect would be to require charitable trusts to disburse all their income, even in years where

77
they found it unnecessary to do so. The noble and learned Lord accordingly suggested that the provision should be dropped till some such body as the Scottish Law Commission had considered it. This course was adopted, and the Amendment before your Lordships gives effect to the advice which has been received from the Commission.
The Commission considered in the first instance the present law on the subject. This is highly complex and technical, and I do not think that for the present purpose I need do more than indicate their conclusion: that there are indications, but no more, that discretion to accumulate would probably be interpreted as falling within the operation of the Thellusson Statutes. Accordingly, the Amendment does not purport to declare the existing law, which is evidently in some doubt. On the merits of the matter, however, the Commission recommend in favour of the provision. There should not, they consider, be very serious difficulties for charitable trusts, since the restrictions do not strike at holding income, as undistributed income, for distribution the following year. What the Statute strikes at is accumulation; that is, rolling up income to form a capital fund. They say that the absence of the provision against permissive accumulation, particularly in contrast with the corresponding English Statute, would be an encouragement to evasion of the law against accumulations: deeds would be framed with a power to accumulate: not a direction, but the settlor would give an indication of his wishes in a letter which would not be legally binding, but which would doubtless be acted upon.
In accordance, therefore, with the Commission's advice, the Amendment strikes at permissive accumulation: but it does not purport to declare the existing law. In this connection, I am sure your Lordships would have welcomed the opinion of the noble and learned Lord, Lord Guest, on this Amendment. Unfortunately, when I sought to consult him, I learned that he is still indisposed and is unable to be with us to-day. I hope your Lordships will accept that I have amply fulfilled the undertaking which I gave to him earlier in the year, and that there is justification now for acting on the advice of the Scottish Law Commission. I beg to move.
Amendment moved—
Page 4, line 25, leave out subsection (2) and insert the said new subsection.—(Lord Hughes.)
On Question, Amendment agreed to.
Clause 6, as amended, agreed to.
Remaining clauses and Schedule agreed to.
House resumed: Bill reported, with the Amendment.

BUILDING CONTROL BILL
3.7 p.m.
Order of the Day for the Second Reading read.
LORD HILTON OF UPTON: My Lords, I beg to move that the Bill be read a second time. Your Lordships will recall that reference was made to a former version of this Bill in the Statement read by my noble friend Lord Mitchison on March 9. The object of the Bill is to provide machinery for controlling the starting dates of some privately sponsored building projects costing £100,000 or more. The control is intended to act as a regulator of demand. It affects only about 7 per cent. of all new construction, estimated at about 500 projects costing about £180 million a year. The purpose is to adjust the rate at which this work is started in order to help to ensure that the total level of demand on the construction industry is roughly in balance with its capacity. When potential demand exceeds the capacity of the industry, socially and economically important projects such as housing, industrial building and work in development districts will be given priority over less essential projects for the resources which are available. The control will not reduce the amount of construction which is carried out. It will, however, help to remove excess demand so that the resources available are used for the most important projects.
The machinery of control is intended to be permanent. This does not mean that the control itself will always be in operation. It will be suspended when it is not needed: when the resources of the industry are sufficient to carry out all the work which it is required to do. But when it appears that demand is going to exceed capacity, it is necessary to have power to take action to reduce demand

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before the industry becomes overheated. The Government already have powers to reduce demand by restricting investment in the public sector. But if these powers are used without regard to the private sector the effect is to defer work of high social priority in order to make labour and materials available for less essential private projects. It would be wrong to hold back work on universities and roads but to do nothing about offices, shops and restaurants. When restriction is necessary it should be applied also to the private sector, and this requires formal machinery.
The absence of such machinery was an embarrassment to the Government in July, 1965, when restriction was necessary. Measures had to be taken to deal with the economic situation. The construction industry was overheated, and it has been generally accepted that it was necessary to restrain the pressure of demand. If the measures to restrain demand had been confined to the public sector, more essential projects would have had to be deferred. But there was no existing machinery by which the Government could extend the restriction to privately sponsored projects. The only way in which this could be done was by announcing the Government's intention to introduce legislation with retrospective effect to enable the starting dates of privately sponsored projects to be controlled.
Criticism of this action by the Government is support for the creation of the permanent machinery proposed in the Bill. There may be differences of opinion about the prospects for the industry at any particular time, but there can be little controversy about the principles on which the Bill is based: first, that the industry is likely to become overheated again at some future time if demand is unchecked: second, that the private sector should be taken into account as well as the public sector when demand has to be checked: and, third, that when privately sponsored work has to be held back there should be machinery for doing it without recourse to retrospective measures, which we all dislike.
I come now to the content of the Bill. Clause 1 establishes the framework of control by making it unlawful to carry out work in the construction of a build-
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ing or other fixed work of construction unless it is licensed by the Minister or exempted later in the Bill. The following Clauses, Nos. 2 to 7, then expressly exempt over 90 per cent. of all new construction and alterations. There is a general exemption in Clause 2 of all projects costing less than £100,000. Provision is made for the aggregation of the cost of related projects to prevent evasion by splitting up a project.
Clause 3 exempts all private dwellings, industrial building and research buildings, whatever their value. This exemption is extended to any building providing services to an adjacent exempt building, so that, for example, a warehouse or office in an industrial complex would normally be exempt. The exemption of housing is entrenched in the Bill and cannot be removed without new legislation. All work in development districts is exempted by Clause 4. Your Lordships will be aware that the Government announced in the White Paper on Investment Incentives their intention to introduce new legislation which will replace development districts by new development areas. It is proposed to extend to construction work in the new development areas the exemption from control conferred by the Bill or work in the existing development districts. In the meantime my right honourable friend the Minister of Public Building and Works is authorising work freely in the extended areas. This exemption will ensure that the control does nothing to impede the development of these areas and it is hoped that it may encourage it.
Clause 5 exempts work in the public sector which is controlled by the Government in other ways, by the approval of programmes, by consents to loans, by the provision of finance or by administrative arrangements. Projects in the public sector will be treated in the same way as privately sponsored projects, and there is no need to impose a duplicate control. The avoidance of duplicate control is also the basis for the exemption in Clause 6 of projects for which office development permits or pipe-line construction authorisations have been granted and work for which a war damage cost of works claim may be made.
Clause 7 deals with projects begun before the commencement of the Act. It exempts from control any work carried out after enactment on a project begun

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or contracted for before July 28, 1965. This was the day after the Government announced their intention to introduce legislation. It also exempts work on a project authorised by the Minister before enactment. This clause contains an element of retrospection. This has been a difficult and controversial matter, to which reference was made in the Statement by my right honourable friend the Lord President of the Council on March 9, which I mentioned earlier. I should like to make it clear that there is no retrospective penal sanction for work done before the Bill becomes law. But when the Bill becomes law it will become unlawful to carry out any work on a project within the scope of the Bill which has not been licensed. It will be unlawful to proceed with an unauthorised project which was started after July 27, 1965, unless a licence is obtained. For this purpose the whole cost of the project counts, and not merely the cost of the work carried out after enactment. There is thus the risk for anyone who went ahead without consulting my right honourable friend that a licence might not be granted to complete a project.
In July, 1965, retrospection was unavoidable because demand had to be reduced immediately. The element of retrospection in the Bill is the minimum that could be devised. Provision was made for the exemption of projects authorised by my right honourable friend in order to ensure that all privately sponsored projects subject to control were not held back until the legislation had been passed and licences could be issued. It would be unworkable now to advance the date in Clause 7 to exempt work on projects begun or contracted for before the enactment of the Bill. This would be unfair on the great majority in the industry who have co-operated with the Government and accepted the deferment of starting dates. It would also invite a rush to get contracts let or work started in the next week or two. Clauses 1 to 7 of the Bill thus set out the scope of the control.
Clause 8 gives the Minister limited Powers to vary the scope by Order. Flexibility is needed in the machinery, and the clause makes provision for suspending control and for varying the exemptions by reference to type of work or geographical situation. The powers are, however, strictly limited.
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The cost limit cannot be reduced below £50,000. The exemption of housing cannot be removed. The use of the powers will be subject to full Parliamentary control. Any Order which extends the scope of control will require an Affirmative Resolution by both Houses. Other Orders will be subject to the Negative Resolution procedure.
Clause 9 provides for the enforcement of the control by inspection and the requisition of information. My right honourable friend has undertaken that two days' notice will normally be given of his intention to exercise the power of entry conferred by this clause. Provision is also made in Clause 9 for the consent of the Director of Public Prosecutions to be required for any prosecution under the Bill. This is an additional precaution to ensure that people who act in good faith are not penalised. A specific defence is provided by subsections (5) and (6) of Clause 1 for persons who carry out controlled work without a licence in ignorance. Protection is also provided for the innocent contractor by subsection (11) of Clause 1 to enable him to recover the cost of his work.
My right honourable friend expects the penal sanctions in the Bill to be used only in exceptional circumstances. Similarly the formal powers in Clause 9, particularly the power of entry, would be used only in the last resort. It is necessary to make provisions of this kind in the Bill, but of course my right honourable friend counts on the continued cooperation of the industry for the successful administration of the control. Parliament will be kept informed of the way in which the Act is operated. Under Clause 10 the Minister is required to prepare and lay before Parliament an annual report. This will give such information as numbers and types of applications approved, under consideration or rejected.
The Bill thus provides machinery for controlling a marginal quantity of demand. There is no question of restricting or controlling the output of the industry. The production of the industry must increase in order to cope with the requirements of the industrial programme, the housing programme and other social programmes. The industry needs to expand at a rate greater than

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that of the rest of the economy, achieving this expansion by increased efficiency without an appreciable increase in manpower. It is the function of the Government to provide the framework in which steady growth can take place, without wide fluctuations in demand. The fluctuations of the past have been bad for growth and efficiency. After the 1960–61 "stop" orders placed in 1961 showed no increase over 1960. In 1962 orders increased by 3 per cent., in 1963 by 10 per cent., and in 1964 by 15 per cent. over the previous years. This increase in demand outstripped increases in capacity and the industry became overheated. There was obvious evidence of overheating in the shortages of labour and materials.
The measures taken by the Government in 1965 checked this rise in demand by deferments in the public sector and by financial checks. There was a decrease of 6 per cent. in new orders in 1965 compared with 1964. As a result the industry has been brought more into balance. There is no longer any general shortage of building materials and none is foreseen. There has been some easing of the pressure of demand for skilled men, but there is still a shortage in many trades. In May 1966 there were 11,757 vacancies for skilled men and only 8,680 skilled men unemployed. These figures were in better balance than in 1965, but there were still three vacancies for every unemployed carpenter and over three for every unemployed bricklayer. There was less unemployment among unskilled men in the industry in May, 1966, than in May, 1965.
The limiting factor on the capacity of the industry is not shortage of materials but shortage of labour, and particularly skilled labour. There are large stocks of bricks—860 million in May—but a shortage of bricklayers. For this reason there is no spare capacity in the industry now. But in considering the need for the control of demand, and thus for the machinery in the Bill, we need to look forward. Decisions taken immediately after the Bill becomes law will affect the pressure on the industry in 1967 and 1968. Demand will increase in 1967. We hope that the increase will be absorbed by extra efficiency, but there would clearly be a danger of overheating in 1967, and in
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1968, if there were no checks on the potential increase in demand. Our objective is to prevent overheating by taking measures in good time, instead of waiting until there are widespread shortages before taking action to correct the balance.
I referred earlier to the provision in Clause 7 which exempts from control work on projects authorised in writing before the enactment of the Bill by my right honourable friend the Minister of Public Building and Works. The purpose of this provision was to ensure that urgent schemes were not held back pending legislation. My right honourable friend accordingly announced on November 1, 1965, that he was prepared to consider applications for urgent projects which were in the public interest. He has since indicated that he is prepared to consider applications in respect of any licensable project. By the end of June, 1966, 357 applications had been received, for projects costing £127 million. The breakdown is interesting. Of these, 281 projects costing £95 million had been authorised; 25 applications for projects costing £9 million refused; and 51 applications for projects costing £23 million were under consideration.
The breakdown of the work authorised is as follows: offices—76 projects, costing £25 million; shops—34 projects, costing £10 million; private educational—24 projects, costing £7 million; hotels—22 projects, costing £8 million; hostels—16 projects, costing £3 million; storage—49 projects, costing £15 million; mixed development—23 projects, costing £13 million; miscellaneous (including nursing homes, training centres and religious buildings)—37 projects, costing £14 million. These figures indicate that the policy followed in recent months has been fairly liberal. The starting dates authorised have been spread over the months up to and including next December in order to control the amount of work started in particular months.
When the Bill becomes law my right honourable friend will issue building licences in advance for starting dates up to six months ahead. These licences will be valid provided that work is actually started within six months of the approved date. This means that as much as a year may elapse between the issue of a licence and the start of work. It would be

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impossible to control demand if licences were issued any further ahead, because the demand and capacity of the construction industry cannot be forecast further ahead. My right honourable friend recognises, however, that it would be useful to developers to have some earlier advice about the prospects of obtaining a licence before incurring expenditure on planning. He will be prepared to give advice, without formal commitment, up to two years before the proposed starting date, or up to three years for complex schemes.
When the pressure on demand makes it necessary to defer some work my right honourable friend has to decide the respective priorities of projects in the public interest. He will have regard both to the urgency and importance of the project and to the load and capacity of the construction industry in the area where the project is planned. He will consult his colleagues about the importance of projects and will, in particular, consult the Minister of Housing and Local Government and the Secretaries of State for Scotland and Wales to see that licensing is used where possible to divert labour to undermanned housing sites. Apart from this, the importance of a project will be judged by its relevance to economic development and efficiency, to housing development and to the implementation of the Government's general policy. The importance of some projects in this sector is fully appreciated, and my right honourable friend will give due weight to the requirements of dispersal of conurbations and the need to reconstruct town centres.
The machinery provided by the Bill will not be used to restrict for restriction's sake: it will be used to defer work when the capacity of the industry is insufficient to carry out all it is asked to do. It will also help to ensure that the less essential work is deferred and that the available resources are devoted to the projects which the country needs most. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(Lord Hilton of Upton.)
3.33 p.m.
LORD HASTINGS: My Lords, I think I may say without fear of contradiction that we on this side of the House are all grateful to the noble Lord, Lord Hilton of Upton, for presenting this Bill in con-
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siderable detail, and with great clarity, and also for giving us a great deal of information which, perhaps, on the reading of the Bill we might not otherwise have expected. Above all, I would thank him for presenting the Bill in such a clear style and with such a delivery that it was easy for everybody to comprehend it. That makes things very much more agreeable in a debate of this nature.
Having said that, however, I must add that I rather wondered how the noble Lord would get on in making out the case for this Bill, which during the course of two Sessions in another place (for, of course, this Bill has been presented twice in another place) the ministerial spokesman had failed to make. If I may say so, without seeming to flatter the noble Lord unduly, I feel that he made out a better case for the Bill in this House than was made out in another place. But I would add that I still do not think he has proved his case or justified the introduction of the Bill at all. I was rather sorry that at one stage during the preamble to his speech he allowed himself to read from the brief, which obviously was necessarily given to him, a statement that there is little controversy about the principles on which the Bill is based. A dogmatic statement of that nature really is not acceptable on this side of the House, because in point of fact this Bill is controversial in its principles and also in a considerable part of its detail.
In taking up this argument that it was not controversial, the noble Lord dwelt at some length on the necessity to control private building, on the ground that public building was also controlled. I must point out, however, that this control is very different in its nature, because in the public sector the control is not a system of priorities: it is a purely financial control, emanating from the Treasury. Therefore I think something more ought to he said from the Government side about how the public sector is to be controlled, in the same way as the noble Lord thinks the private sector is going to be controlled, from the point of view of priorities.
The reasons for this Bill are rather extraordinary, and although the noble Lord has, I think, made them clear today, it is worth going back a little to see what they were when the Bill was

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first premeditated—because, of course, in the first place the previous Minister had said that he had no intention of putting controls upon the building industry. It was only when the Chancellor of the Exchequer made a statement on July 28, 1965, that this Bill was promulgated, or, rather, promised. The Chancellor's reasons for it were, of course, that it would help to reduce our deficit and also to strengthen sterling. But one wondered how it would do that. The only way it could do that would be to cut down capital expenditure; in other words, reduce the amount of construction.
The previous Minister also said that the present measures envisaged "might be inappropriate in the future," and the Parliamentary Secretary of the day at one stage said that this was "a contingency measure". So it was quite clear that originally this legislation was thought to be temporary; yet we now find that the temporary legislation which has been introduced is to be permanent. This is just another example, I regret to say, of the sort of double talk to which we have become all too accustomed since the Labour Government came into power, getting on now for two years ago. It is very difficult, not only for Parliamentarians like ourselves but for the industries concerned and for the public at large to know just where they are when this sort of progression is pursued throughout Government policy, saying one thing at the beginning and winding up with another thing at the end.
We come to a different situation with a new Minister of Public Building and Works, and he has made it clear, as the noble Lord has this afternoon, that this Bill is to be viewed as necessary for the building industry and really nothing to do with the position of the economy of this country. It is to be viewed as permanent planning machinery, and the Minister said:
"…it is the forward-looking view that is relevant".
He said that—and I have quoted his words—in the Second Reading in the other place not very long ago. If this is permanent planning machinery, I am bound to ask, for what purpose? We have been told that only 7 per cent. of
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all construction is to be controlled. But what is the result? I was going to say that the Government must make up their mind whether it is a negative Bill or a positive Bill, and I will at least say that the noble Lord has told us clearly to-day that it is meant to be a positive measure. Therefore I am bound to assume—as in fact he said in some part of his earlier remarks—that construction will not be reduced.
If 7 per cent. of construction is to be controlled I can only assume that it is for the purpose of building more houses and more factories in the places in which they are needed. Therefore, let us examine the Bill from that point of view. Is it really true that, if fewer hotels and places of entertainment generally are built, we shall get more houses or more factories? At this point it is the economics of the private building industry which we have to consider because, after all, private builders only construct for profit: that is the essence of the industry, or of any industry.
Let us just regard for a moment the Government's record. I do not want to sidetrack the issue into a debate on housing in general, which we shall be having in a week or two; but the Government record is briefly as follows: local authorities' mortgages have been severely cut back in number; the number of building society mortgages is down. We have had the Rent Restriction Act, which ignored the most important finding of the Milner Holland Report in respect of the private sector of the building industry and the provision of houses for rent. We have had increased indirect taxation, and now we are going to have the selective employment tax on top of that. Quite naturally, the result has been that there have been increased costs, increased wages; houses cost more and fewer houses are being built. This really is not surprising.
So I ask the Government: where is the incentive in this Bill to provide the extra houses which we all wish to see? If there is this incentive, then perhaps the Bill is justified. But the noble Lord has not proved to our satisfaction that this is going to happen as the result of this form of control. We know that houses are needed everywhere, but they are needed most of all in the Northern part of the country, the North West and the

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North East, and in Scotland, where there are the most slums; in other words, in the development districts. Yet it is precisely in these areas where there is complete exemption for all forms of building.
Here, the Government find themselves in rather a cleft stick. On the one hand, they want to ensure a high level of employment in the development districts, and therefore they are preparing to allow the building of hotels and all these other amenities which we know are badly needed in these districts, to improve what we call the quality of life; and to that extent I agree with the Government. On the other hand, they need more houses there than anywhere else in the country. How then, are they going to employ or redistribute the labour in those areas so that they will get the houses if they are going to allow every other form of construction to go ahead?
Has this been thought out, or has any sort of research been done into the availability of labour, and particularly skilled labour, to which the noble, Lord, Lord Hilton of Upton, referred, because that is the gravest shortage of all; or are the Government really saying that from this 7 per cent. saving of construction in the Midlands and the South—because that is where the control will operate—they are going to redeploy construction firms and the labour they use in the development districts, so that, at the same time, they can go ahead not only with building amenities in these districts but also with the houses? Is this really what the Government are saying? If so, how are they going to do it? If they are not going to do this, what is the purpose of the Bill?—because, as I said before, I do not see that by restricting certain building in the Midlands and the South they are necessarily going to get other forms of building put in the Midlands and the South. It may well be that the Government think there is enough house building in the Midlands and the South, and that this really is the whole crux of the Bill and its purpose. This has not been sufficiently explained to us by the Government, and therefore I suggest that at the moment it has not been fully thought out. I should like to know what the Government's proposals are in order to get around the difficulty in which they find themselves, and in which in fact they are proposing to put themselves as a result of this Bill.
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If I may turn briefly to a little detail in the Bill, although at nothing like the length to which the noble Lord necessarily went, I would just say that, as a result of its going twice through the other place, we have a much better Bill than we could otherwise have expected, and therefore perhaps we shall not have to spend so much time on it as we should have had to do. Some improvements on the original have been made. As the noble Lord pointed out, there is to be no prosecution without the consent of the Director of Public Prosecutions; also there is to be no imprisonment by magistrates' courts as was originally envisaged. The burden of proof is also to be shifted fairly and squarely on to the shoulders of the person who is ordering and paying for the whole project, and in the future it will be a good defence if any person can reasonably prove that he did not know that he was committing an offence.
Then, when we come to the limit of £100,000, in the original Bill it was thought that the Minister might have power to reduce this to a figure as low as £10,000. Thank goodness that has been altered too, because quite minor private projects would have been caught and an impossible bureaucratic situation would have arisen. Now it is possible that the lowest limit will be £50,000; so that is a slight improvement. On the other hand, something which is going to create uncertainty in the industry is still retained in the Bill. At a stroke of the pen the Minister can say, "I have changed my mind. I have been advised that we now can drop the limit, and these projects of £50,000 will in the future require licences." It is not easy for the building industry, which, as the noble Lord has said, is a forward-looking industry, to plan far ahead on a basis of that sort. So I think that this is a weakness in the Bill.
Now I come to Clause 7, which is the retrospective clause; the noble Lord admitted it had, as he put it, an element of retrospection in it. It will be well remembered by noble Lords in this House how, just before the General Election, the Parliamentary Secretary of the time came down to another place and threatened that anybody going ahead without a licence, although there was then no legal necessity for one, would

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be subject to penalty if he dared to carry out a project costing over £100,000. Naturally the Minister had to hurry down quickly to say that this was not so at all, and that there would be no legal penalty. It is true that this Bill has no legal penalty written into it. But the effect is going to be the same, because anybody who has not had—whatever you may call it—the wisdom, the common sense or the desire to co-operate, anybody who has not got a letter of consent from the Minister in the meantime, may find that, although he is half way through a £200,000 project, when this Bill becomes law he will be refused a licence. The effect is that this clause will, or can, be used as retrospective legislation; although it is not actually written into the Bill, it will be a penal sanction.
LORD SHEPHERD: My Lords, I think the noble Lord will agree that that would apply only to building that had been started after the Chancellor of the Exchequer had made his statement. It would not apply to a building which had been started or contracted for prior to that date.
LORD HASTINGS: That is quite true. I am dealing with the interval between July, 1965, and the present day. Although one must remember that if the building was started before that time without a licence, the sum expended before the time would also count towards the total cost when the owner applied for a licence. What I am concerned with is this interval of the past year.
The Government must decide—and it is not an easy decision for them, in view of the line they have taken—what they are going to do when presented with such a contract. Are they going to allow it to finish or not? Maybe a hundred thousand pounds' worth of work or more has been completed, and is that all going to be wasted simply because the Minister does not like the fact that somebody started doing this work without his consent? That is what it will come to. It is a most unsatisfactory situation, because in point of fact, even though the Minister and the Government may not like it, the owner or developer will have done nothing illegal: the Government cannot get round that point. Although they say that this is not actually retrospective legisla-
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tion in the legal sense, in effect it can, and may well, be in some cases retrospective and much to the detriment, perhaps, of the building industry and employment. I can only say that I hope very much that every case will be considered most carefully and with great sympathy, and that the Minister's personal feelings will not be allowed to enter into the matter.
Finally, I come to Clause 8, which is the power to extend or restrict control. This gives the most sweeping powers to the Minister to change virtually everything in the Bill, including the right of interference in the affairs of other Departments—to cite a few, the Ministry of Health, the Ministry of Technology and the Ministry of Education. If this is not duplication of control, which the noble Lord a short while ago was boasting that they were trying to avoid in other clauses, I do not know what is. Perhaps we shall be able to elucidate this point further in Committee stage. The point I want to make here is that if there is to be any slackening of control—that is to say, that the limit may go up perhaps to £200,000, therefore making private building industry to that extent freer to do what it wants—it will require an Affirmative Resolution; in other words, Parliament must then consider the matter and take a decision.
On the other hand, if there is going to be a tightening of control—which we on this side, knowing the Labour Government well and its tendencies past, present and probably future, fear very much will happen—then the Statutory Instrument is subject only to Negative Resolution; that is to say, somebody has to be on the alert and take some action to stop this independently of the instrument coming automatically before Parliament. That is my understanding of the difference between Affirmative and Negative Resolution, but if I am wrong the noble Lord will correct me.
LORD SHEPHERD: You are.
LORD HASTINGS: I hope I am. It seems to me that there is a difference here and that it is easier for the Government to tighten the control rather than to slacken it.
I will conclude my few remarks by declaring that we find the principles of

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this Bill objectionable, but, not to such an extent, after the consideration which has been given to the Bill twice in another place, that I would advise my noble friends to divide against it. Further, we find it is highly unlikely that the Bill will be effective in the way the noble Lord has tried to make us believe. I consider that the Government have failed to prove their case, and I shall be glad to hear from the noble Lord, Lord Shepherd, when he winds up, whether he has anything more convincing to say which will lead us to believe that the Bill will have the effect the Government hope, and to tell us the way in which they think, in the light of the remarks I have made, they may achieve their goal.
3.55 p.m.
LORD MITCHISON: My Lords, may I begin by associating myself with the kind words which were addressed by the noble Lord, Lord Hastings, to my noble friend on the way in which he presented the Bill. I, too, found it admirably lucid and containing the sort of information which one requires to consider the principle of the matter, as one does, on Second Reading. There is not much more on which I agree with the noble Lord, Lord Hastings. He began by saying that the Government had been inconsistent about this Bill, but I have looked at what has been said about it and am entirely unable to agree with him. It is quite true that the first foreshadowing of the Bill was made by the Chancellor of the Exchequer in relation to private investment, but he made it quite clear, even speaking as Chancellor of the Exchequer on financial matters, that there were social considerations which would govern the principle of selection which is implicit in the Bill. He mentioned development districts and similar matters.
When in fact the first Bill, if I may so call it, was introduced in another place, my right honourable friend, the then Minister, made it abundantly clear. He said that it was permanent legislation. This is not something which has been introduced by my right honourable friend, the present Minister; it has always been intended. He made it equally clear that the Bill had a double purpose, and one can look at it in that way. The first purpose, as I see it, is to deal with what is commonly called "overheating" in this industry. Overheating is no new
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thing. There was an investigation carried out by "Neddy" in 1964. They made it quite clear that it was a very serious matter, not in the short run but in the long run, and that unless there were some control of some kind there was a serious risk that the construction industry generally would hold back development in the broadest sense in this country; the possibility of this occurring has become more and more apparent for years past. It is not a new business at all. Therefore the object was to see that the demand on the industry was correlated to the industry's capacity to meet it, and in that connection it must be linked with the projects still active in the Ministry—projects which, I hope, will become more active—to improve methods of construction, to improve the use of industrial building, and to effect improvements in other ways also; in other words, to get what is really a rather chaotic industry in many respects a little better adapted for what we require it to do. That was one side of it.
But if you are going to do that, until you can develop the capacity of the industry you must see that the things which are most required to be done receive priority. The most effective priority was given to housing simply by excluding housing altogether from the scope of the Bill. I think that that is quite right; there are other controls over housing. This Bill is really nothing to do with the housing programme. It was something of a "blue herring" which the noble Lord, Lord Hastings, trailed across his speech when he started talking about the housing programme. I think that the housing programme has done a great deal better than he makes out, but I do not think it is really relevant to what we have to consider to-day. What we have to consider to-day is something far more limited than that.
I would agree at once that this Bill is a little like the Irishman's definition of a net—a lot of holes with some string round it. Indeed, Clause 1 appears to contain a fairly sweeping proposition, and that is followed by exceptions. But I think that is unavoidable, because we can all think of instances of buildings which are not socially required. There is the almost standard one of too many petrol stations, and there is the growth of bingo halls. I do not know how

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many betting shops have been built new, or established in existing buildings. But the only way to define is to take the "rest" method as is done here, and specifically leave out housing and industrial building, too—a very important exception—and then make a number of specific exceptions including the one about development districts, and say that the Bill covers the rest. It is an extremely important "rest", because out of that you have to draw what you want to get rid of, if you are going to equate demand and supply in this industry.
I feel that the noble Lord, Lord Hastings, did not quite follow my noble friend's point, and the point that was indeed made through all the debates on this Bill and on its predecessor in another place; that is, that it does not really restrict anything. The more you can get out of the building industry as a whole, the better we shall all be pleased. But if you cannot get all you want out of it, you must at least see that you build what is required and not what is not required. That is said to be a wicked interference with the right of choice, the freedom of private industry, or something of that sort.
LORD HASTINGS: My Lords, may I just interrupt the noble Lord? I did not miss the point at all, and my answer to it was that the Government have completely failed to prove that, by restricting this 7 per cent. of the industry, they are in fact going to get the priorities they want. I have been told, and the House has been told, that—whether in quantity or value or whatever you may like to choose; I do not know—the overall volume of construction will not fall. The presumption is that, by the Government's restricting what is considered unnecessary building, other building is going to be done, and that is what I have not been convinced of.
LORD MITCHISON: My Lords, perhaps the noble Lord would consider what I said just now about the "Neddy" Report on this several years ago: and, incidentally, what has been said and detailed in all the debates on the matter in another place. The fact is that the industry is overheating. It cannot meet all the demands that will be made upon it, and are being made upon it, in the
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absence of some control over those demands. That is the point, and it is something which I should have thought was perfectly self-evident.
What are we talking about in the Bill? What is all this about? It is simply that at present the industry, and the part of it with which we are concerned to-day, cannot meet all the actual, let alone all the prospective, demands on it and one must therefore choose. The question to which I was coming was: Who makes the choice? The answer to that, in the year of grace 1966, really must be that that is the responsibility of the Government of the day, and the noble Lord, Lord Hastings, so far from denying it, pressed it firmly. But if that is the position, either he must say that the industry can meet all the demands on it, or he must recognise that there is some reason for directing the industry, through the kind of machinery which is in this Bill, towards what is socially required unless and until you can get the industry to do everything that is required. It may be a desirable object or it may not, but we are a long way from that position now. If the noble Lord wants me to prove that, he is asking me to prove something which was well recognised by this expert Committee, something which I have never heard anybody seriously deny, and that is that there are more demands on the building industry at present within this field than it can meet. That is the whole basis of the Bill.
The other side of the matter is that the choice, as I see it, must be the Government's, and it cannot possibly be left to the unrestricted competition of private industry. Whether a builder can get a larger profit out of building a bingo hall or another petrol pump instead of a schoolmay be very interesting for the builder. He may have his point of view about it, but it is not necessarily our point of view, and it is not a responsible criterion for the Government of the country under any political Party to adopt. That is what this Bill is about.
I do not quite know what the noble Lord really sought by way of proof. What did he want us to show—that the industry in fact cannot meet all the demands on it? Does he not agree that the industry is far from meeting all the demands made upon it? Did he want

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us to prove to him that there were certain projects which had social advantages and social merits beyond others? Is that a matter of proof, or of individual judgment and opinion? I do not know, but I should have thought there could be no doubt about it. I was really surprised that the noble Lord wanted more than he got from my noble friend and wanted more than was given (I thought, lavishly) below when the Bill was discussed in full.
I am not going through the details of the rest of the Bill. Since there may be proceedings in Committee, it is sufficient at this stage to remove the enormous misunderstanding which there appears to be about the purpose and object of the Bill. It is said that we think it really terrible that people should build; that this is a method of restricting the building industry because, of course, a Socialist Government likes restricting everything, and it is just letting itself rip on the building industry! I thought that prehistoric point of view had tended to disappear over the course of years, and that we were now disposed to attribute a certain amount of common sense to noble Lords opposite. I see one noble Lord fervently shaking his head. I will, therefore, except him from the attribution, and no doubt there are such cases. On the rest of the Bill—
VISCOUNT ECCLES: My Lords, would the noble Lord allow me to interrupt? He asked what proof my noble friend wanted. I am not quite sure myself, but I know what proof I want. I agree that the industry overheats. I agree that it has to be kept in balance if one can do this. But what I cannot agree is this. When the noble Lord, Lord Hilton of Upton, tells us that in one year there was a 15 per cent. rise in orders, how do the Government think that that can be controlled by this tiny little fringe of the industry which is only 10 per cent. at the outside? This is why the Bill is a bad Bill. It does not do what sensible people ought to want it to do.
LORD MITCHISON: My Lords, I am sure the noble Viscount would agree that that is a completely different point from anything that was put by his noble friend. It has some force and to some extent, I agree with it. But I think one must remember one or two things. The first is that if you want more out of
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the industry, you must give it the capacity of making more and do it at a time when there is a heavy demand on labour generally; that is to say, when you are in the position contemplated by the National Plan that we are likely to suffer generally, outside the construction industry, from a shortage of labour. Therefore, you must see to it that such methods as industrial building, or the reorganisation of the industry itself, are used to the full to maximise the output which you can get out of a given number of men, skilled or unskilled. That is the first point.
Secondly, I think one has to bear in mind that, if you are going to deal with the whole of this problem, then there is already machinery, as indeed I said earlier, for dealing with housing, which is a complicated part of the whole matter and cannot be considered without the industrial building, which is mentioned in this Bill in the same exemption. Nowadays, it seems to me, the two things must stand or fall together. It is no use building new towns which are merely dormitories, to take an instance. My Lords, I will not develop that point any further, for fear of taking up too much time.
About the rest of the Bill, all I will say is that I find the various arguments based on supposed retrospection, or actual retrospection, very unconvincing. What has happened here is quite clear. The Government's intention, substantially as it now is, was announced in July, 1965, by the Chancellor of the Exchequer, and soon after that it was made pretty clear that the building industry was going to be required to conform to that intention. I say that if, after that, anybody chooses to try to avoid what is coming, or to get round the terms of some Bill which is being discussed, then he is in the same sort of position as a man who starts doing work which is contrary to planning arrangements. I do not feel any sympathy with that kind of plea. There have been precedents for that sort of thing; and the Bill has very carefully avoided what is perhaps the most dangerous thing—retrospective punishment. But, be that as it may, it is rather a Committee point.
On the possible extension of the Bill under Clause 8, the noble Lord, Lord Hastings, was wrong. If there is to be

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any extension of control, an Affirmative Resolution is required. It is only when there is to be a diminution of control (I think that if he looks at the Bill, he will find I am right) that the Negative Resolution procedure is sufficient.
I would say that, in a very difficult field, this Bill keeps a pretty good balance between, on the one side, giving the Minister the powers that are necessary, and no more than are necessary, and, on the other side of the picture, letting people know what they have got to do. What has always been assumed, I think, in these cases, particularly in this industry, is that the connection between the construction industry and the Ministry is in practice fairly close. It always has been, I believe. In these circumstances, I cannot think that any builder who wanted to know what he could do would find any real difficulty in ascertaining it; and we were told that there would be two years or, in other cases, three years for the purpose—a reasonable sort of time. Therefore, I regard this as an admirable instance, within a rather limited field, of using the Government's power to direct a particular industry—and I do not shrink from the word "direct"—to do work which is socially important, in preference to work which is socially less important, whether or not it is more profitable to the builder. I regard it, too, as keeping a balance in the sense I have mentioned.
Therefore, my Lords, speaking for myself, and without regard to the very important position from which I was very properly sacked. I feel that noble Lords who find this Bill, in principle, a horror, are rather conjuring up the horror—a Chinese dragon pulled up out of the smoke and flames: not a very real beast, but a hit of a paper tiger, if I may use another Chinese phrase.
4.15 p.m.
LORD SILKIN: My Lords, I am always glad to hear the speeches of the noble Lord, Lord Hastings. He always makes his meaning clear, and I think that, on the whole, he is as fair as anybody can be when dealing with a controversial subject. I must confess that I had some sympathy with him to-day: he was in a real difficulty in finding something to say against this Bill He started off by saying that there was a difference in principle
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between ourselves and noble Lords opposite, and I waited to hear what was this principle about which we were disagreeing. But there was not a word.
Having merely announced the difference in principle, the noble Lord went on to say that we had not proved or justified the necessity for the Bill. In other words, it is not a matter of principle; it is a matter of expediency. In fact, his complaint about lack of principle was fortified by the interjection of the noble Viscount, Lord Eccles, who said merely that he did not think it was going to do very much good. That is not an objection of principle; that is an objection of expediency. And when the noble Lord, Lord Hastings, went on to say that we had not proved that this Bill was necessary, I thought he was emphasising this point of expediency. My Lords I do not propose to go into the question of proof, because my noble friend Lord Mitchison, I thought, abundantly proved the necessity for the Bill.
The noble Lord, Lord Hastings, then went on, in the second part of his speech, to say that this was a bad Bill; and I waited to hear in what respect it was a bad Bill. He told us how much it had been improved since it was first introduced, largely, as he said—and he and his friends are quite entitled to the credit for it; that is what an Opposition is for—as the result of proposals by the Opposition in another place. It is a better Bill. But that is not a criticism of the Bill: it is a justification. I waited to hear what were the noble Lord's real criticisms. I think that they amounted to one—namely, that if, under this system, we prevented building taking place, it would not necessarily result in more houses being built in the development areas.
LORD HASTINGS: Or any area.
LORD SILKIN: The noble Lord said that that was where the houses were needed, and his argument was directed to saying that more houses would not be built in development areas because in those areas there was a complete exemption. Of course, his basis is wrong. We need houses all over the country, not merely in the development areas. They will go on just the same, but housing is needed in other parts of the country as well. If you prevent a contract

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for half a million pounds being carried out in respect of, say, a public hall or an hotel—I am not going to talk about bingo halls; I do not think anyone is going to build bingo halls to-day; but buildings of that sort, which are not of a high priority—is it not pretty certain that, in its place, the contractors would be prepared to undertake building of a character more useful to the community, including houses? It seems to me self-evident.
LORD HASTINGS: My Lords, may I say that the noble Lord, Lord Mitchison, spent practically his entire speech saying that the industry was overheated, and that therefore they must be prevented from undertaking too much work. If that is the real truth of the matter, there is no reason to suppose that, if they are stopped from building hotels, or whatever it may be, they will build houses instead, because they would have been stopped building hotels for the simple reason that they are not able to build everything at the same time. There may be no more building of another nature that they can do.
LORD SILKIN: My Lords, I understand that. But is it not a fact that at the present time, when we talk about the overheating of the building industry, what we mean is that the building industry is undertaking more contracts than it can, in fact, carry out? Is it not almost proverbial that no contractor carries out his contracts within the stipulated time? We know that is the fact, whether in housing or in anything else. One of the reasons—though I know that the contractor blames it on the weather—is that most contractors take on too much work; they take on more than they can handle. They put a few men on one job and a few on another, and do not take most of the jobs seriously enough. The suggestion is that if they were not allowed to take on a certain number of jobs they would be able to utilise their existing resources of labour and materials to the advantage of the jobs that really matter. I would submit that in that sense the volume of work done on housing would increase and output would be substantially greater than it is to-day.
I know that this Bill represents a relatively small interference with the building industry; it has been stated that
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at the maximum it will not amount to more than 7 per cent. But if licences are to be granted to the extent that my noble friend forecast in his opening speech, then the interference with the building industry will be very slight. It may be that the limit of£100,000 will prove too high, and that it will have to be reduced. But that is a matter which events will determine. The advantage of this Bill, in my view, is that it is flexible: if it turns out that the building industry is capable of coping with all the work it has to do, and that interference is not necessary, then, under Clause 8, the Minister can relax and grant more licences than he would otherwise have done. He can even propose that, for a period, licensing shall not in certain respects be necessary. I hope that he will be able to go further (though this is rather a Committee point) and say that licences will not be necessary in respect of certain types of building, but may still be necessary in others. But we can discuss that on the Committee stage.
Generally, I think this Bill is a good Bill because of its flexibility; because it will permit some kind of restriction where restriction is needed and less where it is not needed. For these reasons, I hope that the Bill will have a quicker passage here than it had in another place. I think there is much less to put right than there was; and I hope that we shall get the Bill through very quickly so that it can operate in good time to give us the greater number of houses that we require.
4.23 p.m.
LORD SHEPHERD: My Lords, if I may, I would join with the noble Lord, Lord Silkin, in expressing a word of sympathy to the noble Lord, Lord Hastings, on his efforts to-day to perform what is, I suppose, the recognised functions of an Opposition: to find some way of criticising Government proposals. I thought the noble Lord tried to make his criticism constructive by asking such questions as: How is the Bill likely to affect house building and the like? I will deal with this in a moment. May I also thank my noble friend Lord Mitchison for his contribution? With his great experience in another place and in the Ministry from which he has just retired (and I think that is a far better expression than the one he used), he is in a far better position to answer this

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debate and to answer the various points made by the noble Lord, Lord Hastings.
The noble Lord, Lord Hastings, asked whether the Government have made a case for this Bill. He also put the questions: Was there overheating then, is there overheating now, and is it likely that in the future there will be overheating? Let us be quite clear what we mean by "overheating" and the effect that overheating within one particular industry may have on the rest of the national economy, because this is a point that the noble Lord, Lord Hastings, made in terms of balance of payments and the strength of sterling. Overheating is the result of an industry taking on too much work and work far beyond its resources. I do not think there is any doubt that in the period 1963–64 the industry was gravely overheated, not only in terms of materials but in terms of man-power.
In an overheated industry there is a tremendous demand on resources and materials. This can have two effects. First, it may be the cause of high import figures. This was the effect in 1964, when in the South-East we were importing bricks from France. Secondly, it tends to raise the prices of materials for those industries which have to buy, for example, copper and other materials used by the building industry. Shortage of materials and competition for supply is bound to have an effect, and a serious one, not only on the contractors operating in this particular field but also on the whole price structure of, say, all public authority work that is being undertaken. In other words, in an overheated industry the shortage of bricks required for, say, a "Bunny club" would have a serious effect on the price of bricks required for, say, a hospital or a school building. I am sure that nobody in this House would say it was right to allow that to continue.
If the noble Lord, Lord Hastings, will cast his mind back to the period in which he held office, he will remember there was overheating then in terms of materials. Perhaps I can refresh the noble Lord's memory. During 1964 there was a period when there was only a three-day supply of bricks in this country. I should have thought that was a clear example of overheating of demand for a particular form of material; and it applied over the whole
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range of articles essential for the building of houses, offices and factories. We know, too, that house building was not advancing as fast as we should have liked. Yet we know too—and the noble Lord, Lord Hastings, will remember many of the debates on this subject initiated sometimes by the noble Lord, Lord Conesford—of the number of offices being built in London which were subsequently standing empty. This is a question in some cases of resources not being used to the best advantage; but in terms of manpower it was very serious then, and is still so.
My noble friend Lord Hilton of Upon indicated the position in regard to the number of special trades. But if the noble Lord will refer to the Annexe to The National plan, he will find it gives figures of what the building industry itself foresaw in the period up to 1970 It estimates that nearly another 100,000 operatives will be needed. What was very interesting was that the main demand would not be for unskilled labour but for what the industry refer to as the administrative, technical and clerical workers—and these are the men whom industry will be demanding more and more if we are to go into advanced forms of building. So, on the figures provided by the building industry, at the time of the industrial survey upon which the National Plan was prepared, it is clear that the industry itself foresaw the serious shortage of essential operatives within the industry. And I think they recognised that there was a fear of overheating. My Lords, I do not think that there is any question about it. The case has been made, and I hope the noble Lord, Lord Hastings, is now satisfied that there is a case.
He referred to the question of the development districts. As the noble Lord knows, when we have the Industrial Development Bill in a few weeks' time these districts will be enlarged into very considerable areas. He will be aware that it is the intention of the Government and, the Government believe, the hope of the country, to develop these regions in order to take out the overheating—if we like to use that phrase again—from the Midlands and the South-East. There is a pool of labour. Do not let us exaggerate. In some of the new development areas there are places where

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there is a labour shortage, but over the area generally a pool of labour is available. If these areas are to be developed, it is clear that we must have not only the factories but hotels and other amenities which make such areas attractive to workers. In the long run we want to see persons, workers and retired individuals, moving from the congested areas of the South-East into the new areas; therefore it is essential that amenities should be provided.
It is true that we are dealing with only about 7 per cent. of the total construction industry, but if the Bill is passed I think that we shall be able to take the steam out of the industry. We may well be able to deploy some of the resources in the South-East to new development areas. There is no question of direction of labour, but I think—I speak from memory and am subject to correction—that operatives in the construction industry are a fairly mobile type of worker. They move from one job to another, and if work is available in the North-East or North-West or in Wales and jobs are not so plentiful in the South, I see no reason why labour should not move from one place to the other.
The noble Lord, Lord Hastings, wanted to know what we are doing to stimulate development areas and the construction industry. May I refresh his memory about the statement made some days ago by the Chancellor of the Exchequer that the construction industry would be receiving investment grants, subject to the investment incentives Bill being passed by your Lordships' House in this Session. In this case the construction industry in development areas will be receiving grants of 40 per cent. for capital expenditure compared with 20 per cent. in the remainder of the country. So we are taking action to assist the construction industry in those areas.
I repeat the words of my noble friend, Lord Hilton of Upton, that we wish to see the construction industry expand. When one considers the tremendous demands that will be placed on it—500,000 houses; schools; hospitals; roads; and the docks which were referred to yesterday by the noble Earl, Lord Jellicoe—one realises that there is plenty of work to be done. I hope that the construction industry will look more to improving productivity through increased
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efficiency and the greater use of machinery and factory-produced building in order to save on the demands of labour. I am quite sure that there is a very considerable and growing future for the construction industry, particularly, I hope, in the North-East of England.
The noble Lord, Lord Hastings, referred to the difficulties which might arise under Clause 8, where a Minister might decide, using the Affirmative Resolution procedure, to lower the present exemption limits on building. I take the point. But the noble Lord will, I hope, appreciate that my right honourable friend—my noble friend Lord Hilton of Upton said so this afternoon—does not wish to have restriction for the sake of restriction. We should alter these limitations only if circumstances justified it. I hope that necessity will not come. I express the hope, as I did to the noble Lord, Lord Erroll of Hale, last Thursday, that we shall move to a period in which we have less restraint and more incentives. Clearly, the Government in a Bill of this sort could not lay down a period by which notice will have to be given before there could be any lowering of the limit, but I take the point made by the noble Lord, Lord Hastings.
LORD MITCHISON: My Lords, would my noble friend allow me to interrupt him? When speaking about this I had in mind Clause 8(5). I see that if there is any work which has been controlled, and it is proposed by order to remove the control, then an Affirmative Resolution—I beg your Lordships' pardon, I have put it wrongly myself. The point is that if there is any work which is exempt from control, and it is proposed that it should cease to be exempt from control, an Affirmative Resolution is required. I do not think that is quite what the noble Lord, Lord Hastings, said.
LORD HASTINGS: My Lords, I think that I can help the noble Lord. I got it the wrong way round myself. This comes of reading "Whitehall-ese" with its double negatives, too quickly, and I apologise to the noble Lord.
LORD SHEPHERD: My Lords, if I may give some advice to the noble Lord, Lord Hastings, about reading these Bills,

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I find that the best way to do so is to use a piece of paper and draw it down line by line. I will look at the point made by my noble friend, but it seems clear to me that if the Minister wishes to lower any of the limits he is required to go to both Houses of Parliament and seek an Affirmative Resolution. The point made by the noble Lord, Lord Hastings, was that if a building was in course of erection at a cost of, say, £100,000, for which a licence had been granted—or, shall we say, a building costing £95,000, which would be exempt—and the Minister were then to make an order prescribing a maximum cost of £50,000, should the work cease? I do not think that this is the usual way in which Government Ministries work. It may well be that at a time of great difficulty such a situation might arise, but I cannot believe that it is possible. But I will see between now and the Committee stage what can be done, and if the noble Lord cares to put down a suitable Amendment I shall be happy to give him an answer in Committee.
The noble Lord, Lord Hastings, asked what would be the position regarding a £200,000 building, started after the Chancellor had made his statement, if the builder had no authority to continue. My Lords, let us be frank. My noble friend, Lord Hilton of Upton, gave the number of those companies who carried out the spirit of the statement made by the Chancellor. There were a number who had delays because they accepted the procedure. There were others who had their projects refused for a period. I do not believe that the noble Lord, Lord Hastings, would feel it right that a company which went ahead without any regard to the national interest, when others within the industry did have regard to it, should now be treated in such a way, and that this would be the end of it. If we were to accept this suggestion, when, for instance, we are asking companies in other fields voluntarily to reduce the transfer of funds overseas—if we were to concede this at this stage—all voluntary agreements and understandings between the Government and industries and individuals would be placed in severe jeopardy. However, I will look at the point the noble Lord made, but at this stage I can give him very little hope.
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The noble Lord said something in regard to Clause 8 and the Negative Resolution Procedure, but I gather that somebody has whispered into his ear and he now understands the position. I cannot believe that the noble Lord thought that the Government were so hopeful as to think that we could get away with the suggestion he made in his speech—I wish we could. But we were not born yesterday.
I hope we shall have a useful Committee stage. I share the noble Lord's feeling that the two Committee stages in another place did a good job. Concessions were made, I think, on both sides and a useful and well-drafted Bill is before us. We will consider any new points that noble Lords wish to make. Perhaps it would help—and I make this offer to the noble Lord, Lord Hastings, in view of the pressure of time—if I say that my noble friend Lord Hilton of Upton and I shall be pleased to meet him between now and the Committee stage to deal with any points he has brought forward. I hope that the House will give the Bill a Second Reading.
LORD HASTINGS: My Lords, before the noble Lord sits down, I should like to thank him for dealing with practically everything I brought up, but he did not deal with the question of control in the public sector. I made the point that there is only a financial control and not a control such as devised in this Bill. I hope the Government will set about co-ordinating this control in the public sector also on the basis of priorities, because at the moment it is done by different means and there is no co-ordination.
LORD SHEPHERD: My Lords, I apologise to the noble Lord if I did not reply to that point. I think that some public authorities would prefer the type of control in this Bill rather than the unsatisfactory monetary control the Treasury has placed on them from time to time. All the public authorities, including the local authorities and the nationalised industries, are pretty well controlled by the Treasury in time. The private sector, about which we have been talking to-day, is the only sector within the construction industry which has had no form of control. We are putting it on, but we hope that we shall not have to use it for very long. Again, I hope

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that the House will give the Bill a Second Reading.
On Question, Bill Read 2a, and committed to a Committee of the Whole House.

OLDHAM CORPORATION BILL
Reported, with Amendments.
DERBY CHURCHES (SAINT CHRISTOPHER'S, SAINT PETER'S AND ST. PAUL'S) BILL.
Reported, with an Amendment.
GREATER LONDON COUNCIL (GENERALPOWERS) BILL
  LIVERPOOL CORPORATION BILL
  Brought from the Commons; read 1a, and referred to the Examiners.
LIVERPOOL CORPORATION (GENERAL POWERS) BILL [H.L.]
Report from the Select Committee, That they have not proceeded with the consideration of the Bill, having found that the Petitioner had not distinctly specified the ground on which he objected to any of the provisions thereof, as required by Standing Order 111: The, order made on April 21 last, in so far as it referred to the commitment of the Bill, and the order made on June 28 last, discharged: Bill committed to the Committee on Unopposed Bills.
  LONDON DELIVERIES OF PROVINCIAL MAIL
  LONDON DELIVERIES OF PROVINCIAL MAIL