Sitting of 12 June 1967

Preamble
The House met at Ten o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORDERS OF THE DAY

  ROAD TRANSPORT LIGHTING BILL
  Considered in Committee.
  [Sir ERIC FLETCHER in the Chair]
  10.4 a.m.
  Mr. David Webster: On a point of order, Sir Eric. Would you be good enough to indicate which Amendments you have selected and also whether you have selected the new Clause dealing with regulations?
  The Chairman: I have selected Amendment No. 1 and Amendment No. 2 which is consequential upon it. The new Clause is out of order.
  Mr. Webster: While, of course, I accept your Ruling, Sir Eric, I understand there is a feeling that the new Clause would be within the intentions of the Bill. It refers to skips for the use of demolition material which are part of a vehicle and are left lying without lighting in
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  the road. I had the feeling that this would be within the intention of the Bill.
  The Chairman: The fact remains that the new Clause as drafted refers to objects which are not vehicles, and therefore it is outside the scope of the Bill. I am afraid, therefore, that it cannot be called. Mr. Mawby.
  Mr. Ray Mawby: I apologise in advance for anything I may say as a result of the Monday morning feeling. Having to catch a night train to get here is not the best way to start the week. I beg to move,—
  The Chairman: Order. I apologise. Before I call the hon. Gentleman for Totnes (Mr. Mawby) to move Amendment No. 1 we must deal with Clause 1.

  Clause 1.—(APPLICATION OF PRINCIPAL ACT TO REFLECTING MATERIAL.)
  Question proposed, That the Clause stand part of the Bill.
  Mr. Webster: I am taken a little by surprise, Sir Eric. Perhaps I am even more Monday morningish than other hon. Members.
  Many hon. Members have had correspondence from people who are in business in the manufacture of equipment. They understand that reflecting material is already in use on the highways and they suggest that the Clause is therefore unnecessary. They say that the intentions of the Bill—and we all support them—are already allowed for

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  because the sort of equipment involved has already been in use for some time. There is a feeling among these people that those who have pioneered such equipment are at a disadvantage. They are anxious about it and wonder whether it is necessary to have legislation of this kind.
  This aspect has come to light in correspondence since Second Reading. My hon. Friend the Member for Twickenham (Mr. Gresham Cooke) brought it to my attention last week. Perhaps the Joint Parliamentary Secretary could indicate whether the equipment already being used—which is a phosphorescent type of lighting number plate, I understand—is now without the law and would be made within the law by this Bill. If that is not the case, perhaps he can tell us whether it is already perfectly legal—in which case, is there need for this legislation?
  We all want to help this Bill through, but there are points about which we should be careful, and certainly one of them is whether it is necessary to legislate if equipment of this type is already perfectly adequate and allowable. There is a considerable school of thought which holds the view that the best Parliament is one that legislates as little as possible. It may not be necessary to legislate in this case.
  Mr. R. Gresham Cooke: Perhaps it would be convenient to put a few general points about reflective material referred to in the Bill and perhaps the Joint Parliamentary Secretary will try to clear them up. I understand that the object of Clause 1 is to authorise reflective material to be used in a number of new ways on vehicles—for instance on number plates. If Clause 1 goes through, number plates would be one of the things which would be capable of being put in reflective form.
  One or two points have been put to me about reflective material. The first is that it will definitely be more expensive than the ordinary way of making number plates and other reflectors for vehicles, and that point should be cleared up by the Parliamentary Secretary.
  Secondly, the glass beads which make up the reflective material will have to be
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  imported from America. This will require a certain amount of dollar expenditure which is not required at the present time in the manufacture of number plates and other accessories for motor vehicles.
  Those are two serious points which will arise when this Bill and the regulations made under it come into operation.
  I might perhaps go on a stage further, although it may be more apt under Clause 2, and you will stop me, Sir Eric, if it is.
  The Chairman: I think that it would be better for the hon. Member to reserve his observations on Clause 2 and the regulations until we come to Clause 2.
  Mr. Gresham Cooke: My point is specifically in relation to number plates, and I take it that will come under the regulations which will be made under Clause 2.
  I will just throw those two points into the arena for the Parliamentary Secretary to tell us about: that here is a new form of reflective material being introduced which will be more expensive and will require imports from America which will require dollars. The Parliamentary Secretary ought seriously to consider those points and tell us why it is necessary.
  Mr. Kenneth Lomas: It is a pity that the hon. Member for Twickenham (Mr. Gresham Cooke) was not here on Second Reading when those two points were specifically dealt with. On the question of expense, I would refer him to Section 7 of the Road Research Laboratory Report (No. 44), published in January, for the third time:
  "Cost of reflectorising. Ordinary registration plates are sold by the manufacturers to garages at a cost of £2 per pair and upwards and fitted to cars by garages at a cost of around £3 10s. It is estimated after consulting with the firm making plates of the type used in the experiment that the price would be about £2 for a pair."
  I said on 31st May that they might be a little more. I was exaggerating the claim of the Road Research Laboratory. Even if that were so, it would be a nominal increase and still a price which would be well worth paying in order to save life.
  Whether imports would be required from America seriously concerned me. I took the matter up immediately with a number of the companies concerned and discovered that these beads could be

  5
  obtained from Germany and that there would be no dollars involved in this transaction.
  Mr. Gresham Cooke: It would still require foreign exchange.
  10.15 a.m.
  Mr. Lomas: But it would not be in dollars. The hon. Member specifically mentioned that it would be necessary to import from America, but I am told that they could be obtained from Germany.
  Those two points are adequately dealt with. The object of Clause 1 is to make it clear that a reflectorised number plate, or any kind of reflective material, is not so much a form of light but a form of warning of danger or hazard. The speech of the Parliamentary Secretary on 31st May made that perfectly clear.
  Mr. Eric Ogden: On Second Reading the Parliamentary Secretary indicated that if his right hon. Friend had those powers Orders would be introduced so that this type of number plate could be brought into general permissive use before the dark nights came on. He spoke of colours other than red being used at the rear of motor vehicles, but did not indicate whether his Department had had any particular thoughts on the type of colour that would be available at one end of the car as against the other.
  My hon. Friend the Member for Huddersfield, West (Mr. Lomas) suggested that the Road Lighting Working Party had suggested that black and amber were the most effective colours at the rear of a motor vehicle and black and white at the front. I have had a pair of reflective number plates on my car, one black and white and the other black and amber. Could the Parliamentary Secretary give any indication of which end of the vehicle they should be placed?
  Mr. Geoffrey Wilson: I was not present on Second Reading. However, I would like to testify that these reflective number plates are extremely effective—much more effective than those in normal use. I have seen them demonstrated and there is no doubt that they are a very useful improvement. Every effort should be made to get out of the present difficulty about showing a light to the rear. The Bill does that and we all ought to welcome it.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Stephen Swingler): I had hoped that I had explained this position on Second Reading, but let me make it absolutely clear. In this Clause we are only dealing with the definition in law. The title of the Bill begins,
  "A Bill to resolve doubts as to the application of the Road Transport Lighting Act, 1957 …."
  and this Clause begins:
  "It is hereby declared for the avoidance of doubt …."
  Doubt has been expressed about whether new types of material which have been developed as a form of reflector can be held in law under the 1957 Act as showing a light when they are reflecting light. The Minister has been advised that they would be so held, and hon. Gentlemen acquainted with the law will know that today the use of any such material on the rear of a vehicle, other than red, would therefore be unlawful. I am not declaring what the law is; that is a matter for the courts. However, that is the advice given to my right hon. Friend. Therefore, anybody using reflective material on the rear of a vehicle, other than red, would be committing an unlawful act.
  We want to resolve the doubt on this point, and the purpose of the Clause is to differentiate between those materials designed to act as reflective materials and other materials that may be on the rear, or any other part, of the vehicle which, because of their polished surface, have the quality of reflecting. We want to get the definition clear, and we shall then pass on to discuss how and to what extent we should allow other reflective materials to be used on various parts of motor vehicles. I hope that makes the position clear.
  Mr. Gresham Cooke: Will the Parliamentary Secretary confirm what his hon. Friend said about expense and the imports necessary?
  Mr. Swingler: The Clause deals with the definition in law. It has nothing to do with the use of reflective materials. The purpose of the Clause is simply to clarify and get rid of doubt. We shall then pass on to consider the question of the circumstances, cost and things of that kind.
  Question put and agreed to.
  Clause ordered to stand part of the Bill.

  Clause 2.—(POWER TO REQUIRE OR AUTHORISE REAR LIGHTS, ETC., OF VARYING COLOURS.)
  Mr. Mawby: I beg to move, in page 1, line 21, at the end to add
  'and
  (c) provision requiring reflective material of specified size to be fitted on each side of vehicles exceeding 18 feet in length and all articulated vehicles'
  I am sorry that I jumped the gun, Sir Eric. On Second Reading, I referred to a type of vehicle to which I hoped that the Parliamentary Secretary would give careful consideration. I said:
  "There is no requirement under the law to show a light on the side or even to have a reflective material for use when a long vehicle is turning. This has led to accidents. I hope that the Minister, in making orders under the Bill, will take into account the long articulated vehicle and require a reflective material at some point along the side of the vehicle."
  The Minister showed that he was sympathetic and said:
  "The hon. Member for Totnes (Mr. Mawby) mentioned the importance of distinctive markings on lorries. I should like to emphasise this. I hope that the Bill will make a contribution by enabling my right hon. Friend to make further regulations about this."—[OFFICIAL REPORT, 31st May, 1967; Vol. 747, c. 10–26.]
  That shows that the Minister and I were at one on this matter, and I do not doubt that the hon. Gentleman meant exactly what he then said.
  However, since then I have studied the Bill closely and I doubt whether Clause 2 gives the Minister sufficient power to require that certain vehicles should have reflectorised materials on their sides. I am not an expert, and I may be wrong about that, but that is the reason for my Amendment. I have also drafted an Amendment to the Long Title so as to make the Bill wide enough to permit the Minister to have these powers. That Amendment is in line 5, after 'vehicles' to insert:
  'and to impose requirements with respect to reflective material in the case of certain vehicles'.
  The Parliamentary Secretary may have been able to take advice since these Amendments appeared on the Amendment Paper and he may be able to satisfy me that the Clause enables him fully to implement his promise on Second Read-
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  ing, in which case, of course, I should not press the Amendment. However, he may feel that some change is required.
  I am not a Parliamentary draftsman and I am not prepared to go to the stake on the wording of the Amendment, but if the Parliamentary Secretary feels that there are not sufficiently wide powers, I hope that he will accept the principle of the Amendment, which will help everyone concerned and make sure that his promise can be fully implemented by Regulations. Since putting down the Amendment a number of matters have come to my attention. For instance, because the Amendment would apply to vehicles more than 18 ft. in length, it would obviously include buses and coaches which are normally lighted and which therefore do not present the same danger as goods vehicles. Naturally, it would be wrong to attempt to tie the Minister to too much detail.
  Those are my main arguments for the Amendment and I hope that the Parliamentary Secretary will appreciate that I have moved it with good intentions and that I hope to hear either that the Clause provides all the power needed, or that he will accept the principle of the Amendment.
  Mr. Swingler: It may be convenient if I say straight away that the Minister has all the powers necessary to achieve this object. We are now engaged in considering draft regulations to amend Regulations 28 and 29 of the Road Vehicles (Lighting Regulations), 1964, specifically to provide for more effective side lighting of long vehicles. I can assure the Committee that in our discussions with the trade my right hon. Friend will take into consideration the possibility of using reflective materials, but it is quite clear that no additional powers are required in this respect if my right hon. Friend wishes to include reflective material among those to be used for the side marking of vehicles.
  Mr. Webster: When does the hon. Gentleman expect a decision to be made and action to be taken on this matter?
  Mr. Swingler: I said that we have draft Regulations, but, as the hon. Gentleman knows, we go through a certain period of consultation with the trade. We

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  have been considering the 1964 Regulations and it is hoped that in a very short time my right hon. Friend will be able to make an announcement about what we regard as an important matter.
  Mr. Geoffrey Wilson: I am glad to hear that Regulations dealing with this matter are being considered. I added my name to the Amendment assuming that it would not apply to passenger vehicles, which in any case, as my hon. Friend the Member for Totnes (Mr. Mawby) said, normally have inside lighting which makes them visible when turning. However, long vehicles, particularly articulated vehicles, when making a turn to the left in the dark can be very dangerous. Military vehicles already have lights on their sides.
  However, there is a matter to which I hope the Parliamentary Secretary will pay attention when the Regulations are being considered. This rule is already followed in Sweden, and the Common Market countries have regulations which are recommended although not yet officially approved. I hope that the Parliamentary Secretary will bear those European regulations in mind when drawing up his own, because it would he convenient if the two sets of regulations could be kept in line because of the greater number of vehicles travelling between the Continent and this country on roll-on, roll-off ferries and so on, and if we have a Channel Tunnel the number will be even greater.
  Mr. James Dance: I added my name to the Amendment because I thought that the issue needed clarification, and we are grateful to the Parliamentary Secretary for saying that the position is fairly clear.
  However, there are one or two things which must be said, because the public is not fully aware of the present danger. When I was at school, although not a great scientist, I learned the rudiments of heat, light and sound, and one of the things I learned about light was that nothing had any colour in the dark. It is only when it is lighted up that it has colour. A white object reflects much more than a black object. That is why people in hot countries are apt to wear light clothes. Exactly the same applies to vehicles. A great dark black lorry
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  does not reflect very much light, even when seen in good headlights.
  This was brought home to me quite recently when a large and very dirty lorry was parked on the side of a country road and when, although I have extremely good brakes on my car and was travelling at a reasonable pace, I almost drove into the back of the lorry because I had not picked it up in my lights. In exactly the same way, an articulated lorry was once turning to the left in front of me. At the moment of turn its rear lights were at right angles to the road and I did not see the lorry until within a few inches of it.
  It should not just be permissible to put reflective signs on the side of a long lorry and particularly an articulated lorry. Such a rule should be compulsory. Although the Amendment may not be necessary, it has helped to clarify the position.
  10.30 a.m.
  Sir Ronald Russell: I would like to support what has been said by my hon. Friends and hon. Gentlemen opposite about articulated lorries and lighting on the sides of lorries. The hon. Gentleman the Joint Parliamentary Secretary may remember that there was a bad accident in Birdcage Walk about two years ago when a car struck a lorry which was turning into Wellington Barracks late at night. I believe that the driver of the car was killed. There has been a reluctance on the part of lorry owners to put either lights or reflective material on the sides of lorries, and I suppose this is understandable because of the expense.
  Anyone who has driven in France at night will know that most lorries are festooned with lights, let alone reflective material, and they can be seen a long way off. There is no danger of mistaking blank space for a lorry. Urgent consideration should be given to this. There is no reason why we should not be as good as the French and why we should not avoid these accidents which occur through lorries not having proper lights.
  Mr. Webster: I would add my thanks to those of my hon. Friends for what the Joint Parliamentary Secretary has said. I am glad that there are powers in present legislation to make regulations. When will they be ready and when will we have a chance of seeing them? Will

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  it be before the House rises for the Summer Recess because, as the Joint Parliamentary Secretary knows very well, if we do not debate them we return to a lighting-up time which is much longer. It is not so urgent during the summer, but we will not have a chance to deliberate upon this until the autumn and early winter.
  I hope that the Joint Parliamentary Secretary will be able to tell me that the regulations will be laid before the House rises. Can he give us any indication of what progress he has made, and whether these regulations have been to the National Road Safety Advisory Council and whether it has expressed a view? It will be helpful to the Committee to know this. I am glad that the information should be a little more favourable than it looked on 31st May. The Committee owes my hon. Friend the Member for Totnes (Mr. Mawby) a debt.
  Both of us raised this point then, and it appeared to me then that the Joint Parliamentary Secretary was trying to say, "Let us get through this limited Measure first." Now we know, as a result of what he has told us, that there are existing powers. I suppose that if he had been able to tell us this—maybe he was not in a position to do so—it would have saved my hon. Friend coming up all the way from the country in order to move his Amendment and have avoided a Monday morning, for which he has all my sympathy.
  This matter requires urgency, and I hope that the Joint Parliamentary Secretary can tell us that these Regulations will be introduced before the House rises in order that they may be enforced in advance of the dark nights. What has been done in this Bill is most important and useful, but it is not half as urgent as the point raised by my hon. Friend in his Amendment, nor as the point that I have made in my new Clause, which is not in order. Both of these are more urgent matters, and I trust that the Joint Parliamentary Secretary will be able to give us a progress report on what we consider to be more urgent than the main intentions of the Bill.
  Mr. Swingler: I do not know how far I am permitted to go in discussing something that is not in the Bill. I shall
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  be very sorry if the hon. Gentleman the Member for Totnes (Mr. Mawby) feels that his journey was not really necessary. I regret that, but knowing his keen interest in the Bill I suspect that he would have made the journey in any case. I am glad to have been able to clarify the position, and I would emphasise that the Minister will make regulations obliging the use of certain types of side-lighting. In reply to the hon. Gentleman the Member for Truro (Mr. Geoffrey Wilson), we will take into account the point he raised about uniformity with Europe.
  It is because we are involved continually in international discussions, designed to bring about a desirable standardisation especially in Europe—because of the interchange of transport—that many regulations are being held up. We shall endeavour to make new regulations about the side-lighting of vehicles as rapidly as we can, I hope in advance of the winter.
  I believe that I said on Second Reading, in respect of regulations to be made under this Bill, if Parliament approves it, that my right hon. Friend is quite determined that the regulations should be made before the winter months. If these powers are granted, we shall certainly proceed as rapidly as possible, but I trust that the hon. Member for Totnes will withdraw this Amendment since these powers already exist.
  Mr. Mawby: Let me make it clear that I do not begrudge coming here this morning for this Bill—what I do begrudge is coming up here because this Bill was put on for this morning sitting when I believe that it involves more country Members than town Members. Some consideration should have been given by the Lord President of the Council to that fact. I am grateful to the Joint Parliamentary Secretary for what he has said and for having drawn my attention to the fact that there are powers in present legislation. He has assured us that that power is there, and has gone even further and stated that the Minister will not drag her feet in bringing regulations into force.
  I hope that he will not take it amiss if, from time to time, if they do not appear as rapidly as we feel they ought, we nudge him and his right hon. Friend and inquire into the reasons for the delay. In

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  view of the hon. Gentleman's reply, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Question proposed, That the Clause stand part of the Bill.
  Mr. Gresham Cooke: Now is the right moment to raise the points that I started to raise at the end of Clause 1. This Clause gives power to the Minister to make regulations for the use of reflective material on a number of components or accessories relating to motor vehicles, in particular in regard to non-reflective number plates. There are three points to which I would like the Joint Parliamentary Secretary to address himself. The first has to do with the use of this reflective material, secondly whether it involves the use of foreign exchange for the production of material to make up the reflective number plates and, thirdly, I would like to refer to the doubts that exist about these adhesive digits.
  Will it be possible for these Regulations to be satisfied by sticking reflective material on to a number plate? If this is not so, must the numbers be of a raised type and rivetted on to the plates? This is important, and should be cleared up. Some authorities say one thing, and some another. There are some counties where one would not be prosecuted for using adhesive digits, yet in Brighton recently the owner of a van was fined £10 for using adhesive number plates. This was taken up with the Chief Constable who said that on his reading of the regulations it was an offence. On the other hand, other chief constables say that as long as the numbers can be read from 75 ft. that is all they care about and would not prosecute anybody for using adhesive digits.
  This is a point which should be cleared up in the regulations—whether people can take a strip of adhesive material, cut out the digits and stick them on. I do not think that that would be satisfactory, because they would come off or flap loose in wet weather. It would not be a satisfactory solution to the reflective number plate problem merely to allow manufacturers to stick on digits made out of reflective material.
  Mr. Dance: Would not my hon. Friend agree that that would play into the hands
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  of thieves? It would make it easy to change number plates in a second or two.
  Mr. Gresham Cooke: That is an excellent point. Instead of having to unscrew a number plate, a thief taking a Jaguar car—they always seem to take Jaguar cars nowadays—would merely strip off the adhesive digits and put on new ones. That is a point which should be carefully considered when framing the regulations.
  I am sorry that I was not present on 31st May, but I was abroad on export business on that day. I have always done my best to assist road safety. My hon. and gallant Friend the Member for Eye (Sir H. Harrison) introduced a Bill about 10 years ago for putting two reflectors on motor vehicles and two rear lights. I advised him and helped him, even before I was in the House, because the daughter of the Chairman of London Transport, when coming to a dance of ours at home, ran into the back of a lorry as the lorry driver had only one tiny muddy reflector.
  In the interests of road safety, we must do everything we can to ensure that number plates are plain and can be seen from the rear. But there are problems for manufacturers. There is also the problem of whether people will be permitted, under the regulations, to stick on reflective number digits. If so, in my view, that would be unsatisfactory.
  Mr. Ogden: I should like to ask my hon. Friend the Parliamentary Secretary whether his Ministry has come to a definite conclusion about the colour of the number plates which may be permitted on the rear and front of vehicles. Will there be two colours, or will the colour be the same at each end?
  Mr. Lomas: I was concerned about whether the numbers could he taken off very easily. The Road Research Laboratory test, which was done over two years on vehicles which were subjected to 80,000 miles of use on the road, showed that with normal wear and tear this did not happen. I am told that provided the numbers are put on properly they would not lift. Equally, I made the point that I should be in favour of riveted raised digits being fitted to make sure that they could not be taken off. This is a question on which I hope that the Ministry will lay down certain specifications. I agree that we have to ensure that

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  the numbers are not interchangeable and that they cannot be taken off and others substituted. The numbers which were utilised in the Road Research Laboratory's test from April, 1964, to April, 1966, clearly showed that this could not and did not happen.
  Mr. Dance: The question of having one colour at the back and another at the front is very important. I gather that this is already done in France. I think that the colour is red at the front and yellow at the back. It helps to know whether a vehicle is coming or going. We should if possible try to get some standardisation with Europe, because we are taking vehicles to and from the Continent frequently these days.
  10.45 a.m.
  Mr. Webster: It is right that the Committee should discuss what should go in the regulations, because if we can give assistance to the Department this is the time to give it. When a regulation is laid, it is a case of take it or leave it. Nothing can be done to amend regulations. My hon. Friend the Member for Twickenham (Mr. Gresham Cooke) is to be commended for what he says about the doubts which exist and the different interpretations of chief constables. It would be useful if we could do something to resolve these doubts before the regulations are laid. I should be glad if the Parliamentary Secretary would tell us whether we shall be seeing the regulations in the next few weeks.
  I refer to the point which I tried to raise on Clause 1 about whether existing number plates are adequate. My hon. Friend the Member for Twickenham said that if we have an existing device which is adequate it is unfortunate that we should have legislation under which we shall need to import equipment, whether with dollars or any other currency. I have a letter from a firm in Leeds which states that it is already producing number plates with reflective digits which conform to existing regulations and that the motoring Press and the Financial Times have been sufficiently interested in the safety aspect of the plates to devote editorial space to them. I am not resisting the Bill because the principle of it is necessary, but it seems to me that if a firm pioneers something as a result of
  16
  which road safety is improved it is unfortunate that we should have to import a substitute material.
  I return to the point which I made on Clause 1 and the quotation which I did not get right then. Carlyle said that that Government was best which legislated least. I agree with the point about security and that we do not want every thief who wants to take away the Jaguar of my hon. Friend the Member for Twickenham—and, incidentally, I am sorry that a member of the Rootes Group should use a Jaguar car—
  Mr. Gresham Cooke: I was not advocating the use of Jaguar cars. I said that they seemed to be very agreeable to every thief.
  Mr. Webster: I am glad that my hon. Friend has made that point abundantly clear, because it was causing me a good deal of worry.
  I hope that the Parliamentary Secretary can assist us about the security of the device, particularly in connection with the use of trailers. The number plate of a trailer has to conform with the number plate of the tractor. As the Parliamentary Secretary well knows, there is already adequate scope for putting fresh number-plates on a trailer. It may be that the next time there is a bullion raid the thieves will use a trailer. Far be it from me to instruct the criminal classes about how they should go about their business. It would appear that there is adequate scope for abuse.
  I return to the point which I made earlier about a firm which has pioneered a safety device. It seems that, as usual, we seem to be penalising British enterprise—[HON. MEMBERS: "No."]—I hope that we are not, and certainly it is something that we here should hesitate to do.
  I agree with what the hon. Member for Liverpool, West Derby (Mr. Ogden) said. I did not like the colour he used in giving the exhibition however. I once suffered from jaundice and yellow is a dazzling colour, particularly on a Monday morning, if one has suffered from jaundice.
  I hope that the Joint Parliamentary Secretary will indicate what is to be in the regulations. I think that this is the time to do so. This has been a useful

  17
  debate and, as a result of it, we have been able to get some indication of what we can expect. I hope that it will result in giving the regulations a fair wind, but it would be helpful to have an indication of what is to come.
  Mr. Mawby: I must differ from my hon. Friend the Member for Westonsuper-Mare (Mr. Webster), although it is true that he is asking the Joint Parliamentary Secretary for information rather than anything else. I believe that we are in danger of giving the wrong impression that certain people at the moment manufacturing certain types of goods will be put in jeopardy as a result of the Clause. I cannot see how this would be possible.
  The Clause codifies and anticipates certain standards either of reflective or fluorescent material and gives the Minister power to recognise the existence of these things to be fitted either at the front or the rear of a vehicle as she thinks' fit. Secondly, she will have power at least to impose conditions to standardise the type and size to be used. I do not believe that the Clause will do anything to jeopardise the position of any present manufacturer of any items which are now within the law. All we are doing in the Clause is to codify the whole thing and to bring more standardisation into what is obviously a good safety device.
  Mr. Swingler: I agree with the hon. Member for Weston-super-Mare (Mr. Webster) that we have had a useful debate. We will take note of all the views expressed. But it would be foolish of me at this point to enter into discussion of technical data and specific dimensions that the Minister may make in regulations. We will take account of all views expressed and there will be an opportunity to discuss the regulations themselves.
  I am grateful to the hon. Gentleman for reminding us of the quotation from Carlyle. I shall remind him of it on future occasions when he demands that we produce more Bills and more regulations more rapidly and in greater volume.
  Mr. Webster: I was only suggesting that we have fewer Bills. We should have the more essential Bill, bringing more into a smaller number of Bills.
  Mr. Swingler: It is hard to satisfy the hon. Gentleman. He wants fewer Bills
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  and more regulations. We will do our best for him. It will be appreciated that when Parliament has approved the Bill, the Minister will be armed with necessary powers to make regulations and certain technical discussions will be carried through as quickly as possible. We shall take all these things into account.
  My hon. Friend the Member for Liverpool, West Derby (Mr. Ogden) raised a point which I dealt with briefly on Second Reading. The tests carried out by the Road Research Laboratory indicate that red reflective material on number plates is considerably less effective than some other colours, and if the maximum benefit is to be obtained from their use it is necessary to relax the provisions of Section 2 of the Act so as to give the Minister the necessary powers to permit use of a colour other than red to be shown to the rear of a vehicle.
  Similarly, experiments with distinctive rear markers for commercial vehicles show that the most easily distinguishing marking both by day and night is made up of red reflective, red orange fluorescent and white reflective strips. We are enabling my right hon. Friend to permit such markers to be introduced.
  My right hon. Friend will be able, under subsection (a) to make regulations permitting the use of yellow or amber reflective number plates on the rear of vehicles. Similarly, she will be able to make regulations requiring a distinctive marking on the backs of commercial vehicles, which would include white reflective strips. We shall naturally rely, in the technical detail of the regulations, on the results of the experiments at the R.R.L., which indicate that this would be the most satisfactory thing to do. That is as far as I can go now. The technical advice of the Laboratory is being given to my right hon. Friend, but there will be many details, including those which the hon. Member for Twickenham (Mr. Gresham Cooke) raised, about the use of certain kinds of materials.
  Under subsection (b) again the Minister will be able to make regulations specifying the kind of materials, the positioning and dimensions. Many details have to be settled. We are relying on getting the best technical information and advice, but I am not in a position now

  19
  to elaborate on these things which must form the subject of the new regulations.
  Mr. Gresham Cooke: But surely the hon. Gentleman is in a position to clear up the two important questions as to whether these materials will not be more expensive and whether they will have to be imported.
  Mr. Swingler: I am glad the hon. Gentleman reminded me. Although in this Clause we are taking powers to require or authorise the use of lights of varying colours, I made it clear on Second Reading, on the authority of my right hon. Friend, that her intention is to make the use of reflective number plates permissive. She will permit motorists who wish to fit reflective number plates, according to certain standards laid down, to do so.
  We have no idea, in moving into this permissive phase, having clarified the law on the subject of reflective materials, to what extent that permission will be used by motorists. Therefore, it is impossible for us now to estimate what will be the additional cost. Certain figures were given earlier in the debate by my hon. Friend the Member for Huddersfield, West (Mr. Lomas). Indeed, certain figures are well known about the cost of reflective number plates now on the market. We have no idea, because this power will be permissive, to what extent these number plates will be used. We will go into the matter carefully. I understand that these materials can be manufactured in the United Kingdom.
  Mr. Dance: I can see danger here. Let us say that 50 per cent. of the cars on the road have clear, brilliant number plates which can be picked up easily. One might be lulled into a false sense of security and bring oneself up close behind a conventional number plate that is dirty. In such circumstances an accident may occur. I do not believe that this should be permissive. I believe that the Minister should make these materials compulsory.
  11.0 a.m.
  Mr. Swingler: I take note of that view. I hope that the hon. Member for Bromsgrove (Mr. Dance) will take note of the
  20
  fact that I said on Second Reading that my right hon. Friend has declared that, to begin with, we would have an experimental period permitting the use of such reflective materials and number plates so as to be able to draw on the experience gained. Nevertheless, this Clause contains the power to make them compulsory at a later date, if we agree that that is what should be done.
  Sir Robert Cary: If it is to remain permissive for the motorist, will it be compulsory for all commercial vehicles?
  Mr. Swingler: I have referred to certain commercial vehicles being marked by distinctive strips at the back, and my right hon. Friend is currently considering the compulsory introduction of certain requirements in that respect. However, that does not apply to the introduction of reflective number plates, for example. My right hon. Friend has declared that she will use the power under this Clause to permit all road users to fit reflective number plates if they wish to do so.
  Mr. Ogden: The hon. Member for Twickenham (Mr. Gresham Cooke) suggested that the cost of this type of plate would be much greater than that of plates normally in use. The cost of the existing range of number plates varies widely, from the Rolls-Royce type down to the ordinary type. I have heard of a garage in the Midlands which charges £10 for a set of ordinary number plates for a Mini. That is excessive. My information confirms the suggestion of my hon. Friend the Member for Huddersfield, West (Mr. Lomas) that the type of plate which we are discussing should cost no more to the public than the existing type of number plate, even during the permissive period when there is only a small market. Of course, if anyone wants his number plates made in ivory, they will cost more, but at the moment the cost of the plates which we are discussing is almost identical with that of the ordinary plate.
  Question put, and agreed to.
  Clause ordered to stand part of the Bill.

  Clause 3.—(CONTROL OF CERTAIN ILLUMINATED SIGNALLING DEVICES.)
  Question proposed, That the Clause stand part of the Bill.
  Mr. Webster: This Clause deals with lights to the rear of vehicles for the purpose of illuminating any device for giving signals to overtaking traffic. I hope that I am in order in asking the Parliamentary Secretary about the signs which the House approved some time ago and which have been in use for three or four months when breakdowns have occurred on motorways. Are these signs operating in a satisfactory manner? I am concerned particularly about the Chiswick flyover and the raised part of that motorway, which are extremely hazardous places when there are breakdowns. I take it that such signs are approved of by this Measure, but is the Minister satisfied that people understand what they mean? Are there any figures available to show that they have been successful on motorways? Can the Minister give us any good news at this stage?
  Mr. Swingler: The hon. Member for Weston-super-Mare (Mr. Webster) loves to range far and wide. We are supposed to be considering devices to give signals to overtaking traffic. I take it that he is referring to the special fog signals on motorways, which are not attached to vehicles and do not give signals to overtaking traffic, but are erected on the shoulders of motorways. I have not to hand the information which he desires. So far as I know, they are working well. However, I undertake to get information about the current position of these signals, and I will give him any data which we have about accidents. I think that he will be aware that, according to a recent report, some improvement has been achieved in the way of a reduction in the number of accidents on our motorways and the casualties resulting from them. The extent to which that is attributable to the signalling system which we have devised is a matter about which I have no information to hand, but I will let the hon. Gentleman have it as soon as possible.
  Question put and agreed to.
  Clause ordered to stand part of the Bill.
  Clause 4 ordered to stand part of the Bill.
  Bill reported, without Amendment.
  11.5 a.m.
  Mr. Swingler: I beg to move, That the Bill be now read the Third time.
  I welcome the support which the Bill has received from all parts of the House. Whatever differences of opinion there may be, I know that we are united in our determination to tackle the problems of accidents on our roads in a variety of ways. I am sorry that it is not possible to deal with all the problems in one omnibus Bill per session. However, even though the present Measure is more in the nature of a mini than an omnibus, hon. Members should not underestimate its importance, nor the extent to which it has resulted from genuine back bench effort and agitation, drawing our attention to the subject with which it deals.
  We all agree that we must take full advantage of new techniques to combat accidents. To do this, sometimes our existing laws have to be altered, because, when they were drafted some years ago, it was quite outside the powers of foresight of any of our legislators to predict the technical advances which have been made over the past few years.
  This is the situation with which the first two Clauses are intended to deal. We wish to be able to permit the wider use of reflective material for the rear lighting of vehicles, while still retaining some powers of control.
  First, we had to deal with the dubiety about the legal status of these materials. If they are to be used as an adjunct to lights on vehicles, it must be clear to all concerned what the position is about the law governing the lighting of vehicles. That is why it is necessary to clarify the legal status of reflective materials in the first Clause.
  Having defined that position, my right hon. Friend is advised that, with the law as it stands at the moment, it would be illegal to use anything except red reflective material to give out light to the rear of a vehicle.
  We do not intend that there should be a multiplicity of colours on the rears of vehicles. That would only lead to confusion. It would also go against the basic principle that the back of a vehicle is denoted by a red light or reflector. However, as long as we control carefully the colours used, we have every reason to believe that we can avoid confusion and,

  23
  at the same time, make it very much easier for vehicles to be seen at night. That is almost as important as making certain that the driver can see properly.
  Similarly, there is little point in saying that a reflective material may or shall be used unless, at the same time, we can say what the optical qualities of the material ought to be. If its reflective properties are inadequate, insufficient light is reflected to serve any useful purpose. At the same time, if they are too efficient, the drivers of other vehicles may be dazzled. It is necessary, therefore, that my right hon. Friend should have the powers contained in Clause 2 to lay down technical details. These will enable her, by means of regulations, to control the colour, optical qualities, positioning and amount of any reflective material which should be used on the back of any vehicle. At the same time, they will enable her to make provisions for special types of vehicles if she so wishes.
  Mr. Gresham Cooke: The hon. Gentleman has told us twice that his right hon. Friend will have power, by means of regulations, to lay down the size, colour, positioning, and so on, of any reflective material. He has not mentioned the problem of rivetting and sticking on the digits, which is most important.
  Mr. Swingler: I promise to go into that. I admit that I have not covered all the details with which we will have to be concerned, and I hope shortly to reply to the hon. Gentleman.
  As I said on Second Reading, I confidently expect my right hon. Friend to use these powers to permit the use of reflective number plates by those drivers who wish to fit them to their cars, and that regulations on the subject will be made before the onset of the long winter nights.
  Finally, there is the question of controlling the devices intended to give signals to overtaking traffic. Signals which are misunderstood, or not well understood, are a potential danger on the roads. When most drivers signalled by hand there could be, and were, misunderstandings. It was sometimes difficult to know whether a driver was intending to turn right, or was merely showing the passengers in the
  24
  rear of his car the Palace of Westminster as he drove by.
  Mechanical devices for direction signalling are replacing hand signals, and illuminated devices may be more readily distinguishable than hand signals. This is particularly true at night, and so long as everybody knows what the signals mean no danger should arise. It is when signals are not understood that accidents are likely to occur. It is therefore extremely important, when new devices are invented, to try to clarify and standardise the position with regard to their use. Since it seems that there may be a loophole in the present Act which could be taken as permitting the use of any signal, provided it was intended as a signal to overtaking traffic, we feel that this should be stopped, and this is why Clause 3 is in the Bill.
  Perhaps I might stress one point which arose during the Second Reading debate. None of these powers will in any way prevent or inhibit developments in vehicle lighting. All that we are doing is ensuring that control can be exercised over the development of new systems, and that new ideas are properly tested and assessed before being tried out on the roads. Perhaps most important of all, we want to ensure that they are properly publicised so that, before they are put into general use on the roads, everybody knows what they mean.
  I think it is generally agreed that this is a good Bill, and again I express my thanks to the many hon. Members on both sides of the House who have contributed to its provisions and considered it with such speed. I commend it as a Measure which will make a further contribution to road safety.
  11.12 a.m.
  Mr. Mawby: I do not want to detain the House for more than a few moments. I was very pleased to hear the Joint Parliamentary Secretary say that he hoped the regulations would come into operation by the time the dark nights arrived.
  The hon. Gentleman said that there must not be a multiplicity of colours, and that the regulations would permit the use of certain colours other than red. I hope that these will be made known as soon as possible because manufacturers will want to distribute the appropriate number plates throughout the country as soon as possible so that those who wish to use them can do so.

  25
  The use of reflective number plates is to be permissive, and only permissive, which means that a motorist will be able to fit them if he wants to. I hope it will be laid down quite clearly that those who purport to produce these plates will have to conform to a certain standard before they can put a British Standards stamp on them. This will ensure that those who purchase them are buying plates with good reflective surfaces, and are not buying a pig in a poke. There would be no difficulty if the use of these plates was obligatory because there would then be some check on whether they were up to the required standard. I hope, therefore, that steps will he taken to ensure that those who purport to sell reflective number plates will make them of the standard which the customer will expect. I hope that they will be made of proper reflective material, and will be up to a proper optical standard.
  11.15 a.m.
  Mr. Lomas: The speed with which the Joint Parliamentary Secretary and his Department have handled the Bill almost makes them guilty of exceeding the speed limit. I say that because an early-day Motion on the subject was signed by a large number of hon. Members in January and February. my ten-minute rule Bill was given a First Reading on 19th April, this Measure received its Second Reading on 31st May, and today, 12th June, we are seeing it through its final stages here. This is a truly remarkable performance and it shows that my hon. Friend and his Department, and indeed all hon. Members, realise that this Measure can save a number of lives.
  I am greatly indebted to my hon. Friend and his Department, and indeed to all hon. Members, for the help which I have received with my Bill. It was in October, 1965, when I read an article in a Sunday newspaper that this matter was first brought to my attention. Since then I have come to realise the tremendous advantages which can be obtained from using reflective material for number plates, and it is good to know that before the winter nights arrive these plates will be in use.
  When I spoke on 19th April and 31st May I said all that I wanted to about the position and dimension of these plates. I hope that it will not be long
  26
  before we get the regulations which will enable us to give effect to the slogan which I coined on an earlier occasion, namely, that all motorists should be able to see and be seen. If we can achieve this, I am sure that we shall reduce the number of appalling tragedies on our roads.
  Even though it may have been a little inconvenient to the hon. Member for Totnes (Mr. Mawby) and to other hon. Members to come here on a Wednesday and Monday morning to consider this Measure, I am sure that everyone will think the effort will have been worthwhile if by it we save a certain amount of suffering on our roads and bring back a little sanity into our road lighting regulations. Without further ado I conclude by thanking by hon. Friend, his Department, and all hon. Members for the tremendous help which they have given me, and I hope that this Measure will very soon become law.
  11.18 a.m.
  Mr. Webster: I, too, thank the Joint Parliamentary Secretary for what he said, and wish the Bill every success in the other place. We have dealt with the Bill extremely speedily. It has taken only ten days to get it through this House.
  I am glad that the Government decided to support the ten-minute rule Bill introduced by the hon. Member for Huddersfield, West (Mr. Lomas). Had they decided to do so earlier instead of getting involved with the controversial Measure dealing with the abolition of live hare coursing, this Bill might by now have completed its stages in the other place. This is something on which the hon. Gentleman can reflect, but I shall not sour a happy morning by pursuing that any further.
  The hon. Gentleman said that this was a mini-Bill. This is reasonable, because we have to get it through before the autumn evenings are with us. It is probably best not just to travel hopefully, but to arrive, but I regret that my new Clause was not considered to be in order. I have discovered the word for the disposal units to which I referred. I understand that they are called—
  Mr. Speaker: Order. The hon. Member cannot pursue what is not in the Bill. He knows that.
  Mr. Webster: I regret that it is not, Mr. Speaker, but I shall leave it there.
  I agree with the Parliamentary Secretary that we do not want a multiplicity of colours on the backs of vehicles. I am glad—although I do not very much like it for political reasons—that we shall stick to the colour red at the rear of vehicles. It is probably basically right. The signs that motorists have to deal with are baffling enough now without making them more difficult, and the same thing applies to signals.
  It is also right that people should know what signals are for. I sometimes wonder whether they do, and whether motorists should not be subjected to a thorough examination, on a snap basis, in order to see how many of these signals are known by them. I believe that the answer would be disappointing, to say the least.
  Having said that, however, I congratulate the Parliamentary Secretary on his celerity in getting the Bill through and wish it success in another place. I hope that no Amendments are made in another place, except to do what we have failed to do here. I hope that the Bill will turn out to be a successful Act and that the regulations will do something to mitigate the loss of life on our roads.
  11.21 a.m.
  Mr. Ogden: I pay tribute to my hon. Friend the Member for Huddersfield, West (Mr. Lomas) and to the Joint Parliamentary Secretary and his Ministry on the progress made by the Bill in such a short time. We are now left with roughly 36 days for the Bill to go through another place and for any regulations to be made. Remarkable progress will have to be made by the Bill if the Minister is to be able to make regulations before we rise, so we may have to wait until the beginning of September before they are made, if there is to be sufficient time for us to discuss them when we come back in the middle of October.
  Reference has been made to the fact that permission would be given before the onset of the dark nights of the coming winter, but we can have some dark nights in June, July and August. I suggest that the Minister might follow the precedent set by the Home Secretary on the Murder (Abolition of Capital Punishment) Bill, which suspended capital
  28
  punishment. If this Bill has gone through the other place and has become law by the end of June it could be indicated to people outside that it would be rather foolish to prosecute someone for using these number plates, in view of the fact that their use would be made lawful by regulation very shortly. This would be as useful a piece of legislation in June, July and August as it would be in September and later.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

  ANCHORS AND CHAIN CABLES BILL
  Order read for resuming adjourned debate on Question [31st May], That the Bill be now read a Second time.
  Question again proposed.
  11.23 a.m.
  Mr. Edward M. Taylor: I have been waiting in the corridor since 31st May to make sure that I would have the opportunity of continuing my speech, and I am glad to do so today. My hon. Friend the Member for Weston-super-Mare (Mr. Webster), speaking on the previous Bill, said that he was grateful for the fact that the Bill was being proceeded with speedily. I agree with him, because that Bill was a good Bill. On 31st May I had an opportunity to study briefly this Bill, and I have studied it since. I do not share the view of my hon. Friend the Member for Weston-super-Mare that this Bill should be rushed through.
  Mr. David Webster: I have never used those words with reference to this Bill.
  Mr. Taylor: Certainly not. I am glad to know that my hon. Friend agrees with me about this Bill, because this will need to be substantially amended. Quite apart from that, the Minister has a clear obligation to explain the reasons why certain provisions are in the Bill and others are not.
  Let us consider the general question of the major change that is being made in the present legislation as laid down in the 1899 Act. That Act was very specific in its provisions, but apart from one or two minor items this Bill is a general

  29
  enabling Bill to enable the Minister to make what regulations he wishes at the times he thinks appropriate. It would make Parliamentary business a great deal easier if all Ministers merely asked the House for general enabling Bills from time to time. If this were done there would be little need for morning sittings—or afternoon or evening sittings. We should require only one or two sittings a year to give Ministers general enabling powers.
  That is what is being done in this Bill, and I do not like it. I was involved in all the discussions and negotiations which led to the shipbuilding regulations, when I worked in the shipyards on the Clyde. Those regulations, in principle, contain many things which I feel should be included in this Bill. I want to refer only to a few points. First, there is the question who should carry out the testing of chain cables and other similar equipment. Clause 1(1) provides that the Minister shall have powers to make rules, and for the supervision of testing and marking of equipment, and its inspection, by surveyors of ships appointed under the Merchant Shipping Act, 1894
  "or by such other person as the Board of Trade may authorise for the purpose."
  That is wrong. The Act of 1899 specified that testers had to be licensed, and clear conditions were laid down for the way in which tests should be carried out. It would be wrong to be too specific, but this difficulty could be overcome if the Minister inserted such words as "a suitably qualified person", or "a fit person", or provided that the person concerned should be qualified for the job. This was clearly laid down in the legislation dealing with shipbuilding.
  The testing of chains and other similar equipment, at a time of changing technology, when new techniques and new equipment are being developed, should not be carried out by a person merely authorised by the Board of Trade. The Minister of State will probably say that they would not just pick any old bloke from the street to carry out this work. We appreciate that any sensible sane Minister would not do that. But why not cover the point by a reference in the legislation?
  Section 6 of the 1899 Act referred to the appointment of an inspector and said:
  30
  "The Board of Trade shall appoint a fit person to be inspector of testing establishments, under this Act, and may remove any person so appointed."
  That was the inspector of testing establishments, but a similar provision could be used in respect of the testing of equipment
  Then we have the question of the definition of a ship or vessel. Several points were raised in connection with this on 31st May and considerable discussion took place on the question whether hovercraft should be included. I was amazed, startled, taken aback and disappointed with the Minister when I read what he said, as reported in col. 31 of the OFFICIAL REPORT of 31st May. One of my hon. Friends was pointing out that when the Bill had been last discussed a specific assurance had been given by the late Mr. Redhead that hovercraft would be included in the Bill. I was therefore quite shocked to read what the Minister said when that specific reference was read out by my hon. Friend. The Minister said:
  "I was aware of that and of the reason why Mr. Redhead was prepared to accept it. He was anxious to get the Bill through.—[OFFICIAL. REPORT, 31st May, 1967, Vol. 747, c. 31.]
  That was a shocking thing to say. I am sure that Mr. Redhead said what he did because, on the basis of information received by his Department, he believed it to be right. If this is the case, there is no excuse whatever for the present Minister, looking forward to a good number of days in this Parliamentary Session, thinking that he can skate over this legislation, and not bother about hovercraft, because it may involve technical difficulties. This is a question of what is right or wrong. If it were right on 19th May, 1965, and unless there are very telling reasons advanced by the Minister against it, it is right that hovercraft should be included now.
  Mr. Webster: Is it not a fact that the carriage of persons by hovercraft in the last two years has increased considerably, and that this has become a most rapidly expanding form of transport, making the point, then accepted by the then Minister of State, all the more valid?
  Mr. Taylor: My hon. Friend is quite right. If any hon. Members need confirmation on this point, I would suggest that they read the annual report of British

  31
  Railways for 1966, published about a fortnight ago. This contains a full report of the extension in hovercraft developments, with a regular service which has increased its traffic three times in one year. On the other hand, it has lost a considerable sum of money, but there is no question that, once these things begin, they will continue. Undoubtedly, hovercraft development is something which is here to stay—something which will grow.
  It is wrong for the Minister to bring a Bill like this, which may last for another 60 or 70 years, before the House without including a definition of a hovercraft. I hope that he will indicate that he intends to change this. Clearly, a hovercraft is a ship or a vessel. It has chains and anchors, and to that extent I cannot see any possible justification for saying that the standards of general maintenance and testing of chains for use by hovercraft should be different.
  There is also the question of oil rigs. I visited John Brown's yard on Clydebank only ten days ago and saw there the fifth oil rig to be built by that firm. They are huge structures and will require to be fixed to the North Sea bed. There is no question that a considerable number of chains will be required. These rigs are launched like a normal ship, although it is a difficult operation, and are clearly things which are on the surface of the sea, requiring chains and anchors. Why have oil rigs been excluded? We are entitled to an explanation. This may be a marginal case, and it may be that to bring oil rigs into the definition would bring in a lot of other things which would not be wanted. Members are entitled to know what regulations will cover oil rigs and what is the position regarding the safety of these rigs.
  We also have the matters referred to by the Minister as a justification for this Bill on the last sitting. He said that the Act of 1899 had two major defects. First of all, it embodied many detailed requirements about the ways in which various anchors and cables may be tested. I would not regard being specific as a defect. This Bill is not at all specific, except for one matter, which I think is wrong and to which I shall refer later.
  The second thing he said was that under the old Act manufacturers were compelled to test anchors and cables in
  32
  licensed proving houses. He also mentioned that new materials have been introduced which required to be covered. These new materials would require to be tested in the same way as anchors or chain cables made from older materials. There is no question that this Bill, being a general enabling Bill, will give powers to extend testing to these. At this stage, we should have an indication of what new materials the Minister has in mind.
  We were very concerned with this at the time of the shipbuilding Regulations and specified the materials that we had in mind very carefully. We should know whether the Minister's definition of chain cables includes in any circumstances a fibre rope or a fibre rope sling, or wire rope. What other new materials does he have in mind? It is all very well to say that new materials are here and others will come, but shipowners ought to know precisely what new materials the Minister has in mind.
  Another point arises on this question of new materials and techniques. We have general rules about the testing of chains, but one thing in which I am particularly interested is tests carried out after repair. Obviously, new materials are being introduced and new chains will require to be tested under any legislation. Obviously, there will be periodic checks, but one thing which has been omitted from legislation in the past has been the testing of chains once a major or minor repair has been carried out.
  It is vital that, in any regulations made under this legislation, it should be clearly specified that not only should equipment be tested when it is manufactured, and not only should it be tested after a period of time, but also on every occasion when a repair, major or minor, is carried out. There have been a good number of accidents in the shipyards and elsewhere, when chains and other forms of lifting tackle have been broken. I believe that many of these accidents have stemmed from repairs carried out to the chain cable. To that extent, I hope that the Minister can give us a clear assurance that there will be an obligation for the testing of chain cables and anchors after a repair has been carried out.
  There is also the question of the vessels to which these regulations will apply. I am not at all clear whether the Bill will

  33
  apply to Admiralty vessels. This is important, and there was no question about it in the 1899 Act. It was clearly specified that the Act did not apply to such vessels. This Bill does not refer to its application to Admiralty vessels. If, as the Minister may say, the Bill does not apply to Admiralty vessels, then he is under an obligation to say why, and whether the legislation which will cover Admiralty vessels will be of a comparable standard. We have a substantial number of naval dockyards, carrying out a greater amount of new work than has been undertaken previously.
  Mr. Webster: Would my hon. Friend not agree that this point has added importance, due to the practice of the Admiralty selling off some of the vessels that it has constructed? Would he give an indication of what he thinks the testing procedure should be in such a case?
  Mr. Taylor: The testing should be of a comparable standard, if not of the same standard. The equipment on merchant ships will be the same, unless the Admiralty vessels are using certain types of chain not available to merchant shipping. We should have an indication from the Minister as to whether this Bill covers Admiralty vessels, and it should be specifically stated in the Bill. If we are to have an advance in our techniques of testing for merchant shipping, then there should be the same advances in the naval sphere. One thing which appalled me in the Bill was that I can find no definition of an anchor or a chain cable. This was alarming. We can understand why we should not be too specific, but what is the point of having a Bill dealing with anchors and chain cables when there is no indication in it of what an anchor or chain cable is.
  The only remote definition which I can see is in Clause 1(7), which provides:
  "In this section 'anchor' and 'chain cable' include any shackle attached to or intended to be used in connection with the anchor or cable …".
  But we are still at a loss to know what is an anchor or a chain cable. This is a point of substance, and I hope that we shall have a satisfactory definition.
  This may be regarded by some as a niggling point—
  Mr. Eric Ogden: Hear, hear.
  Mr. Taylor: —but it is not. I know that the hon. Member for Liverpool, West Derby (Mr. Ogden) takes a very real interest in shipping matters. He brought forward a Private Member's Bill which I was glad to support which was in the interests of the industry, and I congratulate him on having done so. I do not think that he could regard this as a niggling point if he has the interests of the shipping and shipbuilding industry at heart, as I believe he has.
  In the Shipbuilding and Ship Repairing Regulations of 1960 we went to considerable lengths to define what a chain was. The Minister may say that regulations will be brought forward which are specific, but I still feel it is going a bit far to have a Bill about anchors and chain cables and which gives general enabling powers without specifying precisely what an anchor or chain cable is. I hope that before the Bill becomes law, if it ever becomes law—and there are doubts about that—we shall have a definition of a chain cable and anchor.
  I come to the more general points about the Bill. I have mentioned that the Bill is not specific in many respects, but there is one respect in which it is specific. In Clause 1(3) it provides:
  "If any person applies to any anchor or cable which has not passed the tests prescribed by rules under this section any mark prescribed by those rules for denoting that it has passed those tests, or any other mark calculated to suggest that it has passed those tests, he shall be liable on summary conviction to a fine not exceeding four hundred pounds."
  That is a very considerable fine, because it is a major offence. But I wonder why the sum of £400 was chosen and whether it is in line with the practice in respect of similar misdemeanours, not only in the law of England but, more imortant, in the law of Scotland. It might be difficult to apply this provision in Scotland, where our court procedure is much different from that in England. Would the Minister indicate how these powers will operate in the Scottish courts? I see real difficulties arising from this provision.
  I have mentioned a number of questions which should be answered clearly and precisely by the Minister. First, why is there so little specification in the Bill? Why is it a general enabling Bill? Secondly, why cannot we have a definition of a person who is to undertake testing? Could not the words "suitably qualified"

  35
  or "fit" be inserted in the Bill? Thirdly, why exclude hovercraft and oil drilling rigs from the Bill? Fourthly, what sort of new materials does the Minister have in mind in saying that this is one of the reasons why the Bill should be introduced? Why are not Admiralty vessels included, if they are not included? Then there is the question of the penalty of £400 on summary conviction. How will that operate in the Scottish courts?
  These are serious problems. However, it would be fair to say that our general objection to the Bill is that the powers in it are too general. I hope that something will be done to put these matters right.
  I come now to the question of where testings will be carried out. We do not get any guidance from the Bill on this point. The 1889 Act was specific. In the First Schedule to that Act several places were specified at which tests could be carried out. I was interested to see reference in it to the Clyde Navigation Trust, which would be able to test establishments in Glasgow and in the Clyde; to the Municipal Corporation of Glasgow, which covered the Glasgow area; and to the trustees of the Port and Harbour of Greenock for testing establishments at Greenock. That provision is now out of date because there has been a merger of the Greenock and Clyde Navigation Trusts. I wonder whether due note has been taken of this change and whether there will be any major alteration in the position in Scotland.
  Mr. Webster: My hon. Friend has referred to the proving houses. I think that there is great anxiety, about which he would know, regarding small manufacturers of anchors and chain cables who, if the proving houses are closed down, will have great difficulty in getting their anchors and chain cables tested. I am sure that my hon. Friend is well aware of this point, and I hope that he will support the continuance of these proving houses.
  Mr. Taylor: As my hon. Friend says, I have been made aware of some concern about that point. What alarms me more is the lack of concern in some places and the fact that some people do not know what is going on. People should be made
  36
  aware of these dangers which could arise. Certainly several people are not aware of them.
  These are some of the objections which we have to the Bill, and I hope that they will be answered. Bearing in mind the present position of the shipping and shipbuilding industries which are both facing such a grave crisis, this is not the time for bringing in legislation of this sort, which is so wide that real and perhaps unnecessary concern will be caused in the shipping and shipbuilding industries. The Clyde is a major centre, not only for shipbuilding, but for our great shipping industries. The Minister has a real obligation to ensure that any legislation which is introduced provides, not only for safe working conditions, but for the continued prosperity of shipbuilding and ship repairing. I think that it is clear from what I have said and from the speeches of my hon. Friends today and on 31st May that we hope that the Bill will be considerably amended.
  I am well aware of the problem of speaking on the Second Reading of Bills of this sort on a Monday morning or a Wednesday morning. The Whips and others often think that thereby a Member is indicating that he wishes to serve on the Committee dealing with the Bill. However, this is a Bill in which a substantial number of Members have a real interest and I will understand the difficulty if it is not possible for me to take part in the Committee on this Bill. I assure my hon. Friend on the Front Bench, the Member for Weston-super-Mare, that I shall well understand if it is not possible to put me on the Committee.
  Mr. Webster: My hon. Friend is being too modest. It would be very difficult for the Committee to consider this point without his presence. He has touched only lightly on some of these very grave matters. I hope that my hon. Friend, who works very hard in the House, will reconsider his decision, although I am not sure that the decision is entirely his.
  Mr. Taylor: I have made no decision. I was simply indicating that, because of the great interest that there is in the Bill, I would understand if it were not possible for me to serve on the Committee. Hon. Members know that I am particularly interested in this subject. If I

  37
  were appointed to the Committee, I should do my best to clarify the Bill.
  I have raised points today and on 31st May which perhaps can be dealt with in greater detail in Committee. They are important and significant points, and I trust that they will be answered by the Minister. If they are not, my hon. Friends who are favoured with appointment to the Committee will press them even more forcefully.
  11.50 a.m.
  Mr. T. L. Iremonger: I should declare an interest in so far as I am a Lloyd's underwriter, and if the ground tackle carries away I must pay through the ship. I therefore have a direct personal financial interest in the Bill, but that is as nothing, although I should declare it as a formality, compared with the interest which I like every hon. Member have in the Bill, because ultimately it is about the lives and safety of persons at sea.
  Nothing could touch more closely the interests of this country. I represent a constituency within convenient distance of the London docks and the City of London. Many seafarers and those interested in their safety are among my constituents, and I therefore approach the Bill with a more than usual degree of interest, if that is possible.
  But there is yet another interest that concerns me. I do not like the smell of the Bill. I smell here the dread scent of autocracy and bureaucracy. I am afraid that I see here an indication of the movement towards making Parliament more efficient. I am all for efficiency, but not in Parliament. The business of Parliament is to be inefficient. From the point of view of Ministers, this is a very efficient little Bill. It empowers the Minister to make regulations. It does no more than that, and the representatives of the people are nut on one side. There is only the farcical provision of the Regulations under the Bill being subject to consideration and the House having the nominal power to annul them. But this will not do in general and in particular.
  I shall come to the particular later, but in general the House should strenuously object to the whole tenor of the Bill and the tendency of which it is symptomatic for Ministers to introduce Bills giving them power to make regulations. The
  38
  most important feature of a Bill of this nature is the detail in it, and it is the duty of the House to scrutinise the detail very closely. The point of doing that is that if the House is not satisfied we should be able to amend it. We shall bring all the resources of the Opposition to that task in Committee, as is our duty.
  But if we are not to have our way in Committee the House should deny the Government the Second Reading. What will happen if the Bill goes through in anything like its present form? The regulations will be submitted to the House and we shall have the nominal right to refuse the Order making them, but, as hon. Members know perfectly well, that adds up to absolutely nothing. I have yet to know in 14 years' experience in the House a single order being refused. I have never seen an Order introduced by the Government making regulations of this kind fail to get through.
  Therefore, we cannot stop the regulations and, what is far more sinister, we cannot amend them. We may well be in the position of either having to go through the farce of refusing the bringing into force of the regulations or having to assent to regulations which are better than nothing but not as good as we think the House should make.
  I now turn to some of the matters of detail, which we shall have to consider at greater length in Committee. There are some omissions in the Bill which strike me as being peculiarly sinister. It purports to make provision in substitution for the Anchors and Chain Cables Act, 1889. A lot has happened at sea since 1889; a lot has happened in many fields of technology; and a lot has happened in the organisation of the maritime powers and their merchant and other fleets.
  For one thing, a large part of the world's commerce is now carried in ships flying flags of convenience. Many ships flying flags of convenience are officered and manned by Her Majesty's subjects, people for whose lives we are largely responsible. I am not sure that the narrow scope of the 1889 Act, and, presumably, the narrow scope contemplated by the regulations to be made under this abortive Bill will go far enough, unless provision is made to try to get some discipline into the ships of fleets registered in places like Liberia, Panama, Costa

  39
  Rica—and no doubt in the future Dahomey and the Congo and Urundi Burundi and all those other new states. It should not be regarded as beyond the wit of Parliament to devise some provision for the safety of these people, so that ships which come into British ports must have their anchors and cables of a standard which will mean that if the ships rely on them at sea there will not be loss of life.
  Mr. Webster: My hon. Friend is no doubt aware that the Merchant Shipping Act, 1964, which ratified the Convention of 1960, covered all the flags of convenience. Unfortunately, this is a Bill for which there is no covering convention, and I have not yet had any satisfactory statement from the Government that they will make it enforceable on ships coming into this country. My hon. Friend's point is essential.
  Mr. Iremonger: I am obliged to my hon. Friend. This matter will have to be gone into with great care in Committee, and if the Minister does not feel able to draft suitable Amendments we shall have to give him assistance. We hope to have an assurance from his hon. Friend when he winds up that he will take this very seriously, and that he will be amenable to the rather full Amendments which we shall probably have to offer.
  A further point which greatly troubled me is that I believe that the Act refers to anchors over 168 lb. Therefore, the Bill will presumably be limited in the same way, and I am not sure that that will be enough now. Many more people go to sea nowadays in small vessels than was the case in 1889. Those were the days of MacMullen and the great pioneers of British yachting, as it used to be called, all going to sea around the dangerous coasts of this country in small vessels. Captain Joshua Slocum had only just finished his circumnavigation single-handed in the sloop "Spray". He rounded Cape Horn, but he went through the Magellan Straits the other way to Sir Francis Chichester.
  The great pioneers of small boat cruising had not fully emerged. It was a very rich man's pleasure. MacMullen was the first man to sail single-handed the type of yacht then in vogue, narrow gutted,
  40
  deep keeled vessels, of over 20 tons, rigged with huge spars, heavy canvas and ground tackle that would hold a battleship, and with paid hands to work them.
  Nowadays it is a very different scene. Anyone who goes to our coastal ports knows that one cannot get a mooring anywhere from the north of Scotland round the south coast and up to the north of Scotland again. East, west, north, and south the creeks and harbours of this country are crowded with small vessels. At the Daily Express Boat Show one sees the enormous change that has come upon the maritime scene with so many amateurs going to sea. Many of them are very skilled and fully competent to take their vessels to sea, but the tendency nowadays is for people to go to sea with the idea that it is rather like driving on the roads, but taking a small vessel to sea without experience can be very dangerous. I should like to see some consideration given to making provision for the proper testing of the kind of ground tackle that these small vessels carry, particularly in the range of toplines and sea anchors.
  While we are on this question of ground tackle, we should consider whether we should not enlarge the scope of the Bill and take account of the kind of anchors and cables, whether they be chain or other cable, specially for the use of ships and boats. These are often in greater danger from defective ground tackle than are large vessels.
  No large vessel lies in an exposed anchorage without steam up in readiness for getting under way at a moment's notice. That is not so with small boats. They are most likely to be in exposed positions without the power of motor, sail or steam. Often their only power will be the pulling power of those aboard and they are often overcrowded. These vessels should often be equipped with ground tackle to hold them, especially on a lee shore.
  This is not just a matter of testing the strength of the anchors or cables, but of seeing that they are of proper design, are stowed properly and can be quickly stocked if necessary. It is a matter of seeing that the cable—the coir rope—is stowed in such a way that it may be paid out so that the anchor can be brought into use quickly.

  41
  I should not like to leave all these questions to the Minister to make regulations, possibly overlooking a whole range of responsibilities of this House to which we should like to give attention. We shall have to consider this in Committee. I hope that, on reflection, the hon. Gentleman will take the Bill back and try again so that, on the Second Reading of its successor, we may see what regulations he has to propose and will be given an opportunity to improve them.
  I am sorry that there is no indication that a serious defect in the 1899 Act is to be remedied in the new regulations on sea anchors. When the Act was brought before the House, Captain Voss had only just completed his famous voyage in the "Tilikum," a small, narrow, cranky, light draught Indian canoe in which he made the immortal voyages which he recounted in his book, "The Venturesome Voyages." He took it over the great oceans of the world. It was a vessel in which most hon. Members would think it unwise to venture out on the Serpentine. He took it through typhoons and through the most dangerous latitudes and seasons all over the world.
  He was able to do this by having perfected the art of using the sea anchor or drogue. He used to come in at exposed beaches, with breaking rollers, using great skill in perfect safety by using his drogue. He recognised that a vessel was only likely to be pooped, as sailors say —the waves coming in astern and breaking over the vessel—or to be broached—swinging round so that the run of the sea is abeam instead of end to end—if she was under way and that the method of preventing her having way through the water was to tow to stern a sea anchor. With that disadvantage, the vessel does not make much progress.
  Captain Voss cunningly overcame that great defect, however, in sea anchors by securing a trip line to the narrow vent of the sea anchor. I am sure that hon. Members are informed of the shape of a sea anchor. It is a cone with a large end and a narrow end, through which there is a vent through which the sea can run so that it does not burst the cone. It stops the vessel having any way on. One can put a trip line on the narrow end of the sea anchor. One has
  42
  the trip line secured to the transom or counter and when one wants to proceed ahead one lets slip the main line, which is attached to the wide end, and then way comes again, with the narrow end of the sea anchor trailing away comparatively harmlessly.
  By using a sea anchor, Captain Voss managed to take the way off his vessel when he saw dangerous waves coming eastern and this allowed him to proceed without being pooped or broached. He would let go and then make way again as the situation allowed.
  Although people had been sailing small boats for hundreds of years when the Act was introduced in 1899—and since we are dealing here with small boats in which the crews and passengers of ships have to sail when the large vessels founder, as they do increasingly with all these Greek shipowners and what-not running them—we should make sure in this legislation that some attention is paid to the design, type, shape and specifications of sea anchors.
  I cannot allow the Second Reading to proceed without making some reference to the hovercraft. This cannot be brushed aside. In opening the debate, the Minister of State said that it was not yet clear whether hovercraft were technically ships. But this Bill is not about ships in themselves. It is about anchors and cables and ground tackle. We are talking about anchors on which people will have to depend upon for their lives.
  The Minister of State, Board of Trade (Mr. J. P. W. Mallalieu): This Bill is about anchors and cables for use in ships registered in the United Kingdom.
  Mr. Iremonger: That is the kind of pettyfogging distinction that I hoped we could avoid.
  Mr. Mallalieu: The hon. Gentleman has not read the Bill.
  Mr. Webster: That did not prevent the Minister of State's predecessor, Mr. Edward Redhead, accepting the principle that a hovercraft should be a ship for the purposes of the Bill. Mr. Redhead did this during the Committee stage of this Bill's predecessor, as a result of which I withdrew the new Clause to which reference has already been made. The Minister of State has made some unfortunate remarks.
  Mr. Iremonger: I am obliged to my hon. Friend the Member for Westonsuper-Mare (Mr. Webster). I cannot accept what the Minister of State says. I have here a photostat copy of the 1899 Act, and the Act describes itself as:
  "An Act to simplify and amend the Law relating to the Testing and Sale of Anchors and Chain Cables."
  This Bill in its Long Title describes itself as
  "A Bill to make new provision in substitution for the Anchors and Chain Cables Act, 1899."
  Therefore, with respect, I am entitled to say that the Bill is not about ships but about anchors and chain cables. It may have provisions with reference to ships, but there is nothing in the Long Title to oblige us to confine ourselves to ships. The Bill is about anchors and chain cables.
  Mr. J. P. W. Mallalieu: The hon. Gentleman has no doubt read Clause 1, which is the main Clause of the Bill, and what it says there about ships.
  Mr. Iremonger: I am prepared to accept that it says,
  "… testing of anchors and chain cables for use in ships …"
  I am objecting to the limitation of it. I am satisfied with the long title,
  "A Bill to Make new provision in substitution for the Anchors and Chain Cables Act 1899."
  The long title of the 1899 Act says that it is for anchors and chain cables. I am objecting to the limitation of the wide ambit of the long title to the
  "… testing of anchors and chain cables for use in ships …"
  I think we should say "for use wherever they are required to be used".
  Whether or not a hovercraft is a ship, it is a vessel which carries human beings whose lives are likely to be in danger if occasion arises for the use of anchors and cables and they are not adequate. Close attention should be given to this. After all, hovercraft are supremely passenger vessels and there will be a large number of our constituents travelling in them. The proposal is that the hoverport should be in Pegwell Bay, a place where extremely short, nasty, choppy seas arise. If a hovercraft were to become immobilized—engines not working—it would require to anchor in the tideway there
  44
  and if her ground tackle was not efficient there could be a disaster—she could be swept out on to the Goodwin Sands before rescue could be effected. Anything might happen. Should there be a hovercraft disaster which could be traced to defective ground tackle, we should look very silly, having tied legislation on anchors and chain cables to use in ships, if we had to say, "A hovercraft is not a ship; we are sorry that people have been drowned."
  Mr. J. P. W. Mallalieu: I cannot let pass the remarks of the hon. Gentleman the Member for Ilford, North (Mr. Ire-monger) and at a previous sitting, the hon. Member for Gosport and Fareham (Dr. Bennett), that there are no safety regulations for hovercraft and that people who travel in them are somehow at risk. The House must be aware that there are safety regulations. Under temporary legislation, hovercraft are classed as aircraft. They are governed by the Air Navigation Order, 1966, and the Air Registration Board has the most stringent regulations about anchors and chain cables used in hovercraft. This is an important industry, as hon. Members on both sides have said, and I would hate it to be thought that the safety of people who travel in hovercraft is not already taken care of.
  Mr. Iremonger: If it is already taken care of by regulations, we have not had an opportunity to debate it. This is what we are objecting to in the Bill. We are told, in the first place, that all we can have under the Bill is regulations which we have to have on a take-it-or-leave-it basis, and we are not able to amend. When we object to that and say, "What is more, we are not able to amend the Bill by putting anything in it about hovercraft", we are told that hovercraft are looked after by regulations which we have not had an opportunity to amend. I would rather see the regulations concerning the safety of hovercraft that depend on anchors and cables brought into the Bill in detail so that we can consider and debate and amend them in Committee, if necessary. I do not withdraw from the position that we should have the safety of hovercraft that depend on anchors and cables as part of the Bill, subject to debate in Committee or in the House.

  45
  Airmen are not qualified to consider the safety of craft which depend on anchors and chain cables. This is a very doubtful operation. The anchoring of light craft such as hovercraft—aircraft—in the waters off the south-east coast of England is not only a matter of the strength of the anchor or of the cable; it is a matter of the springing of the ground tackle. It is a matter of rigging the chain or cable with a spring—maybe by dropping a weight down the cable—so that the snubbing of the vessel does not come straight on the anchor. Small vessels pitch very heavily in the kind of seas which we get around our coasts. If there is a strong wind one gets a taut line between the anchor and the bitts of the vessel. The hon. Gentleman is a seaman and he knows that the bitts can be torn out of a craft in those conditions.
  In a way, the stronger the cable the more dangerous the situation. What is needed is something which will take the snub off the cable. I should like provision to be made that there shall be a proper fitting to run a weight down the cable to take the strain off the anchor and the cable and the bit so that the cables and the anchors are not regarded as being adequate simply because of their strength. A chain is not a suitable material for this. It is the sort of work for which preferably coir rope should be used.
  Mr. J. P. W. Mallalieu: That is what happens now under the A.R.B. Regulations. They have nylon warp to Admiralty specification.
  Mr. Iremonger: The hon. Gentleman keeps reciting these regulations. They may be admirable, but my objection is that if we are to have a bill on the subject we ought to have them brought into it and made the subject of discussion in Committee. I would not object to the provision of nylon rope. I would welcome it. However, I would like to be able to reassure the House that it had been considered. I am afraid that the Bill will leave it entirely to the Minister's Department—which, I am sure, will be very efficient and conscientious about it—but we shall have to take or leave what it produces without being able, from our experience or the experience of our constituents, to make any amend-
  46
  ments to satisfy ourselves that we have done the right thing.
  I am concerned that no consideration should have been given to the great development in the design of anchors which has taken place since 1899, namely, the broad category of stockless anchors. The Schedules to the 1899 Act, specifically mention anchors' weight, ex stock; that is to say, the weight of the anchor without the stock. By definition, it is concerned with stocked anchors. I am surprised that the modem type of anchor used by steamers, in which there is no stock, is not referred to. Presumably the concern was exclusively with stocked anchors. A stocked anchor is very much more efficient than a stockless anchor. A much greater weight of stockless anchor is needed to have the same holding power as a stock anchor. I would always rather have a stock anchor—I am not talking about the C.Q.R. anchors, but about the traditional stockless anchors used in steam ships.
  There is a further complication that it is not only a matter of testing for the breaking strain of a stockless anchor which involves the safety of the ship. There is also the adequacy of the design, the possible danger that a stockless anchor can be dropped and that the flukes will jam and fail to drop down into the bed of the sea and be pulled in to provide proper holding power. Therefore, although the Act which is to be repealed might have proved adequate in so far as it concerned itself with the strength of stocked anchors, we have no guarantee at all that the regulations to be made under the Bill will concern themselves with the rather different specifications and requirements for stockless anchors. I cannot feel that any serious thought—I have no doubt that I am wrong, but I cannot be assured of it—has been given to this problem. When we are shown the fruits of the Departmental consideration, we shall be powerless to do anything about it, powerless to improve it, and the House should therefore have a look at the provisions of the Act which the Bill seeks to repeal.
  Section 1, for example, starts off with the definition of anchors and cables as being the anchors of any British ship. I have already referred to that as being a classification which we ought now to

  47
  reconsider. It excludes any anchor not exceeding 168 lb. in weight, again a rather dangerous limitation in present circumstances.
  Section 5 talks about the fees to be paid for inspection or testing and yet we are to have no indication of what the Minister has in mind about the provision to be made for fees for testing under the new regulations. If the fees in 1899 should not exceed£50, they ought to be up to at least£200 today. We have not had a Socialist Government throughout the whole of that period, or the fees would have had to have been increased to£2,000 or£3,000; but, even with Liberal and Conservative Administrations for some of the period, war and inflation have made the figure of£50 totally unrealistic.
  Mr. Webster: Has my hon. Friend observed that Section 11(3) is very precise about how a licensed dealer or tester shall apply to the Board of Trade for a change in the fees?
  Mr. Iremonger: I was hoping to work towards Section 11 if time permitted, but I must hasten on in order to make sure that no point of scrutiny escapes me. I have a copy of the Act with me and it is important to consider its Sections one by one. I had skipped Sections 6 and 7 and was about to refer to Section 8 which deals with tests.
  It refers to the tensile strain and the breaking strain. Since 1899 new techniques have been developed, new materials have been introduced and processing of steel has undergone great changes. The whole technological philosophy of fatigue has been introduced. New methods of detecting flaws by x-rays and spectroscopic methods have been introduced. I am not sure that the mere brute process of giving something a good pull and seeing whether it busts is a test with which we should be satisfied in this technological age. How do we know that when he introduces his regulations the Minister will do full justice to all the possibilities of the technological resources which may be at the disposal of those who are testing ground tackle?
  Mr. Edward M. Taylor: The trouble with many systems of testing is that they weaken the items being tested.
  Mr. Iremonger: On that matter I should be subject to persuasion, especially by my hon. Friend who is saying that if something is tested, while it may survive, it will never be the same again.
  Mr. Taylor: Testing could affect it.
  Mr. Iremonger: It could affect it and we should therefore be now thinking in terms of not subjecting the ground tackle of ships to tests which, for all we know, may leave it no longer as sound as it is supposed to be. Ought we to introduce new methods of testing and new qualifications for those who do the testing? Obviously, my hon. Friend or I could give a good pull at something and see whether it busted, but if we were to have a more sophisticated form of testing, he and I would need to have qualifications for subjecting it to spectroscopic processes and so on, and while I do not know about my hon. Friend, I should be very diffident about taking that on if the Minister were to appoint me one of the testers of chain cables.
  Section 11 is a very dangerous Section. It deals with the scale of charges for testing anchors and chain cables. How do we know that in the new regulations the charges will be reasonable? How are we to know on what basis they are to be made? How are we to know what is the Minister's philosophy? Surely, we have a responsibility to our constituents who are yachtsmen, and their passengers, for the scale of charges for testing the ground tackle of small vessels. Will those be the same as the charges for testing the ground tackle of commercial vessels?
  I should have thought that we would need much more explanation of what is in the Minister's mind before giving the Bill a Second Reading. I am sure that if we do not get a satisfactory explanation, if the Bill goes to Committee my hon. Friends will be able exhaustively to examine all the possible variations and combinations and permutations of charges for testing. We might have different scales of charges for foreign vessels.
  Mr. Edward M. Taylor: I am sorry to interrupt my hon. Friend again. I hope that our attitudes are not diverging and I hope that he is not suggesting that the British shipping industry, especially in the Clyde, should subsidise

  49
  those of his constituents who are wealthy enough to have yachts.
  Mr. Iremonger: There are obviously important sociological implications in the Bill which had escaped even me. It is clear that we should not dismiss the Bill in a cavalier fashion and if we are to examine it as conscientiously as we should, we should consider these obviously important aspects.
  Section 15 of the 1899 Act deals with private testing and uses words which open questions which the Minister should have tried to answer in submitting a new Bill. The words are:
  "other chain or cable"
  and the words
  "cable (not being a chain cable)"
  This opens a whole realm of distinction to which reference has already been made and about which I hope to make some observations, if not this morning, then on some other suitable occasion. Obviously, although it does not say so in the Short Title, the Bill includes cables other than chain cables. When I was training to be a naval officer, I was always taught that the distinction between chain and cable was that cable had a stud in the links and that chain did not. The object of having cable instead of chain was that, when piled into the chain locker, studs in the links stopped the links from overriding one another and forming a sort of half knot in the chain, which would obviously be very dangerous, because chain in that condition and subject to great strain would be more liable to break than chain stretched out in its proper tensile position.
  It being half-past Twelve o'clock, the debate stood adjourned.
  Debate to be resumed Tomorrow.

  RAILWAY PASSENGERS, BIRMINGHAM (SNOW HILL STATION)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. McCann.]
  12.30 p.m.
  Mr. Victor Yates: I am grateful for the opportunity to raise a question that has caused more widespread anxiety and dissatisfaction in the city of Birmingham than I can remember during the time that I have represented part of the city in this House—over 21 years. It is the matter of the unsatisfactory arrangements for railway passengers in Birmingham, pending the Minister's decision regarding the future of Snow Hill Station. I can understand that the Minister will tell me that the Ministry of Transport has no responsibility for certain day-to-day measures and that this is a matter for the British Railways Board.
  I am raising matters of such serious concern that I hope that the Minister will not dismiss this merely by referring to the powers of the Ministry. Some months ago the Minister of Transport received a deputation from a number of Members of Parliament in the Birmingham and Midlands area and representatives of local authorities. At that time the Minister was warned that there were grave fears about the closing of Snow Hill Station. Then I had not quite made up my mind about the matter. I thought that there may be a good deal to be said for the closing of the station.
  Now, after the experience of the last few months, I am fully convinced that Snow Hill Station should not be closed. The more I go into the matter, the more I am convinced of it. If the Minister is considering closing a station that station ought to be able to run normally, apart from changes in the trains, without measures which create considerable inconvenience. What the British Railways Board did, while the Minister was considering this matter, was to close every entrance to the station except the most unpopular one. I have appealed for the front entrance to be kept open. The present entrance, which is most inconvenient, could be closed. To alter a

  51
  station in this way is to some extent to prejudice the whole consideration of the matter. If the Railways Board had it in mind to deliberately sabotage the Minister's consideration of the matter, it could not have done better than it is doing now.
  Anyone who knows Birmingham will know that the decision to keep Moor Street Station open was not a good one. It is most inaccessible and is not the solution to the problem. If I were to quote from the large number of letters that I have received, more than I have received on any subject since I became a Member, apart from one or two major national issues, I should need much more time.
  I wish to give three quotations from letters. The first is from the managing director of a firm in my constituency, who says:
  "For years I have travelled to Birmingham Snow Hill, and in fact I am a season ticket holder of some 35 years, although I have lived in Dorridge for eight years … and as you know Birmingham well, and you will see that from Moor Street the distance I have to walk is almost treble. I am sure that the majority of travellers have been inconvenienced likewise. This diversion to Moor Street was done without any reference to users, in a most arbitrary manner."
  A resident of Stourbridge has sent me a letter, in which he says:
  "Due to a derailment on the curve at Smethwick West on Wednesday, May 31st, all Hereford, Worcester, Kidderminster, Stourbridge and intermediate station trains were diverted to Snow Hill. What a good job it was available."
  What an inconvenience it was, because there is no bus service from one station to another, and it means crossing Birmingham at its most crowded area. The letter continues:
  "To close the front entrance of Snow Hill is a vicious and dictatorial action, to cause inconvenience to the public."
  I have put representations to the Ministry. The trade unions, public servants and people in Birmingham are utterly disgusted at the arrangements which have been made. Another constituent writes, and this is a copy of a letter sent to the divisional manager:
  "Prior to the partial closure of Snow Hill station my total travelling time in the morning from my home in Prospect Lane, Solihull, to my factory in Warstone Lane, Birmingham, was not more than 35 minutes and the return
  52
  journey in the evening also took 35 minutes. My minimum time for travelling in the mornings is now 50 minutes",
  and owing to delays in trains, it is often 75 minutes each way.
  One can add much more to all of this inconvenience. As a result of closing Snow Hill there will be no direct service to the Welsh coast, or to the south coast. There were services from Snow Hill to Bournemouth and Brighton.
  I wish to refer now to New Street. It is beyond my comprehension how planners can plan a station in this way. I have had the pleasure of travelling from London to Birmingham, and at New Street there were two sections, where one could walk from the train to a taxi or to a bus. Now this has changed. The front entrance is closed, and a temporary staircase has been erected. In order to get to the station, one as to walk up 30 temporary wooden stairs, a long way over the roof, walk down 36 steps to the next level and to reach the station, down another 36 steps. So one has to go up 30 and down 72 steps.
  This is temporary, and there has been such an outcry that the railway authorities have put a temporary entrance at the front. This is limited to between 8 a.m. and 9.30 a.m. and 4.30 p.m. to 6 p.m., so that other people travelling have to suffer this inconvenience. I cannot describe how inconvenient it is to old people and, people with families, particularly bearing in mind that there are escalators from the main station to the bridge. Those escalators do not work after half-past ten in the evening. I have been inconvenienced when travelling from London on a late train and having to carry heavy luggage up all these steps. It is unfair.
  I ask my hon. Friend the Parliamentary Secretary to consider whether the temporary entrance to the station can remain open at all hours. Would he make representations to the Railways Board to ensure that in the ultimate planning of the station people will not have to tolerate this inconvenience? This entrance from New Street—he main centre of Birming-ham—is called" the hole in the wall". I should like to see the reconstruction of the station to provide for an entrance from New Street without the necessity of having to go up and down these steps.

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  There are no down escalators, which is extraordinary for a modern station.
  It is difficult to describe the inconvenience which is caused to the travelling public at this station. There is a tiny refreshment room which is not as big as one on Snow Hill Station. Last night I saw people standing up. I have even seen a policewoman giving first aid in this crowded tiny room. This is most unsatisfactory. There is no proper provision for the workers. There is no accommodation for the 253 drivers except in the old huts left by Bryants the builders.
  The electric trains are good when they are in order, but there are evidently many technical difficulties. My experience has been unfortunate. I have travelled on them many times when they have not reached their destination on time. Last night my train was 20 minutes late and I had to wait 25 minutes for a taxi. The Railways Board seems to be obstructive and hostile to the approaches made by the travelling public.
  The Minister will no doubt say that there is a body called the Transport Users' Consultative Committee. How is this committee constituted? My information is that there are 25 members of it and that not one-third of them use the railways. I do not see how people who do not use the railways can understand the indignity and inconvenience which is caused. Furthermore, the secretarial staff of the committee cannot be independent. It is housed in the same buildings as the Railways Board in Birmingham. I should have thought that, as so much inconvenience was caused, the first thing which this committee would do would be to consider the hardship to the public. The Minister, in reply to me, said that he did not know why the public did not consult the Transport Users' Consultative Committee. I should have thought that he would have inquired and would have insisted that it was most important that the committee should consider this matter.
  It is in sorrow that I criticise what seems to me a very bad example of a nationalised industry. I have worked in private industry. I am sure that if private industries were guilty of causing such inconvenience to the public something would be done, and done speedily. Perhaps the station was opened before it was ready, but I am sure that a good deal
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  of the inconvenience would be removed if people could use the alternative service at Snow Hill and be allowed to go through the front entrance instead of having to walk a long way. There is a strong case to be made for the opening of more entrances at the station, pending the Minister's consideration of the matter.
  I hope that the Minister will not make a decision until very much more has been heard about the effect on the public of Birmingham. A city with a population of over one million is entitled to have reasonable transport facilities. If they are unsatisfactory, as is the case at present, more and more people will turn to the motor car. I do not think that the bus service is entirely satisfactory. Old people and people with children find it increasingly difficult to travel on the railways.
  I hope that my hon. Friend the Parliamentary Secretary will take my remarks seriously and will deal with them today or will put them to the Minister. I beg the Minister not to make a final decision until much more has been heard about this matter. I should like to take a high-powered deputation from the whole of the Midlands to the Minister to show the dissatisfaction that there is on this matter. Trade unionists and the public are frustrated. There are large blocks of offices and banks in the centre of Birmingham to which the nearest approach is Snow Hill station. Having to get to these offices and banks by using the other station is causing grave inconvenience.
  A lot more could be said on this subject, but I ask my hon. Friend the Parliamentary Secretary to give careful consideration to the matters which I have raised.
  12.48 p.m.
  Mr. Christopher Price: I wish to back up some of the points made by my hon. Friend the Member for Birmingham, Ladywood (Mr. Victor Yates). It is probably right that, on financial grounds, British Railways should centralise station facilities in Birmingham. From that point of view, it is right to close Snow Hill; and I realise that many of the facilities at New Street are temporary and will get better.
  I reinforce what my hon. Friend said about the entrances to New Street station, which are absolutely appalling. Many

  55
  of the faults in the design of the station are emerging. Incidentally, it is one of the worst station designs I have seen in Europe. It is in what I would call the British public lavatory architecture tradition—and it is a very bad example of that. But the worst feature is the ascent of 30 steps and the crossing of what some people have described as the Siberian waste of the vast plateau on top of the station. So far we have seen what happens in the spring and summer. What this waste on the top of the station will be like during the coming mid-winter is impossible to imagine. I hope that other entrances will be opened by then.
  Snow Hill Station is virtually closed already, and it is hypocritical to think that we have any proper closure procedure if the Railways Boards is able, by closing all reasonable entrances, to circumvent that procedure. I hope that we will get rid of this hypocrisy and force the Board to keep the station open until a decision has been made or at least ensure that that decision is soon enough to enable the Board to run its financial affairs properly.
  12.50 p.m.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. John Morris): I have listened with great interest to the speeches of my hon. Friends the Members for Birmingham, Ladywood (Mr. Victor Yates) and Birmingham, Perry Barr (Mr. Christopher Price). I know my hon. Friend the Member for Birmingham, Ladywood has been very concerned with this issue over a substantial period. He has corresponded with me about it and has also raised it in conversation. I am glad that he has raised it today. I will try and reply in the short time I have available. Nearly all the matters my hon. Friends have raised are questions of management which, under the Transport Act, 1962, are made the sole responsibility of the Railways Board. That will be no surprise to my hon. Friend the Member for Ladywood. When we corresponded, I explained the position to him but I appreciate his wish nevertheless to have these matters aired in this House. Clearly, they are important questions and should be aired.
  My hon. Friend stressed in particular the inconvenience that travellers are
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  suffering following the Board's closing the main entrance at Snow Hill Station. It may be helpful if I explain to the House just why this is something on which it would be quite wrong for my right hon. Friend to try and intervene. As I have said, questions of this kind—that is, question of day to day management—are placed by the 1962 Act in the sole responsibility of the Board. There is only one proviso. If there are representations to the local Transport Users Consultative Committee and it refers the matter to the Central Committee which, in turn, makes a recommendation to the Minister, then and only then does my right hon. Friend have power to issue a direction to the Board. My hon. Friend is aware of that I believe.
  In this case there were indeed representations to the T.U.C.C. and it considered them on 20th April. I do not know whether my hon. Friend knows that.
  Mr. Victor Yates: Yes.
  Mr. Morris: This adds force to what I have to say. I understand that the Committee concluded that, in view of the Board's reasons for the closure—its desire to operate the revised services into Snow Hill as economically as it could, as part of its general anxiety to keep down the deficit—it could not support the representations.
  There is therefore no question of any reference to the Central Committee or of any recommendation from that Committee to the Minister. In these circumstances I do not think it would be right for me to take up the time of the House by going into the merits of the question; the Board have made its management decision, the proper consumer body has studied the representations and has drawn its own conclusions.
  My hon. Friend has suggested it would have been better if the T.U.C.C. had been told in advance about the changes. I think generally it is helpful to both the Committees and the Board if there is this sort of informal contact; though there is of course under the Act no obligation on the Board to do so. I understand the West Midland Committee do in fact find London Midland Region most helpful in answering their queries.
  My hon. Friend also referred to the accesses to be provided at New Street Station. As the House will know, this

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  station has been comprehensively re-built as part of London Midland Region's electrification programme. I had the privilege of going to the opening. I confess I am sorry that the occasion on which I should have to speak about the new station should be one of criticism, because I think in many ways the Board has done a magnificent job in producing a right up to date major terminus which accords so well with the new spirit of that great city.
  But if detailed complaints have been made about the accesses it is right that they should be looked into. Here again the proper body for such examination is the Transport Users Consultative Committee, which is specifically charged with considering and, where desirable, making recommendations about any matters affecting the services and facilities provided by the Board which have been the subject of representations.
  In fact in this case also the Committee has received representations. I know that it has been looking into them with great thoroughness and that members of the Committee have made a special investigation of the sites in question. But I could not tell the House what their conclusions might be. This is because the matter is still within the consultative machinery. If the Committee should decide to make a recommendation to the Central Committee, and that Committee in turn were to make one to the Minister then and only then would she have the power, if she thought fit, to intervene.
  I can tell the House, however, that it was as a result of some suggestions by the Committee about the present temporary access from Stephenson Place that some practical improvements have been made, for example to the steps and to the handrails. I think this is a good example of what can be achieved by this sort of informal contact between the T.U.C.C.s and the regions. The wider matters, such as whether this arrangement is to be permanent, are still in the consultative machinery.
  Hon. Members have referred to the reduction of services at Snow Hill, particularly to the Welsh coast and other parts. Again, however, I must point out to the House that these reductions are, under the Transport Act, 1962, matters
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  of management for the Board. We in the Ministry knew the Board were going to make these changes, in order to get the best possible return on their investment in electrification. But it was entirely their decision. This does not mean of course that the public have no right of redress. On the contrary it is open to them, notwithstanding the current closure proposals to withdraw all services into Snow Hill, to make representations to the T.U.C.C. about the current level of service—though not the reduction itself—if they feel it is inadequate and this would bring into operation the procedure I have described.
  Hon. Members have also raised the question of the Minister's decision on the Snow Hill to Wolverhampton closure proposal itself. I know that Members and the people in the area are anxious that there should soon be an end to the present uncertainty about this and other services. All I can say is that my right hon. Friend fully appreciates the need to take a decision as soon as she can.
  The considerations outlined by my hon. Friend the Member for Ladywood indicate that this is a matter which will need a little time to investigate. We shall need to study thoroughly all these considerations to ensure that at the end of the day the right decision is taken. I know that the delay is causing anxiety but I am sure that I carry my hon. Friends with me in saying that it is better that there should be thorough examination of this very complex proposal and that in the end, the decision should be the right one, even though it may take a little time.
  I see it has taken me almost as much of the House's time to tell Members why I could not answer their points in detail as it might have done to answer them. I ask the House's pardon. But I wanted to make it absolutely clear what my right hon. Friend's statutory position is in these matters. The Transport Act, 1962, left questions of management to the Railways Board, subject to the very important proviso that the T.U.C.C.s should have the duty of looking into representations by the public, in the knowledge that if they feel something is wrong and the Board are not willing to put it right, they have a direct line of access to the Minister. In this situation my right hon. Friend wants the T.U.C.C. machinery to work.

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  This is why she has decided only recently, and has begun the work, to widen the basis of their representation. This has already been done in many parts of the country.
  My right hon. Friend is anxious to ensure that the T.U.C.C.s represent a wide variety of people, including those who use both the railways and other services. I do not carry all the details of the Birmingham area in my head and I will write to my hon. Friend the Member for Ladywood. But I know that a number of appointments have been made of people
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  representing women's organisations, the National Parks, the disabled and the elderly, among others who place almost complete reliance on public service. All these matters that have been raised will certainly be studied by the Board. It will consider what my hon. Friends have said. They can properly go through the existing machinery and therefore to the Board itself.
  The debate having been concluded, Mr. DEPUTY SPEAKER suspended the Sitting until half-past Two o'clock, pursuant to Order.
  Sitting resumed at 2.30 p.m.

  ROYAL ASSENT
  Mr. Speaker: I have to notify the House in accordance with the Royal Assent Act 1967 that the Queen has signified Her Royal Assent to the following Act:
  Industrial Injuries and Diseases (Old Cases) Act, 1967.

ORAL ANSWERS TO QUESTIONS

  VIETNAM
  Mr. Ormeasked the Secretary of State for Foreign Affairs what representations he has made to the United States Government regarding the escalation of the war involved in their proposal to increase the numbers of troops in Vietnam.
  Mr. Dickensasked the Secretary of State for Foreign Affairs what representations he has made to the United States of America about the proposed increase in their armed forces serving in Vietnam, in view of the danger of further escalation of the war.
  The Secretary of State for Foreign Affairs (Mr. George Brown): I have nothing to add to the reply which my right hon. Friend the Prime Minister gave to a Supplementary Question by my hon. Friend the Member for Lewisham, West (Mr. Dickens) on 6th June.—[Vol. 747, c. 803.]
  Mr. Orme: Is my right hon. Friend aware that there is a growing concern in this country about the threats of escalation of the war? Could he say what positive steps Her Majesty's Government are taking to try to bring about negotiations and the end of this terrible war?
  Mr. Brown: I have said that many times in this House, and we are doing our utmost to do it. However, it means approaching more than one party to the war. It means trying to get in touch with those who entered the demilitarised zone in flagrant breach of the Geneva Convention, as well as those who responded. I am doing my best.
  Mr. Dickens: May I press my right hon. Friend a little further? Will he state what is the present attitude of Her Majesty's Government to the further escalation of the war in Vietnam by the Americans and, in particular, will he deal with the potential threat of an American land invasion of North Vietnam?
  Mr. Brown: I have no reason to suspect the latter. I am against the escalation of the war, and would very much welcome the support of my hon. Friend to oppose those who, from North Vietnam, from China and elsewhere, are in fact encouraging the escalation.
  Mr. Rankin: Can my right hon. Friend say if forces from any other source or nation are entering the theatre of war in Vietnam?
  Mr. Brown: Like the South Vietnamese, the North Vietnamese have allies and friends. There is no reason to think that either is failing to use them.

  ADEN
  Mr. Winnickasked the Secretary of State for Foreign Affairs if he will make a statement on the latest position in Aden.
  Mr. Evelyn Kingasked the Secretary of State for Foreign Affairs what is to be his policy in the matter of the Eastern Aden Protectorate and its relationship with the Federation of South Arabia; and if he will make a statement.
  Mr. Martenasked the Secretary of State for Foreign Affairs if he will make a statement about the future policy towards Aden.
  Mr. Wallasked the Secretary of State for Foreign Affairs if he will make a statement on Aden and on his discussions with the Federal Ministers.
  Mr. Eldon Griffithsasked the Secretary of State for Foreign Affairs what further constitutional proposals he has for the South Arabian Federation and on what date he now expects Aden to achieve independence.
  Mr. Stratton Millsasked the Secretary of State for Foreign Affairs if he will make a further statement on the present situation in Aden.
  Mr. Fisherasked the Secretary of State for Foreign Affairs whether he will make a further statement about the constitutional arrangements for Aden and South Arabia prior to independence in 1968.
  Mr. George Brown: Sir Humphrey Trevelyan has now had time to settle in and has made a number of important reports which I am now considering. I will be in a position to fulfil my promise to the House to make a full statement of policy at the beginning of the debate planned for 19th June.
  On internal security in Aden, although there has been no fundamental change I regret to say that in the last few days two British servicemen were killed and five were wounded, and one British civilian was killed and two were wounded.
  The United Arab Republic/Israeli war, and the lie about British intervention broadcast by Cairo radio as an alibi for its defeat, has increased tension in Aden and there were some disturbances which, however, were contained without difficulty. As two of them were in the Eastern Aden Protectorate, elements of the Irish Guards have been flown there as a precaution.
  Mr. Winnick: While appreciating that reply, and deploring the acts of violence which have taken place in Aden in the last few weeks, can my right hon. Friend say whether there is any chance of a change in the Federal structure and if our minds are open to that possibility? Secondly, is he optimistic that in the next few months there can be direct British negotiation with the main nationalist organizations—Flosy, obviously?
  Mr. Brown: Both of these are the sorts of matters with which I want to deal in the very full policy statement which I intend to make next week.
  Mr. Marten: Is the right hon. Gentleman aware that President Nasser has said that he will continue the struggle towards victory, and would he, therefore, dissociate himself from the remark by his right hon. Friend the Secretary of State for Defence that what is happening today in the Sinai Peninsula has no reference to our position in Aden? Could we not have the statement before the debate?
  Mr. Brown: I have not heard of that remark, and the last thing that I would want to do is dissociate myself from my right hon. Friend the Secretary of State for Defence. I am often asked to dissociate myself from other people, but I do not think that I would from my right hon. Friend the Secretary of State.
  On the general issue which the hon. Gentleman raises, perhaps he will be kind enough to wait until I make a full statement next week. I will fulfil my promise to the House to make a very full statement of policy at the opening of the debate, and then the House can proceed to debate it.
  Mr. Stratton Mills: In the light of the events of last week, will the right hon. Gentleman give his assessment of whether or not, in his view, there is a danger of an external attack upon the South Arabian Federation after independence?
  Mr. Brown: I do not think that I can answer that question just like that. One would have to assess much that is currently happening in the Middle East. One would have to be in a position to assess the events of the last few days. I think that the hon. Gentleman will agree that it is a wee bit early to do that. I might be in a better position to do so next week.
  Mr. Fisher: Has the Foreign Secretary been able to make any progress in reconciling the very different aims and interests of the Arab traditionalists in South Arabia and the Arab nationalists in Aden, without which it will be very difficult for us to hand over to a united and powerful federation and without which we may be handing over to chaos?
  Mr. Brown: I do not consider that we are handing over to chaos, but obviously there are difficulties here. That is why I decided to change the High Commissioner. That is why I asked the House to be allowed to have a little time to think about the changes to be made. Obviously one wants to hand over to a more viable and widely constituted Government, if one can bring it about, than the one there at the moment. By next week, I hope to be able to present to the House a wide range of proposals which I trust the House will think commend themselves to it.
  Sir Alec Douglas-Home: Will the Foreign Secretary reconsider the timing

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  of his statement? The House has been very patient. Could he not make it on Thursday or Friday, so that we might have it in our possession over the weekend and, thereby, make the debate that much more valuable?
  Mr. Brown: When I was in Opposition, I always used to say that to the Government—[Interruption.] I never expected the Government in those days to respond; neither did they. However, there are other more serious reasons than that. In fulfilment of my pledge, I want to give the House a full statement. If I am to do that, I want to do it having taken into account all the various elements which make it up—political, security, external defence, and the rest. I shall not be in a position to do that until next week—
  Mr. Sandys rose—
  Mr. Brown: I really think that the House as distinct from the right hon. Member for Streatham (Mr. Sandys), will be better served if I open the debate next week with a full statement—[Interruption.] Since heads are being shaken and the right hon. Gentleman is jumping up and down, may I remind the Opposition Front Bench, slightly undermanned as it is at the moment—[Interruption.] I mean in terms of quality. May I remind them that the Leader of the Opposition called upon me, in terms which I can read out if necessary, to make my statement at the beginning of the debate. I shall do that.
  Mr. Speaker: Order. Answers ought to be reasonably brief.
  Mr. Sandys: May I ask the right hon. Gentleman, leaving out all his cheap points which I do not propose to take up, whether he realises that nobody objects to his making his statement next Monday; that what we object to is the idea that we must have an immediate debate on this tremendously important issue? Surely he could arrange to have the debate on the Aden Bill postponed if he was not able to make the statement before Monday? Would not that be perfectly reasonable?
  Mr. Brown: Certainly not, and I commend to the right hon. Gentleman the statement of the Leader of the Opposition that he expected me to open the debate
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  with a full statement of policy. After all, that is what debates in the House are for. The idea that the Government must make their statements of policy earlier in order that the right hon. Gentleman is able to compose his speech at leisure later does not normally go along with the practice of the House.
  Sir Alec Douglas-Home: The right hon. Gentleman need not worry about my speech. I can compose one very well, but it would be a much better speech, and so would all the speeches from both sides, if the right hon. Gentleman would concede that we should have the information before we debate this important question. My right hon. Friend was not talking about the debate on the Aden Bill. He was talking about a debate on Aden. The debate that we are to have next Monday is on the Aden Bill. Will the right hon. Gentleman try, through the usual channels, to see whether this can be arranged to the satisfaction of everybody?
  Mr. Brown: Certainly not. The debate next Monday is on the Aden Bill, and the policy which the Government are going to operate is obviously relevant to the Bill and to the circumstances of it. The appropriate moment for announcing the wide area of policy is on the debate on the Bill which has relevance to it, and I will do it in full. Right hon. and hon. Gentlemen will have a perfect opportunity of discussing it. The purpose of the debate is to discuss Her Majesty's Government's policy, and that is what I will unfold next week.
  Sir Alec Douglas-Home: Mr. Speaker, may we have a guarantee from you that when we come to discuss the Aden Bill we shall be able to debate the full scope of Her Majesty's Government's policy in every respect?
  Mr. Speaker: I was asked that on Thursday. I must reserve my position. I shall decide what is in order when I see the shape of the debate.
  Mr. Moyleasked the Secretary of State for Foreign Affairs what steps he is taking to strengthen the administration of the High Commission in Aden during the period before independence.
  The Minister of State for Foreign Affairs (Mr. George Thomson): We have

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  recently reinforced the High Commission in Aden by appointing now a number of Diplomatic Service officers who will remain to staff the British Embassy in Aden after independence.
  Mr. Moyle: Has my right hon. Friend had time to consider strengthening the High Commission in the light of the events of last week, or does he still consider it strong enough to perform its functions on independence?
  Mr. Thomson: We have recently sent a Foreign Office inspector to Aden to make a special report on the point mentioned by my hon. Friend—the need to strengthen the administration in the period up to independence. The principal recommendations of that report have already been carried out.
  Mr. Dodds-Parker: What action is the Minister taking to protect the families of the members of the Administration up to independence, in addition to the action taken to protect Service families?
  Mr. Thomson: The most careful precautions are taken to protect the families of members of the Administration in South Arabia.

  EMIGRANTS (MAINTENANCE ORDER PAYMENTS)
  Mr. Tinnasked the Secretary of State for Foreign Affairs what action Her Majesty's Government propose to take to facilitate collection of maintenance payments on behalf of a divorced wife from an ex-husband who has emigrated to a non-Commonwealth country.
  The Under-Secretary of State for Foreign Affairs (Mr. William Rodgers): We are considering the amendment of existing legislation in order to provide facilities for the enforcement, on a reciprocal basis, of maintenance and affiliation orders emanating from courts of foreign countries.
  Mr. Tinn: Is my hon. Friend aware that that reply will give considerable satisfaction since the incidence of hardship in individual cases far exceeds the number involved? Those affected will be most reassured and pleased to hear that the Government are planning legislation along these lines.
  Mr. Rodgers: I appreciate what my hon. Friend has said. This is a genuine human problem, and we are doing all that we can to help.

  FOREIGN AND DIPLOMATIC SERVICES (RECRUITMENT)
  Mr. Tinnasked the Secretary of State for Foreign Affairs whether he will now take steps to recruit members of the Foreign Service from an older age group than that from which new recruits are normally drawn.
  Mr. George Thomson: There is a regular annual competition for recruitment to the Administrative Branch of the Diplomatic Service for candidates aged between 27 and 40 (or 45 in the case of candidates with regular service in Her Majesty's Forces or who are serving or have served in Her Majesty's Overseas Civil Service).
  Mr. Tinn: Can my right hon. Friend assure me that such people, when accepted, are fully safeguarded from the point of view of superannuation and pension rights, and that they enter at a salary scale appropriate to their age?
  Mr. Thomson: Yes, Sir. They normally enter at Second Secretary or First Secretary grade, depending on their experience. The purpose of this is to enrich the diplomatic service with people who bring into it experience from outside—commercial work, journalism, scientific work, and so on.
  Mr. Coeasked the Secretary of State for Foreign Affairs what weight he gives to facility in languages in the choice of candidates for the Diplomatic Service.
  Mr. George Thomson: Candidates are expected to demonstrate a capacity to learn languages. They are tested on the basis of the opportunities they have so far had. They need not be already accomplished linguists. The necessary language training is given after entry into the Diplomatic Service.
  Mr. Coe: Has there been an improvement in the number of language candidates going into method 2, because three-quarters of the entrants into the Diplomatic Service are examined through

  69
  method 2 and in the past, apparently, results have been very poor?
  Mr. Thomson: As I have told my hon. Friend, our prime qualification is not a language facility on entry but the necessary sort of intellectual capacity and ability.
  Sir J. Langford-Holt: Is the knowledge of a language or languages a condition of promotion in the Foreign Service?
  Mr. Thomson: Yes, Sir. Once candidates are in the Foreign Service they undergo language training, and there are special incentives to learn particular languages. The Foreign Service has set up its own foreign language centre and has its own language laboratory.

  SOUTH-EAST ASIA TREATY ORGANISATION (COUNCIL MEETING)
  Mr. Ogdenasked the Secretary of State for Foreign Affairs if he will make a statement about the recent South-East Asia Treaty Organisation Council Meeting held in Washington.
  Mr. George Brown: I attended the South-East Asia Treaty Organisation Council Meeting in Washington from 18th to 20th April, when members exchanged frank views on many problems concerning South-East Asia. I took the opportunity of stressing Britain's interest in the peaceful development of the area, our satisfaction at the new spirit of cooperation between South-East Asian countries, and the urgent need for a negotiated settlement to end the Vietnam war.
  Mr. Ogden: May I ask my right hon. Friend whether he is satisfied with the frequency of the meetings of the Council and with the arrangements in force for continuing consultation between those meetings?
  Mr. Brown: The answer to both parts of the question is "Yes".

  UNITED NATIONS

    Peace-keeping Rôle
    Mr. Ogdenasked the Secretary of State for Foreign Affairs what action he proposes to enable the United Nations to
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    play a more prompt and effective rôle in dealing with dangerous and difficult international situations where United Nations intervention is desirable.
    Mr. George Brown: I do not exclude the possibility of putting forward proposals for reform at the right time. The problem at present is much more the lack of will amongst the membership to make the Organisation effective, than any structural deficiencies in it.
    Mr. Ogden: Would not my right hon. Friend agree that there is an urgent need for reform of the United Nations' Charter? Will he at least begin preliminary consultations with friendly Governments to see what proposals can be put forward at an early date?
    Mr. Brown: I do not think I agree with my hon. Friend that the need at the moment is to reform the Charter. I think that the need at the moment is to try to produce some will to make the Charter work. As to the second part of the question, I do not think I agree that one should divide members of the United Nations into friendly Governments and unfriendly Governments. I think that one has to work with them all.
    Mr. G. Campbell: Can the right hon. Gentleman make any report on progress towards agreement on the validity of and procedure for peace-keeping operations?
    Mr. Brown: This is obviously being discussed. It arises very much out of recent events, and it is one of the things which the Security Council and the Foreign Ministers will have to take into account when they meet.
    Mr. P. Noel-Baker: Will my right hon. Friend consider proposing that there should be quarterly meetings of the Security Council, with Foreign Ministers as delegates, in accordance with Article 28(2) of the Charter, so that disputes like that between Israel and the Arabs can be dealt with at the proper level of authority and in time to prevent them leading to war, as the recent dispute did?
    Mr. Brown: I doubt whether statutory meetings of that kind would help, but I assure my right hon. Friend, having very much in mind the arguments which he has urged on me for some time now,

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    that I am keeping in mind the question whether an early meeting of the Security Council at Foreign Minister level would be a good thing.
    Mr. Evelyn King: Will the right hon. Gentleman accept that the way in which the General Assembly works, giving equal voting power to Togoland and to Great Britain, divorces power from responsibility?
    Mr. Brown: I think that in saying that the hon. Gentleman is attacking a very important issue on which the whole edifice is erected. I would not encourage him to go too far along that road.

    Secretariat
    Mr. Alan Lee Williamsasked the Secretary of State for Foreign Affairs what steps he is taking to represent to the Secretary-General of the United Nations at the start of his new term of office the need for an overhaul of the administrative structure of the United Nations secretariat with a view to both streamlining and strengthening it.
    Mr. George Thomson: Her Majesty's Government certainly wish the United Nations secretariat to be strong and efficient. Our views on this matter are known to the Secretary-General, and he is aware that he will have our support for any proposals designed to improve the administrative strength of the organisation.
    Mr. Williams: Does my right hon. Friend appreciate that there is a great deal of evidence that certain of the specialised agencies of the United Nations overlap in their responsibilities, and will he press for an inquiry at the highest level in the United Nations to examine the relationship of the specialised agencies with the Secretary-General, as it is a long time now since 1945 and workings of the specialised agencies need to undergo some change?
    Mr. Thomson: I agree that there is overlapping among these specialised agencies and it is a matter for concern. The E.C.O.S.O.C. meeting is one of the places where this matter is under review, and it also comes under the consideration of the Secretary-General, and I hope that it will be helped by the kind of
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    reorganisation mentioned in my hon. Friend's original Question.
    Mr. Fortescue: As a former member of the staff of the United Nations secretariat, may I ask the right hon. Gentleman whether he is aware of the view held by many there, somewhat paradoxically, perhaps, that the structure of the United Nations would be strengthened if the salaries were not so extravagantly high?
    Mr. Thomson: That is a separate point. The important matter here is not the numbers employed but the effectiveness of the actual administrative structure; and it is that which requires some attention.

    China
    Mr. Molloyasked the Secretary of State for Foreign Affairs if he will now take all necessary measures to seek to obtain admission to the United Nations of the People's Republic of China.
    Mr. William Rodgers: My right hon. Friend the Minister of State said on 25th April that we shall continue to work for the seating of China in the United Nations. I hope that China's own actions will not have made this task more difficult.—[Vol. 745, c. 269.] [Interruption.]
    Mr. Molloy: Is my hon. Friend aware that time is running out—[Laughter.] Yes, it is; I should have thought that the fright the world had last week showed that.—[Interruption.] Does my hon. Friend accept that the evil situation still extant in Vietnam has grave dangers of escalation and it would, therefore, be sensible for our Government now to give a lead in recognising reality and acknowledging that the Republic of China exists and should take its seat in all responsible councils of the world?
    Mr. Rodgers: We have acknowledged for a long time that it exists, and, as I said in my original Answer, we shall continue to do all we can to make sure that China is seated at the United Nations. However, it is only right for me to add that, if we have obligations in this respect, China has obligations to us, particularly to our diplomats and others who have been put in an intolerable situation in the past few weeks.
    Mr. G. Campbell: Have the Government any grounds for assuming that the Chinese Government would accept a place at the United Nations if it were now offered, especially if the Nationalist Government were still to remain there?
    Mr. Rodgers: Clearly, there are problems here, and we cannot anticipate the attitude which China might adopt; but this should not affect our general policy on the main issue.

    Committee of 24
    Mr. Blakerasked the Secretary of State for Foreign Affairs what is the policy of Her Majesty's Government regarding the United Nations Special Committee of 24.
    Mr. George Thomson: The policy of Her Majesty's Government is to cooperate with the Committee of 24 as far as they can and seek the Committee's support for measures designed to promote the interests of the inhabitants of the territories concerned and where that support is not forthcoming to ensure that our policies of constitutional progress are adequately explained and where necessary defended.
    Mr. Blaker: Is the Minister aware that the House will welcome the Government's decision not to take any further part in the deliberations of this Committee so far as concerns the West Indian associated States? Is a British representative currently a member of the Committee which is touring Africa and Asia?
    Mr. Thomson: We have decided not to take part in the Committee's tour of Africa and Asia on the ground that these kind of deliberations can be more economically performed in New York. This would not preclude us taking part in any particular debate where we felt that our own interest was threatened.

    BURMA (EXCHANGE CONTROL RESTRICTIONS)
    Mr. Bob Brownasked the Secretary of State for Foreign Affairs what further representations he has made to the Burmese Government about the delay in lifting exchange control restrictions to
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    enable British citizens who have spent years in the service of their country to withdraw their life savings.
    Mr. William Rodgers: We are continuing to do all we can to persuade the Burmese Government to authorise remittances in these cases, and I have myself lately made representations to the Burmese Ambassador. Representations have also been made in Rangoon.
    Mr. Brown: In view of the limited amount of exchange involved, and the disproportionate distress being caused to individuals, would not my hon. Friend agree that the attitude of the Burmese Government is parsimonious, to say the least?
    Mr. Rodgers: I do not think I would chose to put it in those terms, but I agree that it ought to be possible to solve this problem without too much difficulty.
    Dame Irene Ward: I am grateful that the hon. Gentleman is making representations, but may I ask him what results he has had from them? This, surely, is the point. When are we going to get a satisfactory answer from the Burmese Government? Is not there something that we can do to stimulate them?
    Mr. Rodgers: It is precisely the point. We have made representations over a considerable period. I have made some again lately to the Ambassador, and I think that for the moment we must await a reply from him.

    MONGOLIA (DELEGATION TO BRITAIN)
    Mr. Bob Brownasked the Secretary of State for Foreign Affairs what was the purpose of the recent official visit to Great Britain by a delegation from Mongolia.
    Mr. William Rodgers: The delegation visited the United Kingdom as guests of the Foreign Office and the British Council. They negotiated a two-year programme of educational, cultural and scientific exchanges. The programme is on a modest scale but reflects our interest in gradually improving our relations with Mongolia.

    KING FAISAL (VISIT)
    Mr. Dewarasked the Secretary of State for Foreign Affairs whether he will make a statement on his discussions with King Faisal during his visit to this country.
    Mr. Moyleasked the Secretary of State for Foreign Affairs if he will make a statement on discussions he has had with King Faisal of Saudi Arabia during the recent State visit.
    Mr. Wallasked the Secretary of State for Foreign Affairs if he will make a statement on his talks with the King of Saudi Arabia.
    Mr. Stratton Millsasked the Secretary of State for Foreign Affairs if he will make a statement on his discussions with King Faisal during his recent visit to the United Kingdom.
    Mr. George Brown: My right hon. Friend the Prime Minister circulated a statement on these talks in reply to a Question from the hon. Gentleman the Member for Shrewsbury (Sir J. Langford-Holt) on 6th June. I have nothing to add to it.—[Vol. 747, c. 790–1.]
    Mr. Dewar: Can my right hon. Friend tell the House whether it was indicated to the Prime Minister by the King of Saudi Arabia that he was prepared to support and guarantee a broadly based Administration for the South Arabian Federation, and if so, what limits he put on the definition of the term "broadly based"?
    Mr. Brown: I am certain that the King of Saudi Arabia, like us and many others, would like to see a broadly based Government in South Arabia. I am certain that he would like to see it introduced as soon as possible. The King put no limit on this, neither do we. What we are trying to bring about is a Government whose composition includes all the various strains of South Arabian nationalism.
    Mr. Moyle: Can my right hon. Friend tell the House whether His Majesty sought any undertakings from Her Majesty's Government about the military protection of the South Arabian Federation after independence, and whether any undertakings were offered?
    Mr. Brown: I am sure that my hon. Friend understands that talks of this nature cannot go on unless they are regarded as confidential, but my hon. Friend would not be far away if he thought that some of these things were discussed.
    Mr. Stratton Mills: Cannot the right hon. Gentleman go a little further? Did not King Faisal make it clear that in his view the policy of Her Majesty's Government in leaving the South Arabian Federation defenceless was total madness, and did he not emphasise the grave danger of external attack?
    Mr. Brown: If I were to answer that question it would be a breach of the confidentiality of the talks.
    Lord Balniel: Does not the right hon. Gentleman recollect that last week the Prime Minister said that King Faisal does not see eye to eye with the Government on the question of South Arabian policy? What is the difference? Does it lie in the fact that the Saudi Arabian Government are extremely concerned about the launching of the South Arabian Federation, on independence, without any proper security against external aggression?
    Mr. Brown: There is no evidence that King Faisal of Saudi Arabia saw eye to eye with the last Government either. I have not the slightest intention of being drawn into a discussion of what passed between us in our talks.

    PERSIAN GULF
    Mr. Dewarasked the Secretary of State for Foreign Affairs what is the purpose of a continuing British presence in the Persian Gulf.
    Mr. Dickensasked the Secretary of State for Foreign Affairs why a continued British military presence is required in the Persian Gulf.
    Mr. George Brown: Our continued presence in the Persian Gulf is required to enable us to fulfil our remaining commitments in the area and to contribute to its stability.
    Mr. Dewar: Does not my right hon. Friend agree, after consideration, that the present standing of France in the Middle East illustrates again that a physical military presence in that area does not

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    necessarily lead to good relations with Middle East countries?
    Mr. Brown: My hon. Friend will recognise that there are different interests and different situations, and I would urge him not to assume too easily that France or any other country has a greater interest than we have, but to keep very much in mind that we have considerable interests in the area.
    Mr. Dickens: Will my right hon. Friend brace himself to receive a compliment from me, namely, is he aware of the widespread and sincere admiration felt in the House and in the country for the way in which he has handled the Middle East situation in the past week? Secondly, does not the Middle East war show, finally and conclusively, the utter futility and ineffectiveness of a British military presence east of Suez?
    Mr. Brown: I found the first part of my hon. Friend's supplementary question most attractive. What he has hung on it in the second part I am not sure about. I will think about it.
    Mr. James Davidson: Can the Foreign Secretary tell us what these commitments in the Persian Gulf are, especially in view of the fact that although we have British forces there, three of our main sources of oil in the area—Kuwait, Saudi Arabia and Iraq—have been closed to us as a result of the recent crisis, leaving us with only two? The other commitments, so far as I know, date back to the treaty of 1856, to prevent slave running in the Gulf. What are our other commitments in the Gulf?
    Mr. Brown: We have commitments to protect and co-operate with States in the area. On the question of oil supplies, this is a particularly delicate moment. It would be wiser if I did not comment on what has happened.
    Mr. Dodds-Parker: Has the right hon. Gentleman studied the apparent success of the French in backing one side and selling aircraft to the other?
    Mr. Ogden: Does not my right hon. Friend agree that the States of the Persian Gulf have commitments to this country, as well as our having commitments to them? What efforts are being made by Her Majesty's Government to encourage those States to fulfil their commitments to us?
    Mr. Brown: My hon. Friend has made a wise and important point. He may be assured that I am drawing this to the attention of everybody concerned.
    Mr. Sandys: Does not the Foreign Secretary realise that once we have broken our commitments and withdrawn our protection from South Arabia it will be politically and militarily almost impossible to hang on in the Persian Gulf?
    Mr. Brown: Having made the mess he did in the past, I think the right hon. Gentleman would be well advised to await the statement that I intend to make next week.

    SOUTH ARABIA (CONSTITUTION)
    Mr. Evelyn Kingasked the Secretary of State for Foreign Affairs what progress has been made in the drafting of the new constitution for the Federation of South Arabia; and if he will make a statement.
    Mr. George Brown: The constitutional proposals prepared by the Federal Government before the visit of the United Nations Mission have been under discussion but no conclusion has yet been reached and I am not at present able to give details.
    Mr. King: Does the right hon. Gentleman accept, first, that these consultations have been going on for a long time, and will he use his influence to speed them up, because they are of the utmost consequence? Secondly, will he seek to use what influence he has to see that they result in a First Minister or Prime Minister emerging as the head of the Federation who might act as a focus of loyalty, rather than a rotating chairman going on from month to month?
    Mr. Brown: The hon. Member has a very good point. I think that he will find that when I make the statement that I have promised to the House next week I will cover it.

    NUCLEAR WEAPONS
    Mr. Martenasked the Secretary of State for Foreign Affairs if he will make a statement on progress towards internationalising Great Britain's nuclear deterrent.
    Mr. Blakerasked the Secretary of State for Foreign Affairs to what extent the Nassau Agreement of December, 1962, remains in force.
    Sir T. Beamishasked the Secretary of State for Foreign Affairs what proportion of the United Kingdom's nuclear strike capacity is assigned to the North Atlantic Treaty Organisation, the Central Treaty Organisation and the South-East Asia Treaty Organisation; and to what extent Her Majesty's Government retains the right claimed at the Bahamas meeting in December, 1962, to withdraw such forces should supreme national interests be at stake.
    The Minister of State for Foreign Affairs (Mr. Frederick Mulley): Our nuclear weapons are already internationalised to the extent that the V-bombers are assigned to the North Atlantic Treaty Organisation and targeted in accordance with North Atlantic Treaty Organisation requirements. Similar arrangements are envisaged for the Polaris force when it becomes operational. Certain of our aircraft with a nuclear capability are declared to the Central Treaty Organisation and to the South East Asia Treaty Organisation.
    Although, as my right hon. Friend the Defence Secretary has said, we can conceive of no situation where it would make sense for this country alone to use these weapons, the right to use our strategic nuclear forces independently continues if our supreme national interests are at stake.
    Mr. Marten: In other words, the situation is exactly the same as it was and has been for the last two and a half years? Is this not entirely against what the Labour Party said during the election?
    Mr. Mulley: On the contrary, we shall continue to consider ways of internationalising our nuclear forces. We have already made considerable progress in this direction by joint targeting arrangements, and by the new N.A.T.O. nuclear consultative machinery which, as the House knows, has been the priority in N.A.T.O. in the last years.
    Mr. Blaker: Since the Government have now made it clear that British Polaris submarines will be assigned to
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    N.A.T.O. on terms which will permit of their being withdrawn, will it, after all, be necessary to renegotiate the Nassau Agreement and, if so why?
    Mr. Mulley: As I have already said, the priority in N.A.T.O., a priority which the Government support, has been to establish collective consultative and planning machinery. When this is working properly, the other question raised by the hon. Member will no doubt be further considered.
    Mr. Philip Noel-Baker: In view of the very dangerous crises which the arms race is continually bringing, are the Government still considering methods of abolishing all nuclear stocks?
    Mr. Mulley: This has been the Government's objective and, as my right hon. Friend knows, we have put forward proposals for general and complete disarmament. I hope that the non-proliferation treaty in Geneva will come along as an important step in that direction.
    Lord Balniel: Am I not right in remembering that the first priority in the defence policy of hon. Gentlemen opposite was to renegotiate the Nassau Agreement?
    Mr. Mulley: I have no recollection of that. [HON. MEMBERS: "Oh."]
    Mr. William Hamilton: Would my right hon. Friend say whether he conceives of any possible circumstances in which we would "go it alone" with nuclear weapons?
    Mr. Mulley: I can conceive of no such circumstances and in my original Answer that was exactly what I said.
    Mr. Marten: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek leave to raise this matter on the Adjournment at the earliest opportunity.
    Mr. Alexander W. Lyonasked the Secretary of State for Foreign Affairs whether he will make a statement on the progress towards a non-proliferation agreement.
    Mr. Luardasked the Secretary of State for Foreign Affairs whether, in view of the difficulties that have arisen over the conclusion of a non-proliferation treaty, Her Majesty's Government will offer to open British non-military nuclear

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    establishments to international inspection on the same basis as is proposed for non-nuclear powers.
    Mr. A. Royleasked the Secretary of State for Foreign Affairs what progress has been made towards an agreement on a treaty banning the proliferation of nuclear weapons.
    Mr. Mulley: I explained on 5th June the efforts that we are making to get an agreed draft non-proliferation treaty tabled at Geneva. Recent events in the Middle East have underlined the need to negotiate the treaty as quickly as possible.—[Vol. 747, c. 100.]
    Mr. Lyon: While agreeing emphatically with the final sentiments of that Answer, may I ask my right hon. Friend whether he is preparing now to take a new initiative to allay the suspicions of those Powers who are concerned about conveying their secrets to an inspectorate in relation to non-military nuclear installations? What is being done about this by the British Government?
    Mr. Mulley: I am sure that it is right that we ensure that civil use of nuclear power is in no way impeded by such a treaty but, until a draft treaty is tabled by the co-Chairmen of the 18-Nations Disarmament Committee, it is not possible to discuss in a wider circle the point raised by my hon. Friend. I hope that this draft treaty will be tabled very shortly.
    Mr. Luard: May I ask the right hon. Gentleman to answer Question No. 37, as he has not yet done so? Can he say whether the Government are prepared to make an offer of opening nuclear installations to the same kind of international inspection that the non-nuclear Governments are being asked to accept, as a means of overcoming some of the objections which have been raised by the West German and other Governments on this point?
    Mr. Mulley: As my right hon. Friend the Foreign Secretary said on 17th April, we are considering what we can do regarding safeguards of our peaceful nuclear facilities. I can give my hon. Friend the assurance that we will bear in mind the point that he has made.
    Mr. Lubbock: What proposals are being made by the Government regarding
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    the sale of enriched uranium to non-nuclear Powers for civil purposes, in order to be absolutely certain that they are not subsequently used for military purposes?
    Mr. Mulley: This question is one of the matters that cannot be very fruitfully pursued until we get a draft treaty tabled. This is the most urgent thing that we can do in this direction.
    Mr. Frank Allaun: To overcome the objections of certain, at present non-nuclear Powers, will the Government consider, if not unconditional relinquishment of the British nuclear bomb, at least giving it up in return for these Powers signing the pact?
    Mr. Mulley: It is a little premature to go as far as that before we actually have a draft treaty. In the present situation, I do not think that a unilateral act of that kind on our part would assist.
    Lord Balniel: How does this draft agreement differ from the draft agreement under discussion in 1963 with the United States Government?
    Mr. Mulley: The treaty which is under discussion between the American and Soviet Union Governments has not yet been published, so it is difficult to say in what respects it will differ, but it will differ on a number of important points.
    Sir Alec Douglas-Home: Is not that strange? Did not the Prime Minister tell me that he had searched all the pigeonholes in the Foreign Office for this draft left by the last Government in 1963 and could not find it? How does he know that it differs?
    Hon. Members: Answer.
    Mr. Mulley: We are dealing with a rather hypothetical situation until we have a draft treaty at Geneva.

    ACCIDENTS AT SEA (INTERNATIONAL LAW)
    Mr. Alexander W. Lyonasked the Secretary of State for Foreign Affairs what progress has been made following the "Torrey Canyon" incident in the review of international law relating to accidents at sea.
    Mr. Mulley: A legal committee was established at the Inter-Governmental Maritime Consultative Organisation Special Meeting of the Council on 4th and 5th May. It will meet on 21st and 22nd June to begin consideration of international legal problems arising out of the "Torrey Canyon" disaster.
    Mr. Lyon: What proposals is my right hon. Friend considering putting before this Committee to deal with the twin problems of compensation for disasters of this kind—compensation which must be shared between all the maritime Powers—and trying to prevent such accidents by ordering the sea-lanes in a better way than is possible at the moment?
    Mr. Mulley: There are many other points as well as the two important ones mentioned by my hon. Friend. It is an extremely complex legal problem and, rather than trespass upon the time of the House now, I will place in the Library the full text of all the 18 points that the Government have submitted to this Committee.
    Sir Knox Cunningham: Will the right hon. Gentleman consider some arrangement by the maritime States whereby they would guarantee a fund to meet similar types of disaster which occur on the High Seas, without any particular liability upon the ship or the owners?
    Mr. Mulley: This is certainly a point which can be considered, and I assure the hon. and learned Gentleman that all relevant points will be put by us before the Committee. It is a very complicated legal question, as he knows, and it will take time for them to be processed by this international body.
    Dr. John Dunwoody: Would my right hon. Friend accept that many people in the South-West consider that progress should be very rapidly made, because we are concerned with the ever-present risk of a disaster similar to that of the Torrey Canyon occurring on our shores in the months ahead?
    Mr. Mulley: I am grateful to my hon. Friend for stressing the urgency, and I can assure him that the Government will do all that they can to press matters forward. It would be unrealistic to expect
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    a very rapid solution to the very many intricate matters involved.
    Mr. Geoffrey Wilson: Can the right hon. Gentleman tell me whether the 18 points to which he has referred include any reference to the provisions for the navigability of large tankers?
    Mr. Mulley: These matters are among the points, but, rather than go into the long list now, I hope that the hon. Member will consult the text in the Library.

    BRITISH ATLANTIC COLLEGE
    Mr. Alan Lee Williamsasked the Secretary of State for Foreign Affairs what funds and personnel are made available by Her Majesty's Government to the British Atlantic College.
    Mr. William Rodgers: The grant given to the Atlantic College for the year 196667 was the final one and no personnel have been made available to the College.
    Mr. Williams: Would my hon. Friend agree that the amount of money that Her Majesty's Government spend on the Atlantic College, which I in no way wish to disparage, is in sharp contrast to the amount of money that official sources give to the Council for Education in World Citizenship? Would my hon. Friend be prepared to look at this matter to see whether a larger grant could be given to the C.E.W.C. which receives only £950?
    Mr. Rodgers: I am not sure that the comparison is as exact as my hon. Friend implies, but I will certainly look at the matter as a whole, though I should point out that responsibility for the Council for Education in World Citizenship is that of my right hon. Friend the Secretary of State for Education and Science.

    GREECE (BRITISH SUBJECTS)
    Mr. Roseasked the Secretary of State for Foreign Affairs (1) what action he is taking to safeguard the interests of British subjects arrested and detained by the new military Government in Greece;
    (2) whether he will make a statement on the whereabout of Mrs. Betty

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    Ambatielos, arrested by the military Government in Greece.
    Mr. William Hamiltonasked the Secretary of State for Foreign Affairs what efforts have been made to secure the release of British-born subjects imprisoned by the new regime in Greece; and with what results.
    Mr. William Rodgers: The only British subjects arrested following the recent Greek coup were Mrs. Betty Ambatielos and two brothers named Olympios. Repeated representations to the Greek authorities were made on their behalf by our Embassy in Athens. The Olympios brothers were released and expelled from Greece on 6th May, and Mrs. Ambatielos on 27th May. To the best of my knowledge, all three are at present in this country.
    Mr. Rose: My hon. Friend's efforts in this regard are greatly appreciated, but will he use his influence in N.A.T.O. and elsewhere to see that we have a speedy end to the military régime in Greece and a return to constitutional rule, and will he use his good offices on behalf of those thousands of Greeks still in prison without trial who have not had the benefit of his intervention?
    Mr. Rodgers: I appreciate my hon. Friend's first observation, and I shall pass on his message to our Embassy in Athens, which did a lot of work in this respect. His supplementary question raises larger issues. We must always be concerned to try to get the best result we can in all the circumstances, and sometimes the more obvious way is not the best way to achieve it.
    Mr. Hamilton: Why were these people detained in the first place, and have any proposals been made by Her Majesty's Government for compensation for them?
    Mr. Rodgers: They were detained by the Greek Government for security reasons. I do not think that the question of compensation arises, but I will look into it.
    Mr. Mawby: Will the hon. Gentleman consult his hon. Friend the Member for Swindon (Mr. Francis Noel-Baker) before finally making up his mind on this question?
    Mr. Ian Lloyd: Could the hon. Gentleman widen his answer on this subject and give some reassurance that Her Majesty's Government have a general and convincing policy for dealing with questions of this kind wherever and whenever they arise? May I draw his attention particularly to the plight of British subjects at the moment marooned on five British ships in the Bitter Lakes?
    Mr. Rodgers: The hon. Gentleman may certainly draw that to my attention, and I shall look into it. In general, we have very satisfactory arrangements and, when British subjects get into difficulties abroad, for whatever reason, prompt and effective action is taken.
    Dr. David Owen: Will my hon. Friend take it that, while many of us are grateful for the individual diplomatic initiatives which are taken, we feel that condemnation of this régime by the Government has been inadequate? With the sole exception of what has been said by the Lord President of the Council, we have not heard an outright condemnation of the regime, and we should like the Government to consider doing this at frequent intervals.
    Mr. Rodgers: The Government very well understand the mood of the House in this respect.

    OVERSEAS INFORMATION (BEELEY REPORT)
    Dr. Ernest A. Daviesasked the Secretary of State for Foreign Affairs whether he will make a statement on the Beeley Report.
    Mr. Bostonasked the Secretary of State for Foreign Affairs if he will make a statement about the progress of the inquiry by Sir Harold Beeley into Great Britain's overseas information services.
    Mr. Eldon Griffithsasked the Secretary of State for Foreign Affairs if he will publish the Beeley Report.
    Mr. Tilneyasked the Secretary of State for Foreign Affairs whether Sir Harold Beeley's review of overseas information will be published: and whether this covers the possibility of setting up a British Council office in the Philippine Republic.
    Mr. William Rodgers: Sir Harold Beeley's Report is now under consideration. We are discussing how the welcome interest of hon. Members and the general public in this Report can most suitably be met. In the meantime, it would hardly be appropriate for me to discuss the contents.
    Dr. Davies: I thank my hon. Friend for that reply, but, as this Report deals generally with our information services and related matters, a subject of great concern to the House, it being increasingly necessary that Britain's voice be heard in the world not only on cultural subjects but also in support of our export drive, ought we not to have an opportunity to discuss its contents when the Report is presented?
    Mr. Rodgers: We have this in mind, and I am sure that the point will have been noted by my right hon. Friend the Lord President of the Council.
    Mr. Boston: When will the Report be published? Second, can my hon. Friend say to what extent overseas broadcasting has been taken into account in the review, especially the need to increase output in the Far East services? In view of the considerable interest on both sides of the House in the need to improve overseas information services, will my hon. Friend take it that we should like a debate at an early opportunity?
    Mr. Rodgers: I cannot give the date when the Report will be available for publication. The question of a debate has already been noted. There are many claimants of different kinds for expanded overseas information services. For services in the Far East as well as in the Middle East, the B.B.C. would be an obvious candidate which ought to be taken into account.
    Lord Balniel: While we should welcome a debate on this Report later on, perhaps the hon. Gentleman would explain at this stage why broadcasts in Arabic were reduced earlier this year from 84 hours a week to 70 hours a week?
    Mr. Rodgers: It is essential that, at all times, we should look at our overseas information services both to ensure proper continuity and to take account of our limited resources and the priorities
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    as we see them. We try to make the best judgment possible in all the circumstances.

    LATIN AMERICA (NUCLEAR-FREE ZONE)
    Mr. Luardasked the Secretary of State for Foreign Affairs whether Her Majesty's Government propose to ratify the two protocols to the agreement for a nuclear-free zone in Latin America.
    Mr. Mulley: We welcome the efforts of the Latin American states to prohibit nuclear weapons from their territories and we are studying the text of the Treaty. We hope that we shall be able to associate ourselves with it by signing and ratifying the two Protocols.
    Mr. Luard: Does my right hon. Friend agree that, in view of the difficulties that have faced the non-proliferation treaty in Geneva, one of the most effective ways of helping to prevent the spread of nuclear weapons is by assisting and promoting non-nuclear zone agreements of this type?
    Mr. Mulley: I agree that non-nuclear zone agreements are very helpful, but I hope that my hon. Friend is not suggesting that they are a substitute for the general non-proliferation treaty, to the attainment of which we are working very hard.
    Mr. Dodds-Parker: Will these agreements cover British still-dependent territories in the Caribbean?
    Mr. Mulley: It is intended that all states within Latin America, including dependent territories, will be covered, and it will be on that basis that we should sign one of the protocols.

    ANGLO-SOVIET CONSULTATIVE COMMITTEE
    Mr. Coeasked the Secretary of State for Foreign Affairs when he expects to announce the membership of the British side of the new Anglo-Soviet Consultative Committee.
    Mr. George Brown: I spoke to the Soviet Government about the Committee during my visit to Moscow. They gave me their proposals for the Committee's terms of reference in reply to the suggestions we put to them earlier. As soon as

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    the terms of reference are settled, I intend to approach people to serve on the British Group of the Committee.
    Mr. Coe: I thank my right hon. Friend for that reply, but may I urge on him the need to push this ahead as quickly as possible? To whom will the Consultative Committee report when it comes to its conclusions on various aspects of Anglo-Soviet co-operation, in view of the wide nature of the subjects covered by the Committee?
    Mr. Brown: I am very well aware of the need and very keen that we should push it ahead as fast as we can, because I think that it will help the relationships of both countries with each other. Each side of the Committee will, of course, report to its own Government.
    Mr. Marten: Are not quite a number of matters in the communiqué going rather slowly? Does the Foreign Secretary recall that the Prime Minister said that we must keep up the momentum? Does not that rather glossy communiqué now look a bit tarnished?
    Mr. Brown: The hon. Gentleman is quite wrong. Quite a lot is happening and is happening rather quickly. My right hon. Friend the Minister of Health is off today to deal with one part of it. What we have to do is to ensure that each part comes to fruition in a form which can then carry us to the next stage of the journey, and that we are doing.

    U.S.S.R. (MR. GERALD BROOKE)
    Mr. Winnickasked the Secretary of State for Foreign Affairs what further proposal he has made to the Russian authorities over the Gerald Brooke case.
    Mr. William Rodgers: My right hon. Friend pressed the Soviet Government very hard about Mr. Brooke during his visit to Moscow, but I regret that there was no change in the Soviet position.
    Mr. Winnick: The House will be pleased with what my right hon. Friend the Foreign Secretary has done, but are the Russians aware of the feelings of right hon. and hon. Members on this issue? Do they appreciate that in a Parliamentary democracy like ours it is
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    not unusual to be concerned about a single individual, even if he is, perhaps, a misguided individual?
    Mr. Rodgers: I am sure that the Russians will be aware and will be made more aware by the interest taken by my hon. Friend.
    Sir Alec Douglas-Home: Does the hon. Gentleman realise that this is really most uncivilised behaviour on the part of the Russian Government, that it is a very serious matter of which the House should take note? How often has Mr. Brooke been visited by the Consul? Is it the case that he has been visited only once in nine months or once a year?
    Mr. Rodgers: Mr. Brooke was last seen by the Consul in December. We have left the Russians in no doubt about the serious view we take about this and, of course, we are anxious that he should be seen as often as possible. It is right that the House should express its view in these terms, and we shall certainly convey them to the Soviet authorities.
    Mr. A. Royle: What action does the hon. Gentleman propose to take now? Is he aware that when the Foreign Secretary returned from Moscow after his last visit he indicated to the House that he had succeeded in obtaining some sort of relaxation in the conditions under which Mr. Brooke was living? What action has been taken—none?
    Mr. Rodgers: There was some relaxation, as my right hon. Friend told the House. [HON. MEMBERS: "What?"] The question relates to what happened on my right hon. Friend's recent visit. We are still pressing very hard and will do all we possibly can to make sure that Mr. Brooke's conditions are improved, but at the end of the day as long as he is held by the Soviet authorities the most we can do is to make representations and convey to the Soviet Government how seriously we regard his detention and its circumstances.
    Sir R. Cary: Without straining Russian prison regulations too much, is Mr. Brooke being allowed to receive a limited number of parcels?
    Mr. Rodgers: Yes, Sir.

    SOUTH-EAST ASIA
    Mr. Gardnerasked the Secretary of State for Foreign Affairs whether he will take the necessary steps to ensure the continuation of friendly relationships between Great Britain and the countries of South-East Asia, with a view in particular to the growth of mutual trade in a period during which the British military presence will be reduced.
    Mr. William Rodgers: A reduction of our military strength in the Far East need not affect our friendly relations with the countries of South-East Asia and we shall certainly do all we can to develop our trading and other relationships to our mutual benefit.
    Mr. Gardner: Will my hon. Friend accept that the withdrawal from Singapore as quickly as possible will be welcomed, at any rate by a good many hon. Members on this side of the House? But will he ensure that any additional assistance in developments taking place should be phased to fit in with that withdrawal so that we do not face another Malta situation?
    Mr. Rodgers: That raises a more specific question than is dealt with in the original question, but we certainly have very much in mind the point made by my hon. Friend.
    Mr. Gardnerasked the Secretary of State for Foreign Affairs what steps he has in mind for encouraging the establishment of regional organisations for economic and social co-operation in South-East Asia, and, in particular, as regards those countries which have a close association with Great Britain.
    Mr. William Rodgers: Her Majesty's Government warmly welcome the interest now being shown by the countries of South-East Asia in the possibilities for regional co-operation. But we believe that the form of this co-operation, and the establishment of new organisations to promote it, are matters which the Asian peoples must decide for themselves.
    Mr. Gardner: While I accept my hon. Friend's point, does he not think that the time has come for a new United Nations initiative in this kind of organisations' development, and will he seek to
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    initiate discussions with other United Nations members on it?
    Mr. Rodgers: I quite agree that the interests of the United Nations must be maintained and, in so far as we can take a useful initiative here, we shall look into it, but the fact still remains that the countries of South-East Asia, with all their problems and ancient rivalries, must find ways of coming together in a way which is mutually acceptable.

    MINISTER OF STATE FOR FOREIGN AFFAIRS (OVERSEAS VISITS)
    Mr. A. Royleasked the Secretary of State for Foreign Affairs what is the total cost to public funds incurred by overseas visits carried out since October 1964 by the Minister of State, Lord Chalfont.
    Mr. George Brown: For the period from October 1964 to September 1966, I would refer the hon. Gentleman to the reply given by my hon. Friend the then Minister of State the Member for Flint, East (Mrs. White) to my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) on 1st November, 1966. From October 1966, total costs of about £5,740 have been incurred by the many missions my right hon. and noble Friend has led so well.—[Vol. 735, c. 71.]
    Mr. Royle: In view of the total failure of Lord Chalfont to achieve anything over the past 2½ years, why is he now being sent to Brussels? Is it a shabby party political manoeuvre at the expense of his right hon. Friend the Member for Sheffield, Park (Mr. Mulley), in order to calm down the opponents of the application to join Europe on his back benches?
    Mr. Brown: That well-written supplementary question seems neither relevant to the Question on the Order Paper nor worthy of the hon. Gentleman.

    PASSPORTS
    Mr. Gwilym Robertsasked the Secretary of State for Foreign Affairs whether he is aware of the anomaly whereby female travellers cannot travel singly on a passport in the name of the

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    husband and wife; and if he will take steps to provide a dual passport which can be used by either husband or wife singly.
    Mr. William Rodgers: Yes, Sir. This arises from a recommendation of the Geneva Passport Conference of 1926, which is still in force internationally. It would be wrong for the United Kingdom to change the rule unilaterally, since British wives travelling alone on joint passports could then run into difficulties abroad, owing to other countries not recognising their passports as valid in the absence of their husbands.
    Mr. Roberts: Would my hon. Friend not agree with me that this is a matter not of an extra 30s. for a passport but of the treatment of the wife as a sovereign citizen and not merely part of the husband's chattels?
    Dame Irene Ward: Is not this a ridiculous situation, and did not the Minister give a ridiculous answer? Will the hon. Gentleman reconsider it? Cannot the House make representations in the hope that some sensible recognition will be taken in this kind of connection? The whole thing is absolutely idiotic.
    Mr. Rodgers: I fully understand the sentiments expressed by my hon. Friend and the hon. Lady, but this is a matter in which we must have reciprocity or we shall not gain the advantage—[Laughter.]—by which I mean that Members of this House will not gain the advantage which would come from reciprocity.
    Mrs. Lena Jeger: Will my hon. Friend try to press in the discussions for the complete abolition of joint passports? Surely it is an absurd anachronism for any woman to be on any man's passport?
    Several Hon. Members rose—
    Mr. Speaker: I think it is fortunate that Question Time has run out.

ORDERS OF THE DAY

  FINANCE (No. 2) BILL
  Further considered in Committee [Progress, 8th June].
  [Mr. SYDNEY IRVING in the Chair]

  FINANCE (No. 2) BILL

    Clause 25.—(CONVEYANCES AND TRANSFERS ON SALE: REDUCTION OF DUTY, AND AMENDMENT OF PROVISIONS FOR EXEMPTION.)
    3.33 p.m.
    Mr. John Hall: I beg to move Amendment 175, in page 31, line 36, at the end to add:
    Provided that the foregoing provisions of this subsection shall only apply where—

    (a) the body from which the interest was transferred (the transferor company) was beneficial owner of not less than ninety per cent. of the issued share capital of the body to which the interest was transferred (the transferee company) or where a third body corporate was beneficial owner of not less than ninety per cent. of the issued share capital of each, and

    (b) the transferor company and the transferee company have ceased to be associated by reason only of the transferor company or the third body corporate ceasing to be beneficial owner as aforesaid, and have not so ceased by reason of the liquidation of the transferor company.

    For the purpose of paragraph (a) above any share capital of the transferee company owned by the said third body through the transferor company shall not be taken into account in calculating the amount of share capital owned by the third body in the transferee company.
    From the point of view of audience rating I suppose that this is the best spot in the daily programme of Parliament, but I am afraid that the series of Amendments now to be discussed arc rather technical and lack popular appeal. In moving this Amendment I cannot hope to match the atmosphere of screaming farce which marks Government replies in debates on S.E.T., nor can I hope to rival the Chief Secretary's colourful and imaginative accounts of the terrible tax that lurk beyond our shores. Nevertheless, I believe that this Amendment and the Amendments which follow are not unimportant, because they will, if nothing else, clarify certain obscurities about the stamp duty Clauses as they are at present worded.

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    Clause 25 is primarily a relieving Clause. I do not want to be accused of looking a gift Clause in the paragraphs, but subsection (4), as now worded, seems to attack innocent transactions where the assets transferred continue to be at least 90 per cent. group owned. The Amendment is designed to provide that the loss of exemption shall arise only where it is the transferee company which ceases to be within the group; that is, the liability to duty arises only if the assets leave the group. Under the present law it is possible in certain circumstances for assets to be transferred within various companies in such a way that duty is avoided. I hope that this Amendment as drafted will meet this point, and I hope, also, that it meets the point of relieving the penalisation of otherwise innocent transactions.
    It is because I believe the Amendment to be fully justified that I move it with complete confidence that the Government will see this point of view and be prepared to accept it.
    The Financial Secretary to the Treasury (Mr. Niall MacDermot): I am grateful to the hon. Member for Wycombe (Mr. John Hall) for the brevity with which he has moved the Amendment, because we have a heavy programme ahead of us. I shall try to meet him with equal brevity. I can assure him that we take his point here and think that something should be done to improve the Clause.
    Subsection (4) counters the device under which relief from transfer duty in respect of transfers within a group of companies can be obtained for a transfer paid for, in effect, by a person outside the group and forming part of an arrangement under which one of the companies leaves the group. It has been represented to us—the hon. Gentleman has put the argument—that the solution that we have sought to this problem may hit at innocent transactions. I need not go into the details of it.
    I am afraid that what is proposed in the Amendment does not meet this point. Clause 25(4) depends on the conception of a group consisting of the transferor and transferee companies, and if the transferor leaves the group there is no longer a group for the subsection to fasten
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    on to and it no longer gives any protection against avoidance. So we think that we shall need to try to attack the problem in a different way. This may mean that a new Ways and Means Resolution will be required and possibly even recommittal of the Bill, but no doubt, with cooperation, this need not provide any very great hurdles.
    We have in mind a provision on the lines of strengthening the existing anti-avoidance provisions of Section 50 of the Finance Act, 1958. This will have some disadvantages in lacking precision, but as we cannot meet the point by amending Clause 25(4) without opening the door to avoidance we think that these disadvantages will have to be accepted.
    If the hon. Gentleman will be willing to withdraw his Amendment, I can assure him that we will look at this and bring forward later the best means we can of meeting the point.
    Mr. John Hall: I am sure that the Committee is grateful to the hon. and learned Gentleman for the way in which he has received the Amendment. When I moved it I thought that the logic and reason of it were such that it would impress the Government benches, as it has done. I hope that the hon. and learned Gentleman will be equally receptive to some of the other Amendments that we shall be moving later. However, in view of what he has said, it is with much pleasure that I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Question proposed, That the Clause stand part of the Bill.
    Mr. John Smith: I shall not detain the Committee for long, but I think that this Clause needs a bit of examination as a whole. I do not think that subsection (1) goes nearly far enough. It is to be welcomed as a step towards the eventual final abolition of stamp duty, which is an obsolete and damaging tax. It is even older than the Inland Revenue. It was introduced at a time when nobody could think of anything workable which was better.
    It is now a very complicated tax, and subsection (2) is evidence of that. It is very uneven in its incidence: if one buys a factory manufacturing goods for export

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    one pays the tax; if one buys a Rubens one does not. It is often not very difficult to avoid the tax. It represents well under 1 per cent. of the revenue of the country and takes a whole department, not necessarily the largest department, of the Inland Revenue to deal with it. It costs over twice as much, pound for pound, as Customs and Excise duties, and I feel that it is a direct obstacle to the process of saving and investment which we all want to encourage.
    I say that simply by way of introduction, because we are here dealing with the tax as it affects property conveyances. After the passage of the Bill this Clause as it affects property conveyances may perhaps raise £15 million in this way. I question whether this is the best way for the country of raising this money.
    Assessing stamp duty on property can be very complicated. In 1965–66, I notice, over 10,000 valuations had to be made and agreed in respect of gifts of property alone, and, as the Committee knows, valuations of property engage the time both on the Government side, the Inland Revenue side, and the public's side, of very skilled and valuable people indeed, all of whom are now badly needed to argue about the Land Commission; and all this is for 1 per cent. tax; that is, one decimal penny in the pound.
    This argument can take 12 months, or even more if the matter goes to court. This is extremely costly. It is costly to the economy. We all know the costs of leaving a site vacant whether it be for Government offices or commercial premises, but sometimes the cost is even greater than we realise, in that not only is the owner not getting a return on his money, but is paying ground rent as well. The highly-trained and important people on both sides, important people in the officies at Worthing, are simply lost to the country by this process just as much as if they had gone down the brain drain.
    This cost to the economy is greater, in my view, now, because whereas in the past the adjudicator of stamp duty was always arguing for the value of property to be put up, and the people on the other side were arguing for it to be put down, very often the Stamp Duty Office is now arguing to get the value of property reduced and the owners are arguing for it to be put up because of the incidence
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    of Capital Gains Tax, and this makes matters more confused.
    I have here, as usual, a letter from one of my constituents which is a very fair sample. He got into trouble with the Stamp Duty Office over "submission to the Adjudication Department of the Stamp Duty Office of Orders of the Court approving schemes for the variation of trusts". I went into this and there is an amount of work involved in this particular type of adjudication procedure that is very great indeed.
    The £15 million, which is what this tax will raise in the form set out is, of course, very agreeable for the Inland Revenue, and, of course, it pays the Revenue to collect it; but I very much doubt whether it pays the economy of the country as a whole. There are, of course, far more small transactions than large ones but the cost of levying a tax like this is not much more, except in cases which have to be adjudicated, for large transactions than it is for small ones. Therefore, the way to start cutting down this jungle is to raise the level of exemption.
    It has been done a little this year, but I feel that subsection (1) does not go nearly far enough and that one simple way of improving it would be by this year exempting all property up to £7,000 which is the second figure mentioned.
    I wonder what the point is of the complication of collection of a tax of a ½ of 1 per cent.—half a decimal penny per £—on a very narrow band of transactions. It is not as though the Chancellor were the Dame of Sark, who I understand, is able to levy a treizieme, which is, I suppose, something over 7½ per cent., but I wonder whether ½ a per cent. is really worth it.
    The third point I want to make—
    3.45 p.m.
    Mr. Eric Lubbock: The Chancellor has one thing in common with the Dame of Sark, in that by his policies he is trying to drive motor vehicles off the road.
    Mr. Smith: I yield to no one in my admiration for that gallant lady, who took such a magnificent stand in the war, but I do not wish to pursue her resemblances and differences to and from the Chancellor at this moment.

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    Further, if conveyances are to receive relief, why not mortgages? Presumably, the man who needs a mortgage to buy his house is in greater need of relief than the man who does not need a mortgage, and a point I have never seen made, is that a mortgage is most often secured by a life policy which itself attracts stamp duty, so that the man burdened with a mortgage pays three sets of duty while the laughably termed "rich" man, who does not need a mortgage, pays only one set. The stamp duty on small mortgages cannot possibly pay for its collection, and I urge the Chancellor to look at this.
    If conveyances are to be relieved, will the Chancellor please consider the abolition of stamp duty on leases. This duty on leases raises something over £2 million a year, but it is raised from literally countless transactions. The average receipt must be tiny and this tax cannot possibly pay for its collection.
    Finally, why has the Chancellor chosen the date of 1st August? I do not see why changes in stamp duty should not be able to take place forthwith like other changes in taxes. The transactions to be relieved will be held up to get reduced duty, and there will be a flood of business just after 1st August in the middle of the holiday season when solicitors and their staffs and even, indeed, the Controller of Stamps and his staff are trying to get a bit of a holiday. There will be a queue of clerks all trying to get things stamped and get off on their holidays, and that will add to the normal confusion of life, and the normal confusion in the office in Worthing. It will make a lot of trouble, I feel, which could be avoided by altering the date.
    To sum up, stamp duty may pay the Revenue, but I do not think that it pays the country. I feel that in the end it ought to go; but a start should be made by abolishing stamp duty on leases and mortgages and on all but the very largest conveyances; and the Chancellor should amend this Clause on Report, to allow the Clause to take effect forthwith.
    Mr. Raymond Gower: My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) has put forth reasonably and
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    fairly a powerful case for examination of the stamp duty system as it remains even after the improvements of recent years and in this Bill. I wish that he had put down an Amendment. It is not always the things which are put down in the first flush of enthusiasm which are necessarily the best. He has had valuable later thoughts about this and has called attention to something which should be closely examined.
    Mr. MacDermot: But not now.
    The Deputy Chairman (Mr. Sydney Irving): The hon. Member for Barry (Mr. Gower) is getting away from the Clause. We can only discuss the Clause as it stands.
    Mr. Gower: The imperfections of the Clause have been effectively stated by my hon. Friend, Mr. Irving, and I shall not go further in emphasising the validity of the points he made.
    I hope that the Financial Secretary paid attention to the comparison between the person who pays cash for a house or other property and the person who has to take out a mortgage. It seems senseless that the man who has to pay a mortgage is prejudiced not only in that sense, but also by having to pay stamp duty, whereas the man who can afford cash does not.
    My hon. Friend also referred to the impact of the duty on a person buying what is not today a particularly expensive property. I have had experience of this in my professional career and I know that the person who buys such a property is usually stretched to the limit. When he finds himself called upon to pay the necessary legal costs, the last straw is the stamp duty. It is difficult to explain to him.
    I hope that the Chancellor will give this serious consideration. Perhaps, as my hon. Friend has suggested, he will come forward with an Amendment on the Report stage. If the right hon. Gentleman cannot, I hope that he will take the point as being valid for the future. We should scrap most of the stamp duty system.
    The Deputy Chairman: Order. We cannot have a general debate on stamp duty. This Clause makes changes on the margin and we can only discuss those changes.
    Mr. Gower: I want to make bigger changes.
    The Deputy Chairman: The hon. Gentleman cannot do it on this Clause.
    Mr. Gower: I deeply regret, Mr. Irving, that we cannot do it on this Clause. I shall agree to the contents of the Clause with great reluctance and, within the rules of the House I shall consider how I can put down an Amendment to the Clause on Report.
    Mr. Charles Fletcher-Cooke: Last year, I put down a Clause which, if added to the Finance Act, 1966, would have had the effect of abolishing stamp duty. It received no support from any one on either side. I raised this matter on the Second Reading of the Bill and again received no support. I am glad to see that today, out of the rules of order, support is growing for my view. Anything that in any way diminishes this ancient and barbaric tax will have my support.
    The Deputy Chairman: Order. I am sorry to interrupt the hon. and learned Gentleman's campaign, but he is out of order.
    Mr. Fletcher-Cooke: My argument is that of a moderate man, Mr. Irving, and I am prepared to support a Clause which diminishes the incidence of this barbaric and ancient tax even to the small extent that this great number of words purports to do.
    Administering directly stamp duty involves about 170 civil servants—far too many. Apart from that, and perhaps increased by this Clause, are innumerable people, in accountants' offices and in private industry, who are concerned to administer this totally out-of-date tax. In so far as the Clause diminishes the tax, it must have our support.
    As I pointed out on Second Reading, the tax was invented in the reign of William and Mary, when there were no Commissioners of Inland Revenue and no policing of the tax services at all. The only way of policing these matters was to rule that one could not produce a settled contract in court without having it properly stamped. I hope that you will agree, Mr. Irving, that the tax is out of date and not in keeping with the white hot, jet-propelled technological age in which we live.
    The Deputy Chairman: Order. The hon. and learned Gentleman is now get-
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    ting into a general debate about administration. He can only discuss this Clause as it relates to the changes in the rates. He must now come back to order or resume his seat.
    Mr. Fletcher-Cooke: My point, in getting into order, Mr. Irving, is that this Clause reduces the incidence of the duty and, therefore, I hope, the number of persons concerned with the levying of the tax. To that extent, I cannot imagine that anyone would oppose it. Now that we tax the cash flow through Income Tax and Capital Gains Tax and other methods that a modern and sophisticated economy has adopted, to that extent this duty should be diminished to what we are talking about now. I understand that this Amendment—
    Mr. McDermot: What Amendment?
    Mr. Fletcher-Cooke: I am referring to Amendment No. 175, moved so eloquently by my hon. Friend the Member for Wycombe (Mr. John Hall).
    Mr. Deputy Chairman: Order. Can I help the hon. and learned Gentleman? We are discussing the Question, "That the Clause stand part of the Bill". We have disposed of Amendment No. 175.
    Mr. Fletcher-Cooke: I understand that, in my temporary absence from the Chamber, Amendment No. 175 was withdrawn, but that was without my consent. I should not have allowed it to be withdrawn had I been here. It was an extremely good Amendment.
    Mr. John Hall: It was withdrawn because the Government agreed to meet the point.
    Mr. Lubbock: I am disappointed that your Ruling, Mr. Irving, and the information just given to the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), interrupted a very valuable and informed speech to which I listened for some time without the feeling that I was being prevented from speaking myself—which is a feeling that I sometimes have in this Committee. I hope that the hon. and learned Gentleman will have the opportunity to return to the interesting discussion on some other occasion; but it is worth underlining a point and asking the Financial Secretary to reply.
    As the hon. and learned Member for Darwen said, we are reducing to some

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    extent the incidence of the duty by raising the limits on which it operates. To that extent, also, the number of persons administering the tax will be reduced, just as the number of persons outside—accountants, solicitors and others—will be reduced. Thereby, the country will be saved money.
    What was the proportion of the cost of the duty to total revenue before this change and what estimate has the Financial Secretary of the proportion afterwards? In looking at any tax, the Committee should examine it from the point of view of collection. The Income Tax system is fairly efficient because the number of people employed in administering it is quite small in relation to the volume of revenue collected.
    4.0 p.m.
    We all know—and it has been discussed on many previous Finance Bills—that the stamp duty is a highly inefficient tax. Therefore, if the hon. and learned Gentleman can show us that only a marginal improvement has been made in the proportion of cost to total revenue by raising the limit in this way, there will be strong argument for saying on another occasion—not now, because I do not want to incur your displeasure, Mr. Irving—that the tax should be removed altogether. That is as far as I want to go, but we should like these figures to make up our minds on this point.
    The Clause is raising the value of houses on which this tax bites. I cannot remember the last occasion when these maxima were altered, but I would like to know whether the increase which is proposed has kept pace with alterations in the index of building costs during the intervening period. That is extremely important, because house prices in my constituency have gone up substantially in recent years.
    The same is true of south-east England, and particularly of the Greater London area. In my constituency, one does not get much of a house for less than £7,000, astonishing as that may seem to some of my hon. Friends and hon. Gentlemen who represent constituencies in the north of England, where an equivalent house would cost half as much. We have to pay very heavily because of the pressure on accommodation in south-
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    east England. Therefore, it is important that the cost, which has been increasing, should be recognised in any alteration of the values on which stamp duties are assessed.
    I should not be content if we went only as far as redressing the position which obtained before, because there is considerable pressure on the building industry. I was informed only last week that supplies of common bricks have completely dried up. That is a complete transformation in a few weeks from large surpluses all over the country to shortages. That, again, will affect the price of houses. It is astonishing how rapidly the situation can change in the building industry from one of slackness to a serious over-pressure which will inflate prices.
    Therefore, I hope that the hon. and learned Gentleman will be able to convince me that we are not only keeping pace with the changing value of the cost of houses since the limits were last revised, but that, in setting the new limits, he has fully taken into account the likely increase in building prices which we will see over the next few years.
    Mr. John Hall: As so often happens in this Committee, this interesting debate has arisen rather unexpectedly. We are indebted to my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) for raising the point about stamp duties in general. Although an Amendment has not been tabled, I am sure that this is something that the Financial Secretary will consider very carefully and that, possibly, the words of my hon. Friend and, indeed, those of the hon. Member for Orpington (Mr. Lubbock), may fall on receptive ears and that, on Report, we might find that stamp duty may be abolished. That is perhaps expressing too high a hope, but, nevertheless, this has been a very useful if short, debate.
    I want to raise a rather different point. As I understand the situation under the present legislation, capital duty and transfer duty rights operate on mergers and takeovers when the consideration is more than 90 per cent. in shares, provided that the bidding company is acquiring not less than 90 per cent. of the capital of the company to be acquired. The point I wish to raise follows from this, and I

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    hope the Financial Secretary will consider and perhaps do something about it on Report.
    The situation, as I have outlined it, means that should company A own more than 10 per cent. of company B, and then decide to merge completely, even though the whole of the transaction may be in shares there is no relief for either capital duty or transfer duty. This generally results in a scheme being undertaken under Section 206, which seems to avoid transfer duty rather than a straightforward operation under Section 209 of the Companies Act.
    There appears to be no logical reason—I am sure that the Financial Secretary will agree—why, if these reliefs were intended to apply to mergers of companies, they should be forfeited in the event that one company happens to have an investment in the other. There is a strong logical argument for introducing legislation so that, provided the operation is designed to result in total ownership and the consideration is not less than 90 per cent. in shares, then, regardless of the interest the acquiring company may have to start with, similar relief should apply.
    I only mention this on the Question now before Committee so that the Financial Secretary might consider it and perhaps do something on Report.
    Mr. Joel Barnett: Subsection (4) of the Clause purports to do something about the possibility of avoidance of the duties. I know that my hon. Friend has said that he will consider the Clause—presumably when he considers the Amendment which was withdrawn—but I hope that he will consider whether subsection (4) is necessary to deal with any possibility of avoidance.
    Subsections like this in the tax laws can be counter-productive, because we could be having all sorts of provisions to close up loopholes to save possibly very small amounts of avoidance. Avoidance might be reprehensible in some circumstances, but in circumstances of this kind, where the amount involved may be very small—unless my hon. and learned Friend can give me figures, showing that without the subsection there is likely to be substantial avoidance—I would prefer not to have this type of provision.
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    If, for instance, to save £1 million in tax, it involves countless hundreds and thousands of solicitors and accountants dealing with the tiny difference between whether a company is associated or not in the terms of this subsection, it might be worth considering whether we need to have it. Larger considerations of social justice may be involved, but where there is not any great social justice involved, I hope that my hon. and learned Friend will very carefully consider whether it is worth stopping this hole, because of the amount of extra work involved, both for the Revenue side and others, for example, in deciding what is an associated company.
    In this case, a 90 per cent. holding is needed for exemption. I am not sure that 75 per cent. would not be enough. Seventy-five per cent., or even less at times, is considered adequate for the purposes of association, or for where companies are considered for tax purposes to be associated, where they are not subsidiaries or parent companies, where there are the same shareholders in two or three companies. The whole thing becomes very involved and, for the amount of revenue which might or might not be saved, it may be worth considering doing away with the whole subsection.
    Mr. John Nott: I support what has been said by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke). My limited experience of these matters is that in mergers and amalgamations an enormous amount of time is taken up trying to take advantage of the stamp duty concession. Experience would show that more mergers and amalgamations have been delayed and complicated as a result of issuing houses trying to take advantage of these stamp duty concessions than could possibly be worth while.
    I agree with the hon. Member for Heywood and Royton (Mr. Barnett) that this sort of concession would be much better abolished so that people would know exactly where they were. Issuing houses certainly act fully within the law when they take advantage of the concession, but an enormous amount of the time of solicitors, accountants, barristers, issuing houses and everyone else is taken up in trying to meet it.

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    It is time that the Chancellor started thinking about abolishing stamp duty altogether. On Second Reading, the Financial Secretary chided me about getting my foot in the door about one provision, but at least it would be a move in the right direction if he could simplify procedure and take out certain complicating aspects such as these. I cannot believe that it would do any harm to issuing houses, although there might be some pernickety, technically-minded accountants who would complain.
    Mr. MacDermot: The Opposition have a remarkable facility for making what is a concession sound as though it is a new charge. In a speech which was wholly out of order the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) drew attention to the fact that the Clause makes a concession, although anyone listening to the debate would have been quite unaware of that fact. Even he thought that he was speaking to an Amendment when, in fact, he was speaking to the Question, "That the Clause stand part of the Bill." I could not follow hon. Members in the general debate which they sought to raise, attacking stamp duty as a whole. The duty brings in a revenue of more than £80 million and the cost of collection is about 2 per cent.
    I was asked some questions which were in order and which I shall seek to answer. I was asked why there was not complete exemption up to £7,000 and what was the point of having a reduced rate band for which the ½ per cent. rate was applied. This is another example of something which is found in many other respects, namely, the need to avoid a sudden jump which would give rise to a sense of injustice among those who found themselves on the wrong side of the dividing line. If no duty were paid up to £7,000 while a rate of 1 per cent. suddenly became applicable from £7,001, it would be considered that that was unfair. For that reason there is a reduced rate band and, whenever the two have moved, they have moved in parallel.
    I was asked why this provision had to take effect from 1st August. The reason is the nature of stamp duty. The Provisional Collection of Taxes Act, 1913, does not apply to stamp duty. As the hon.
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    and learned Member for Darwen pointed out, one of the origins of stamp duty is that a document for legal purposes is useless until it is duly stamped, and unless it were known with certainty what the law was, people would not be able duly to stamp a document or to know that it was duly stamped. Therefore, unlike other taxes to which the Provisional Collection of Taxes Act applies, it could not be made applicable from Budget day and could not be made applicable until after the passing of the Finance Bill.
    The hon. Member for the Cities of London and Westminster (Mr. John Smith) had a terrible vision of an appalling queue of clerks all waiting to go on their holidays and not being able to do so because of this duty. This change has been made in 1947, 1956, 1958 and 1963 and I am not aware that on those occasions there has been any such problem as he has suggested.
    4.15 p.m.
    The hon. Member for Orpington (Mr. Lubbock) wanted to know what would be the cost of this increase in the limit. The limits for exemption from transfer duty on houses are being increased from £4,500 to £5,500 and for the reduced rate from £6,000 to £7,000. The cost is estimated at £2½ million this year and £3½ million in a full year, and from those figures the hon. Member will be able to work out the proportions for which he asked.
    Mr. Lubbock: What is the saving?
    Mr. McDermot: The saving is the cost.
    Mr. Lubbock: The cost of the concession is the revenue which will not be collected and is £2½ million this year and £3½ million in a full year. I wanted to know how much saving would be made in administration, how many fewer officials would be needed to administer the duty by reason of the increase in the exemption.
    Mr. MacDermot: The hon. Gentleman must put down a Question about that. He cannot expect me to answer questions like that "off the cuff".
    The hon. Member also asked how the movement in these limits compared with limits in building costs. I do not have the figures. The last time when the limits were raised was in 1963, but I do not have the figures before me. These limits

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    are considerably in excess of the average cost of houses transferred, but that is the national average, including old houses as well as modernly-built houses. The position is that the limits have been raised by £1,000 compared with what they were three or four years ago.
    The hon. Member for Wycombe (Mr. John Hall) put a technical argument which he asked me to consider before Report, and I gathered that he himself might give further thought to it. I shall be glad to study what he had to say.
    My hon. Friend the Member for Heywood and Royton (Mr. Barnett) raised the general issue of anti-avoidance provisions and asked us to consider, not only in this context but generally, whether anti-avoidance provisions in any particular case were worth the trouble, in other words, whether the amount saved would be likely to justify the increased costs of administration, not only for the Revenue, but for others concerned with transactions, and so on. That, of course, is a factor to be taken into account in framing anti-avoidance provisions and I will certainly bear in mind what he had to say about the problem, and I promise to study subsection (4).
    However, it is well-known experience that once an anti-avoidance device has been established, unless action is taken to stop it, there is a great rush for the breach in the Revenue's defences. That is illustrated by my hon. Friend's own suggestion for 75 per cent. instead of a 90 per cent. test. I am advised that a provision for 75 per cent. would lead at once to avoidance and to a considerable number of purely artificial transactions to exploit the resulting gap in the stamp duty. I take his point, but I am doubtful about its application in this instance.
    Mr. John Smith: I would like to apologise briefly to the Financial Secretary. He stated that the matters raised by me should have been raised in the form of Amendments. Well, I have not had much luck with Amendments, and I have rather given up putting them down.
    The Deputy Chairman: Order. For the hon. Gentleman's own safety in the future he had better not raise these matters. He cannot discuss anything that has not been accepted as an Amend-
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    ment on the Question "That the Clause stand part of the Bill".
    Mr. Smith: I just wanted to make one point, which was that the Financial Secretary mentioned that stamp duty raised about £80 million—for the latest recorded year it raised, in fact, just over £76 million. There are 171 different categories and rates under which this duty is raised. Two of those rates, the simplest ones, stamp duty on share transfer and on cheques, about which there is no possible complication, raise nearly half of the duty. It is the 169 other rates and categories which raise this, large in absolute terms, but, relative to the total Revenue, rather trifling sum. I hope that the hon. and learned Gentleman will have a look at this. I am afraid that I am becoming a bit of an Ancient Mariner to the hon. and learned Gentleman. As I said, that is why I did not put down Amendments.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 26.—(LOAN CAPITAL: INCREASE OF DUTY, AND AMENDMENTS AS TO EXEMPTIONS AND RELIEFS.)
    Mr. John Hall: I beg to move Amendment No. 176, in page 32, line 12, to leave out subsection (3).
    The Deputy Chairman: With this Amendment we can also discuss Amendment No. 177, in page 32, line 16, leave out first 'company' to end of line 37 and insert:
    'which is not a body of persons established for charitable purposes only unless the loan capital is "short-term borrowing" that is to say the loan capital is borrowed on terms that either the lender is entitled to be repaid on a fixed date not later than twelve months after the date of the borrowing or the lender is at the date of the borrowing and will at all times while any of the loan is outstanding be entitled to be repaid on demand or on not more than twelve months' notice; and where loan capital has been issued without payment of loan capital duty under the said section 8 by reason of its being short-term borrowing and the terms of the loan are subsequently varied in such a manner that if the date of the variation were the date of the loan the loan would not be short-term borrowing that section shall have effect as if the amount outstanding (otherwise than for interest) in respect of the loan at the date of the variation were an amount of loan capital issued immediately after that time'.

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    Amendment No. 178, in page 32, line 21, leave out 'also so resident' and insert 'whether or not so resident' and Amendment No. 194, in page 32, line 28, after 'body', insert:
    'or an associate of a director as defined by paragraph 5 of Schedule 18 to the Finance Act 1965'.
    Mr. Hall: Amendments 178 and 194 are rather technical, and small, points which I will deal with separately at the end of my remarks. Amendment No. 176, by deleting subsection (3), is the simplest way of ensuring that we maintain a clear distinction between borrowing which is chargeable and borrowing not chargeable—a distinction which is well established by Section 29 of the Finance Act 1934.
    Amendment 177 is an alternative, and with our usual spirit of compromise we would be happy to accept this if the Government found themselves unable to accept the first Amendment. It is designed to exempt charities, which seem to be caught if the Clause is unamended, and, secondly, to exclude from loan capital duty such borrowing as the borrower can be called upon to repay within 12 months.
    When the Chancellor stated his intention to bring loan capital duty into line with share capital duty he gave no reason for this, it was just a brief statement of fact. It was proposed, coincidentally, that the total cost of the stamp duty concessions given by the other Clauses, including £2 million concessions to local authorities and about £3,500,000 to house purchasers under the Clause that we have just been debating, should amount to about the same sum as the additional £6 million to be raised by this Clause. I am sure that it was entire coincidence.
    The Chancellor did not tell us this. However, the Chief Secretary when he came to the Second Reading of the Finance Bill was a little clearer. He said:
    "Clause 26 provides that the rate of loan capital duty, hitherto 2s. 6d. per cent., shall be the same as share capital duty, namely 10s. per cent. One of the repercussions of the effects of the introduction of Corporation Tax was that many companies which would have raised new money in the form of share capital now prefer to raise it in the form of loan capital. It seems sensible therefore that the level of duty should be equated."—
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    [OFFICIAL REPORT, 2nd May, 1967; Vol. 746, c. 345.]
    So much for the provisions dealing with the relief of taxation. It seems a little odd to those of us on this side of the Committee, although I am not sure that it necessarily seems odd to the Government side of the Committee, that to get themselves out of a difficulty created by their financial policy, they should now introduce a stamp duty measure imposing a further burden of £6 million upon those who wish to raise capital in this way.
    However, if the reason given by the Chief Secretary is the real one, and it is not a question of raising revenue but of offsetting the cost of the concessions given by the other stamp duty Clauses, then, if the Government are not prepared to accept Amendment No. 176, they must surely be prepared to accept the alternative, Amendment No. 177, Clause 26 will make liable for duty very much borrowing which bears little resemblance to loan capital.
    Furthermore, if Section 29 of the Finance Act, 1934, is substantially repealed, then the distinction between borrowing which is chargeable, and borrowing which is not chargeable will become blurred at a time when, because of the increase in duty, it is important that the distinction should be absolutely clear. The definition of loan capital for the purpose of the charge is contained in Section 8(5) of the Finance Act, 1899, and it might be for the convenience of the Committee if I read this, because it shows what a wide area is covered.
    The relevant section reads:
    "In this section the expression "loan capital" means any debenture stock, county stock, corporation stock, municipal stock, or funded debt, by whatever name known, or any capital raised by any local authority, corporation, company, or body of persons formed or established in the United Kingdom, which is borrowed, or has the character of borrowed money, whether it is in the form of stock or in any other form, but does not include any county council or municipal corporation bills repayable not later than twelve months from their date or any overdraft at the bank or other loan raised for a merely temporary purpose for a period not exceeding twelve months, and the expression "local authority" includes any county council, municipal corporation, district council, dock trustees, harbour trustees, or other local body by whatever name called."
    We have seen from that that this particular section covers a very wide variety

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    of borrowing indeed. It is virtually all borrowing. The most important exceptions that will remain after the Bill is enacted is any overdraft at the bank or other loan raised for a merely temporary purpose for a period not exceeding 12 months.
    It is that last case which creates some difficulty. Liability to loan capital duty, like any other stamp duty, has to he determined when the chargeable instrument, in this case the statement of loan capital, is executed. In many cases, it will be difficult to say with certainty that borrowing is temporary, for a period of less than 12 months. This can create an area of uncertainty, with the scrupulous taxpayer placed at a disadvantage in relation to the unscrupulous taxpayer, or the taxpayer with a more flexible mind, which is the modern jargon for these things.
    What is needed is an objective test. If 12 months is to be taken as the dividing line between short and long-term borrowing for the purposes of the Section which I have read out, then the objective test could be that set out in Amendment 177, which is the alternative Amendment, namely, that borrowing which may be called in within 12 months, whether or not it is called in within that period, can be regarded as short-term borrowing.
    This would compare with a bank overdraft and be a reasonable test. Amendment No. 177 does not refer to exemptions provided for in subsection (3) in the Bill, because the Amendment, if the Government are prepared to accept this alternative, would mean that borrowing within a group and directors' loans would be short-term borrowing with the definition.
    I do not want to take up the time of the Committee with this point, which I am sure is well understood by the Minister. We find it difficult to understand the desire to bring within the definition of loan capital the very wide variety and form of loan covered by Section8(5) of the Finance Act, 1899, I am sure that it was not intended to make it quite as wide as that. Because we believe that the Government welcome an opportunity to limit the extent to which this Clause penalises the raising of loan capital of various forms, we tabled the Amendment. If it cannot be accepted as it is drafted, the point will no doubt be seen, and the Government will make some attempt to
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    reduce the liability which they are now imposing.
    4.30 p.m.
    Referring to Amendment No. 178, a practice has developed in legislation granting tax reliefs on transactions within groups of companies requiring that all companies concerned must be resident in the United Kingdom. Consequently, when an overseas company controls two separate United Kingdom resident companies, the reliefs which would otherwise have been available on transactions between those two companies are denied solely because the parent company is not resident. In some cases, as will be appreciated, overseas parent companies have, for good commercial reasons, incorporated separate United Kingdom subsidiary companies. There seems to me to be no reason why transactions between the United Kingdom subsidiaries should not attract tax reliefs available for inter-group transactions.
    On Amendment No. 194, in taxing statutes as a whole, I think that I am right in saying that the reference is to director or an associate of a director. Should not that phrase be used in the Clause, or is there some reason why it is not used?
    Mr. Nott: I support what my hon. Friend the Member for Wycombe (Mr. John Hall) has said on subsection (3), which cancels, except in special cases, the definition given by Section 29 of the Finance Act, 1934, to loan capital as capital capable of being dealt in on a Stock Exchange in the United Kingdom. Without this definition, bank loans for more than 12 months would become, by implication, liable to loan capital duty under Section 8 of the Finance Act, 1899.
    The United Kingdom, in accordance with Government policy, is making increasing use of medium-term loans, particularly in foreign currency, so that United Kingdom subsidiaries abroad can finance their capital expenditure overseas by borrowing in foreign currency. Unless this point is clarified, some inhibition may be placed on borrowing in foreign currency by United Kingdom companies operating overseas. This is contrary to Government policy, which is to encourage non-sterling borrowing abroad.
    Moreover, Report No. 34 of the Prices and Incomes Board on bank charges,

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    which no doubt we shall hear a good deal more about, calls for greater diversification by the clearing banks of their activities and, in particular, suggests that they should undertake mortgage loans and medium-term commitments. I look forward with great interest to the retort of the clearing banks to this Report and, perhaps, their proposal that, in accordance with Mr. Aubrey Jones's suggestion, they should start competing for deposits in the market. I shall be very interested to see the reaction of the Chancellor of the Exchequer to a suggestion that they should issue certificates of deposit. Nevertheless, an imposition of 10s. per cent. capital duty on a two-year bank loan—by implication, two-year bank loans would be caught, I think—would be serious.
    Take a leading company which is borrowing at ½ per cent. over Bank Rate. If it borrows from a clearing bank for two years it will have to bear an additional ½ per cent. over two years—in other words, an additional a per cent. per annum—on the cost of the borrowing. I cannot believe that it is the Government's intention to catch two-year bank loans. Perhaps the Joint Under-Secretary of State would clarify this point about bank loans.
    The Joint Under-Secretary of State for Economic Affairs (Mr. Harold Lever): My right hon. Friend the Chancellor of the Exchequer intends to assimilate the duty on loan stock, and the like, with the duty on ordinary share capital. I will deal later with the question, should it be in order and relevant, about whether the Chancellor of the Exchequer is seeking to make good a loss to the Inland Revenue by increasing the stamp duty, but be it enough to say at the moment that all that we are trying to do is to achieve a certain amount of logic, namely, that when a company raises capital, if it is to pay stamp duty on the raising of permanent capital, it should pay the same rate on one lot of capital as on another.
    If there is an argument arising from the Finance Bill, it is that in the case of loan stock the company pays less tax on its profits than it would if it issued the same proportion of ordinary stock. But this is not relevant to the question. It
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    is simply a matter of attempting to bring about a common sense change in the stamp duty rate so that it is at the same level. The Opposition could well contend that the way to achieve this would be to level down. Normally they are, very properly, levellers up and they must not complain that in this case the reasonable thing to do is to level up.
    When I listened to the persuasive moderation of hon. Members speaking on these Amendments, an old Latin tag came in to my mind, "Nemo repente fuit turpissimus", meaning that nobody can achieve the summit of vice at one bound, nobody can achieve the superb professional obduracy of a Treasury Minister overnight. If I find myself listening objectively to the Opposition's arguments, I hope that they will not regard it as a precedent which will last for a long time.
    However, I am bound to say that the arguments on the question of short-term borrowing seemed cogent. It seemed to me that if we left the matter as it stood there would be an anomalous division between the short-term borrowings which will remain exempt and others which are equally entitled on the same principle but which will not be exempt.
    It should be borne in mind that the original exemption—the 1934 Act exemption—which is being abolished was granted so that associated companies might borrow from each other without incurring stamp duty. However, the draftsmen of those days, who had not achieved the meticulous skill of modern Parliamentary draftsmen, drafted at the wrong point. They drafted the provision so that there was exemption as long as a transaction was of such a description as to be incapable of being dealt with on the Stock Exchange. It does not seem to me that this is a very relevant point of distinction for the purpose of exempting loan stock.
    While the exemption which is being taken away by the subsection is rightly being taken away, it would not be enough to leave the matter there. I promise the hon. Member for Wycombe (Mr. John Hall) that we will consider the point very carefully and sympathetically. We shall consider the question of giving such exemption to short term borrowings as would bring them all into line and would give people greater certainty in the application of the stamp duty.

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    We shall take into account what was said by the hon. Member for St. Ives (Mr. Nott), who raised the real difficulty that if 10s. per cent. stamp duty were charged on two-year borrowings through a bank, this would defeat the clear purposes of the exempting subsection. In these circumstances, I hope that the hon. Member for Wycombe will withdraw his Amendment, because Amendments 178 and 194 would not be very relevant if we made a concession of substance on Amendment 177.
    I ought, however, to make clear that this sympathy does not, oddly enough, extend to charities. Nobody has advanced a particular case in favour of charities having stamp duty exemption of this kind. From a purely technical viewpoint, it is difficult for the Inland Revenue to administer a stamp duty exemption for charities. The Inland Revenue can administer an Income Tax exemption much more readily. With the Income Tax exemption, the Revenue can ensure that although charity begins with the Inland Revenue, it does not end at home. With stamp duty, there are technical difficulties which make it difficult to ensure that the benefit of the concession is actually applied for charitable purposes.
    As, however, no substantial case was made on that point, I hope that the hon. Member will feel able to withdraw the Amendment. We will certainly do our best on Report to meet the points which have been raised.
    Mr. John M. Temple: Would the hon. Gentleman care to say that he will take into account loans made within the surrender value of life insurance policies in the same way as he will take into consideration bank loans?
    Mr. Lever: We are talking at this point about loans issued by companies and not about borrowings by individuals. I take it that the hon. Member wants me to consider the borrowing by companies on insurance policies. They must be very rare. If, however, they qualified within the exemptions suggested by hon. Members in this discussion, to which I have lent a sympathetic ear, of course they would qualify, too.
    Mr. John Hall: I am certain that the Committee fully appreciates and regards with sympathy the difficult transitional
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    period through which the Minister is passing. Coming from his position as one of the most forceful critics of the Government on financial matters, he now finds himself in the position of defending Government decisions. We appreciate that it will take time for him to settle down and develop the usual stonewalling tactics of the rest of the Treasury Bench.
    In the meantime, we are happy to take advantage of the hon. Gentleman's reasonable approach to this matter. I must express to him my own and, I am sure, the Committee's thanks for taking such a reasonable attitude towards our Amendment. On the understanding that on Report the Treasury Bench will bring forward something which goes a long way towards meeting the point which we have raised, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Harold Lever: I beg to move, Amendment 37 in page 33, line 21, at the end to add:
    (5) Subsection (1) above shall apply to loan capital issued on or after the said 1st August notwithstanding that a statement relating to it (whether or not with other loan capital) was delivered pursuant to the said section 8 before that day, and the additional duty chargeable by virtue of that subsection shall in such a case be payable on the day on which the capital in question is issued; and where duty in respect of a mortgage or marketable security has been paid on a trust deed or other instrument executed before the said 1st August and securing loan capital any part of which is issued on or after that day, the duty chargeable under the said section 8 as respects that part by virtue of subsections (1) and (2) above shall be payable on the day on which it is issued, but shall be reduced by an amount equal to the excess of the duty paid on the trust deed or other instrument over that which would have been payable on it if it had not secured that part.
    The Deputy Chairman: With this Amendment we can discuss Amendment No. 179, in line 21, at end add:
    (5) Subsection (1) above shall apply to loan capital issued on or after the said 1st August notwithstanding that a statement relating to it (whether or not with any other loan capital) was delivered pursuant to the said section 8 before that day, and the additional duty chargeable by virtue of that subsection shall in such case be payable on the day on which the capital in question is issued; and where duty under the heading 'Marketable Security' or that beginning 'Mortgage Bond, Debenture, Covenant' has been paid on a trust deed or other instrument whether executed before, on or after the said 1st August and securing loan capital any part of which is issued on

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    or after that day, the duty chargeable under the said section 8 as respects that part by virtue of subsections (1) and (2) above shall be reduced by an amount equal to the excess of the duty paid on the trust deed or other instrument over that which would have been payable on it if it had not secured that part.
    Mr. Lever: My Amendment adds to the Clause to cover the transitional difficulty that somebody might issue a loan stock before 1st August and only collect his money afterwards. This provision will ensure that the full rate of 10s. per cent. will be payable on the money which is raised after 1st August. Assuming that the Committee passes the Clause, that would presumably be the intention of the Committee.
    There is no excessive avarice on the part of the Inland Revenue in this matter, because where a debenture, for example, is issued by instalments, the Inland Revenue will treat the issue of the stock as the issue of the debenture and there will be no further duty payable even though the whole of the price is not paid before 1st August next, provided that the instalments to be paid are incorporated in the debenture and that it is issued to the lender before 1st August. This is a commonsense transitional period which the Amendment covers and I hope that the Committee will accept it.
    4.45 p.m.
    Mr. John Hall: The Government's Amendment goes some way towards removing a defect in the Clause, but I cannot understand why the relief which is given by the Amendment should be limited to instruments executed before 1st August. In our Amendment No. 179, we would like to modify this by the addition of
    "whether executed before, on or after"
    and by the omission of the words
    "shall be payable on the day on which it is issued",
    which in any event seem to be superfluous. That is designed to enable the relief to be applied to instruments which are executed on or after, as well as before, 1st August.
    The second part of our Amendment is designed to avoid a possible source of ambiguity. In lines 5 and 6, the Chancellor's Amendment uses the words,
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    "mortgage or marketable security." We would replace those words by the same words as are used in subsection (2) of the Clause.
    In many cases, duty will have been paid on a trustee securing unsecured loan stock. Such a document, I understand, is neither a mortgage nor a marketable security, but it is liable to the same duty under the heading which begins, "Mortgage Bond, Debenture, Covenant". If this phraseology is used in subsections (2) and (5), it could be argued that it was intended to convey a different meaning in each case. To remove the ambiguity, we have included the different words in our Amendment.
    Mr. Harold Lever: Our consideration of all the points which were raised on the previous Amendment will involve redrafting the Clause, and in so far as any consequential Amendment is required to give effect to the principle which I outlined on the Amendment, it will be taken into account when the Clause is redrafted.
    In those circumstances, I trust that the Committee will agree to the Amendment as it stands and, when the Clause is redrafted, take into account the other matters which are properly thought to be adjustable. Whatever is the appropriate consequential Amendment will follow.
    Amendment agreed to.
    Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Nott: The Clause appears to me to conflict in one respect with Clause 28. My reading of the Clause is that it would make a United Kingdom company which issues bearer bonds denominated in a foreign currency liable to capital duty of 10s. per cent. in accordance with the Clause, whereas the effect of Clause 28 is to exempt from duty of 3 per cent. under the heading "Bearer Instrument" all issues of this type. In other words, Clause 28 rightly abolishes stamp duty on bearer bonds for issues denominated in foreign currency, but in the case of a British company borrowing overseas it makes the position worse than it was before.
    As I said on an earlier Amendment, in his 1966 Budget speech the Chancellor of the Exchequer encouraged British firms like I.C.I., B.P. and others to borrow abroad in foreign currency to finance

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    their expenditure overseas. As I read Clause 26, it would make I.C.I. and B.P. liable for the 10s. per cent. capital duty for which they were not liable before.
    There was a specific instance of this in December last year when B.P. borrowed 25 million dollars abroad. B.P. was able to satisfy the Inland Revenue and the Treasury, I think wrongly, that its issue was a foreign loan security. This is an unsatisfactory system whereby the Inland Revenue indulges in extra-statutory legislation. The Inland Revenue told B.P. that its loan in dollars would qualify as a foreign loan security under Section 60(1) of the Finance Act, 1963, because it was neither offered for subscription in the United Kingdom nor offered for subscription with a view to sale in the United Kingdom.
    On the basis of an undertaking with regard to Section 60(1) of the Finance Act, 1963, British Petroleum, and I.C.I. before it, borrowed overseas in dollars without being liable to the 3 per cent. bearer bond duty. Now, in accordance with Clause 26, they would be liable for the 10s. capital duty on their borrowing overseas in foreign currency. Therefore, it conflicts with the admirable Clause 28 which we shall come to presently, and I would ask the Minister to look into this, because it must be an error on the part of the draftsman.
    Mr. Harold Lever: I will look into it, though I am not persuaded that there is anything to look into. The hon. Gentleman said that someone persuaded the Revenue, wrongly in his opinion, to take the view that the borrowing last year was not dutiable. My first answer to that is that anyone who is able to persuade the Revenue wrongly that a stamp dutiable transaction is not dutiable will enjoy the same privileges, whatever Amendments we make to our legislation. If his case is that last year the law enabled a British company to borrow abroad in dollars without incurring stamp duty, I should have thought that that was not the case. Without notice of the points I should not care to express a more final opinion. In my view, the Clause does not change the law in this regard.
    What Clause 28 does is quite different. It exempts from stamp duty bearer bonds issued abroad in certain circumstances.
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    The intention is to give the relief which my hon. and learned Friend the Financial Secretary will explain. I should be called to order if I were to leap into Clause 28, particularly as I signed an Amendment last year in the sense of Clause 28. As my hon. and learned Friend will be outlining Clause 28 to the Committee, I cannot go into details. However, I must say, provisionally, that borrowing by British companies, whether at home or abroad, is dutiable unless it is exempted by the kind of exemption that we have been discussing which already exists or may exist when we have brought in a suitable Amendment on Report.
    Mr. Nott: To clarify the point—
    The Deputy Chairman: If the point relates to Clause 28, I think that it would be more appropriate if the hon. Gentleman waited until the Question, "That the Clause stand part of the Bill" on that Clause before pursuing the matter.
    Mr. Nott: Mr. Irving, when we come to the Question, "That the Clause stand part of the Bill" on Clause 28, I shall answer the hon. Gentleman's point. I do not believe that it is the intention of the Government under Clause 26 to impose a duty of 10s. per cent. where a United Kingdom company borrows in foreign currency overseas. I do not think that that is the Government's intention, because, previously, under section 60(1) of the Finance Act, 1963, such a British company borrowing overseas in foreign currency by means of a foreign loan security was not liable to any duty, and I do not think that it is the Government's intention to charge them with a 10s. duty now. I am told that, under Clause 26, they will now be liable for the 10s. duty.
    Mr. Harold Lever: They will, but that was always the position as I understand it. If there is an exemption due to anyone under Section 60(1) or some other Section of some other Act of which I have not had notice, this Clause will not take that concession away. The position remains as it was in that respect. The benefits of Clause 28, which are partly the result of the hon. Gentleman's interventions on previous Finance Bills, should be discussed in their proper time.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 27.—(LOCAL AUTHORITIES: EXEMPTION OF LOAN CAPITAL AND SECURITIES, AND OF TRANSFERS OF THEIR STOCK.)
    Mr. Peter Walker: I beg to move Amendment No. 94, in page 33, line 24, after 'authority', to insert:
    'or to capital issued by a docks or harbours authority under the Harbours Act 1964'.
    I am delighted that the chief poacher turned Under-Secretary is remaining to continue his happy trend of providing major concessions and agreeing to important Amendments such as this one.
    This Clause exempts local authorities from paying stamp duty on their loans and transfers connected with those loans, and the Amendment is an endeavour to see that the various port and harbour authorities will be included in that exemption.
    This is a particularly important Amendment to our major ports and docks. If the Amendment is not accepted, it will create an incredible disparity between the treatment of some of our major ports and docks as opposed to others. For example, Bristol, which is a local authority port, will obtain the benefits of the Clause. Liverpool, which is a port controlled by a non-profit-making public trust, will have to pay a considerable amount of stamp duty. I cannot believe that that would be the Government's intention.
    In his Budget statement, the Chancellor made no specific mention of ports and docks. He said that local authorities would enjoy exemption, and naturally I concluded that part of the exemption would be extended to the various port and dock authorities. When I looked at the Finance Bill, I was surprised to discover that these authorities were not included in the Clause and, as a result, we have tabled the appropriate Amendment.
    The Government have made it clear that they are anxious to assist in the various investment programmes in our ports and docks. I would remind the Committee that the "Little Neddy" dealing with exports considered that one of the most fundamentally important steps which could be taken by the Government was the encouragement of investment in ports and docks, particularly with the revolution in containerisation which is taking place.
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    This increase in stamp duty on loans probably will hit ports and docks to a greater extent than it will affect almost any sector of the economy. I wonder if the Under-Secretary recognises that it is likely that something like 6d. in the £ of all the tax raised by these new increases will come from the ports and docks unless this Amendment is accepted. It bears particularly heavily upon some of the areas which the Goverment say that they wish to encourage. For example, on Merseyside, the increase in duty will cost the Mersey Docks and Harbour Board no less than £187,500 during the next three years. I do not believe that the Government seriously wish to add to the costs of the non-profit making publicly-owned Mersey Docks and Harbour Board to that extent over the next three years. London will have to meet a similar sort of bill during the next three years, and some of the other ports and docks which will be affected include the Tyne ports, the Clyde and Belfast. In all, something like £375,000 will be taken in additional stamp duty from these ports and docks as a result of the investment programmes which they are having to carry out.
    We noticed in his speech that the Under-Secretary stated how keen he was on logic and conformity, and I am sure that he would not want to see this Bill go through with Bristol treated in one way and the Mersey treated in another. Therefore, in order to obtain the consistency and logic which he now desires, I know that he will be pleased to accept this Amendment. It is because I know that he will spring to his feet with another sensible concession that I cease my remarks in order that the Committee should continue with further business.
    5.0 p.m.
    Mr. Harold Lever: I do not want to imply that the persuasive moderation of the hon. Member for Worcester (Mr. Peter Walker) is less convincing than any which has preceded it, even though it may not be as effective in its consequence.
    The hon. Gentleman's case is, unfortunately, defective in logic, in that he appears to be acting as though the exemption from duty of local authorities who happen to be running a dock or harbour was given to them because they happened to be doing that. The essence of the

    125
    concession or exemption from stamp duty is that it is given to a local authority more or less as the Government give it to part of themselves—because a local authority is part of the governmental machine. In order to reduce—we cannot avoid—pointless transfer payments from the left pocket to the right one, we exempt local authorities.
    Some local authorities may be docks and harbour authorities, but that does not mean that because of that we can exempt other docks and harbour people who are not local authorities. The essence of the exemption derives not from the wider connections of the local authority, but because of the administrative governmental connection, so that what the hon. Gentleman is really seeking to do is to transfer the concession granted to a local authority because of its capacity as part of the governmental machine to docks and harbour boards whose endeavours, however worthy, cannot qualify for the description which the hon. Gentleman has given.
    There are objections, which the hon. Gentleman will see, to making this somewhat illogical jump, because once this concession is given to docks and harbour authorities, the case becomes much wider. The hon. Gentleman ought to be logical and table an Amendment to exclude all public utilities. Why pick on docks and harbour boards? Why not exclude other public utilities?
    Mr. Nott: Hear, hear.
    Mr. Lever: The hon. Member for St. Ives (Mr. Nott) says "Hear, hear", but we do not see any Amendment, either in his name, or in the name of anybody else in the Opposition, to this effect. If the case is that hon. Gentlemen opposite want to demolish stamp duty by giving wholesale exemptions, that is one thing, and it is a case which might meet with a responsive ear somewhere in the Treasury, but the point at issue is that we are discussing a somewhat illogical demand that because some local authorities are also docks and harbour authorities and get stamp duty exemption on their borrowings, all docks and harbour boards which are not local authorities should get a similar exemption.
    The cogency of this has not overtaken me, and, much as I would like to listen sympathetically to the Amendment, I must
    126
    advise the Committee to reject it if the hon. Gentleman does not withdraw it.
    Mr. David Webster: It seems to me that the Joint Under Secretary of State for Economic Affairs, whose knowledge on this subject I respect, gave the best possible argument for accepting the Amendment. It seems that because one part of the docks system is part of the governmental machine, it should be given advantages. I think that the best thing to do is to accept the Amendment and say that all the docks and harbour authorities should be treated alike.
    I have no complaint against that part of the present system by which Bristol is singled out for particular advantages, but it seems an anomaly that Merseyside, which is the same distance from the other side of the Atlantic as Bristol is, should be treated differently. The history of the development by Brunel and others, and the rise and fall of the two ports, has been very much the woof and warp of this country's naval history. It therefore seems crazy that this anomaly should be maintained because of an absolutely fallacious argument put forward by the hon. Gentleman.
    It is the intention of the Minister of Transport to abolish this anomaly next year by nationalising the docks. I am sorry that the right hon. Lady is not here to maintain an element of justice between two different parts of the docks system by persuading the hon. Gentleman that what my hon. Friend is suggesting is reasonable.
    As there is a tremendous demand for exports to be increased and to reduce import charges, and because of the immense amount of capital needed to handle the new container traffic, I should have thought that anything that could be done to ameliorate the loss of those who devotedly administer our docks was reasonable. Despite the fact that there is nobody here from the Ministry of Transport, I hope that the hon. Gentleman will reconsider his attitude to the Amendment.
    Mr. Nott: I would be very much concerned about competing with the hon. Gentleman's logic which we know is of the highest order, but when he spoke about local authority borrowing going out of one pocket and into another he made much sense. He said that it would merely

    127
    add to the Government's own cost of borrowing and the Government ultimately had to stand behind local authorities in their borrowing. Does this not also apply to public utilities? What my hon. Friend is suggesting is merely one example where public utilities might be exempted from this duty.
    Is it not the case that ultimately the Government would have to stand behind the Mersey Docks and Harbour Board and the Port of London Authority? Does not stamp duty merely add to the cost of borrowing for the P.L.A. and Mersey Docks and Harbour Board? Either the Mersey Docks and Harbour Board has to raise its charges, which is bad for the export trade, or the Government have to help public utilities in some other way.
    Mr. Barnett: If we accept the argument that all public utilities should be exempted, would not the next piece of logic be that private industry, which is competing with public utilities, should be exempted so as to be fair? Would the hon. Gentleman agree with that extension of his logic?
    Mr. Nott: I was not discussing whether it was fair. We know that there is nothing fair in the competition between the public and private sectors, but I am delighted that the hon. Gentleman might become an advocate of the theory that the two sectors should receive equal treatment. I was trying to say that, ultimately, public utilities were the responsibility of the Government, at least in practice if not in theory, and that they should therefore be treated in the same way as local authorities for stamp duty purposes.
    Mr. Harold Lever: Perhaps I might try to clear up one or two of the points which have been raised. I recognise that this is an interesting debate which can be extended by linkage into all sorts of spheres, but I think that the Committee would be well advised to focus its attention more narrowly. After all, these boards have ordinary capital which they issue, and on which they sometimes pay dividends, and this is not exempt at the present time. Nobody has suggested that it should be. One knows that when a party has been in power for 13 years, and then becomes the Opposition, impatient perfectionism develops on their
    128
    arrival on the Opposition benches. We can see that they have had time to reflect on the advantages of exempting docks and harbour boards from all stamp duty, but nobody has suggested this before.
    I am sure that the hon. Gentleman, who was very responsible and moderate in his approach, would not want to burst on the Committee with the shock of novelty the whole concept that we should abolish stamp duty on the ordinary shares as well as the loan accounts, of all docks and harbour boards, because if we do it for loan stock we should do it for ordinary stock.
    Mr. Nott: I am not aware of any harbour authority which has ordinary shares. Could the hon. Gentleman give an example of one?
    Mr. Lever: My information is that one was recently offered on the Stock Exchange. There is no doubt that some of these boards have ordinary stock. At any rate, nobody has suggested that it would be desirable to exempt them.
    If we follow the hon. Member for St. Ives (Mr. Nott) and say that we ought to exempt all public utilities—although nobody has suggested this, it has come as a side-wind from this debate—it will represent a massive incursion into stamp duty.
    That is not what the Amendment requires, but never mind. If we were to do that, we would raise serious problems, upon which I could not enlarge without becoming out of order. Local authorities who run certain businesses and trades would be exempt from stamp duty vis-à-vis their private enterprise competitors. That would raise another objection. Then we would find the hon. Member for St. Ives saying that we must relieve private enterprise competitors of local authorities of stamp duty. In other words, we should abolish all stamp duty. It is an interesting exercise, but it is hardly justified by the terms of the Amendment.
    For the most part it is the intention of utilities to try to make a profit and run on commercial terms. The case for simply exempting them—on the ground that they are publicly-owned—from some of the commercial handicaps that operate against private enterprise would be a difficult one to sustain. In those circumstances, I hope that the hon. Member will reflect upon

    129
    the point and feel that, in the circumstances, the Amendment should be withdrawn.
    I give it to him that he has one point, in logic. If the stamp duty really were such as to make a great difference in the competitive position of different ports—and this was rather implied by the intervention of the hon. Member for Weston-super-Mare (Mr. Webster)—the matter would require looking at, but we are dealing with 10s. per £100 loan stock duty, and the Amendment can hardly be accepted.
    Mr. Peter Walker: After the Minister's good performance, when my hon. Friend the Member for Wycombe (Mr. John Hall) commented that he hoped that it would be some time before the Treasury had its effect on him, it is disappointing that in so short a time the Treasury should have had its full effect upon him. He mentioned the impatient perfectionism that Oppositions indulge in. In the years from 1951 to 1964 the Parliamentary Secretary has been in impatient opposition, and we were hoping that when he moved into the Government we would have some perfectionism and better treatment than this.
    The Government claim that they are always seeking ways in which to help development areas and exporters. Until this moment there has been no tax upon port authorities raising loan capital.
    Mr. Harold Lever: Does the hon. Member mean to say that there has been no duty of this kind at all until now? Surely that is incorrect.
    Mr. Walker: The tax on the loan capital of non-profit-making port authorities has been substantially increased from 2s. 6d. to 10s. Until this time there has been a tax of 2s. 6d., and now, when the ports and docks are embarking upon an enormous reinvestment programme, owing to containerisation and similar developments, the Government decide to quadruple the duty on these ports.
    The Amendment is so framed as to define those port authorities which are not private enterprise but are public trusts, and this is a way in which the Government could have made a small concession which would have helped a number of development areas. More than half the revenue raised from the ports comes from the Mersey, the Tyne, the Clyde and Belfast. If the Amendment were accepted those four development areas would be helped.
    Secondly, it would have helped exports. The Government claim that one difficulty about giving concessions to exporters is that it would be contrary to various international agreements. This was a way which would have avoided that difficulty, without any great extension of principle. They could have assisted part of our industry and commerce which was helping both development areas and exporters. Instead, they have decided to stick rigidly to a Treasury brief, and I must ask my hon. Friends to divide on the Amendment.
    Question put, That those words be there inserted:—
    The Committee divided: Ayes 139, Noes 192.

    Division No. 358.]

    AYES

    [5.17 p.m.

    Allason, James (Hemel Hempstead)

    Corfield, F. V.

    Gower, Raymond

    Astor, John

    Costain, A. P.

    Grant, Anthony

    Bell, Ronald

    Craddock, Sir Beresford (Spelthorne)

    Grieve, Percy

    Biffen, John

    Crosthwaite-Eyre, Sir Oliver

    Grimond, Rt. Hn. J.

    Biggs-Davison, John

    Crowder, F. P.

    Gurden, Harold

    Body, Richard

    Cunningham, Sir Knox

    Hall, John (Wycombe)

    Bossom, Sir Clive

    Currie, G. B. H.

    Harris, Frederic (Croydon, N.W.)

    Boyd-Carpenter, Rt. Hn. John

    Dance, James

    Harris, Reader (Heston)

    Boyle, Rt. Hn. Sir Edward

    Davidson, James (Aberdeenshire, W.)

    Harrison, Brian (Maldon)

    Braine, Bernard

    Dean, Paul (Somerset, N.)

    Harrison, Col. Sir Harwood (Eye)

    Bromley-Davenport, Lt.-Col. Sir Walter

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

    Harvey, Sir Arthur Vera

    Brown, Sir Edward (Bath)

    Doughty, Charles

    Hastings, Stephen

    Bruce-Gardyne, J.

    Eyre, Reginald

    Heald, Rt. Hn. Sir Lionel

    Burden, F. A.

    Fisher, Nigel

    Heath, Rt. Hn. Edward

    Campbell, Gordon

    Fletcher-Cooke, Charles

    Higgins, Terence L.

    Carr, Rt. Hn. Robert

    Fortescue, Tim

    Hill, J. E. B.

    Cary, Sir Robert

    Foster, Sir John

    Hobson, Rt. Hn. Sir John

    Channon, H. P. G.

    Gilmour, Ian (Norfolk, C.)

    Holland, Philip

    Chichester-Clark, R.

    Glover, Sir Douglas

    Hooson, Emlyn

    Cooke, Robert

    Glyn, Sir Richard

    Hordern, Peter

    Cooper-Key, Sir Neill

    Goodhew, Victor

    Hornby, Richard

    Howell, David (Guildford)

    Murton, Oscar

    Tapsell, Peter

    Hunt, John

    Nabarro, Sir Gerald

    Taylor, Sir Charles (Eastbourne)

    Hutchison, Michael Clark

    Noble, Rt. Hn. Michael

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

    Iremonger, T. L.

    Nott, John

    Taylor, Frank (Moss Side)

    Jenkin, Patrick (Woodford)

    Onslow, Cranley

    Temple, John M.

    King, Evelyn (Dorset, S.)

    Page, Graham (Crosby)

    Thatcher, Mrs. Margaret

    Knight, Mrs. Jill

    Page, John (Harrow, W.)

    Thorpe, Rt. Hn. Jeremy

    Langford-Holt, Sir John

    Pardoe, John

    Turton, Rt. Hn. R. H.

    Lewis, Kenneth (Rutland)

    Pearson, Sir Frank (Clitheroe)

    van Straubenzee, W. R.

    Lloyd, Rt. Hn. Selwyn (Wirral)

    Percival, Ian

    Vaughan-Morgan, Rt. Hn. Sir John

    Loveys, W. H.

    Pike, Miss Mervyn

    Walker, Peter (Worcester)

    Lubbock, Eric

    Pink, R. Bonner

    Walker-Smith, Rt. Hn. Sir Derek

    McAdden, Sir Stephen

    Prior, J. M. L.

    Wall, Patrick

    MacArthur, Ian

    Pym, Francis

    Ward, Dame Irene

    Maclean, Sir Fitzroy

    Rawlinson, Rt. Hn. Sir Peter

    Weatherill, Bernard

    Macleod, Rt. Hn. Iain

    Rees-Davies, W. R.

    Webster, David

    McMaster, Stanley

    Renton, Rt. Hn. Sir David

    Wells, John (Maidstone)

    Marples, Rt. Hn. Ernest

    Ridley, Hn. Nicholas

    Whitelaw, Rt. Hn. William

    Marten, Neil

    Rippon, Rt. Hn. Geoffrey

    Wills, Sir Gerald (Bridgwater)

    Maude, Angus

    Rodgers, Sir John (Sevenoaks)

    Wilson, Geoffrey (Truro)

    Mawby, Ray

    Russell, Sir Ronald

    Wolrige-Gordon, Patrick

    Maxwell-Hyslop, R. J.

    Scott, Nicholas

    Woodnutt, Mark

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

    Sharples, Richard

    Mills, Stratton (Belfast, N.)

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

    TELLERS FOR THE AYES:

    Mitchell, David (Basingstoke)

    Sinclair, Sir George

    Mr. R. W. Elliott and

    More, Jasper

    Smith, John

    Mr. Timothy Kitson.

    Mott-Radclyffe, Sir Charles

    Summers, Sir Spencer

    NOES

    Abse, Leo

    Finch, Harold

    MacPherson, Malcolm

    Albu, Austen

    Fletcher, Ted (Darlington)

    Mallalieu, E. L. (Brigg)

    Allaun, Frank (Salford, E.)

    Ford, Ben

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

    Allen, Scholefield

    Freeson, Reginald

    Manuel, Archie

    Atkins, Ronald (Preston, N.)

    Gordon Walker, Rt. Hn. P. C.

    Mapp, Charles

    Atkinson, Norman (Tottenham)

    Greenwood, Rt. Hn. Anthony

    Marquand, David

    Bacon, Rt. Hn. Alice

    Gregory, Arnold

    Mendelson, J. J.

    Bagier, Gordon A. T.

    Grey, Charles (Durham)

    Millan, Bruce

    Barnett, Joel

    Griffiths, David (Rother Valley)

    Miller, Dr. M. S.

    Beaney, Alan

    Griffiths, Rt. Hn. James (Llanelly)

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

    Benn, Rt. Hn. Anthony Wedgwood

    Hale, Leslie (Oldham, W.)

    Moonman, Eric

    Bidwell, Sydney

    Hamilton, James (Bothwell)

    Morgan, Elystan (Cardiganshire)

    Binns, John

    Hamilton, William (Fife, W.)

    Morris, Alfred (Wythenshawe)

    Bishop, E. S.

    Hannan, William

    Morris, Charles R. (Openshaw)

    Blackburn, F,

    Harper, Joseph

    Morris, John (Aberavon)

    Booth, Albert

    Harrison, Walter (Wakefield)

    Moyle, Roland

    Boston, Terence

    Hart, Mrs. Judith

    Mulley, Rt. Hn. Frederick

    Boyden, James

    Haseldine, Norman

    Newens, Stan

    Braddock, Mrs. E. M.

    Henig, Stanley

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

    Bray, Dr. Jeremy

    Herbison, Rt. Hn. Margaret

    Oakes, Cordon

    Brown, Rt. Hn. George (Belper)

    Hooley, Frank

    Ogden, Eric

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

    Howarth, Harry (Wellingborough)

    O'Malley, Brian

    Buchanan, Richard (G'gow, Sp'burn)

    Howarth, Robert (Bolton, E.)

    Oram, Albert E.

    Butler, Herbert (Hackney, C.)

    Howell, Denis (Small Heath)

    Orbach, Maurice

    Callaghan, Rt. Hn. James

    Hoy, James

    Orme, Stanley

    Carmichael, Neil

    Huckfield, L.

    Oswald, Thomas

    Carter-Jones, Lewis

    Hughes, Rt. Hn. Cledwyn (Anglesey)

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

    Castle, Rt. Hn. Barbara

    Hughes, Hector (Aberdeen, N.)

    Owen, Will (Morpeth)

    Chapman, Donald

    Hynd, John

    Paget, R. T.

    Coe, Denis

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

    Pannell, Rt. Hn. Charles

    Coleman, Donald

    Jackson, Peter M. (High Peak)

    Pavitt, Laurence

    Concannon, J. D.

    Janner, Sir Barnett

    Pearson, Arthur (Pontypridd)

    Conlan, Bernard

    Peart, Rt. Hn. Fred

    Craddock, George (Bradford, S.)

    Jenkins, Rt. Hn. Roy (Stechford)

    Pentland, Norman

    Crossman, Rt. Hn. Richard

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

    Perry, Ernest G. (Battersea, S.)

    Dalyell, Tam

    Jones, Dan (Burnley)

    Perry, George H. (Nottingham, S.)

    Darling, Rt. Hn. George

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

    Prentice, Rt. Hn. R. E.

    Davidson, Arthur (Accrington)

    Judd, Frank

    Price, Thomas (Westhoughton)

    Kelley, Richard

    Randall, Harry

    Davies, Dr. Ernest (Stretford)

    Kerr, Russell (Feltham)

    Rankin, John

    Davies, Harold (Leek)

    Lee, John (Reading)

    Rees, Merlyn

    Delargy, Hugh

    Lestor, Miss Joan

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

    Dempsey, James

    Lewis, Arthur (W. Ham, N.)

    Roebuck, Roy

    Dewar, Donald

    Lewis, Ron (Carlisle)

    Rogers, George (Kensington, N.)

    Diamond, Rt. Hn. John

    Lipton, Marcus

    Ross, Rt. Hn. William

    Dickens, James

    Lomas, Kenneth

    Rowland, Christopher (Meriden)

    Doig, Peter

    Lyon, Alexander W. (York)

    Rowlands, E. (Cardiff, N.)

    Driberg, Tom

    McBride, Neil

    Shaw, Arnold (Ilford, S.)

    Dunwoody, Mrs. Gwyneth (Exeter)

    McCann, John

    Sheldon, Robert

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

    MacColl, James

    Shinwell, Rt. Hn. E.

    Ellis, John

    MacDermot, Niall

    Shore, Peter (Stepney)

    English, Michael

    Macdonald, A. H.

    Silkin, Rt. Hn. John (Deptford)

    Ensor, David

    Mackenzie, Gregor (Rutherglen)

    Silverman, Julius (Aston)

    Evans, Albert (Islington, S.W.)

    Maclennan, Robert

    Silverman, Sydney (Nelson)

    Faulds, Andrew

    McMillan, Tom (Glasgow, C.)

    Slater, Joseph

    132

    133

    Small, William

    Tuck, Raphael

    Williams, Alan Lee (Hornchurch)

    Snow, Julian

    Urwin, T. W.

    Williams, W. T. (Warrington)

    Spriggs, Leslie

    Wainwright, Edwin (Dearne Valley)

    Wilson, William (Coventry, S.)

    Stewart, Rt. Hn. Michael

    Walker, Harold (Doncaster)

    Winnick, David

    Strauss, Rt. Hn. G. R.

    Wallace, George

    Winterbottom, R. E.

    Swain, Thomas

    Watkins, David (Consett)

    Woof, Robert

    Symonds, J. B.

    Watkins, Tudor (Brecon & Radnor)

    Yates, Victor

    Taverne, Dick

    Weitzman, David

    Thomson, Rt. Hn. George

    Wellbeloved, James

    TELLERS FOR THE NOES:

    Thornton, Ernest

    Willey, Rt. Hn. Frederick

    Mr. Ioan L. Evans and

    Tinn, James

    Williams, Alan (Swansea, W.)

    Mr. Ernest Armstrong.

    Mr. Harold Lever: I beg to move Amendment No. 38, in page 33, line 37, after 'instrument', to insert 'executed or'.
    This Amendment and No. 39 are drafting, to add precision to subsection (2). They grant exemption from stamp duty with effect from 1st August, 1967, to instruments securing money lent to local authorities and transfers of local authority stocks and other securities for moneys which they are lent. This will be of interest more to students of Parliamentary draftsmanship than to those concerned with the substance of the Clause, and I hope that the Committee will accept these technical Amendments.
    Amendment agreed to.
    Further Amendment made: No. 39, in page 33, line 31, leave out from 'stock' to 'a' and insert:
    'issued by, or other security for money lent to'.—[Mr. Harold Lever.]
    Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Harold Lever: I treated the Committee earlier to an argument relating to the ordinary stock issues by docks and harbour boards and the existence of any such stock was questioned by hon. Members. I would not confidently assert now that any such stock exists and I hope that I have not misled the Committee on this side issue. I doubt whether any such ordinary stock exists.
    Mr. Temple: Watching this Clause closely and following the debate, I greatly doubted whether any ordinary stock of docks and harbour boards existed, and I am glad that the hon. Gentleman has confirmed that it does not. We accept that, and we also accept the Clause as it stands.
    Sir Douglas Glover: I am appalled that the Under-Secretary should now be going into theory, in view of the fact that when he was on the back benches supporting his party he always
    134
    spoke from practical experience. It is worrying to me that, now he is in the Government, he has become much more of a theoretician than many of his colleagues.
    Mr. Harold Lever: The responsibility is mine personally and not that of my advisers. I was anxious that the Committee should not be misled and I was careful to say that I would not confidently assert that there was not any such ordinary stock of a docks and harbour board in existence. I have not said that I would assert the contrary, but I would not like the Committee to be influenced by such an argument in accepting the Clause.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.
    Clause 28 ordered to stand part of the Bill.

    Clause 29.—(STAMPING OF FOREIGN BILLS OF EXCHANGE.)
    Question proposed, That the Clause stand part of the Bill.
    Mr. John Hall: A similar provision to that of this Clause is contained in Section 39 of the Finance Act, 1956, as amended by Section 33(4) of the Finance Act, 1961, in relation to inland bills of exchange and promissory notes. Is there any reason why this Clause should not also apply to promissory notes? Perhaps it was so intended, as, in line 24 on page 35, the words "bills of exchange" are followed by the words "drawn or made". Under the Stamp Act of 1891, bills of exchange are drawn and promissory notes are made, so perhaps it is intended to include them, but I should like the point cleared up.
    Mr. John Smith: The Clause deals with bills of exchange drawn outside the United Kingdom and this Clause—even if not some of the others that we have been discussing are not—really is

    135
    de minimis. We are dealing with a tax of 2d. If a bill of exchange drawn abroad does not have a stamp on it, one sticks on a 2d stamp. The revenue from the tax on these bills and on inland bills and promissory notes all rolled up together amounts to only £540,000 a year. Of course, bills drawn abroad are immensely fewer and of much less value in total than inland bills and promissory notes together, and I feel that the yield from this tax must, therefore, be trifling.
    5.30 p.m.
    It is another example of a tax which it may pay the Revenue to collect but which, I am sure, does not pay the economy as a whole. The total revenue from all bills of exchange, including cheques, is about £9 million. This revenue is raised in twopences. The Clause goes on to provide that any such instrument, that is, a bill of exchange,
    "may be marked by or on behalf of the banker".
    What does this operation of marking involve?
    I take, because it is the simplest and cheapest and, therefore, the best example from the Government's point of view, the case of a bank which has its own printing works and does its own marking. This operation is the same for inland bills of exchange in the form of cheques. It involves two printing operations and security problems as well. It involves returns from each branch of the bank to its head office of the number of cheques—I call them cheques because that is simpler and people understand it better than bills of exchange—received from the printers, the number issued to customers, and those sent back for destruction.
    The printer has to make two returns. He has to make a return of stocks in hand, of the number printed, the number issued to the bank and the number destroyed; and he has to make returns to the chief cashier of the numbers issued to branches. The bank has to keep a revenue account which the printer has to debit and credit, and he has to match that with his own returns.
    Even if all those operations cost nothing, let us consider what happens when a bill of exchange marked by the bank is issued to a customer. Anyone
    136
    who gets a cheque book has his account—
    Mr. J. T. Price: I understood the hon. Gentleman to say a minute ago that about £9 million is collected in odd coppers, in pennies and twopences. My understanding is that bills of exchange are stamped ad valorem according to the value of the bill, and the amounts can be quite substantial. That is what applies to bills of exchange as distinct from cheques, is it not?
    Mr. Smith: To the best of my knowledge, they used to be stamped ad valorem, but that requirement was repealed and they are now stamped on a fixed duty.
    I was saying that any ordinary customer of a bank who asks for a book of bill of exchange forms, that is, cheque forms in this case, will have his account debited with the value of the stamps and another account in the bank will be credited with that amount of money. The cost of putting an entry through the books of a bank now is about 4s. So the issue of a cheque book costs at least 8s., and the effect of buying a cheque book, with stamp duty on the cheques amounting to less than 8s., is equivalent to tearing up the nation's money. Even ignoring the rest of this operation, that one part of it costs more than the duty raised.
    There are other disadvantages to this trifling duty. Another example is the dividend warrant. Many small companies still have the trouble of sending dividend warrants to the Stamp Office for embossing, and, in my experience, the embossing machine occasionally tears them all up so that one has to start again. Irritations of that kind occur.
    Not all countries have this tax. It is noteworthy—not that we should copy foreign countries—that good old Sweden does not have this tax and neither does China, though South Africa does. There is a division of opinion in the world on whether a trifling tax on bills of exchange is worth having at all.
    We must watch the growing trend of the Revenue to get the taxpayer to do its work for it. It is not sufficient for the Revenue to say that the cost of collection of the tax is small compared with what it brings in. This is a very good example of what I mean. It costs the Revenue

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    practically nothing to collect this tax—it simply receives large sums from a small number of banks—but the Revenue should not be blind to the cost to the economy of collecting these taxes. The revenue raised by this 2d. tax is just as much lost to the country, owing to the cost of collecting it, as if the money had been torn up.
    Mr. Nott: I support my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith). I am delighted at the rapid progress which we are making in this country. First, bills of this type had ad valorem duty, and then it was changed to a 2d. duty. Then there was a period when bills had to be stamped at the Stamp Office. That was changed, and they no longer had to be stamped at the Stamp Office. Then there was a period when it was possible to buy a 2d. stamp, lick it and stick it on the bill. That was great progress, too. Now we have reached the stage when the Commissioners agree that banking houses dealing in foreign bills of exchange may compound the 2d. duty, and this, of course, is even more convenient than the previous concessions made.
    I hope that the hon. Gentleman will tell us how much is involved in foreign bills of exchange. I doubt that it is much more than £100,000 in revenue. I may be wrong and, perhaps, it is a bit more than that, but the fact that people are delirious with joy now that they may compound the 2d. duty on foreign bills of exchange is an indication of the state to which this country is coming. The Government are congratulated on concessions of this kind, but, surely, the duty could be abolished altogether, thereby enhancing international business of this sort. The Clause is a sad reflection, although progress of a sort is being made, on the way that we in this country are unable to cut through the jungle of stamp duty law and bring some sanity into the situation.
    Mr. Harold Lever: The hon. Member for St. Ives (Mr. Nott) presupposes a state of enthusiastic delirium among those subject to what I admit is a minor concession on the stamp duty. If there is anyone in a state of exaltation at this minor concession, he is not to be found on this side of the Committee.
    The arguments of the hon. Member for the Cities of London and Westminster
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    (Mr. John Smith) are always listened to with great care, as he is the Member for the entire Treasury Bench, so far as I know. He is certainly my Member of Parliament, so I always listen to him with great attention, in order to feel sure that I am getting value for money. I am rarely disappointed, but on this occasion I was not so impressed. The hon. Gentleman argued that this tax brings in £9 million and the sum paid is 2d. I should have thought that this was an argument for retaining the duty rather than not. We are always talking in favour of shifting from direct taxation which, it is said, deters effort and the like, to indirect taxation. What is this tax? Not only is it indirect taxation, but it is indirect taxation at its most painless. The number of spectacular examples of malnutrition caused by 2d. having to be paid on a bill of exchange must be very limited. On the whole, I imagine that the Committee would regard it as not unreasonable to retain the duty and accept this welcome concession.
    It is a concession, and, while speaking in support of it—we are discussing a concession, not the duty itself—I should tell the Committee that a right hon. Gentleman who was more well known in the House as the Chief Whip of the Conservative Party was the fons et origo of this concession. I do not know why my mood inclines to Latin on this occasion, but I should like the Committee to know that he thought of the idea of making this concession, and the Treasury, with its characteristic open-mindedness on concessions which cost nothing, decided that it was possible to make it.
    What we are doing here is granting the right to pay this duty in the most convenient and least costly way, namely, by a franking machine. If hon. Members ask why we should not go further, the answer is that we would readily extend the concession, which is convenient for the Revenue as well as for the taxpayer, wherever incentive to forgery would not arise as a result of the use of a franking machine. If there are other points at which hon. Members can suggest extension, they have the excellent precedent that this proposal came from the former Tory Chief Whip, now Lord Redmayne. There is no reason why hon. Members on both sides should not make similar suggestions for extension.
    Mr. Gower: We accept that it is a concession—no one denies that—but there was quite an ominous ring in the Under-Secretary's voice when he said that this is a good tax, that it is a small amount, and that we collect this sum of money. I do not like the sound of that. I do not like the ominous tones, the suggestions that this can be extended. I would far rather get it removed. Anyway, we accept this as a concession, though a very minor one.
    Mr. John Hall: I think that inadvertently the hon. Gentleman omitted to reply to my point about the promissory notes.
    Mr. Harold Lever: I am sorry. I thought that the hon. Gentleman appreciated that I was replying to him. I thought wrongly that it was the hon. Member for the Cities of London and Westminster (Mr. John Smith) who raised the point and I am sorry that I did not realise that this suggestion came from the hon. Gentleman. The position on promissory notes is that we cannot extend the franking permission further until we are satisfied that there is no danger of abuse or misuse of this concession. We will extend the concession in this direction as soon as we can feel reasonably safe about it.
    Mr. John Smith: Perhaps I might briefly reply to my constituent. This is not a concession. We must not allow ourselves to be so brain-washed that we treat everything as a concession. It is a way of reducing the cost to the Revenue of raising this tax. It will cost the Revenue much less to collect it in this way. That does not alter the fact that the total cost of collecting the tax, whether it falls on the Revenue or the economy, is greater than the money the tax produces. The reason is that this is a very rare type of tax, a tax on something which costs nothing. A cheque book costs nothing to the customer; he is charged only because of the tax. Therefore, the whole cost of accounting for the wretched thing is part of the cost of collecting the tax. Finally, just how much does this 2d. on bills of exchange drawn abroad raise? I have a little to do with foreign bills, and my experience is that there is not an enormous number
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    of them about. I do not think that it raises very much money.
    Mr. Harold Lever: I may not be able to give the hon. Gentleman the figure. I shall do my best, and if I cannot give it to him this afternoon I will see that he gets it in due course. The fact remains that this is a concession. I do not want to encourage the hon. Gentleman in the insubstantial hope of his winning my vote at the next election. He should not criticise the Revenue for making what is a concession of convenience both to the Revenue and to people who pay the tax. The concession originated from a former Tory Chief Whip, and we at any rate are very grateful to him for this helpful suggestion.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 30.—(CAPITAL GAINS.)
    Mr. John Hall: I beg to move Amendment No. 182, in page 36, line 13, at the end to add:
    (2) For the year of assessment 1967–68, the rate of capital gains tax shall be 25 per cent.
    This is the third year in succession that the Opposition have moved to reduce the rate of Capital Gains Tax. In the first year, 1965, it was moved from the Liberal benches, but last year and again this year the reduction was moved by my right hon. and hon. Friends. The arguments used on previous occasions are as valid now as they were then, and their truth does not become less by repetition. Nothing more clearly demonstrates the truth contained in Alexander Pope's line that
    "Hope springs eternal in the human breast;"
    than our moving this Amendment for the third time. He went on to say that
    "Man never is, but always to be blessed,"
    and little realised when he penned that line that he was describing what would be the whole philosophy of the Government Front Bench.
    5.45 p.m.
    If there is one achievement of which the Government can take pride it is in the field of fiscal legislation. That may sound rather odd in the ears of my hon.

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    Friends, but the Government have succeeded in doing something which I do not think any previous Government have done—to make our tax law so complicated that even tax counsel and accountants cannot understand it, or give proper advice on it to their clients.
    The Government have also succeeded in so overburdening the Inland Revenue that the Chancellor of the Exchequer had to buy off a threatened strike last year, and it is clear from the recent conference of Inland Revenue staffs that they find the present situation very grave and unsatisfactory. The Government have also succeeded more than any previous Government—I must be fair and say that other Governments have had a good shot at this—in diverting top men from their proper productive jobs to the consideration of tax affairs to the detriment of the economy.
    If I were to try to give pride of place to the tax which has contributed most to this undesirable result I think that I should give it to the Capital Gains Tax. Professor Wheatcroft, who, together with Mr. Park, has produced as authoritative a volume on Capital Gains Tax as any volume can be in the present confused state of the tax, expresses this point very fairly on page 457 of his book, in which he points out:
    "Unfortunately, however, the Capital Gains Tax also has considerable demerits. First of all, it is unlikely to produce any substantial revenue for a number of years. A tax which brings in no money but involves the country in extremely complicated administration, both to the Revenue and to the tax payer, is a handicap to the country at a time when it is suffering from a serious shortage of skilled manpower."
    I could quote further from his strictures, but I think that that is enough for my purpose.
    What is the revenue that we are likely to get from the tax? In his 1965 Budget speech the Chancellor of the Exchequer estimated that it would build up to, I think he said, £125 million at some unexplained time in the future—[An HON. MEMBER: "Fifteen years."]—Yes, in 15 years. He estimated then that in 1966–67 the yield from long and short term tax would be £12 million, and in 1967–68 £30 million.
    I understand that the actual result in 1966–67 was £7 million and the estimated out-turn for the current fiscal year
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    1967–68 is £5 million. The cost of our proposal to reduce the rate from 30 to 25 per cent. would be under £1 million on the basis of the present estimate, a very modest proposal. But, of course, this is entirely arithmetic. Nobody really knows what the figures will be. Whatever we put up to the Committee as a possible yield from the tax at this stage appears to be simply guesswork.
    However, we know that in other countries the revenue from this type of tax is small and the cost of collection is very high. What we do not know is what the cost of collection is in this country. Certain of my hon. Friends and I have tried from time to time to get information on this point by varying our questions to the Treasury Bench. But with that skill which one so admires its members manage to stonewall in their answers, and we still have no information on the point. But we do know the total cost in terms of extra Inland Revenue staff and accounts staff. The total time spent on it by many thousands of people throughout the country must be high. We also know that the tax as now operated is increasingly becoming a tax on capital as well as on capital gains.
    I turn again to the only authoritative book outside the Inland Revenue's own pamphlet on the subject. Professor Wheatcroft gives very interesting tables on page 2 of his book. Table 1 shows the money gain of an asset at different rates of inflation with a constant real value over five, 15, 20 and 25 years. Let us take an example from that, bearing in mind that the Index of Retail Prices in April this year showed a rise of 10·8 per cent. since October, 1964. It would not be unreasonable to take 5 per cent. as the rate of inflation under the present Government for a period of years until they are superseded. Taking it as 5 per cent., at this rate of inflation an asset worth £100 today will be valued in 10 years' time at £162·9 and there will be a tax on the gain of nearly £19 if the rate of 30 per cent. still applied. Taking the value of the asset 15 years from now, an asset of £100 now will then be worth £207·9, and if it is realised then, the tax on gain will be slightly over £60. If we take it over the whole period of 25 years, the value of that asset will be £338·6 at the end of that period and the tax on the gain will be over £100.
    Mr. Barnett: With regard to the tax on the gain, if the hon. Gentleman wants to be completely fair to the Committee he should point out that the rate that he has taken applies to a very small percentage of taxpayers.
    Mr. Hall: It applies to a percentage of taxpayers, it is true, but the full rate applies to many taxpayers in addition. If one takes the smaller rate, the argument still remains that it is a tax on capital and not a tax on capital gains. What one sees here is that whereas one has an asset at the end of these various periods which is worth no more in real terms, nevertheless in each case the individual concerned has had to pay tax of an increasing amount, which is the tax on capital.
    Professor Wheatcroft has made clear in Table II on the same page that with inflation Capital Gains Tax is equivalent to a wealth tax at a substantial rate. Perhaps this was the intention of the Government when they introduced Capital Gains Tax. If so, it did not say so, but it may well have been their intention.
    Our proposal to reduce the rate to 25 per cent. will not cure this, however, but it will tend to reduce its effect. Furthermore, it will bring us into line with the U.S.A., which is the one country with which the Financial Secretary has on the two previous occasions when we have debated the substance of this Amend-suggested that we could properly compare ourselves. It was this comparison, as the Financial Secretary will no doubt remember, that led to the birth of MacDermot's Law in 1965. That is an event that we have celebrated each year about this time, and no doubt it will find its place in due course in the cautionary tales with which we regale our grandchildren.
    I would remind the Committee of MacDermot's Law. I will sum it up as accurately as I can. Briefly, it was that if we have a higher maximum level of personal taxation than any other country, our other taxes should also be higher. As the United Kingdom has a much higher maximum level of personal taxation than any other country, the Capital Gains Tax should also be higher. I remember on a previous occasion summing this up by a version of an old verse:
    "High taxes have higher taxes
    Upon their backs to bite 'em,
    And higher taxes have higher taxes
    And so ad infinitum."
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    That seemed roughly what MacDermot's Law amounted to.
    Many tax experts take a rather different view, the view that when Capital Gains Tax was introduced at the rate of 30 per cent. there should have been substantial reductions in the top rates of Surtax. This is a fairly widely held view. Nevertheless, the Surtax remains at the top rate of 91¼ per cent., excluding the surcharge which we are paying this year.
    Mr. MacDermot: Could the hon. Gentleman explain why, if there was a 30 per cent. rate of Capital Gains Tax, it would be very logical to reduce the Surtax level?
    Mr. Hall: The reason is that it is considered that the maximum rate of Capital Gains Tax affects those who come into the Surtax level, and, therefore, if one imposed a rate of 30 per cent. of Capital Gains Tax, which includes an element of wealth tax in it, it would have been logical in itself, if social justice is to be done, to reduce the top level of Surtax at the same time. Perhaps in consequence of this the Financial Secretary may be moved to give a small concession, though after his intervention I am not very hopeful about that.
    I am driven to quote Alexander Pope again. In "Letters to Fortescue" he wrote:
    "Blessed is the man who expects nothing for he shall not be disappointed."
    In that sense I am blessed indeed because I expect nothing. A Government who can produce the Selective Employment Tax and the Capital Gains Tax in its present form are unlikely to be moved by any appeal to their sense of fiscal justice. Ministers who were unmoved last year and the year before by the eloquent arguments advanced by my right hon. and hon. Friends must, I fear, have developed a built-in resistance to reason and logic.
    I very much regret that the Joint Under-Secretary of State for Economic Affairs—he has now left us—who from time to time in our previous debates in 1965 and 1966 supported our point of view with great cogency and logic, should gradually become contaminated by the atmosphere of the Government Front Bench and is coming to a point when before long I am sure he will be arguing even against his own convictions.

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    I do not want to repeat the arguments that were advanced on the two previous occasions. I have tried to avoid doing so. I have taken another point altogether. As I have tried to resist that temptation, I hope that the Financial Secretary will resist the temptation to repeat the usual argument about this concession benefiting only Surtax payers—even if that were wholly true, which it is not. I remind him that the overwhelming majority of the leaders of our community on whom we depend for their skill, drive, initiative and enterprise are Surtax payers, and if they become really convinced that the Government believe it right to maintain the most savage progressive Surtax system of any major industrial country—and knowing that continuing inflation will push them higher up the Surtax scale without increasing their real income—they may reconsider the motives of prestige, power and status which the Chief Secretary believes keep them anchored to this country without regard to the mundane matter of net income.
    Mr. J. T. Price: The hon. Gentleman is producing a most heartrending argument in favour of very wealthy members of our community. In that narrow band of logic there is a single argument that he can sustain so far as fiscal affairs are concerned. But is it not going rather far to suggest that all the people in the higher income brackets who have the privilege of paying Surtax render any useful service to the community? Surely it is a question of the professional owning classes, the great estate owners, who contribute nothing to the welfare of this country but are in that bracket. Surely the argument is invalid.
    Mr. Hall: It is, of course, true that not all Surtax payers make a useful contribution to the welfare and the economy of the country. It is also true that not all those who do not pay any tax at all make a useful contribution to the welfare and economy of the country.
    Mr. Frederic Harris: Like some Members of Parliament. Some do, some do not.
    Mr. Hall: I should not like to say which Members of Parliament make the greatest contribution. Just because in a particular class of taxpayers there is a minority who may not contribute all
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    that they should to the country's wellbeing and welfare, that is no argument for imposing a fiscal injustice upon all of them as a body. [Interruption.]
    The Chairman: Order. We are dealing with the rate of Capital Gains Tax.
    Mr. Hall: I was about to conclude by saying—
    Mr. J. T. Price: On a point of order, Sir Eric. I do not mind being rebuked from the Chair, whoever occupies it, if I am in the wrong. But the first interruption was by an hon. Member opposite. Surely he should not get away with it without challenge.
    6.0 p.m.
    Sir Gerald Nabarro: Further to that point of order. I cannot, Sir Eric, hear my own Front Bench spokesman due to the sedentary interruptions of the hon. Member for Westhoughton (Mr. J. T. Price). Could he be asked to restrain himself?
    Mr. Hall: If I may be forgiven for intervening in this debate, perhaps I could now come to the end of my short speech on this Amendment. I was going to say to the Financial Secretary that to grant the concession which we ask, which, as I have already pointed out, on the figures already put before us is a very small concession indeed, and would not cost very much money, would at least be some assurance that the most able are not regarded as fiscal untouchables. It would go a small way to reducing the impact of the wealth tax which is contained in this Capital Gains Tax on top of the Surtax itself.
    I am sure that the Financial Secretary has not even had to rehearse all the arguments; he has probably taken note of his speeches on previous occasions and will produce the same argument in trying to reject this Amendment. I hope that I am wrong in that. I hope that his approach will be a fresh one. I hope that he will see how the tax has been developed over the last three years, and has now come to the conclusion that he can at last grant the concession for which we ask.
    Mr. Robert Sheldon: The hon. Member for Wycombe (Mr. John Hall) started off with the argument that the Capital Gains Tax is a bad

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    one because it brings in insufficient revenue, and he has moved an Amendment which reduces the revenue further, but that was only one of a number of contradictions in his speech.
    Mr. John Hall: I am sure the hon. Gentleman does not wish to misrepresent me. I was not saying that it was a bad tax because it did not bring in sufficient revenue. I was merely saying that it was not bringing in the amount of revenue which had been estimated.
    Mr. Sheldon: With due respect, I understood the hon. Gentleman to mean that a tax which brought in the amount of revenue that this one did was not worth the trouble of collecting.
    However, I will leave that, because it became quite clear during the hon. Gentleman's speech what he is really after in moving this Amendment. Of course, we need to consider that this Amendment will affect some people. It may be assumed that it will affect most, but, by the interventions which have been made, I think it has become clear by now that the people whom this Amendment is meant to help are the Surtax payers. Standard rate taxpayers pay, as we know, Capital Gains Tax at a rate of about 20½ per cent., and those who pay Income Tax at a rate less than the standard rate will have an even lower rate of Capital Gains Tax. The only people who pay this tax at the level of 30 per cent. are the high Surtax payers. Once again, we come to one of the favourite taxes for reduction of hon. Members opposite—the reduction of Surtax—and I think that this needs to be clearly understood here and throughout the country.
    Mr. Gower: Why does the hon. Member make that assertion, that this for us is one of the favourite taxes for reduction? Is he not aware that, within reason, we are in favour of keeping taxes down, and that it is the party opposite which seems to be in favour of keeping taxes up?
    Mr. Sheldon: It may be a purely personal impression, but it seems to me that the greatest fervour is aroused and the most heat generated amongst hon. Members opposite whenever Surtax or the reduction of Surtax is mentioned.
    The purpose of the Capital Gains Tax was threefold, as I understood it. First,
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    there was the need for fairness in taxation, the need to tax increases in wealth wherever it was and in whatever form. Secondly, there was the growing difficulty in distinguishing between capital gains and income; because of the various devices sophisticated people were beginning to employ it became extremely difficult to distinguish between income and appreciation of capital, and obvious that what really needed to be taxed was wealth.
    The third and the big argument, as I understood it, was the closing of the loophole for the avoidance of Corporation Tax and this was really why it was introduced at the same time. With the introduction of Corporation Tax, with its many advantages in separating company tax from individual tax, encouraging the ploughing back of profits, and all the other benefits which, I believe, flowed from the introduction of Corporation Tax, a large part of this could have been negatived by artificial and untaxed creations of capital. This is prevented by the Capital Gains Tax. The formation of companies, and the selling of companies and the creation, in other words, of capital assets to avoid Corporation Tax would have been a loophole. The Capital Gains Tax effected the stopping of a loophole.
    We all know that as soon as we stop a loophole, and stop it successfully, we then stop a large part of the activity going through that loophole. This is one of the reasons why, as we well know, Capital Gains Tax in its initial years will be a very low revenue raiser. It stops the use of making capital gains in the way that would have been so used if the tax had not been brought in. It is, therefore, in its essential nature, a long-term tax in its revenue aspects, but a short-term requirement to be used with the Corporation Tax. This was why it was so introduced, and I think that this should be clearly understood.
    Sir G. Nabarro: I want at once to bring this debate down to earth and to contradict outright and downright the hon. Gentleman the Member for Ashton-under-Lyne (Mr. Sheldon). The tenor of his speech, as usual, was to impute to me and many of my hon. Friends the sole desire to see Surtax and other taxes which afflict the wealthy and the well-to-do reduced. Nothing of the kind. Neither is it true: there is not one jot or tittle of

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    truth in the statement made by the hon. Gentleman the Member for Ashton-underLyne—that only Surtax payers are affected by this Amendment. I wrote his words down—"only Surtax payers". What drivelling rot.
    Take the Stock Exchange alone, of which the hon. Gentleman's knowledge is nil. There are 4 million owners of equity and other stocks and securities, including unit trusts, quoted on the London and provincial stock exchanges—4 million of them. Every one of the 4 million is affected by the Capital Gains Tax. Are all those 4 million people Surtax payers? Of course they are not. The number of Surtax payers in this country is relatively tiny.
    The hon. Member has never carried out the juvenile exercise, the relatively simple exercise, of looking at the report of a unit trust, to see the extraordinary complexities in which we have now been plunged by the incidence of the capital gains duty. Does the hon. Member know, for example, that all the calculations in respect of the value of units declared half yearly by all our unit trusts often have to be shown to nine places of decimals of 1d. for the guidance of unit owners? And there are 4 million owners of stocks and shares afflicted.
    Perhaps the hon. Gentleman the Member for Ashton-under-Lyne, when he has had time to reflect upon the errors of his utterances, will apologise for deliberately misleading the Committee, deliberately—
    Mr. Sheldon rose—
    Sir G. Nabarro: I will give way in a moment, when I am ready. The hon. Gentleman is the most reluctant hon. Member of this Committee ever to give way. I will teach him how to do it in a moment.
    Mr. Sheldon: I shall have to be leaving in a moment, and may not be able to intervene if the hon. Member does not give way now.
    Sir G. Nabarro: If the hon. Gentleman has to leave, I hasten him on his way. He will wait in his seat till I am ready for him. A pompous, arrogant statement. I have driven the hon. Gentleman out of the Chamber. Hooray! He is one Socialist Member who cannot take his medicine.
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    There are 4 million Stock Exchange investors alone who are interested in Capital Gains Tax. Then there are millions more people who own houses other than the houses they live in and who are also affected by the provisions of Capital Gains Tax. There are millions more people who own chattels and capital assets valued individually at over £2,000 other than stocks, shares and securities. All of them, under the provisions of the 1965 Act, are afflicted by Capital Gains Tax.
    We now perhaps will realise what drivelling rot it was on the part of the hon. Member for Ashton-under-Lyne to use those words, "Only Surtax payers are afflicted by this measure." It was Socialist political polemics, seeking to represent that my hon. Friends and I are advancing the cause in this Committee only of rich men. On the contrary, we are advocating the cause of fiscal equity and simplicity.
    Mr. J. T. Price: Not so simple.
    Sir G. Nabarro: Does the hon. Gentleman wish to intervene? I gladly give way to him.
    Mr. J. T. Price: I was saying that the hon. Gentleman the Member for Worcestershire, South (Sir G. Nabarro) is not so simple as he would have us believe. His argument is based on fallacious reporting of what my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said. My hon. Friend said that Surtax payers were only affected by the highest rate of Capital Gains Tax, which is 30 per cent. If the hon. Gentleman reads HANSARD tomorrow he will find that his rather bombastic argument is based on a misquotation of what my hon. Friend said. That is why my hon. Friend left the Chamber in disgust.
    Sir G. Nabarro: I disagree entirely with the hon. Member for Westhoughton (Mr. J. T. Price).
    Mr. J. T. Price: The hon. Gentleman can read my hon. Friend's words.
    Sir G. Nabarro: What I shall read first is the green carbon unedited copy of the speech of the hon. Member for Ashton-under-Lyne, to make certain that nothing has been corrected. I know the tricks much better than the hon. Member for Ashton-under-Lyne does. Perhaps the

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    hon. Member for Westhoughton thought that I was running out of steam.
    Mr. Dan Jones: On a point of order, Sir Eric. Is it in order that an hon. Member's speech can be altered and, in so doing, that the hon. Member for Worcestershire, South (Sir G. Nabarro) knows the "tricks" whereby that is done?
    The Chairman (Sir Eric Fletcher): It is not in order to suggest that any hon. Member makes corrections in the OFFICIAL REPORT apart from mere verbal corrections which, by custom, are recognised.
    Sir G. Nabarro: That is my reading of the situation, Sir Eric. I am delighted that we are in complete unanimity on this matter. I want to return to the Capital Gains Tax after these interruptions.
    Of course, the miniscule yield of this duty has a bearing on our considerations as to the way it should be amended. I turned up the Financial Statement for the year to check the figures. Last year, the Budget estimate for 1966–67, printed on page 10 of the Financial Statement, was a yield of £5 million. The out-turn was £7 million. The Financial Secretary will recall that, in answer to a Question a few weeks ago, he gave me the precise figure of £7·2 million. This year it has fallen. The estimate is £5 million and after the Budget changes it is said still to be £5 million. I wonder why it is falling!
    Mr. Lubbock: I suggest that it is obvious why the yield is falling. It is because no one is making any capital gains under this Government. It is difficult enough for stocks and shares to keep where they were at the beginning of the year.
    Sir G. Nabarro: I profoundly disagree. I am only an amateur punter on the Stock Exchange. When I see the Financial Times index of equities going up and down very steeply, as it has been going up and down very steeply between 284 a matter of little more than 12 months ago and 346, as it is now, I would point out that this is the sort of time when people make money on the Stock Exchange, and the Treasury is more likely to attract Capital Gains Duty on a move-
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    ment of the stock markets as steeply as they have moved in the last 12 months than if the stock markets remained on a plateau. I am fascinated to know the answer, having argued the ethics of Capital Gains Tax with Socialists and Fabians for 20 years or more. I remember a disputation in Coventry in 1948 with the present Leader of the House, who was trying to mislead an audience of Coventry people that it was possible to raise hundreds of millions of pounds a year by a comprehensive Capital Gains Tax. I made then the same kind of speech as I am making now.
    6.15 p.m.
    Wily people will always find their way around this iniquitous form of taxation, because, fundamentally, it is an inoperable tax. It is so complicated and capable of so many devious activities within the scope of the Statute that the Treasury, I fear, will never secure any substantial sum of money from it. The Financial Secretary will no doubt point to me as an arch-villain in tax evasion matters. I am nothing of the kind. But I do believe in condemning, root and branch, taxes which are so complex as to be incomprehensible to the chartered accountancy profession and to intelligent men and women who are subject to them.
    I also believe, with a good deal of professional opinion behind me both in the legal and chartered accountancy professions, that the yield of this tax is going to continue to be miniscule. What are the facts? The Chancellor and Prime Minister were going round the country volubly, three years ago, and trying to bamboozle people, pointing an accusing finger at the Tory Administration of the day. They were saying that the tax was worth a revenue of £125 million a year. It was said over and over again, not just once.
    Of course, uninitiated members of the general public—coal miners, engineers, artisans, labourers, agricultural workers and the remainder—who are uninitiated in complex fiscal matters, believed it. The Chancellor and the Prime Minister said, "Let us take £125 million out of the pockets of the rich."
    A favourite expression of the Prime Minister's in those days was "the Cottons and the Clores". He used to impugn this and then follow it up by

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    saying that £125 million would be the benefit to the general bodly of taxpayers. What, therefore, should be done about it? he would ask. He said, "We shall apply it to the poor, the poverty-stricken, the families on the lowest income scales. We will take it from the rich and give it to the poor."
    Where is that £125 million? It has not shown up. Neither will it show up. That is why I am attacking it today.
    The Chairman: Order. We are not discussing the Capital Gains Tax in general, but an Amendment saying that the appropriate rate should be 25 per cent.
    Sir G. Nabarro: Thank you, Sir Eric. If a tax is wholly bad, as I seek to demonstrate that this one is, we should remit the badness by reducing it—only by a tiny margin, but at least reducing it.
    The Treasury estimate this year is £5 million, and less than last year, in the second year of collecting this tax. Why is it less? If we bring it down from 30 per cent. to 25 per cent. it would cost something less than £1 million, but I am not sure exactly how much it would cost, because the Treasury's estimates in these matters have an unhappy habit of being very wide of the mark.
    I propose, and I am sure the great majority of my hon. Friends propose as well, to continue to attack this form of taxation. The Tory Party does not accept it in principle.
    Mr. Lubbock: Yes, it does.
    Sir G. Nabarro: I am glad to have the Liberal Party putting me on the primrose path. Does the Liberal Party wish me to give way?
    Mr. Lubbock: I would remind the hon. Gentleman that it was his own Government who introduced the short-term Capital Gains Tax.
    Sir G. Nabarro: Now we are getting places. The hon. Gentleman has interpolated "short-term". The Tory Party introduced short-term provisions—six months for the Stock Exchange and three years for land. That does not give a blessing to a comprehensive gains tax covering chattels of all descriptions for all time.
    The Chairman: I do not want to interrupt, but we cannot go into the short-term Capital Gains Tax. We are discussing the present rate of tax and whether it should be 30 per cent. or 25 per cent.
    Sir G. Nabarro: I would remind you, Sir Eric, with deep respect, that whether the rate is 30 per cent. or 25 per cent. it applies equally to the whole gamut of considerations which I have named: Stock Exchange securities, land and chattels of all descriptions.
    The Tory Party, to avoid certain malpractices—people buying stocks and shares at the beginning of a Stock Exchange period and selling them before the end, which does nobody any good—consented to a form of tax at a very short-term modest level—what is now the equivalent of the betterment value within the Land Commission over three years on land—not a comprehensive Capital Gains Tax.
    This year, I hope that my hon. Friends and right hon. Friends will take the view that we should condemn root and branch this form of taxation, because it is inequitable, because it militates against savings, because there are 4 million people in this country with Stock Exchange securities—and 4 million is not the tiny number of Surtax payers—because the Statute is incomprehensible, because the cost of assessment and collection by the Inland Revenue is probably greater than the whole of the £5 million estimated yield this year, so abstruse is the Statute in this context, and because this form of taxation is wholly bad and ought continuously to be condemned by a party which espouses capitalism as opposed to Socialism. The object of Socialism is to deprive the owners of property of their property.
    The Chairman: The hon. Gentleman is going far wider than debate on the Amendment ought to be allowed. We are only discussing what the appropriate rate for Capital Gains Tax should be.
    Sir G. Nabarro: The lower the better.
    For all those reasons I hope we shall see the Treasury Bench accept this year a salutary reduction, an overdue reduction, though only a token reduction, for when we return to the benches opposite—which will be not long delayed, I hope—

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    it will be my sincere desire that my party will abolish this iniquitous form of taxation.
    Mr. A. H. Macdonald: The hon. Member for Wycombe (Mr. John Hall) did not appear to advance any arguments precisely in support of the Amendment. I could not tell from what he said what was so horrid about the present level of this tax and so superb about the level which he proposed. He directed his arguments, such as they were, to the general nature of the tax. I thought that that was strange.
    Then, when I listened to the hon. Member for Worcestershire, South (Sir G. Nabarro), I realised how wise the hon. Member for Wycombe had been, because the argument which we have heard—and I will confine myself to the Amendment before us—seemed quite extraordinary. The hon. Member for Worcestershire, South referred to his activities—successful, as I understood him to boast—on the Stock Exchange and protested that the gains he made there should be subject to tax.
    I cannot see in what way that kind of activity contributes towards the economy which, in his other speeches, he is so anxious to promote. This sort of activity seems comparable to some form of gambling, and I understand the hon. Member is with me in suggesting that taxes on gambling should be significantly increased.
    Sir G. Nabarro: The hon. Gentleman has unkindly and incorrectly used the word "boast". What I said, and I repeat the words, was, "I am myself a modest punter on the Stock Exchange". I did not say whether I was successful or unsuccessful, but I believe in loss leaders in the context of Capital Gains Tax to avoid a liability at least in the early stages.
    Mr. Macdonald: It is unusual to hear the hon. Member opposite claiming the virtue of modesty. Perhaps it was ungracious of me to have paid attention to the tone and manner in which he spoke rather than the actual words which escaped his mouth. I believe that the hon. Member opposite is with me in suggesting that taxation upon gambling should be increased. If punting on the Stock Exchange is no more or less than
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    a form of gambling, then the tax applicable should be related, for example, to the tax on football pools. I see no merit whatever in the arguments advanced that the tax upon gains, or alleged gains, made by the hon. Member opposite should in any way be less than the tax that now operates upon football pools operators, which I think to be proper and just.
    Mr. Lubbock: Surely the hon. Gentleman is aware that there is no taxation on football pools winnings. Two years ago, an Amendment was suggested by the Liberal Party to tax football pool winnings, but it was rejected by the hon. Gentleman's own Government.
    Mr. Macdonald: It was the most ridiculous Amendment I had ever heard in the history of debates in the House of Commons. Of course there is a tax on football pools.
    Mr. Lubbock: Winnings on football pools.
    Mr. Macdonald: I am perfectly well aware of what the tax upon football pools is. Because it is not levied upon winnings is of no relevance in noting that it is levied upon football pools. It could equally well be levied upon winnings. There would have to be a slightly different amount, but the tax is nonetheless a tax upon money put into football pools.
    I cannot accept the extraordinary arguments advanced by the hon. Members on the Liberal bench that the tax on football pools is somehow different or more meritorious than the existing state of affairs. I will not continue, or I shall be ruled out of order, much as I would like to refute those extraordinary arguments.
    The simple point that I wanted to make, before I was diverted by the hon. Member for Orpington (Mr. Lubbock), was that this tax on capital gains seems entirely comparable with a tax upon gambling. I see no reason, therefore, why the level of tax should be in any way differentiated. For that reason, it appears to me that the existing level of tax is entirely appropriate.
    6.30 p.m.
    Mr. Lubbock: The argument of the hon. Member for Chislehurst (Mr. Macdonald) is most peculiar. First, he

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    says that the tax on capital gains is analogous with a tax on gambling, and then displays complete ignorance of the system of taxation on gambling. He ought to know that on the football pools people can win sums of up to £300,000 which are not treated as income in their hands and that they get away without a penny of tax, whereas with Capital Gains Tax people can pay up to 30 per cent.
    If we agree that winnings on gambling on the Stock Exchange are identical with the winnings on football pools, then, in all logic, we should tax at 30 per cent. football pool prizes of £300,000, or at such reduced rates as we have in this Clause. I am sorry that the hon. Gentleman has not studied the facts before coming to the debate. If he had done so, he would not have made these ridiculous comparisons.
    Mr. Macdonald: I do not want to prolong discussion on a matter which is not directly relevant, but I am perfectly well aware of how football pools are taxed. There is a tax of approximately 30 per cent. on football pools. That is an undisputed fact. To say that the people who take the winnings are not taxed is absurd. Of course they are taxed. It is simply that the tax does not fall precisely on the winnings. It falls on the total stake going into the pools, but the effect of the tax is the same.
    Mr. Lubbock: Then let us take the analogy a little further. Companies in which people invest are also taxed. They pay Corporation Tax, and so on. That is the analogy with what the hon. Gentleman said about the taxation of football pools themselves. But there is a complete absence of any parallel in the final stages of taxing capital gains, Stock Exchange winnings and football pool winnings. I would have thought that that was so elementary that it must be obvious to the rest of the Committee, even if it still escapes the hon. Member for Chislehurst.
    However, I know that you do not want me to develop this further, Sir Eric, so I will come to the Amendment itself and try to eschew the general remarks on the Capital Gains Tax which have tempted some hon. Members into discussing matters which are wider than the Amendment. I agree with the hon. Member
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    for Worcestershire, South (Sir G. Nabarro) that a reduction is necessary, but I do not think that the argument has been put to the Financial Secretary as it should have been and as it was developed in some detail two years ago.
    I am not concerned with the general arguments about the merits of the Capital Gains Tax as such. I happen to be one of those who believe that a tax of this nature is a necessity, but here we are discussing only the rate and whether it should be 30 per cent. or 25 per cent. I have no doubt that the Financial Secretary will remember that when we discussed this matter two years ago I pointed out that many of the gains on which the tax would be levied would not be real and that, because of the change in the value of money, people would find themselves paying tax when in fact they had a reduced sum of money in real terms at the end of the period.
    I then gave the example of medium-dated gilt-edged securities on which appreciation might be at about 2½ per cent. or 3 per cent. per annum—I gave an actual gilt-edged security as an example—with the amount of the discount on its maturity value taken over the period of years which would elapse before maturity giving a certain inevitable capital appreciation. In the context of a steady rate of inflation, such as we have had since the war, a person investing in such a security at, say, 84 and holding it until maturity then disposing of it at 100 would have made a capital gain for the purposes of the Finance Act, 1965, but, in fact, would have lost money. He would find that it was worth less than before and he would then have to pay tax at 30 per cent., or at some reduced rate if he was not a Surtax payer.
    The hon. Member for Chislehurst may have misunderstood what was said by his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) when suggesting that the Amendment would benefit only those paying Surtax, because it deals only with the maximum rate and not with the provisions for alternative charge contained in the Finance Act, 1965.
    Sir G. Nabarro: I must contradict the hon. Gentleman. He is quite wrong about that. The tax applies to any chattel over £1,000 so long as the chattel is kept for longer than 12 months. If the chattel is

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    a mink coat at £3,000, it applies to that. Under the Amendment, the Capital Gains Tax on it would be reduced from 30 to 25 per cent.
    Mr. Lubbock: The hon. Gentleman has not got it quite right. I am talking about the alternative charge to tax. I am looking at the booklet published by the Institute of Chartered Accountants, which I find easier to understand than the Finance Act itself. It says that it is provided in the Finance Act, 1965, that
    "If it should prove to be to the benefit of an individual for any year of assessment in any part of which he was resident in or in which he was ordinarily resident in the United Kingdom, the capital gains tax payable on his total long-term gains of that year, less losses of that year and losses brought forward, will be restricted to an amount equal to the income tax (including surtax) which would be payable if a fraction of his net gains were taxed as if it were income, instead of the whole of the net gains being taxed at the flat rate of 30 per cent. The fraction of the net gains on which the notional income tax (including surtax) will be calculated is:
    where the net gains are less than £5,000, one-half of the net gains; …"
    He has this alternative.
    I understood the hon. Member for Ashton-under-Lyne to be saying that as the alternative charge to tax had not been altered, persons who had opted for that and found it to their benefit to do so would not be advantaged by the reduction in the maximum from 30 per cent. to 25 per cent. As far as I can see, he is quite correct. But that is not a reason for rejecting the Amendment. It is a very good reason for moving another so as to bring into line these alternative charges so that they bear the same relationship to the original rates as 25 per cent. bears to 30 per cent. I am sure that it would not be beyond the wit of the hon. Member, if he agreed with that principle, to devise a suitable Amendment for the alternative.
    In the meantime, I urge the Financial Secretary to look with some favour on this proposed reduction. "MacDermot's Law" has been mentioned. I remember very well the debate in which he said that because our maximum rate of Income Tax was 91¼ per cent., as compared with 70 per cent. in America, it was reasonable for us to have a separate maximum rate
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    of Capital Gains Tax of 30 per cent. as compared with the 25 per cent., which was the maximum rate in the United States.
    At the time I thought that that was a peculiar argument, and I still think so. My main reason for asking him seriously to consider accepting the Amendment is that inflation is a much more serious problem in the United Kingdom than it has been in the United States in the past few years. Even if his contention were right and a high level of personal tax required a high level of Capital Gains Tax, "MacDermot's Law" should be applied only in real and not in money terms when money terms cause people not only to lose money when they invest in gilt-edged securities over a period of time, but, into the bargain, to add insult to injury, having to pay Capital Gains Tax as well.
    Mr. J. T. Price: Under the guise of moving a token reduction of 5 per cent. in Capital Gains Tax, Opposition spokesmen have sought to raise a general opposition to the whole principle of Capital Gains Tax. I understand from the Rulings which you have already given, Sir Eric, that it would be quite out of order for me to be drawn into a general debate, but I am entitled to say that whatever the rate of Capital Gains Tax may be, hon. Members opposite, with all their expertise in the affairs of the Stock Exchange, the City of London and the manipulation of property in all its guises, must forgive me if when they attack the tax on ethical grounds and try to trump up ethical arguments, I and my hon. Friends make stiff rejoinders. We at least have taken the trouble to study not only the mechanics of this form of taxation, but the ethics of the distribution of wealth.
    I listened with considerable interest and amusement and with some respect to the hon. Member for Worcestershire, South (Sir G. Nabarro). It is inevitable, and no one holds it against him, that he comes into this Committee with a bombastic, dogmatic, enunciation of all kinds of ideas that have been flowing from his active brain ever since he was a Member and probably before. But he must not expect that we swallow all those arguments hook line and sinker. We do not.
    The hon. Gentleman was trying to argue that the Capital Gains Tax in its

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    present form was the maximum and not the universal rate. But if it produced nothing at all it has at least altered the direction in which the manipulators of financial investment were operating. The main objective for a skilful and prudent investor before we introduced this principle into our fiscal law was not to get a good high yield of dividend on a particular equity, but to so manipulate equities and other forms of property, particularly land, so that they did not attract any taxation.
    This may have had a very salutary effect upon these transactions. I sometimes hear hon. Members opposite, who individually, I hold in the highest respect, arguing vehemently that there is something ethically wrong in attacking the state of affairs existing before the introduction of Capital Gains Tax. When one talks of ethics one must also consider that before this tax came into being the people who were using every technical device, with the most skilled professional guidance—of lawyers and accountants—were doing so for the main purpose of defeating the objects of this House in having certain taxation measures on the Statute Book.
    The Chairman: The hon. Member has recognised that he cannot debate the ethics of the Capital Gains Tax. We can only discuss the appropriate rates.
    Mr. Price: I am prepared to do that and I do not wish to detain the Committee because I can see that the Financial Secretary wishes to get on to the next business.
    It is not a valid argument to say that in a moment of weakness, aberration or forgetfulness, we on his side of the Committee should agree to a small reduction of 5 per cent., because it might be justifiable in present circumstances. We are not to be taken in by that sort of thing, because this is an argument directed not against the rate of the tax, but against the very tax itself.
    I am rather surprised that such an experienced campaigner as the hon. Gentleman the Member for Worcestershire, South should try to buttress up his very weak argument by saying that when we advocated the Capital Gains Tax on our election platforms we were speaking to a lot of illiterate people such as, and I took his words down, "miners, engin-
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    eers, labourers, and so on". These people, he said, in their deep ignorance could not understand what the Stock Exchange was about. They had voted for us in ignorance.
    The hon. Gentleman must not imagine that because people who are doing useful work, and who are the foundation of the economic life of the country, miners, engineers, labourers, are to be spoken of here so disparagingly as the hon. Gentleman seems to impute. I wonder whether, in South Worcestershire, he has no one but bookmakers and stockbrokers to appeal to when he goes on to the election platform.
    Sir G. Nabarro: I included farm workers and referred to agriculture and horticulture. They predominate in South Worcestershire. What the hon. Gentleman has conveniently left out of his argument, when he brought in this unfortunate word "disparaging", which I reject utterly, was that I said that these are not normally people very well versed in the complexities of capital gains provisions. The majority of Members on the benches opposite do not begin to understand what it is all about, let alone their constituents.
    Mr. Price: I do not think that that has advanced modern thought very much. I am concerned with all kinds of heretical ideas that are introduced, not only by the hon. Gentleman, but by the hon. Member for Wycombe (Mr. John Hall), who even quoted the poet Pope to reinforce some of the arguments that he was using. The hon. Gentleman spoke of this as being the highest taxed country in the world. It is not true. The argument might be proven on direct taxation, but if one couples direct and indirect taxation, and makes a league of the nations, the total impact of taxation is higher in many other countries, including the United States.
    6.45 p.m.
    The hon. Gentleman the Member for Orpington (Mr. Lubbock) made an interesting speech. I can understand the full-blooded arguments of the hon. Gentleman the Member for Worcestershire, South and some of the hon. Gentlemen opposite, but I can never understand the half-cocked arguments of the Liberal Party. First of all, the hon. Gentleman says that he agrees in principle with the Capital Gains Tax, but

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    he goes on to argue, as I have so often heard argued by other members of the Liberal Party, that because inflation is a continuing process, and the nominal value of capital becomes less in relation to its purchase price, one must not have a Capital Gains Tax at all. If I am wrong, perhaps the hon. Gentleman will put me right.
    This does not apply to land. There was a generation of Liberals in the days of Lloyd George—the "God gave the land to the people" brigade, whom I deeply respect and who were some of my political forebears. There have been scandalous manipulations of land needed for public works such as hospitals, schools and roads, necessary to make society efficient. Since I came to this House, 16 or 17 years ago, land in my division on which could have been bought for £30 an acre when I first became a Member is now being sold at £3,000 to £4,000 an acre for building pockethandkerchief-sized bungalows. This is the scandal about which the Liberal Party ought to be talking and fighting, not tying itself with all kinds of petty arguments about Capital Gains Tax.
    Mr. Lubbock: I could have saved the hon. Gentleman's breath in the last five minutes by reminding him that in the near future the betterment levy will take over the responsibility for recouping for the community the increase in land values, and that, therefore, it will not be dealt with under this tax deduction of 30 per cent. to 35 per cent., as proposed in the Amendment. This proposal will have no effect whatever on the taxation of increased land values.
    Mr. Price: That may be so. We will have to wait and see what are the effects of the betterment levy. I am quite philosophical about it. There are sure to be clever people who will find all kinds of devious methods to avoid the impact of betterment levy.
    As to the general question of the capital gains on chattels, there may be a strong argument for simplifying in this respect. At the same time, there are many prudent and shrewd investors who, even though beaten on manipulating stocks and shares, will not hesitate to buy diamonds, rare works of art, antique furniture, in the hope of hedging themselves against the
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    effects of taxation and other things. I hope that I have put forward some points worthy of consideration by hon. Members, and I trust that the Committee will reject the Amendment.
    Mr. Gower: The hon. Member for Westhoughton (Mr. J. T. Price) and the hon. Member for Ashton-under-Lyne (Mr. Sheldon) returned to the old argument that we on this side of the Committee are concerned only with reducing taxation in a fairly narrow band, particularly Surtax. I hope that they will recognise that our attitude to taxation in general is that it is too heavy and that people pay too much tax of all kinds. They must not, therefore, deem it strange that we should explore opportunities to reduce all kinds of taxation. That is the attitude of most of us. This is but one of many different kinds of taxation which we seek to reduce, though modestly.
    Unlike my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), I have no deep philosophical objection to the principle of Capital Gains Tax. I do not think that anyone on these benches can speak for all of us. There must be a great variety of opinions about the merits of such a tax. Nevertheless, I think that the hon. Member for Westhoughton will recognise that this particular tax, as introduced by his party a couple of years ago, is at a higher rate than that which obtains in countries where there is a free economy in which it has been tried. That is a matter which deserves the Committee's serious attention.
    The Capital Gains Tax must be a very disappointing tax for the Government. The revenue yield from it has been very small indeed. The estimate for the next year is about £5 million, or slightly in excess of £5 million. I think that the Financial Secretary and his colleagues must recognise that there must be some reason beyond those which have been stated in the debate why the yield has been so disappointing. One is the disincentive effect on people of a tax of this percentage to sell their holdings. This is very serious. It is not desirable that investments should be frozen, or that a sum of money should be frozen in a particular shareholding for ever. In many cases, it is desirable that the holder of a shareholding or some other form of wealth

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    should dispose of it and that the money should flow into some other form of investment.
    One of the reasons why the yield from the tax has been so very disappointing is that many people who, in other circumstances, would have sold have been disinclined to do so and to pay perhaps one-third or slightly less in tax. The Committee would not be fulfilling its duty if it did not look closely at the tax as it obtains in its present percentage. I should have thought that the hon. Member for Westhoughton, who is inclined usually to be fair in his assessments, would not think it strange that a responsible Opposition should examine carefully a tax of this kind which, even on the Government's own assessment, is very disappointing.
    My hon. Friend the Member for Wycombe (Mr. John Hall) was right to point out that the tax appears to have placed an extraordinary burden on the Inland Revenue officers and that it has diverted an enormous amount of talented manpower which, perhaps, could have been used more effectively in other sectors of the economy.
    I hope that the Government are considering methods of changing the tax. I should not think that anything said in the debate was a fatal objection to a modest reduction in the tax such as is called for in the Amendment. I agree with the hon. Member for Orpington (Mr. Lubbock) that if the Government could accept the principle of a reduction in the maximum rate they could also, to be fair, study the possibility of reducing the impact of the tax at the lower levels. If they did that, it would be a fillip to one particular sector of the economy.
    I return to my original premise. Taxation has tended for a long time, under Governments of both parties, to be excessive. It greatly needs to be reduced.
    Mr. MacDermot: Many of the speeches have been derogatory of the Capital Gains Tax, but we have heard remarkably few arguments in support of the Amendment, which is to reduce the rate from 30 to 25 per cent. We have heard that this is a complicated tax and that it throws a heavy burden on the Revenue.
    I know that many Members dislike the Capital Gains Tax. In spite of that, I had always thought that the Opposition were in support in general of the principle
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    of taxing capital gains and having a general Capital Gains Tax. But the hon. Member for Worcestershire, South (Sir G. Nabarro) tells us that that is not so. I do not know whether the hon. Member for Wycombe (Mr. John Hall), speaking from the Opposition Front Bench, would confirm that.
    In any event, what is the argument about complication and the burden on the Revenue to do with the rate? How would reducing the rate from 30 to 25 per cent. reduce the burden on the Revenue.
    Mr. Robert Cooke: If the rate were moderate, presumably people would be prepared to pay it without the interminable argument which goes on in working out what should be paid.
    Mr. MacDermot: If the hon. Gentleman thinks that people would argue less about paying 25 per cent. rather than 30 per cent. he is not in touch with reality.
    The hon. Member for Wycombe suggested that my right hon. Friend the Chancellor of the Exchequer had had to buy off a threatened strike in the Revenue over the Capital Gains Tax. I assure the hon. Gentleman that that is not the case. There were a few foolish people who talked in terms of strike action. They very nearly prejudiced the claim which was successfully made and to which the hon. Gentleman referred.
    The hon. Gentleman quoted Professor Wheatcroft's book and his criticism that the tax would not produce much revenue for a number of years and that it was complicated in its administration. I do not know whether the hon. Gentleman or Professor Wheatcroft would have preferred that we made the tax operate, as we did, only on gains since Budget day, in which case it was inevitable that the revenue would be small in the initial years and would build up to a substantial sum. I should have thought that that plainly was right, otherwise we should have a retrospective tax. Unless it is being said that it is wrong to introduce the Capital Gains Tax, it is no criticism to say that the revenue in early years will be small.
    It is easy to criticise and to say that the administration of the tax is complicated. But that is the inevitable result

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    of trying to make the tax fair. I say without fear of denial that ours is the fairest Capital Gains Tax anywhere in the world. Part of the price to be paid for that is that its administration is complicated.
    But, bearing in mind that we intend the tax to last and be a permanent feature of our system, is it not better and right that we should get the structure of it as fair as we can, even if the price in terms of work load and administration is fairly considerable, bearing in mind that, as my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said in an excellent speech, one of the reasons for the tax was to produce greater social equity so that people who made substantial increases in their wealth in the form of capital gains should not escape the tax net? It is an object of social justice which underlies this tax. That being so, it was our duty to make the tax as fair as we could.
    7.0 p.m.
    The hon. Member for Wycombe said, as a supposed criticism, that the tax produced less than was estimated, but he was wrong about that, as was shown by his hon. Friend the Member for Worcestershire South who quoted the figures. Our estimate of the yield last year was £5 million. The outturn was 7·2 million.
    Mr. John Hall: When I gave the original estimate, and mentioned a figure of £12 million for the last completed fiscal year, I gave the original estimate given by the Chancellor in his 1965 Budget speech.
    Mr. MacDermot: I do not recall the passage to which the hon. Member refers, but I confidently say that my right hon. Friend did not estimate the return for this tax within the first year or two as being £12 million. Perhaps the hon. Member is thinking of a figure which included the Corporation Tax on capital gains. That is something which we are not discussing either on the Amendment or in the figures about which we have been talking.
    In dealing with the general features, we had the suggestion by the hon. Member for Worcestershire, South that this was an inoperable tax, one that people would easily be able to evade and from
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    which we would never be able to collect a substantial amount of revenue. I have heard the hon. Member, in his usual confident manner, make exactly the same criticism of death duties. I heard him describe it as a voluntary tax which no one need pay unless he wanted to. Last year, we collected just under £300 million by this voluntary tax, and we estimate that in the coming year we will collect over £300 million. I am not, therefore, greatly impressed with that argument.
    I turn to the real question whether the rate should be 30 per cent. or 25 per cent. First, let us see who would be affected by the Amendment. My hon. Friend the Member for Ashton-under-Lyne was perfectly correct. We can all be indirectly affected, but the only people who would be directly affected by the Amendment would be Surtax payers. The hon. Member for Worcestershire, South, who, I am sorry, has left the Chamber, and who has been so abusive about the lack of understanding by my right hon. and hon. Friends concerning the tax, showed his complete ignorance by his whole argument about the way that the tax works, because he ignored the alternative basis of charge. Even when it was pointed out to him by the hon. Member for Orpington (Mr. Lubbock), he still showed that he was completely ignorant even of the alternative basis of charge, let alone how it works.
    Mr. Gower: Would not the hon. and learned Gentleman agree that any reduction in the rate would tend to lessen any disincentive effect that the tax might have upon sales or transactions which in turn would attract the duty? Might it not happen that if there were a smaller disincentive effect in that respect, the revenue would be increased?
    Mr. MacDermot: No, I do not accept that argument. The alternative basis of charge provides that if it is to the advantage of any individual taxpayer to have half his gains for the year up to a maximum of £5,000, plus the whole of the gains in the year in excess of £5,000, treated as an addition to his income of the year instead of being taxed at the 30 per cent. flat rate, he is entitled to elect to have it so treated. That is the alternative basis of charge.

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    That means, in practice, that the flat rate of 30 per cent. applies to gains accruing to a relatively small minority, to individuals with a marginal rate of tax—Income Tax plus Surtax—of 10s. in the £ or more. It applies to about 400,000 taxpayers—and that is all—assuming that all those taxpayers realise capital gains. Four hundred thousand is the greatest potential number of individuals to whom the rate can apply.
    The number of taxpayers to whom it does not apply—people who actually pay tax who, if they realised capital gains, would pay not at the flat rate, but at a lesser rate—is about 19½ million taxpayers, whose marginal rate is the standard rate and who would pay at the rate of 20·5 per cent. Again, as my hon. Friend the Member for Ashton-under-Lyne pointed out, those who pay less than the standard rate—I do not have the exact figure, but from memory it is about 12 million taxpayers—will pay at less, in some cases substantially less, than the 20·5 per cent. rate.
    It is, therefore, a complete fallacy for anyone to think that the usual average rate on which people pay tax on capital gains is 30 per cent. It is not. That is the rate which applies to a small minority of 400,000 Surtax payers. What we are discussing is whether their rate of Capital Gains Tax should be reduced from 30 to 25 per cent.
    How do we decide what is the fair and right rate at which those wealthy people should pay tax on their capital gains? I am sorry if I disappoint the hon. Member for Wycombe in repeating some of the arguments of previous years, because we have discussed this subject thoroughly for the past two years and this is the third occasion. The arguments are the came.
    I suggest that one can arrive rationally at a reasonable rate only by comparison. One can make internal comparisons with the rate which people pay on other forms of wealth and external comparison with what happens in other countries. Let us start with the internal comparisons. The theoretical basis for this tax is that it is not fair or right that people, in particular wealthy people who on the whole are those who make most of the capital gains, should be able to make increases and to realise increases in their total wealth in the form of capital gains and
    170
    escape the tax net when they would have to pay tax on increases which in law take the form of income. That is the reason for it.
    The starting point, therefore, is a comparison with the rate of what those people pay on their income. When there are high rates of Income Tax and of Surtax for wealthy people, I suggest that a very low rate is not a reasonable rate. A second reason for this is to try to provide a disincentive for the sort of arrangement by which people artificially try to dress up what is income as an increase in capital. Again, if there is too great a disparity, the incentive is increased.
    I repeat, as I have said in previous years, that for wealthy Surtax payers who normally pay a high rate on their income, a flat rate of 30 per cent. is a low and a moderate rate. It would be quite unreasonable, particularly in a year when we are not reducing other levels of taxation, to reduce that by 5 per cent.
    In view of what I have been saying, it may be argued that the rate should be higher than 30 per cent. Indeed, my hon. Friend the Member for Chislehurst (Mr. Macdonald) argued that this should be equated with gains which people make from gambling. The short-term gains tax, which was introduced by the party opposite, in a sense does that and equates it wholly with income. It is added to income and is taxed at the Income Tax rate.
    When dealing with longer-term gains, however—and some of these gains may be made over a considerable number of years—there are reasons for saying that there should be a lower rate. First, our steeply graduated rates of Income Tax and Surtax would mean a very heavy rate indeed if a person had to add the whole of his realised gains to his income for the particular year of realisation. Secondly, there is the point, which was made by the hon. Member for Orpington and also by the hon. Member for Wycombe in opening the discussion, of the inflation element which may be present in a long-term gain.
    As was made clear at the outset, that was something which was taken into account. We thought that it was the right and fair way to take it into account when we were fixing the rate, and that is another reason for having this low rate of 30 per cent.

    171
    Then one can make comparisons with other countries. However, it is not right to suggest, as the hon. Member for Barry (Mr. Gower) did, that ours is the highest rate of Capital Gains Tax in the world. It is not. There are other countries with substantially higher rates. But it is not fair to make comparisons with them because of their different tax structures. The only country with a structure comparable to ours is America—
    7.15 p.m.
    Mr. Lubbock: Before the hon. and learned Gentleman leaves the point about inflation, can he justify the case where a person has a money gain but not a real gain and, nevertheless, is required to pay 30 per cent. on it?
    Mr. MacDermot: If I took up that point, I should be going back over all the old arguments. We went into all this in great detail two years ago. Equally, there can be cases where a person finds himself brought into a higher tax bracket for Income Tax purposes when he has not made any total increase in his income in real terms.
    To complete what I was saying about the international comparison and comparing our system with America's, this is where what has been referred to as "MacDermot's Law" becomes relevant.
    When one compares their rate for Capital Gains Tax, which is a 25 per cent. rate, with our rate of 30 per cent., assuming that my first point is valid and that there should be a correspondence between the Capital Gains Tax rate and the rate of personal taxation of income, one cannot compare our Capital Gains Tax rationally with that of America without looking also at their rates for taxes on income.
    It must be remembered, too, what is the wealth of that country as a nation, and the average levels of income there compared with the level here. When one makes that comparison, I suggest that our rate of 30 per cent., which I repeat is only the rate for Surtax payers, is a reasonable one. I hope that no one in the Committee will continue under the illusion that this is the general rate for the payment of Capital Gains Tax. It is not. The vast majority of individuals pay at a rate of 20½ per cent. or less.
    172
    I regret that there is nothing novel about my argument, because I have advanced the same reasons as have been given for the last two years. However, for those reasons, I must urge the Committee to reject the Amendment.
    Mr. David Mitchell: I have been listening to the Financial Secretary very carefully. He has advanced a curious argument which perhaps can be summed up by saying that, because some of our taxes are too high, we must see that all of them are. It is an extraordinary basis on which to approach taxation on behalf of the Government.
    I rise to make two points. The first of them is to pick up something said by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) about the cost of collection of Capital Gains Tax by the Government. I want to stress the immense cost to the country in terms of skilled labour employed in private industry which is needed in accountancy and managerial skills tied up in dealing with the complicated provisions of Corporation Tax and Capital Gains Tax. The stage has been reached today when it is true to say that it can be more profitable for an industrialist or businessman to spend half a day with his accountant than to spend half a month trying to get export business.
    Mr. J. T. Price: Perhaps the hon. Gentleman will tell the Committee how a reduction of 5 per cent. in the Capital Gains Tax will affect the number of skilled accountants and civil servants required to administer it. Will it reduce them, and, if so, by how many?
    Mr. Mitchell: I shall come to that argument shortly. I was making the point at this stage because it had been raised earlier. The amount of work which has to be done by an accountant in valuing a share going back over past rights issues for years is amazing. However, if I pursue that point further, Mr. Jennings, you will probably rule me out of order, so perhaps I might come to the points made by the Financial Secretary.
    I nearly laughed aloud when I heard him suggest that ours was the fairest form of Capital Gains Tax in the world. He actually suggested that it was as fair as it could be made.

    173
    As the hon. Member for Orpington (Mr. Lubbock) said, it is a tax on inflation. This is the first Government in history to have imposed a tax on and made a profit out of inflation. By no stroke of the imagination could it be called fair.
    Mr. MacDermot: The hon. Gentleman says that we are the first Government in history to do it. He is wrong. The Americans began by having an exclusion in their tax for the inflation element, but they found that it did not work and removed it.
    Mr. Mitchell: They did not have the disadvantage of a Government whose policies were as inflationary as this Government's have proved to be in practice—
    The Temporary Chairman (Mr. J. C. Jennings): We are getting very wide of the Amendment. Hon. Gentlemen are tending to talk about the principle of capital gains instead of the words of the Amendment, which seeks to reduce the rate by 5 per cent. Perhaps we might now come more narrowly to the Amendment.
    Mr. Mitchell: Over the past two years, we have seen a decrease in the value of money, with a rate of inflation in excess of 5 per cent., which is the amount by which we seek to reduce a rate of Capital Gains Tax. All the time since 1965 the meter has been ticking away. The Government can argue that they are only taking a small amount of money in Capital Gains Tax, but, all the time, the effect is greater and greater. The business community finds itself more tied to its existing investment, because it does not dare sell out and lose such a vast proportion of its capital.
    The tax affects our farmers particularly. I represent a constituency which is partly farming, and an important factor which has to be faced is that we have a Ministry of Agriculture which wants to see larger farms, but a Treasury which, by means of Capital Gains Tax, will produce the fragmentation of farms.
    If a farm is owned by a man for 20 years and inflation runs at 5 per cent. a year, without an increase in land acreage, the value on paper will have doubled, and 30 per cent. of that has to be paid out in Capital Gains Tax. The effect is
    174
    that, when that farmer dies, sells his farm or, more often, gives it to his son, he has to find cash to hand to the Treasury far in excess of any savings which he may have made in running his farm over that period of time. He has to sell off land, which produces the fragmentation of farms when they should be coming together into larger units. This is a serious matter to the farming community, to the small businessman and to the business community in general.
    There is one other aspect which has not been mentioned. The Government and the country know of the desperate need for Britain to increase her investments in the modernisation of her industries. But how can capital be accumulated to invest in modernisation with an excessive rate of Capital Gains Tax which reduces people's incentive to save and reduces the formation of the capital which is so desperately needed by the nation?
    Mr. John Hall: We have had a useful, and perhaps rather wide, debate. I apologise for rising when I know that several of my hon. Friends want to take part in the debate, but I think that an opportunity may occur for them to speak on following Amendments.
    The Financial Secretary did not disappoint me. I rather fancied that we would hear the same argument that we heard on two previous occasions, despite the fact that I tried to avoid deploying the same argument again, and concentrated on the element of wealth tax which forms part of the Capital Gains Tax as it now exists.
    As far as I can understand it, the argument has come down to the basic one that as the rate of 30 per cent. applies to only a comparatively few taxpayers—the Financial Secretary said that 400,000 surtax payers represented the extent of the problem—and as the rate of Surtax in this country is very high, indeed higher than it is in America, it is right that the rate of Capital Gains Tax should be high as well. I find it hard to understand—and I am sure that my hon. Friends do, too—why the mere fact that only 400,000 taxpayers are involved means that we should do nothing to help them. There are many instances in which we help a small section of taxpayers, yet when it comes to those who pay the highest rate

    175
    of tax, apparently it is somehow immoral to suggest that they should be given relief.
    On many occasions we have heard this comparison of taxes, and about the operation of "MacDermot's Law". We find it hard to accept this law. It means, I suppose, that if Surtax is increased—which under the present Government is quite likely—we shall have to increase the rate of Capital Gains Tax at the same time because the two will have to be brought into relation in some way. It means that as far as can be arranged we should increase the taxes paid by those paying the highest rate of Surtax. They should be required to pay a higher local rate of tax. They should, as far as could be arranged, pay a higher rate of national
    taxation that is paid by those who pay Income Tax and Surtax at a lower rate. This is a difficult argument to sustain, and I do not propose to take up time discussing it any further.
    I think that I shall be expressing the wish of my hon. Friends if I say that we cannot accept the arguments which have been advanced by the Financial Secretary, just as we were not able to accept them on previous occasions. I am sure that I am expressing the wish of my right hon. and hon. Friends when I say that we ought to take the matter to a Division to express our views in the Lobby.
    Question put, That those words be there added:—
    The Committee divided: Ayes 121, Noes 185.

    Division No. 359.]

    AYES

    [7.25 p.m.

    Allason, James (Hemel Hempstead)

    Harris, Reader (Heston)

    Page, Graham (Crosby)

    Bell, Ronald

    Harrison, Col. Sir Harwood (Eye)

    Page, John (Harrow, W.)

    Biffen, John

    Harvey, Sir Arthur Vere

    Pardoe, John

    Biggs-Davison, John

    Hastings, Stephen

    Pearson, Sir Frank (Clitheroe)

    Bottom, Sir Clive

    Heald, Rt. Hn. Sir Lionel

    Percival, Ian

    Boyle, Rt. Hn. sir Edward

    Heseltine, Michael

    Pike, Miss Mervyn

    Braine, Bernard

    Higgine, Terence L.

    Pink, R. Bonner

    Brinton, Sir Tatton

    Hiley, Joseph

    Pym, Francis

    Bromley-Davenport, Lt.-Col. Sir Walter

    Hill, J. E. B.

    Rawlinson, Rt. Hn. Sir Peter

    Brown, Sir Edward (Bath)

    Holland, Philip

    Renton, Rt. Hn. Sir David

    Bruce-Gardyne, J.

    Hooson, Emlyn

    Ridley, Hn. Nicholas

    Buck, Antony (Colchester)

    Hordern, Peter

    Rippon, Rt. Hn. Geoffrey

    Carr, Rt. Hn. Robert

    Hornby, Richard

    Rodgers, Sir John (Sevenoaks)

    Chichester-Clark, R.

    Howell, David (Guildford)

    Russell, Sir Ronald

    Cooke, Robert

    Hunt, John

    Sharples, Richard

    Cooper-Key, Sir Neill

    Jenkin, Patrick (Woodford)

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

    Craddock, Sir Beresford (Spelthorne)

    Jopling, Michael

    Sinclair, Sir George

    Cunningham, Sir Knox

    King, Evelyn (Dorset, S.)

    Smith, John

    Currie, G. B. H.

    Kitson, Timothy

    Summers, Sir Spencer

    Dance, James

    Knight, Mrs. Jill

    Taylor, Sir Charles (Eastbourne)

    Davidson, James(Aberdeenshire, W.)

    Lancaster, col. C. G.

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

    Dean, Paul (Somerset, H.)

    Langford-Holt, Sir John

    Taylor, Frank (Moss Side)

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

    Loveys, W. H.

    Temple, John M.

    Doughty, Charles

    McAdden, Sir Stephen

    Thatcher, Mrs. Margaret

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

    Turton, Rt. Hn. R. H.

    Emery, Peter

    MacArthur, Ian

    van Straubenzee, W. R.

    Errington, Sir Eric

    Macleod, Rt. Hn. Iain

    Vaughan-Morgan, Rt. Hn. Sir John

    Eyre, Reginald

    McMaster, Stanley

    Walker, Peter (Worcester)

    Fisher, Nigel

    Marten, Neil

    Walker-Smith, Rt. Hn. Sir Derek

    Fletcher-Cooke, Charles

    Maude, Angus

    Wall, Patrick

    Fortescue, Tim

    Mawby, Ray

    Ward, Dame Irene

    Gilmour, Ian (Norfolk, C.)

    Maxwell-Hyslop, R. J.

    Weatherill, Bernard

    Glover, Sir Douglas

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

    Webster, David

    Glyn, Sir Richard

    Mills, Stratton (Belfast, N.)

    Wells, John (Maidstone)

    Goodhart, Philip

    Miscampbell, Norman

    Whitelaw, Rt. Hn. William

    Cower, Raymond

    More, Jasper

    Wills, Sir Gerald (Bridgwater)

    Grieve, Percy

    Murton, Oscar

    Wilson, Geoffrey (Truro)

    Grimond, Rt. Hn. J.

    Nabarro, Sir Gerald

    Wolrige-Gordon, Patrick

    Gurden, Harold

    Noble, Rt. Hn. Michael

    Hall, John (Wycombe)

    Nott, John

    TELLERS FOR THE AYES:

    Hall-Davis, A. G. F.

    Onslow, Cranley

    Mr. Anthony Grant and

    Harris, Frederic (Croydon, N.W.)

    Osborne, Sir Cyril (Louth)

    Mr. David Mitchell.

    NOES

    Albu, Austen

    Beaney, Alan

    Booth, Albert

    Allaun, Frank (Salford, E.)

    Bence, Cyril

    Boyden, James

    Allen, Scholefield

    Benn, Rt. Hn. Anthony Wedgwood

    Braddock, Mrs. E. M.

    Atkins, Ronald (Preston, N.)

    Bidwell, Sydney

    Bray, Dr. Jeremy

    Atkinson, Norman (Tottenham)

    Binns, John

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

    Bagier, Gordon A. T.

    Bishop, E. S.

    Buchanan, Richard (G'gow, Sp'burn)

    Barnett, Joel

    Blackburn, F.

    Callaghan, Rt. Hn. James

    Carmichael, Neil

    Howarth, Robert (Bolton, E.)

    Page, Derek (King's Lynn)

    Carter-Jones, Lewis

    Hoy, James

    Paget, R. T.

    Castle, Rt. Hn. Barbara

    Huckfield, L.

    Pannell, Rt. Hn. Charles

    Cos, Denis

    Hughes, Rt. Hn. Cledwyn (Anglesey)

    Parker, John (Dagenham)

    Coleman, Donald

    Hughes, Hector (Aberdeen, N.)

    Pavitt, Laurence

    Concannon, J. D.

    Hynd, John

    Pearson, Arthur (Pontypridd)

    Conlan, Bernard

    Irvine, A. J. (Edge Hill)

    Peart, Rt. Hn. Fred

    Craddock, George (Bradford, S.)

    Jackson, Peter M. (High Peak)

    Pentland, Norman

    Crawshaw, Richard

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

    Perry, George H. (Nottingham, S.)

    Cronin, John

    Jones, Dan (Burnley)

    Prentice, Rt. Hn. R. E.

    Dalyell, Tam

    Judd, Frank

    Price, Christopher (Perry Barr)

    Davidson, Arthur (Accrington)

    Kelley, Richard

    Price, Thomas (Westhoughton)

    Davies, Dr. Ernest (Stretford)

    Kerr, Russell (Feltham)

    Pursey, Cmdr. Harry

    Davies, Harold (Leek)

    Lee, John (Reading)

    Randall, Harry

    Delargy, Hugh

    Lewis, Ron (Carlisle)

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

    Dempsey, James

    Lomas, Kenneth

    Rogers, George (Kensington, N.)

    Dewar, Donald

    Luard, Evan

    Ross, Rt. Hn. William

    Diamond, Rt. Hn. John

    Lyon, Alexander W. (York)

    Rowlands, E. (Cardiff, N.)

    Dickens, James

    McBride, Neil

    Shaw, Arnold (Ilford, S.)

    Dobson, Ray

    McCann, John

    Sheldon, Robert

    Doig, Peter

    MacColl, James

    Silkin, Rt. Hn. John (Deptford)

    Dunwoody, Mrs. Gwyneth (Exeter)

    MacDermot, Niall

    Silverman, Sydney (Nelson)

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

    Macdonald, A. H.

    Slater, Joseph

    Ellis, John

    Mackenzie, Gregor (Rutherglen)

    Small, William

    English, Michael

    Mackie, John

    Spriggs, Leslie

    Ennals, David

    Maclennan, Robert

    Stewart, Rt. Hn. Michael

    Ensor, David

    McMillan, Tom (Glasgow, C.)

    Swain, Thomas

    Evans, Albert (Islington, S.W.)

    MacPherson, Malcolm

    Swingler, Stephen

    Faulds, Andrew

    Mallalieu, E. L. (Brigg)

    Symonds, J. B.

    Finch, Harold

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

    Taverne, Dick

    Fletcher, Raymond (Ilkeston)

    Fletcher, Ted (Darlington)

    Manuel, Archie

    Thomson, Rt. Hn. George

    Floud, Bernard

    Mapp, Charles

    Thornton, Ernest

    Foot, Sir Dingle (Ipswich)

    Marquand, David

    Tinn, James

    Ford, Ben

    Marsh, Rt. Hn. Richard

    Tomney, Frank

    Freeson, Reginald

    Mason, Roy

    Tuck, Raphael

    Galpern, Sir Myer

    Maxwell, Robert

    Urwin, T. W.

    Gordon Walker, Rt. Hn. P. C.

    Millan, Bruce

    Wainwright, Edwin (Dearne Valley)

    Gourlay, Harry

    Miller, Dr. M. S.

    Walker, Harold (Doncaster)

    Gregory, Arnold

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

    Wallace, George

    Grey, Charles (Durham)

    Moonman, Eric

    Watkins, David (Consett)

    Griffiths, David (Rother Valley)

    Morgan, Elystan (Cardiganshire)

    Watkins, Tudor (Brecon & Radnor)

    Griffiths, Rt. Hn. James (Llanelly)

    Morris, Alfred (Wythenshawe)

    Wellbeloved, James

    Hale, Leslie (Oldham, W.)

    Morris, Charles R. (Openshaw)

    Willey, Rt. Hn. Frederick

    Hamilton, James (Bothwell)

    Morris, John (Aberavon)

    Williams, Alan (Swansea, W.)

    Hamilton, William (Fife, W.)

    Moyle, Roland

    Williams. Alan Lee (Hornchurch)

    Hamling, William

    Mulley, Rt. Hn. Frederick

    Williams, W. T. (Warrington)

    Hannan, William

    Nowens, Stan

    Wilson, William (Coventry, S.)

    Harper, Joseph

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

    Winnick, David

    Harrison, Walter (Wakefield)

    Oakes, Gordon

    Winterbottom, R. E.

    Hart, Mrs. Judith

    Ogden, Eric

    Woof, Robert

    Haseldine, Norman

    O'Malley, Brian

    Yates, Victor

    Hazell, Bert

    Oram, Albert E.

    Henig, Stanley

    Orbach, Maurice

    TELLERS FOR THE NOES:

    Herbison, Rt. Hn. Margaret

    Orme, Stanley

    Mr. Ioan L. Evans and

    Hooley, Frank

    Oswald, Thomas

    Mr. Ernest Armstrong.

    Howarth, Harry (Wellingborough)

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

    Question proposed, That the Clause stand part of the Bill.
    The Temporary Chairman: I think that it would be for the convenience of the Committee if I put this Question without discussion, the reason being that the Clause merely adds Schedule 13 to the Bill and that anything that could be said on the Question, "That the Clause stand part of the Bill" should be able to be said on the various Amendments to the Schedule. I should be grateful if the Committee could meet me in that regard.
    Mr. Nott: On a point of order. The point that I wanted to raise concerns the statement of the Financial Secretary that the 30 per cent, rate applied only to
    178
    Surtax payers. I shall certainly raise the question when we debate the Schedule if you wish, Mr. Jennings, but I would have thought that it applied more properly to the Clause.
    The Temporary Chairman: Of course it does, but if I give way may I have an assurance from the hon. Member that his speech will be brief?
    Mr. Nott: I shall certainly be brief—
    Mr. MacDermot: I fail to see how any question which is relevant to the rate of tax can be relevant to the Question, "That the Clause stand part of the Bill".
    The Temporary Chairman: The unfortunate thing is that it is not relevant to

    179
    the Schedule either. I deliberately did not see the hon. Member when he rose, but I am prepared to allow him to make a brief speech on this point, provided that my generosity is not taken advantage of.
    Mr. Nott: I shall not take advantage of your generosity, Mr. Jennings. Due to a misunderstanding at the end of the debate on the previous Amendment I did not have an opportunity of putting the point to the Financial Secretary. It is an extremely important one. The argument put forward by the hon. and learned Gentleman is utterly misleading. Having made several comments about the speeches of my hon. Friends, he went on to say that the argument was relevant only where a member of the public paid Surtax. I suggest that that is completely misleading.
    Let us suppose that, every year, a young executive—not a Surtax payer—earning £2,000 a year puts aside, on his after-tax income, £500. The day comes when he needs to sell the I.C.I. shares—let us say—which he has bought with the £500. He wants to sell them to buy a house. He then becomes a Surtax payer for the first and only time in his life. In that case he then as to pay a 30 per cent. rate of Capital Gains Tax. For the Financial Secretary to say that my hon. Friends were making a misleading point is in itself misleading.
    Let us take another case of a young company executive with an option in a company. Year by year he is waiting for his option to be called. The day comes when it is, and in that one year he makes a capital gain, on which he has to pay tax at the rate of 30 per cent. It is not correct to imply that the 30 per cent. rate applies only to Surtax payers it would apply only to them if people with capital gains always sold those capital gains bit by bit, year by year, but that is often quite impracticable.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

  Schedule 13.—(CAPITAL GAINS.)
  Mr. MacDermot: I beg to move Amendment No. 174, in page 81, line 18, after the first 'tax', to insert 'capital gains tax'.
  180
  This Amendment corrects in favour of the taxpayer a drafting error in paragraph 10. As at present drafted it provides that a payment by a nonresident company of tax charged on a shareholder by virtue of Section 41(2) is not for the purpose of Income Tax or Corporation Tax to be regarded as a payment to that person. It was overlooked that this had the effect of converting it into a capital distribution made by the company and, as such, becoming generally chargeable to Capital Gains Tax in the hands of the individual, though not in the hands of corporate shareholders.
  This was not the intention. The purpose of the Amendment is to correct the error and to ensure that Capital Gains Tax is also excluded.
  Amendment agreed to.
  Mr. John Hall: I beg to move Amendment No. 180, in page 81, line 20, at the end to insert:
  Estate Duty
  11. In section 26 of the Finance Act 1965 subsections (1) and (2) shall be deleted and the following inserted:—

  '(1) In determining the amount of estate duty payable on a death allowance shall be made for any capital gains tax chargeable in consequence of the death and, in determining the value of the estate for the purposes of estate duty an allowance shall be made for any capital gains tax owed by the deceased.

  (2) In determining the amount of estate duty payable by reference to settled property passing on a death, whether it continues to be settled property or not, an allowance shall be made for any capital gains tax chargeable in consequence of the death in respect of the settled property, so far as that tax falls to be paid out of the property so passing or to be borne by any person to whom the property so passes for any beneficial interest in possession'.

  This matter has not be debated since the first Capital Gains Tax debates in May, 1965. The Amendment would provide that the whole amount of tax paid would be allowed as relief against claim for Estate Duty. The debate on a similar Amendment in 1965 came towards the end of a series of Estate Duty Amendments. The arguments were directed towards the adverse effect of imposing what amounts to double taxation on an estate at death.
  A telling contribution was made on that occasion by an hon. Member who said:
  "The Financial Secretary will he relieved to know that I propose to express strong

  181
  support for him. It is true that it will take the form of inviting the Government to drop the whole proposition of making Capital Gains Tax payable on death. But I think that, on reflection, they will come to the conclusion that there is a good deal to their advantage in the invitation, which they may well accept, to be big about this and not merely to content themselves with a useful Amendment, but to throw out the whole miserable idea of bringing Capital Gains Tax to bear on death."
  The hon. Gentleman went on:
  "I have spoken to many persons of all shades of political opinion and all parties about death duties, and I have yet to meet anybody who does not regard the present level of duty on estates of all sizes, big and small, as being already at a rate so penal that they could not conceivably with equity be increased."—[OFFICIAL REPORT, 26th May, 1965; Vol. 713, c. 638.]
  The hon. Member continued in that strain for several columns.
  I am, of course, quoting from the hon. Member for Manchester, Cheetham (Mr. Harold Lever), who is now the Joint Under-Secretary of State for Economic Affairs. I can well understand his being moved to the Treasury Bench, because his criticisms from the back benches were becoming so telling that some way had to be found of shutting him up, and this was as good a way as any. Of course, he was quite right: it is wrong to impose Capital Gains Tax on top of what he described as the "most ruthless, penal and progressive rates" of Estate Duty.
  Various examples of the effect of the tax on small businesses were given in that debate. I do not want to repeat them all, but one illustrates its effect on top of Estate Duty. It was given in column 635–6 of the same date—that of a business started by a man with £1,000 and built up to a value of £20,000. The Financial Secretary will be aware of the example. As a result, on death, there was a capital gain of £19,000 and, after allowing for the £5,000, tax was payable on £14,000, and amounted to £4,200.
  Therefore, the estate on which Estate Duty was calculated would be £15,800, or the original value less the tax paid, on which would be paid £1,580 in death duties, totalling £5,780, Capital Gains Tax and Estate Duty combined.
  However, if a man inherited £20,000 in assets and did nothing about them so that they did not change in value, on his death, his executors would pay only £2,400 on his estate. Although both
  182
  amounts are exactly the same, the only difference is that the estate of the first man, who had worked hard and built up a business from small beginnings to £20,000, would suffer a charge of £5,780, and, that of the second man, who had merely lived on the interest of his assets, would bear only £2,400.
  I have always understood, from debates on the subject over several years, that Capital Gains Tax was not imposed fundamentally to raise revenue—if it was, it has been very disappointing—but to give the impression at least that the Government were promoting social justice, and also to help to sell the conception of an incomes policy. If it was designed to remove a sense of injustice between a man living on taxed income and one living on the proceeds of capital appreciation, surely it was not designed to increase the tax on the dead, which does so much harm to their families and dependants, or deliberately to discourage savings, which, in its present form, it must do.
  If the tax is to remain as it is, the only other way of reducing the impact on death is to reduce Estate Duty. If Estate Duty is to remain as it is, then surely, in equity, this Amendment should be accepted.
  7.45 p.m.
  Mr. MadDermot: I do not think that the hon. Member for Wycombe (Mr. John Hall) will be surprised if I say that I must advise the Committee to reject the Amendment. As he said, it is similar to one which we discussed in May, 1965. In his admirably brief and clear speech, the hon. Gentleman made clear the Amendment's purpose—to try to overcome the effect of death being an occasion of charge to Capital Gains Tax. That is what he dislikes. In a great many cases, the Amendment would eliminate liability for the tax altogether on death.
  The cost of the Amendment ultimately, as Capital Gains Tax builds up to its full amount, could be substantial about £5 million. Normally, Capital Gains Tax charged on gains at death will be less than the Estate Duty on the whole value of the property. As the hon. Gentleman said, the first £5,000 is of course, exempt, so the allowance of the tax against the duty, which is what the Amendment proposes, would in effect cancel out the Capital Gains Tax charge.

  183
  This leads to the principle for making death an occasion of charge, to use the horrible legalistic language. The general principle is that we think that it is right to charge the tax when capital gains are realised and that gains are realised in general when the asset is transferred, whether voluntarily, as by sale or by gift, or involuntarily, as by death and inheritance.
  If we were to make an exception in the case of death, we should undermine the tax in important respects and produce injustices. There would be an indefensibly different result in the case of heirs of people who had exactly similar properties, except that one of the deceased had switched his assets shortly before death and the other had not.
  An example is that of two people owning property which originally cost £100,000 but then appreciated in value to £150,000. In one case, the owner sells the property and reinvests shortly before his death. In the other case, the owner does not. If the Amendment were accepted—I need not go into all the figures, and perhaps the Committee will take it from me—the result in the second case would be that the heirs to the net estate would inherit £7,500 more than would the heirs of the man who had reinvested his assets shortly before death, the reason being that, under the Amendment, liability to Capital Gains Tax in the second case would be set off against the Estate Duty whereas in the first case liability to Capital Gains Tax would have arisen shortly before the death and would not have been set off.
  This shows the real danger of exempting death from being an occasion of charge to Capital Gains Tax. We have the experience of America to act as a warning in this respect. There is no liability to charge on death in America, and this is known among tax experts there, significantly, as the death gap. It enables large fortunes to be transmitted from generation to generation without any liability to Capital Gains Tax arising, which we at least on this side would regard as socially inequitable, and it also has a stultifying effect economically because it provides a great disincentive to reinvestment. In order to benefit from the death gap many wealthy people will
  184
  not, and do not, reinvest so as to avoid liability to capital gains tax.
  On both general economic grounds and social grounds, therefore, and to preserve the purpose of the tax, we think it right, as we said at the outset, that death should be an occasion of charge, and we would think it wrong to undermine that principle by an Amendment of this kind.
  Mr. Frederic Harris: Will the Financial Secretary deal with the specific case put to him by my hon. Friend the Member for Wycombe (Mr. John Hall)? Would he comment on that case, which seems an extraordinarily good one to support our argument?
  Mr. MacDermot: The hon. Gentleman put an extreme case. It was to meet cases of that kind that we made several concessions in the 1965 Act, one being the £5,000 exemption on death, another being a provision for a similar exemption on retirement, another being a provision for deferment of liability in the case of transfer of assets, which was to help small businesses. Moreover, in the case of persons who are, relatively speaking, small businessmen—the kind of case we are considering—the taxpayer would in many circumstances have the benefit of the alternative basis of charge which we discussed a few minutes ago.
  Mr. John Hall: The hon. and learned Gentleman, in detailing the small concessions which were made as the result of the many Amendments and criticisms which we put in 1965, failed to answer the point put to him by my hon. Friend the Member for Croydon, North-West (Mr. Frederic Harris). The figures I gave still largely apply. I took account of the £5,000 concession in making my calculation.
  The hon. and learned Gentleman said that the principle behind the Capital Gains Tax is that the gain should be charged when the assets are realised. So far as I know, there is no other case where an asset is realised and a chargeable gain results where the asset is subject also to another and crippling tax; yet this is what happens with assets on death when Estate Duty has to be paid in addition.
  The hon. and learned Gentleman referred to the American experience and what is described, appropriately enough,

  185
  as the death gap. He pointed out that that experience seemed to indicate that there was a disincentive to reinvestment. I understand that the death gap has operated in American fiscal law for a very long time, and there has been no indication of a proposal to change it. If it really had ill effects on the American economy in so far as it discouraged reinvestment on a large scale, measures would have been taken to correct it.
  This has not been done, and the reason is that the Americans appreciate that, whatever small effect there might be by way of disincentive, the overriding effect of double taxation is to produce considerable injustice and a great burden on death
  on the heirs of an individual whose estate is subject to both Capital Gains Tax and Estate Duty. I speak subject to correction, but I understand that the rates of estate duty in America are a good deal lower than ours, so there is even less reason in this country for imposing both taxes on death.
  The hon. and learned Gentleman's reply is no more satisfactory now than it was two years ago. I advise my right hon. and hon. Friends to divide the Committee.
  Question put, That those words be there inserted:
  The Committee divided: Ayes 121, Noes 186.

  Division No. 360.]

  AYES

  [7.57 p.m.

  Allason, James (Hemel Hempstead)

  Harris, Reader (Heston)

  Page, John (Harrow, W.)

  Bell, Ronald

  Harrison, Col. Sir Harwood (Eye)

  Pardoe, John

  Biffen, John

  Hastings, Stephen

  Pearson, Sir Frank (Clitheroe)

  Biggs-Davison, John

  Heald, Rt. Hn. Sir Lionel

  Percival, Ian

  Bossom, Sir Clive

  Heseltine, Michael

  Pike, Miss Mervyn

  Boyle, Rt. Hn. Sir Edward

  Higgins, Terence L.

  Pink, R. Bonner

  Braine, Bernard

  Hiley, Joseph

  Pym, Francis

  Brinton, Sir Tatton

  Hill, J. E. B.

  Rawlinson, Rt. Hn. Sir Peter

  Bromley-Davenport, Lt. -Col. Sir Walter

  Holland, Philip

  Ronton, Rt. Hn. Sir David

  Brown, Sir Edward (Bath)

  Hooson, Emlyn

  Ridley, Hn. Nicholas

  Bruce-Gardyne, J.

  Hordern, Peter

  Rippon, Rt. Hn. Geoffrey

  Buck, Antony (Colchester)

  Hornby, Richard

  Rodgers, Sir John (Sevenoaks)

  Carr, Rt. Hn. Robert

  Howell, David (Guildford)

  Russell, Sir Ronald

  Chichester-Clark, R.

  Hunt, John

  Sharpies, Richard

  Cooke, Robert

  Iremonger, T. L.

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

  Craddock, Sir Beresford (Spelthorne)

  Jenkin, Patrick (Woodford)

  Sinclair, Sir George

  Cunningham, Sir Knox

  Jopling, Michael

  Smith, John

  Currie, G. B. H.

  Kaberry, Sir Donald

  Steel, David (Roxburgh)

  Dance, James

  King, Evelyn (Dorset, S.)

  Summers, Sir Spencer

  Davidson, James(Aberdeenshire, W.)

  Kitson, Timothy

  Taylor, Sir Charles (Eastbourne)

  Dean, Paul (Somerset, N.)

  Knight, Mrs. Jill

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

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

  Lancaster, Col. C. G.

  Taylor, Frank (Moss Side)

  Doughty, Charles

  Langford-Holt, Sir John

  Temple, John M.

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

  Loveys, W. H.

  Thatcher, Mrs. Margaret

  Emery, Peter

  Lubbock, Eric

  Turton, Rt. Hn. R. H.

  Errington, Sir Eric

  McAdden, Sir Stephen

  van Straubenzee, W. R.

  Eyre, Reginald

  MacArthur, Ian

  Walker, Peter (Worcester)

  Fisher, Nigel

  Macleod, Rt. Hn. Iain

  Walker-Smith, Rt. Hn. Sir Derek

  Fletcher-Cooke, Charles

  McMaster, Stanley

  Wall, Patrick

  Fortescue, Tim

  Marten, Neil

  Ward, Dame Irene

  Gilmour, Ian (Norfolk, C.)

  Maude, Angus

  Weatherill, Bernard

  Glover, Sir Douglas

  Mawby, Ray

  Webster, David

  Glyn, Sir Richard

  Maxwell-Hyslop, R. J.

  Wells, John (Maidstone)

  Goodhart, Philip

  Mills, Stratton (Belfast, N.)

  Whitelaw, Rt. Hn. William

  Goodhew, Victor

  More, Jasper

  Wills, Sir Gerald (Bridgwater)

  Gower, Raymond

  Murton, Oscar

  Wilson, Geoffrey (Truro)

  Grieve, Percy

  Mabarro, Sir Gerald

  Wolrige-Gordon, Patrick

  Grimond, Rt. Hn. J.

  Noble, Rt. Hn. Michael

  Gurden, Harold

  Nott, John

  TELLERS FOR THE AYES:

  Hall, John (Wycombe)

  Onslow, Cranley

  Mr. Anthony Grant and

  Hall-Davis, A. G. F.

  Osborne, Sir Cyril (Louth)

  Mr. David Mitchell.

  Harris, Frederic (Croydon, N.W.)

  Page, Graham (Crosby)

  NOES

  Albu, Austen

  Binns, John

  Callaghan, Rt. Hn. James

  Allaun, Frank (Salford, E.)

  Bishop, E. S.

  Carmichael, Neil

  Allen, Scholefield

  Blackburn, F.

  Carter-Jones, Lewis

  Atkins, Ronald (Preston, N.)

  Booth, Albert

  Castle, Rt. Hn. Barbara

  Atkinson, Norman (Tottenham)

  Boyden, James

  Coe, Denis

  Bagier, Gordon A. T.

  Braddock, Mrs. E. M.

  Coleman, Donald

  Barnett, Joel

  Bray, Dr. Jeremy

  Concannon, J. D.

  Beaney, Alan

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

  Conlan, Bernard

  Bence, Cyril

  Buchan, Norman

  Craddock, George (Bradford, S.)

  Bidwell, Sydney

  Buchanan, Richard (G'gow, Sp'burn)

  Crawshaw, Richard

  Cronin, John

  Irvine, A. J. (Edge Hill)

  Pavitt, Laurence

  Dalyell, Tam

  Jackson, Peter M. (High Peak)

  Pearson, Arthur (Pontypridd)

  Davidson, Arthur (Accrington)

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

  Peart, Rt. Hn. Fred

  Davies, Dr. Ernest (Stretford)

  Jones, Dan (Burnley)

  Pentland, Norman

  Davies, Harold (Leek)

  Judd, Frank

  Perry, George H. (Nottingham, S.)

  Delargy, Hugh

  Kelley, Richard

  Prentice, Rt. Hn. R. E.

  Dempsey, James

  Kerr, Russell (Feltham)

  Price, Christopher (Perry Barr)

  Dewar, Donald

  Lee, John (Reading)

  Price, Thomas (Westhoughton)

  Diamond, Rt. Hn. John

  Lewis, Ron (Carlisle)

  Pursey, Cmdr. Harry

  Dickens, James

  Lomas, Kenneth

  Randall, Harry

  Dobson, Ray

  Luard, Evan

  Roberts, Albert (Normanton)

  Doig, Peter

  Lyon, Alexander W. (York)

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

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

  McBride, Neil

  Roebuck, Roy

  Ellis, John

  McCann, John

  Rogers, George (Kensington, N.)

  English, Michael

  MacColl, James

  Ross, Rt. Hn. William

  Ennals, David

  MacDermot, Niall

  Rowlands, E. (Cardiff, N.)

  Ensor, David

  Macdonald, A. H.

  Shaw, Arnold (Ilford, S.)

  Evans, Albert (Islington, S.W.)

  Mackenzie, Gregor (Rutherglen)

  Sheldon, Robert

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

  Mackie, John

  Silkin, Rt. Hn. John (Deptford)

  Faulds, Andrew

  Maclennan, Robert

  Silverman, Julius (Aston)

  Finch, Harold

  McMillan, Tom (Glasgow, C.)

  Silverman, Sydney (Nelson)

  Fletcher, Raymond (Ilkeston)

  MacPherson, Malcolm

  Slater, Joseph

  Fletcher, Ted (Darlington)

  Mallalieu, E. L. (Brigs)

  Small, William

  Foot, Sir Dingle (Ipswich)

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

  Spriggs, Leslie

  Ford, Ben

  Manuel, Archie

  Stewart, Rt. Hn. Michael

  Freeson, Reginald

  Mapp, Charles

  Swain, Thomas

  Galpern, Sir Myer

  Marquand, David

  Swingler, Stephen

  Gordon Walker, Rt. Hn. P.C.

  Marsh, Rt. Hn. Richard

  Symonds, J. B.

  Gregory, Arnold

  Maxwell, Robert

  Taverne, Dick

  Grey, Charles (Durham)

  Millan, Bruce

  Thomson, Rt. Hn. George

  Griffiths, David (Rother Valley)

  Miller, Dr. M. S.

  Thornton, Ernest

  Griffiths, Rt. Hn. James (Llanelly)

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

  Tinn, James

  Hale, Leslie (Oldham, W.)

  Moonman, Eric

  Tomney, Frank

  Hamilton, James (Bothwell)

  Morgan, Elystan (Cardiganshire)

  Tuck, Rahpael

  Hamilton, William (Fife, W.)

  Morris, Alfred (Wythenshawe)

  Urwin, T. W.

  Hamling, William

  Morris, Charles R. (Openshaw)

  Wainwright, Edwin (Dearne Valley)

  Hannan, William

  Morris, John (Aberavon)

  Walker, Harold (Doncaster)

  Harper, Joseph

  Moyle, Roland

  Wallace, George

  Harrison, Walter (Wakefield)

  Mulley, Rt. Hn. Frederick

  Watkins, David (Consett)

  Hart, Mrs. Judith

  Newens, Stan

  Watkins, Tudor (Brecon & Radnor)

  Haseldine, Norman

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

  Wellbeloved, James

  Hazell, Bert

  Oakes, Gordon

  Willey, Rt. Hn. Frederick

  Henig, Stanley

  Ogden, Eric

  Williams, Alan (Swansea, W.)

  Herbison, Rt. Hn. Margaret

  O'Malley, Brian

  Williams, Alan Lee (Hornchurch)

  Hooley, Frank

  Oram, Albert E.

  Williams, W. T. (Warrington)

  Houghton, Rt. Hn. Douglas

  Orbach, Maurice

  Wilson, William (Coventry, S.)

  Howarth, Harry (Wellingborough)

  Orme, Stanley

  Winnick, David

  Howarth, Robert (Bolton, E.)

  Oswald, Thomas

  Winterbottom, R. E.

  Hoy, James

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

  Woof, Robert

  Huckfield, L.

  Page, Derek (King's Lynn)

  Yates, Victor

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Paget, R. T.

  Hughes, Hector (Aberdeen, N.)

  Pannell, Rt. Hn. Charles

  TELLERS FOR THE NOES:

  Hynd, John

  Parker, John (Dagenham)

  Mr. Harry Gourlay and

  Mr. Ernest Armstrong.

  8.0 p.m.
  Mr. John Hall: I beg to move Amendment No. 183, in page 81, line 20 at the end to insert:
  Valuation of Assets
  Paragraph 25(3) of Schedule 6 to the Finance Act 1965 shall cease to have effect and it is hereby declared that any election made in accordance with paragraph 25(1) of the said Schedule shall be revocable by the taxpayer at any time within two years of the disposal to which the election refers.
  The form of the Amendment will be familiar to the Financial Secretary. After the Finance Act, 1965 came on to the Statute Book it became apparent that paragraph 25 of Schedule 6 had been worded as it had so that the taxpayer might be compelled to make an irrevocable election before he could become
  188
  aware of the factors on which his decision would have to be based.
  Paragraphs 24 and 25 of the Schedule offer the taxpayer two alternative methods of calculating the capital gain made on the realisation of an asset acquired before 6th April, 1965. The nature of the calculations which must be made in these cases is such that it is very difficult for him to decide, before figures have been finally agreed with the Inland Revenue, which of the alternatives it is in his interests to elect. This becomes an irrevocable election, and it must be made before the taxpayer knows which is the best way of doing it.
  It can well be that the decision he makes without the full knowledge of the facts can be against his interests. The

  189
  new sub-paragraph which we propose would give the taxpayer the genuine freedom of choice based on known facts to which he is properly entitled whenever the law gives a right of election. The right should not be clouded over to facilitate the administration of what is admittedly very complicated legislation.
  I do not think that the Financial Secretary could, in justice, refuse an Amendment of this kind. We are not wedded to the wording, and if he states that he accepts the principle we would be prepared to withdraw the Amendment and accept any suitable alternative. I think that the principle is clear, namely, that as the law stands the taxpayer is put at a disadvantage in having to make an election in the way he now must before the figures have been finally agreed with the Inland Revenue.
  Mr. MacDermot: The Amendment overlooks the purpose for which the time apportionment method of valuation was included in the 1965 Finance Act. What we were concerned with was the problem of valuation of assets which were held at Budget day, assets which had been acquired before Budget day. We saw that both for the Inland Revenue and for the taxpayers and their advisers it would have involved an appalling volume of valuation work if every one of those assets had to be the subject of a specific valuation at Budget day in order to get its Budget day value and thereby be able to calculate the gains since Budget day.
  What we did was to provide in paragraph 24 of Schedule 6 for the time apportionment formula, so that one compared the time which had elapsed since the asset was acquired, or since 6th April, 1945, if it had been acquired before then, and assumed that the increase in the value had taken place steadily over that period. In the vast majority of cases this would work to the benefit of the taxpayer, but so that no taxpayer should feel a sense of injustice we gave taxpayers two years—from the date of disposal, not from Budget day—to elect if they wished instead to have a valuation as at Budget day, 1965. We did not take any similar right to the Revenue. In cases where this time apportionment formula would operate heavily against the Revenue there was no right for the Revenue to elect; it was bound by the time apportionment formula. We gave
  190
  the right to taxpayers in order to correct any sense of injustice on their part.
  The Amendment suggests that the election should not be made irrevocable and that if the taxpayer, having made his election, were to find that after all the time apportionment formula would operate more to his benefit, he should be allowed to re-elect in favour of it. If we did that we should defeat the object of the time apportionment formula because the result would be that people would make an actual valuation to find out precisely which would be more to their favour, and the time of the Revenue would be taken up because it also would have to make a valuation and it would have to do all the negotiations.
  There is, of course, a point of principle involved. If all that work is done and an actual valuation is made and agreed as at Budget day, then we have the actual correct figure from which to calculate properly and truly what has been the gain since Budget day. There would be no reason then to go back on that and say in a somewhat sporting spirit that because the taxpayer elected to have the true valuation made instead of taking what had turned out to be more to his advantage by way of the time apportionment formula, we should be jolly decent chaps and not levy the correct duty but instead levy an incorrect duty more in favour of the taxpayer.
  For both reasons—that the Amendment will undermine the purpose, which is to save administrative work, and because, the true value having been found, there is no reason then to substitute for it an artificial one—I must advise the Committee to reject the Amendment.
  Mr. John Hall: I do not understand why the Financial Secretary thinks that the Revenue authorities should not be jolly decent chaps. If alternatives are open to a taxpayer, and he is free to take one or the other, I should have thought that the Revenue, if not trying to get more money out of the taxpayer than it was entitled to, would be prepared to assist him.
  In every other aspect of our taxation legislation, if one is in difficulty one discusses the matter with one's tax inspector and he gives one all the help that he can. Indeed, during our debates last year I pointed to the problems that

  191
  affect the average taxpayer in calculating his Capital Gains Tax and spoke of the number of people who were throwing their hands up in despair over the problems that they face. I was told by one of the Treasury Ministers that the individual's proper course was to go to his tax inspector and have a full discussion with him, when the inspector would do all he could to help and make sure that he did not pay any more tax than was justly required by the Inland Revenue.
  The Amendment gives the taxpayer an option and it enables the Revenue to discuss the matter with the taxpayer and gives him information on which he can make a sound judgment and do it on the basis of giving himself a smaller liability to tax. Surely nobody could quarrel with that. I cannot see why the Financial Secretary should in this case wish to keep to the Inland Revenue a sort of hidden weapon. In some cases the taxpayer has almost to toss a coin to decide which alternative he should adopt.
  I am very disappointed with the Financial Secretary's reply. This is almost a technical Amendment, and I should have thought that he would have been more forthcoming. No doubt the feeling of conciliation that he might have had earlier is beginning to wear off and now he is sticking strictly to his Treasury briefs. I am very sorry about that. I do not propose to advise the Committee to divide on the Amendment, but I hope that we shall be able to return to the subject on Report.
  Amendment negatived.
  8.15 p.m.
  Mr. John Hall: I beg to move Amendment 40, in page 81, line 31, at the end to add:
  12.—(1) In section 20(4) of the Finance Act, 1965, after the words 'total amount of chargeable gains' there shall be inserted the words 'in excess of £500'.
  (2) This paragraph shall have effect for the years 1967–68 and later years of assessment.
  There is a certain similarity between the Amendments that we are moving to Schedule 13 and the Amendments that were moved last year. This Amendment is similar in form to one moved last year by my hon. Friend the Member for Harrow, Central (Mr. Grant). During
  192
  that debate he deployed three main arguments—the administrative burden, the effect of the tax on the share market and the fact that the tax was a disincentive to small savers, pointing out that the exemption of small gains was of particular value to that class of investor.
  I do not wish to cover that ground again—this afternoon I have been careful to avoid going over arguments deployed on previous occasions—but I remember that on that occasion the points so cogently argued by my hon. Friends were supported, with his usual eloquence, by the Joint Under-Secretary of State for Economic Affairs. I only wish the hon. Gentleman were here now; I have a feeling that I should get a more sympathetic reception from him than I shall from the Chief Secretary. The points are as valid now as they were then.
  I shall confine my remarks to the problem of the administrative burden. I do not think that there is any doubt, whatever the Treasury Bench may say, that the Inland Revenue staff are feeling the strain. There was a revolt last year, although the Financial Secretary earlier on said that it could not be described as a revolt but was just a matter of a few hotheads, who almost jeopardised the negotiations for increased salaries, which in themselves had been brought about because of the burden of work involved in the Government's fiscal legislation. We had a number of bitter complaints from the Inland Revenue staff at their conference this year. I think it is true to say that the Chancellor of the Exchequer will find it impossible to introduce any more tax reforms for some time to come unless, as in the case of S.E.T. he turns other Ministries into collecting and administrative organisations.
  I suppose that the fact that we are not likely to see any more tax reforms for some little time is something not to be deplored, and one can say that perhaps in this case "out of evil cometh good". Nevertheless, it means that the Inland Revenue is under such pressure that it could not accept any further burden. Various professional bodies of which the Chief Secretary is well aware have for some time been expressing increasing anxiety about the work imposed upon them by the complicated legislation of the Capital Gains Tax.

  193
  I have a letter from a chartered accountant in my constituency, who writes:
  "So-called simplification of the tax code has created an almost intolerable burden for my profession and certainly for me personally. The extra work involved requires more staff, who are very difficult to get. I am just recovering from a coronary induced, my doctor says, by overwork coupled with anxiety resulting from the difficulty of advising my clients about the effect of the incredibly complicated legislation with which we now have to cope. For heaven's sake do something to convince the Government of the crying need for a reform which will reduce the present load and save the many thousands of wasted man-hours spent not only in my profession, but in industry and the legal profession."
  That was a cry from the heart. I know the man slightly, and I know that he is very conscientious and has, as he says, been ill. This kind of experience has been shared by many thousands of professional men throughout the country. One of the purposes of our Amendment is to reduce the load on the Inland Revenue, on the professions, and on the individual taxpayers.
  Professor Wheatcroft suggested another reason why there should be a small annual exemption, namely, that the high cost to the taxpayers who make the small gains is an extremely unfair element in a tax designed for social justice. He makes the suggestion, which I commend for consideration, first, that there should be an annual exemption for gains, and that is what we are suggesting here; and secondly, as an alternative, annual exemption for disposal of a value which would be of some much larger amount.
  I am not, and I am sure my hon. Friends are not, wedded to the wording of the Amendment. If the Chief Secretary can suggest ways and means by which small gains may be exempted iii some way or another, which would reduce the administrative burden on the Inland Revenue, and on the professions which have to do much of the work, and on the taxpayers, I am sure that we would be prepared to accept the suggestion on the understanding that it would be brought forward on Report.
  I hope that the right hon. Gentleman will not just repeat the sort of arguments we have had on previous occasions. He has had now enough experience of the working of the tax to realise that what I say now, and what I forecast two years
  194
  ago, is, in fact, happening, that it is tying up a vast number of man-hours in the consideration of individual taxpayers' business, which involves many calculations being made and a great deal of time spent on them.
  When it turns out to show that there is no gain, possibly, at all, or only a very little, surely it must be to the interests of the Inland Revenue and of the Government as a whole to reduce the burden, to simplify the administration, even if only to reduce the general cost of collecting this tax. From the point of view of saving wear and tear on the minds and tempers, and, indeed, the bodies, of many thousands of people, I hope that the Chief Secretary will find it in his heart to accept this Amendment or something like it.
  Mr. Frederic Harris: I shall detain the Committee for only a few moments. I have listened to the whole of the debate this afternoon and this evening about the Capital Gains Tax without having made a speech at all. I strongly support the view which my hon. Friend the Member for Wycombe (Mr. John Hall) has been expressing. I start with the contention that the tax is a bad tax in itself in any case. It militates against investment; it costs endless difficulties and any amount of work. As my hon. Friend has said, the administrative effort is very considerable. The officials are very much overworked; one has only to see them in one's own local district to know that.
  Complaints come in all the time about this kind of difficulty in the administration, which just cannot stand up to the pressure. That is why there is little doubt that we shall not see much in the way of additional taxation in the very near future—and that, to my mind is a good thing in any case.
  My thinking on this matter is now what it has always been, in favour of simplification, to make the business much easier wherever we possibly can. I have put forward various suggestions on these lines from time to time. Here we have a simple proposal to eliminate anything up to £500. This is a very sound proposition. I cannot imagine that it means much in the way of loss of taxation which the Government presently obtain from capital gains, but the ease to the administration generally by such a move, and the saving of annoyance to the people

  195
  making small gains and worrying about the returns, would be considerable.
  I therefore very strongly support the view which my hon. Friend has put forward, and I hope that the Chief Secretary will see his way clear to accept the Amendment.
  The Chief Secretary to the Treasury (Mr. John Diamond): As the hon. Gentleman the Member for Wycombe (Mr. John Hall) said, this proposal and similar proposals are not being discussed for the first time, and the arguments, as he said, are as valid as they ever were. That is to say, this proposal would in the first place save practically no time; in the second place would mean loss of revenue; and in the third place would help the richest and give no help to the less wealthy section. It is for this reason that this proposal has been top-hatted by the Conservative Front Bench.
  The hon. Gentleman spent most of his time dealing with the element of saving time, so perhaps I could deal with that first, by pointing out that this would save time only in those cases where there was a disposal of the whole of the asset and not a part of it. This is not at all the normal situation because where one disposes of part of the asset one has to keep records just the same in order to see what value shall be attached to the remaining part. It would save time only in those cases where it would be abundantly clear that the amount involved could not possibly reach £500, because if there were any possibility of reaching that figure the calculation would have to be made just the same.
  Let me say straight away that we are just as anxious as is the hon. Gentleman that this tax be collected with the minimum trouble and the minimum of time for all concerned, including the professions, as well as the Revenue, and that it should be collected with the minimum of irritation. Therefore, we have not only before these matters were discussed last year and the year before and also since then, reviewed the whole of the circumstances, to see if it was possible to produce any means whereby, without great cost to the Revenue and without unfairness to the taxpayer, one could reduce the amount of work. The answer is, as
  196
  the hon. Gentleman has indicated, that it was not possible.
  It is not the subject of this Amendment, but, subject to what you say, Sir Eric, I should like to deal very shortly indeed with the only alternative method which offers any possibility of a reduction. No time is saved by a limitation of the amount on disposal, to which the hon. Gentleman referred very shortly. If we have a limitation on a disposal this would be wholly arbitrary and unjust. I am quite sure that it would not meet with the support of the Chamber once the details were known. A disposal limitation of £500 might, in fact, hide a capital gain of £490; it might hide a capital gain of £1; it might involve a capital loss—and nothing is said about what is to happen about capital losses.
  So I repeat that, although, in principle, I am with the hon. Gentleman in the sense of wanting to find, if possible, a time saving method, even if that were to have a slight effect on the collection of the tax, but would nevertheless be fair to all taxpayers, we have not been able to find one, and this proposal certainly does not help, other than very marginally; and it certainly cannot be justified as a reform on the grounds of the time it saves, and it has all the defects which we have referred to previously.
  Perhaps I can go through these very shortly indeed once more. It helps the most prosperous because only the man who has £500 worth of capital gains which he could manipulate, and could so very easily manipulate, is to escape. He would get the full benefit. The man who has less capital gain on average net, who cannot take advantage and cannot assess an alternative basis of assessment is excluded from this proposal completely.
  One has to bear in mind that the rate of tax on capital gains is substantially less than the rate of tax on income. One accepts this, but it still requires a lot of demonstrating that the tax on hard earned income should be heavier than the tax on gains which do not involve the element of hard work but are merely the result of passive gains on savings.
  There is, furthermore, the fact that personal allowances are available to anybody who is being assessed under the alternative basis and that would mean that one could not possibly be in the

  197
  position of attempting to collect Capital Gains Tax from anyone whose personal allowances had not been allowed in full or who had a balance of personal allowances unrelieved. It is unjustifiable that one should attempt to adjust taxes in this way. But the main reason against the Amendment—a reason which the hon. Member himself put forward—is that it does not serve the purpose at all well or, at the most, only to a very minimal extent.
  I shall not dwell on the aspect of loss, but if we accepted £500 in gains, the corollary would normally be £500 in losses. But, having regard to the fact that it is inequitable, that it would help the most prosperous and not help at all the less prosperous, and that it would fail to serve its essential purpose of saving a useful amount of time in administration, I cannot recommend the Amendment to the Committee.
  8.30 p.m.
  Mr. John Hall: We got the usual reply. As we have many things to do yet, I shall not take up the time of the Committee in dealing with what the right hon. Gentleman has said point by point. However, he referred to the difference between earnings and gains which have occurred without effort on the part of the individual. In many cases, Capital Gains Tax will be imposed not on any true gain in the value of the asset but arising entirely out of inflation.
  Thus, if one wants to replace an asset and has to sell it to do so and pay Capital Gains Tax on what is a theoretical capital
  gain on the original cost, one finds as a rule that one has to pay much more than one realises after the deduction of the tax—more than would otherwise have been the case.
  I explained on the last Amendment that one of the worst things about the tax was its element of wealth tax. This applies in this case as in the other. The right hon. Gentleman did not touch on the point and I did not bring it up myself, but the Minority Report of the Royal Commission recommended that there should be an exemption up to £400. That recommendation had the full support of Dr. Kaldor at that time and it is a pity that it was one of the few recommendations of his that were not accepted.
  The right hon. Gentleman made the point that this Amendment would only benefit the wealthy, but that would not be so. Many people make small gains. It is true that they have an alternative method of assessment but, even so, the exemption of this completely from Capital Gains Tax would help people not in the top Surtax bracket as well as those who are.
  As the right hon. Gentleman is determined to do nothing to relieve the burden not only on the Inland Revenue, which apparently he is prepared to accept, but on many thousands outside who will still have to cope with this incredibly complicated legislation, I can only advise my hon. and right hon. Friends to divide.
  Question put, That those words be there added:—
  The Committee divided: Ayes 122; Noes 187.

  Division No. 361.]

  AYES

  [8.35 p.m.

  Allason, James (Hemel Hempstead)

  Doughty, Charles

  Heseltine, Michael

  Bell, Ronald

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

  Higgins, Terence L.

  Biffen, John

  Emery, Peter

  Hiley, Joseph

  Biggs-Davison, John

  Errington, Sir Eric

  Hill, J. E. B.

  Bossom, Sir Clive

  Eyre, Reginald

  Holland, Philip

  Boyle, Rt. Hn. Sir Edward

  Fisher, Nigel

  Hooson, Emlyn

  Braine, Bernard

  Fletcher-Cooke, Charles

  Hordern, Peter

  Brinton, Sir Tatton

  Fortescue, Tim

  Howell, David (Guildford)

  Bromley-Davenport,Lt.-Col.Sir Walter

  Gilmour, Ian (Norfolk, C.)

  Hunt, John

  Brown, Sir Edward (Bath)

  Glover, Sir Douglas

  Iremonger, T. L.

  Bruce-Gardyne, J.

  Glyn, Sir Richard

  Jenkin, Patrick (Woodlord)

  Goodhart, Philip

  Buck, Antony (Colchester)

  Goodhew, Victor

  Jopling, Michael

  Carr, Rt. Hn. Robert

  Gower, Raymond

  Kaberry, Sir Donald

  Chichester-Clark, R.

  Grieve, Percy

  King, Evelyn (Dorset, S.)

  Cooke, Robert

  Grimond, Rt. Hn. J.

  Kitson, Timothy

  Cooper-Key, Sir Neill

  Gurden, Harold

  Lancaster, Col. C. G.

  Craddock, Sir Beresford (Spelthorne)

  Hall, John (Wycombe)

  Langford-Holt, Sir John

  Cunningham, Sir Knox

  Hall-Davis, A. G. F.

  Loveys, W. H.

  Currie, G. B. H.

  Harris, Frederic (Croydon, N.W.)

  Lubbock, Eric

  Dance, James

  Harris, Reader (Heston)

  McAdden, Sir Stephen

  Davidson,James(Aberdeenshire, W.)

  Harrison, Col. Sir Harwood (Eye)

  MacArthur, Ian

  Dean, Paul (Somerset, N.)

  Hastings, Stephen

  Macleod, Rt. Hn. Iain

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

  Heald, Rt. Hn. Sir Lionel

  McMaster, Stanley

  Marten, Nell

  Pike, Miss Mervyn

  Taylor, Frank (Moss Side)

  Maude, Angus

  Pink, R. Bonner

  Temple John M.

  Mawby, Ray

  Price, David (Eastleigh)

  Thatcher, Mrs. Margaret

  Maxwell-Hyslop, R. J.

  Pym, Francis

  Turton, Rt. Hn. R. H.

  Mills, Stratum (Belfast, N.)

  Rawlinson, Rt. Hn. Sir Peter

  van Straubenzee, W. R.

  Miscampbell, Norman

  Renton, Rt. Hn. Sir David

  Walker, Peter (Worcester)

  Mitchell, David (Basingstoke)

  Ridley, Hn. Nicholas

  Walker-Smith, Rt. Hn. Sir Derek

  More, Jasper

  Rippon, Rt. Hn. Geoffrey

  Wall, Patrick

  Murton, Oscar

  Rodgers, Sir John (Sevenoaks)

  Ward, Dame Irene

  Nabarro, Sir Gerald

  Russell, Sir Ronald

  Wells, John (Maidstone)

  Noble, Rt. Hn. Michael

  Scott, Nicholas

  Whitelaw, Rt. Hn. William

  Nott, John

  Sharpies, Richard

  Wills, Sir Gerald (Bridgwater)

  Onslow, Cranley

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

  Wilson, Geoffrey (Truro)

  Osborne, Sir Cyril (Louth)

  Sinclair, Sir George

  Wolrige-Gordon, Patrick

  Page, Graham (Crosby)

  Smith, John

  Page, John (Harrow, W.)

  Steel, David (Roxburgh)

  TELLERS FOR THE AYES:

  Pardoe, John

  Summers, Sir Spencer

  Mr. Anthony Grant and

  Pearson, Sir Frank (Clitheroe)

  Taylor, Sir Charles (Eastbourne)

  Mr. Bernard Weatherill.

  Percival, Ian

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

  NOES

  Albu, Austen

  Gordon Walker, Rt. Hn. P. C.

  Morris, John (Aberavon)

  Allaun, Frank (Salford, E.)

  Gourlay, Harry

  Moyle, Roland

  Alldritt, Walter

  Gregory, Arnold

  Mulley, Rt. Hn. Frederick

  Allen, Scholefield

  Grey, Charles (Durham)

  Newens, Stan

  Armstrong, Ernest

  Griffiths, David (Rother Valley)

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

  Atkins, Ronald (Preston, N.)

  Griffiths, Rt. Hn. James (Llanelly)

  Oakes, Gordon

  Atkinson, Norman (Tottenham)

  Hale, Leslie (Oldham, W.)

  Ogden, Eric

  Bagier, Gordon A. T.

  Hamilton, James (Bothwell)

  O'Malley, Brian

  Barnett, Joel

  Hamling, William

  Oram, Albert E.

  Beaney, Alan

  Hannan, William

  Orbach, Maurice

  Bence, Cyril

  Hart, Mrs. Judith

  Orme, Stanley

  Bldwell, Sydney

  Haseldine, Norman

  Oswald, Thomas

  Bishop, E. S.

  Hazell, Bert

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

  Blackburn, F.

  Henig, Stanley

  Page, Derek (King's Lynn)

  Booth, Albert

  Herbison, Rt. Hn. Margaret

  Pannell, Rt. Hn. Charles

  Boyden, James

  Hooley, Frank

  Parker, John (Dagenham)

  Braddock, Mrs. E. M.

  Houghton, Rt. Hn. Douglas

  Pavitt, Laurence

  Bray, Dr. Jeremy

  Howarth, Harry (Wellingborough)

  Pearson, Arthur (Pontypridd)

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

  Howarth, Robert (Bolton, E.)

  Pentland, Norman

  Buchanan, Richard (G'gow, Sp'burn)

  Hoy, James

  Perry, George H. (Nottingham, S.)

  Huckfield, L.

  Prentice, Rt. Hn. R. E.

  Callaghan, Rt. Hn. James

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Price, Christopher (Perry Barr)

  Carmichael, Neil

  Hughes, Hector (Aberdeen, N.)

  Price, Thomas (Westhoughton)

  Carter-Jones, Lewis

  Hynd, John

  Pursey, Cmdr. Harry

  Castle, Rt. Hn. Barbara

  Irvine, A. J. (Edge Hill)

  Randall, Harry

  Coe, Denis

  Jackson, Peter M. (High Peak)

  Roberts, Albert (Normanton)

  Coleman, Donald

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

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

  Concannon, J. D.

  Jones, Dan (Burnley)

  Roebuck, Roy

  Conlan, Bernard

  Judd, Frank

  Rogers, George (Kensington, N.)

  Craddock, George (Bradford, S.)

  Kelley, Richard

  Ross, Rt. Hn. William

  Crawshaw, Richard

  Kerr, Russell (Feltham)

  Rowlands, E. (Cardiff, N.)

  Cronin, John

  Lee, John (Reading)

  Shaw, Arnold (Ilford, S.)

  Crossman, Rt. Hn. Richard

  Lewis, Ron (Carlisle)

  Sheldon, Robert

  Dalyell, Tam

  Lomas, Kenneth

  Shore, Peter (Stepney)

  Davidson, Arthur (Accrington)

  Luard, Evan

  Silkin, Rt. Hn. John (Deptford)

  Davies, Dr. Ernest (Stretford)

  Silverman, Julius (Aston)

  Davies, Harold (Leek)

  Lyon, Alexander W. (York)

  Silverman, Sydney (Nelson)

  Delargy, Hugh

  McBride, Neil

  Slater, Joseph

  Dempsey, James

  McCann, John

  Small, William

  Dewar, Donald

  MacColl, James

  Spriggs, Leslie

  Diamond, Rt. Hn. John

  MacDermot, Niall

  Stewart, Rt. Hn. Michael

  Dickens, James

  Macdonald, A. H.

  Swain, Thomas

  Dobson, Ray

  Mackenzie, Gregor (Rutherglen)

  Swingler, Stephen

  Doig, Peter

  Mackie, John

  Symonds, J. B.

  Dunn, James A.

  Maclennan, Robert

  Taverne, Dick

  Dunwoody, Mrs. Gwyneth (Exeter)

  McMillan, Tom (Glasgow, C.)

  Thomson, Rt. Hn. George

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

  MacPherson, Malcolm

  Thornton, Ernest

  Ellis, John

  Mahon, Peter (Preston, S.)

  Tinn, James

  English, Michael

  Mallalieu, E. L. (Brigg)

  Tomney, Frank

  Ennals, David

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

  Tuck, Raphael

  Ensor, David

  Manuel, Archie

  Urwin, T. W.

  Evans, Albert (Islington, S.W.)

  Mapp, Charles

  Wainwright, Edwin (Dearne Valley)

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

  Marquand, David

  Walker, Harold (Doncaster)

  Faulds, Andrew

  Maxwell, Robert

  Wallace, George

  Finch, Harold

  Millan, Bruce

  Watkins, David (Consett)

  Fletcher, Raymond (Ilkeston)

  Miller, Dr. M. S.

  Watkins, Tudor (Brecon & Radnor)

  Fletcher, Ted (Darlington)

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

  Wellbeloved, James

  Foot, Sir Dingle (Ipswich)

  Moonman, Eric

  Willey, Rt. Hn. Frederick

  Ford, Ben

  Morgan, Elystan (Cardiganshire)

  Williams, Alan (Swansea, W.)

  Freeson, Reginald

  Morris, Alfred (Wythenshawe)

  Williams, Alan Lee (Hornchurch)

  Galpern, Sir Myer

  Morris, Charles R. (Openshaw)

  Williams, Mrs. Shirley (Hitchin)

  200

  201

  Williams, W. T. (Warrington)

  Winterbottom, R. E.

  TELLERS FOR THE NOES:

  Wilson, William (Coventry, S.)

  Woof, Robert

  Mr. Joseph Harper and

  Winnick, David

  Yates, Victor

  Mr. Walter Harrison.

  Question proposed, That the Schedule, as amended, be the Thirteenth Schedule to the Bill.
  Mr. MacDermot: There is one point which I should like to make about paragraph 5. Under paragraph 18 of Schedule 7 to the 1965 Act, if a close company transfers an asset to a person at a price less than the full market value, the difference between the price and the market value is apportioned among the company's shareholders and regarded as replacing the acquisition of cost for Capital Gains Tax purposes. Where the disposition at less than market value is between two close companies which are members of a group it is obvious that there is no diminution in the shareholders' equity, looking at the group as a whole, and it follows that to apply paragraph 18 in these circumstances could produce inequitable results.
  An Amendment to deal with this was tabled by the Opposition last year, but it was not called. At that time, the Government thought that it was unnecessary, or we would have proposed a similar Amendment ourselves. But it now appears that our view was misconceived and that paragraph 18 as the law stands is not overridden by Schedule 13, and so this paragraph is designed to amend the law in order to give the effect which we thought there would be.
  The aim of the Amendment is to avoid penalising bona fide business arrangements, but we already hear of schemes being devised which, if put into effect, would take advantage of this relieving provision, or other provisions enacted for the convenience of groups of companies, in order to create artificial losses.
  I wanted to make it clear that this would be blatant avoidance, and I take the opportunity to give a warning that if these provisions are abused, my right hon. Friend the Chancellor will not hesitate to introduce appropriate legislation, if need be with retrospective effect, to deal with it. We have not thought it right, in respect of these arrangements to alter our intention to proceed with this paragraph as it stands in the Schedule. We do so coupled with that warning.
  8.45 p.m.
  Mr. John Hall: We heard with interest the warning given by the Financial Secretary to would-be tax avoiders. It is also of interest for him to recall that this paragraph 5 follows an Amendment which we tried to move last year. Paragraph I also follows an Amendment which we moved last year. We are delighted that the Government have at last seen the error of their ways in these respects.
  Question put and agreed to.
  Schedule, as amended, agreed to.

  Clause 31.—(CHARGEABLE GAINS: EXCLUSION OF DEVELOPMENT VALUE OF LAND IN GREAT BRITAIN.)
  Mr. Graham Page: I beg to move Amendment No. 206, in page 36, line 29, after '(2)', to insert:
  'for the purposes of this section "current use value" shall have the same meaning as in the Land Commission Act 1967 and in statutory instruments made under the authority of that Act and'.
  The Chairman: With this Amendment we may also take Amendment No. 209, in page 36, line 31, at end insert:
  'but in no event shall the amount equal to current use value, ascertained by virtue of this section and the said Schedule, exceed the amount of current use value ascertained in accordance with the provisions of the Land Commission Act 1967 and the statutory instruments made thereunder'.;
  Amendment 207, in Schedule 14, page 81, line 34, leave out from beginning to end of line 47 on page 82; and Amendment 208, in page 83, line 32, leave out from beginning to end of line 50 on page 86.
  Mr. Graham Page: As this is the first Amendment to the Clauses and Schedules dealing with the effect of betterment levy on taxation, and, in particular, with Corporation Tax and Capital Gains Tax, perhaps I might preface a detailed explanation of the Amendment with a general statement of what I believe to be the purpose of the Clause, so that I may fit the Amendment into that general purpose.
  Throughout the debates on the Land Commission Bill, now the Land Commission Act, 1967, the Opposition protested against a tax upon development

  203
  value of land being imposed not as a tax, but as a levy. We would have wished it to be imposed as part of the normal system of taxation, but the Government insisted upon a levy, with all the administrative problems inherent in this. In particular, there is the calculation involved, which has resulted in the utmost complexity.
  One of the major complexities is that to prevent double taxation, that is to relieve the taxpayer from paying both Capital Gains Tax or Corporation Tax, as well as betterment levy upon the same sum of money. In Clause 31, we have the formula preventing that happening for the non-trader in land, by dividing up the gain made by the disposal of land into a part attributable to net development value. The Land Commission Act made it clear—as clear as anything could be in that Act—that betterment levy is to be charged on net development value, and net development value is a figure calculated by deducting current use value of property from its market value. In most cases one is able to take the purchase price as the current use value and the sale price as the market value. But current use value plus one-tenth is the base from which we start to calculate the net development value on which betterment levy is paid.
  Therefore, very roughly, the effect of the Land Commission Act and Clause 1 of the Bill will be that a gain on a sale is divided into, first, the increase in current use value—the value of the property for the purpose for which it being used when purchased or sold—and, secondly, the remainder of the gain less a figure equal to one-tenth of the current use value.
  The Land Commission Act went to some trouble to define "current use value". In Schedule 4, it defines it for the purpose of the several cases of chargeable acts or events on which betterment levy arises. Scattered thoughout the 100 or so pages of closely-typed print of that Act are definitions or modifications of definitions of current use value. One might have thought that, having so exhaustively described current use value when it is to be used as the base from which net development value is to be calculated, that description could have
  204
  remained the same for the purpose of the Finance Bill when we use it as the top and bottom limit for Capital Gains Tax upon another part of the same gain. But in this Bill we have yet another Schedule, Schedule 14, and another eight or more closely printed pages giving yet another definition of "current use value".
  I do not know whether the result is a gap between the increase in current use value and the net development value, or whether there is an overlap. I defy anyone to know from reading the two Schedules. All that I can do is to give an example of what I think might occur by taking the several Schedules of the Land Commission Act with Schedule 14 of the Bill.
  Suppose that I buy some fields for £2,000. Let us say that, as fields, they are worth £1,000,but I hope to build on them, so I pay £2,000 for them. I get planning permission and then sell them for £3,000. I therefore make a gain of £1,000. Let us assume that by that time the current use value of the fields has risen, the farmland around them has become more expensive, and that, instead of £1,000 current use value, by the time that I sell them the current use value is £1,500. Therefore, there has been an increase in current use value of £500. I would pay Capital Gains Tax on £500. I pay betterment levy on the difference between the sale price and the purchase price—£1,000. I could perhaps choose to pay it on the difference between the current use value at the time that I sell and the sale price. It would be the current use value plus one-tenth, which would work out at £1,650. I should find myself paying a betterment levy on £1,350. That would not be worth it, so I choose to pay the betterment levy on £1,000—the difference between the sale price and the purchase price.
  I said that I had got planning permission for the fields. I had assumed that I had done nothing about them. Suppose, however, that I had started work under that planning permission. I should then have to turn up the Schedule to the Bill and find what happens when I have planning permission on which I have started work. I find in the second part of paragraph 1(3) that if I have started work under that planning permission, the planning permission is taken into account in

  205
  assessing the current use value. Therefore, for the purpose of this example, I might be paying Capital Gains Tax on the full increase in current use valu.- from the £1,000 that the fields were worth when I bought them to the whole £3,000 at which I sold them, paying capital Gains Tax on £2,000.
  Then, however, I turn to the Land Commission Act to find the base from which I start to calculate net development value, and I find that the definition of "current use value" concerning planning permission and work is different. It has certain qualifications. The planning permission on which work has started is to be excluded only in certain circumstances.
  I refer to Schedule 6, paragraph 7(2), of the Land Commission Act, 1967, in which the planning permission on which work has started is to be excluded from the current use value of the land only if it was begun on or after the first appointed day and notice has been given under certain Sections of the Act or the carrying out of the project was done before the first appointed day. There is, therefore, a totally different definition.
  I might find, therefore, that I was paying betterment levy on the difference between the current use value at the time of the sale, disregarding the planning permission, and the selling price, which in the example I have given would be £1.350. Therefore, I would be taxed, either by betterment levy or by Capital Gains Tax, on £2,350 when I had made a gain from the transaction of only £1,000.
  There may be other anomalies when one takes the two Schedules together. I have picked only on one. While there are such anomalies, however, I see no reason for producing a Schedule to the Bill to deal with current use value. Surely, if we have a definition in the Land Commission Act, we should stick to that definition and not risk the chance of there being either a gap or an overlap in the assessment of tax. In the example which I have given, there was an overlap. Accordingly, there seems to me to be a substantial possibility of double taxation.
  For these reasons, in our Amendment we merely say that "current use value" under the Bill should have the same definition as "current use value" in the Land Commission Act. That would be a simple
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  way of solving these problems, and, indeed, simple for the ordinary taxpayer to understand. The Land Commission Act was complicated enough, but to add to it a complicated Schedule such as Schedule 14 to the Bill is straining the efforts of the taxpayer too far.
  9.0 p.m.
  Mr. MacDermot: We are now embarked upon the provisions relating to betterment levy, and I suspect that we are in grave danger of this developing into a private argument between the Front Bench experts, as it becomes extremely technical.
  At the outside of his speech, the hon. Member for Crosby (Mr. Graham Page) made an implied criticism that these provisions are lengthy and technical. However, that is inevitable. When we have to try to marry together one highly complex and technical affair like the Capital Gains Tax with another like betterment levy, it is inevitable that, if we are to get them right, the provisions themselves will be complicated and technical.
  In moving his Amendment, the hon. Gentleman urged two matters—simplification and consistency. He said that if we were just to say that our basis of current use value for purposes of Capital Gains Tax is to be the same as that in the Land Commission Bill for purposes of betterment levy, that would be much simpler.
  I am assured that if we had tried to legislate by reference in that way, it would have been extremely complicated, apart from the fact that there is a general dislike these days of legislation by reference. As it is desirable to get one code as coherent as one can in one place, because of certain exceptions to which I shall allude in a moment, from a drafting point of view it would have been difficult to legislate this matter by reference.
  The other point which the hon. Gentleman urged was consistency. We accept his argument that, generally speaking, the basis for assessing the current use value should be the same for the two purposes, because the general object is to charge Capital Gains Tax on increases in current use value, and to charge betterment levy on increases in development value.
  The result is that in framing Clause 31 and Schedule 14 we have reproduced

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  largely the provisions of the Land Commission Act. In particular, the first three sub-paragraphs of paragraph 1 of the Schedule reproduce almost word for word the provisions of the Land Commission Act and are entirely based on it. In addition, sub-paragraph (4) imports Land Commission Act definitions necessary for defining current use value in particular cases.
  There are two exceptions, and I should explain what they are and the reasons for them. The first exception is very near to the case which the hon. Gentleman put to me, though not precisely. It arises in this way. It is an extremely technical matter, and I apologise to the Committee in advance.
  Paragraph 7 of Schedule 6 to the Land Commission Act sets out the assumptions which are to be made about planning permission in computing current use value to determine base value for betterment levy. Almost all of that paragraph, directly or indirectly, has been brought into the rules for determining current use value for Capital Gains Tax. Thus, sub-paragraphs (3), (4) and (5) of paragraph 7 have been applied by paragraph 1(4,b) of the Fourteenth Schedule to the Bill, and the substance of sub-paragraphs (1) and (2) have been reproduced in paragraph 1(3) of the Schedule.
  However, this is without the condition contained in paragraph 7(2,b) that account is to be taken of planning permission in pursuance of which material development has been begun after the first appointed day but not completed only if it was notified to the Land Commission. This means that where land on which material development has begun is sold, and this condition as to notification has not been complied with, a low current use value based on the value of the land without planning permission will be adopted as the base value for betterment levy purposes, thus enabling the Land Commission to recover the levy which should have been charged when the development started.
  This low current use value could not be adopted as the consideration for the disposal for Capital Gains Tax purposes because the vendor of land on which material development has begun is entitled, under paragraph 2 of the
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  Fourteenth Schedule, to a deduction in computing his Capital Gains Tax liability for the increase in the current use value as a result of the development. Thus his gain cannot be ascertained properly unless the consideration for the disposal is taken to be the higher current use value reflecting the development.
  It is true that the correct result could equally be achieved, at any rate, in relation to the vendor's liability, if the lower current use value were taken as the consideration and a special rule providing that the deduction for the increase in current use value under paragraph 2 of the Fourteenth Schedule should not be given in cases of this kind were to be introduced—
  Mr. Lubbock rose—
  Mr. MacDermot: I have nearly finished. I shall give way when I have —but this would give the wrong result for the purchases of land because the amount treated as the consideration received by the vendor would also be the cost of acquisition to the purchaser in computing any gain on a subsequent sale by him, and the adoption of the lower current use value as his acquisition cost would lead to the artificial inflation of his gain since he would be selling the land as developed.
  Mr. Lubbock: I am sure the Financial Secretary would agree that the argument he is presenting is immensely complicated, and that even with the Land Commission Act before him it is almost impossible for an hon. Member to follow the Bill unless he has prior knowledge of the arguments being presented. I suggest, with respect, that in a case like this, where complicated technical matters are at stake, the Committee should be given an opportunity of studying the arguments in advance, and we should not have to try to listen to them and follow our way through complicated Schedules to find out what the argument means.
  Mr. MacDermot: It is precisely because of that difficulty that I thought it right to explain the technical matter. I appreciate that hon. Members will not want to debate the matter now, but it is on the record and hon. Members can see the explanation. This will enable them to consider it, and, subject to the agreement of the Chair, to raise the matter at

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  a later stage. It is for this reason that I have dealt with the matter in this way, and if, on a technical matter of this kind, an hon. Member on studying the Bill considers that he ought to approach me to seek an explanation, I shall be only too happy to oblige.
  The hon. Member for Crosby put to me an example which I think he will agree comes near to the point which I have been seeking to explain to the Committee, but I think that his point is misconceived, in that planning permission is taken into account in current use value only if the work is started under these provisions in the way in which I have been describing. If the work is started, an allowance in the current use value cost is given under paragraph 2 of the Fourteenth Schedule, but, as I say, this is a case in which the basis of the assessment of the current use value is not identical with that under the Land Commission Act, for the reason which I have explained.
  The other case is rather simpler, and is dealt with under paragraph 1(5) of the Fourteenth Schedule. If any hon. Member wants a further explanation of that, we can perhaps deal with it when we come to the Schedule. This is why we have taken this course of setting out the definition again in accordance with the definition in the Land Commission Act, but with those exceptions which I have mentioned.
  I think that what I have said covers Amendments Nos. 209 and 206. We are also discussing Amendment No. 208, and the Amendment would not be acceptable at all in the light of what I have said because it would omit from the Schedule important paragraphs for extending the provisions for applying current use value rules in cases of part-disposal of land with development value, paragraphs dealing with disposals by way of grant on a lease, and provisions dealing with certain minor cases where current use value is to be substituted for market value, and cases where market value is to be taken into account notwithstanding the provisions of the principal Section.
  The other Amendment is Amendment No. 207. I am not sure what its proposers had in mind, but without it, in cases where material development within Case C of the Land Commission Act
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  takes place, and the land is subsequently disposed of, the result will be a charge to Capital Gains Tax on the development value which had already been charged on the betterment levy. For these reasons, I must advise the Committee to reject the Amendment.
  Mr. Graham Page: The Committee is grateful to the Financial Secretary for his explanation of this rather technical point. I am grateful to him for so aptly summarising what I had sought to do in the Amendment, namely, to simplify and to be consistent. For the record, I point out that the hon. and learned Gentleman did not deal with sub-paragraph (2,a) of the Schedule. He dealt with sub-paragraph (2,b). There is a possibility of the same sort of thing arising under subparagraph (2,a), and in connection with Amendment No. 208, which sought to remove from the Schedule any new rules relating to current use value, there is some difficulty in applying rules concerning part disposals under the Finance Bill, which differ from those under the Land Commission Act.
  This is a subject which one cannot take in by listening as well as by reading. The Financial Secretary has said that if there is any difficulty we may return to the question at a later stage. From what he told the Committee I am sure that he is not able to give a firm undertaking that no double taxation will arise out of the inter-relation of the Schedules of the Land Commission Act and this Schedule. I am sure that in the examples which he and I gave—which were very near each other—there will be double taxation. There will be Capital Gains Tax and betterment levy on the same sum or part of the same sum.
  I shall study carefully what the hon. and learned Gentleman has said in order to see whether we can gain any assurance that double taxation will be avoided. At the moment I cannot think that it will be.
  Mr. MacDermot: I will study what the hon. Member has said about sub-paragraph (2,a) and if there is anything further I should add I will let him know.
  On his last point, I can give him an unequivocal assurance that in our view there will be no overlap or double taxation.
  Mr. Graham Page: With those assurances, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Graham Page: I beg to move Amendment No. 186, in page 36, to leave out lines 38 to 41.
  The Chairman: With this Amendment we can take Amendment No. 187, in page 36, line 39, leave out from 'given' to 'or' in line 40 and insert:
  'before the end of the third fiscal year following that in which the disposal took place'.
  and Government Amendments No. 151 and No. 152.
  9.15 p.m.
  Mr. Graham Page: I am much obliged, Sir Eric.
  The Amendment seeks to remove words which set a time within which the taxpayer must elect whether he will take the formula under Clause 31(1) for the assessment of Capital Gains Tax or choose to have Capital Gains Tax assessed on the whole of his gain. Subsection (3), to which this is an Amendment, allows the taxpayer to choose. The principle of the Clause is to divide a gain on disposal of property between an increase in current use value and the net development value, and to charge Capital Gains Tax on the former and betterment levy on the latter.
  However, if the taxpayer has losses to take into account against a capital gain, it may be worth his while to be assessed for Capital Gains Tax on the whole gain and also, perhaps, to pay betterment levy on such part of it as is attributable to net development value. The question is, how soon will he know what choice to make? How soon, for example, will the increase in the current use value be settled by the Inland Revenue? I understand that this is the first Department to which this transaction will go and which will issue some sort of certificate on that increase.
  Then, how soon will he know the net development value on which he has to pay betterment levy? That is to be decided by the Land Commission. He ought not to be set a time limit for his election when those who have to settle these figures for him have no time limit under six years. The taxpayer is required to choose "blind", and the pur-
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  pose of Amendment No. 186 is to remove that time limit.
  If there is to be a time limit, on the other hand, it should not date, as do those in the Bill, from the date of disposal of the property, which might be any date in the year of assessment or the fiscal year. It has no relationship to the end of a tax year and it is inconvenient for the taxpayer to remember the date on which disposal took place and the fact that he must choose within a certain time from that date.
  The Government appear to have seen that it would be inconvenient, having regard to Amendments Nos. 151 and 152 in the name of the Chancellor, in which they provide that the election must be within the year of disposal. Surely that is either cynical and callous or a very good joke. How on earth can a man decide within a year of assessment in which a disposal took place whether he should make this choice or not? That sort of Amendment says, in effect, "You make your choice and we will then work out the figures so as to get the most out of you."
  As opposed to that, our Amendment No. 187 gives the taxpayer three years to decide. It provides that he shall make his election within the third year from the year of the disposal. This is not unreasonable, considering that the Land Commission has six years to work out these figures and the Inland Revenue, on Capital Gains Tax, has, I believe, no limit at all.
  Here is a simple example of what may happen. I purchase some vacant land for £10,000 because I hope to build 50 houses on it. As vacant land it is worth only £2,000. I obtain planning permission not for the 50 houses I want to build but for 25, so I sell the land at a loss, at £9,000 instead of the £10,000 which I paid for it. Between that purchase and sale, farm land round about has gone up in value, and the vacant land which I bought has increased in current use value from £2,000 to £3,000.
  If I take the formula in Clause 31(1), taking the difference between current use values when I purchased and when I sold, that is, the difference between £2,000 and £3,000, I shall pay Capital Gains Tax on £1,000. But for the purpose of betterment levy the sale price was £9,000, the purchase price having been £10,000, so

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  I have made a loss on the transaction and I have no betterment levy to pay. That is what happens if I elect under Clause 31(1).
  If I elect to disregard Clause 31(1) and I say that I want my Capital Gains Tax assessed on the whole transaction, not just on the difference between current use values, then, instead of paying Capital Gains Tax on £1,000, I have a loss, a capital loss of £500, perhaps, to take into account against another capital gain which I may have made.
  That is all perfectly straightforward. [Laughter.] I have not complicated it. The only complication is the sale price. I sold for £9,000 at a loss, after paying £10,000 for the land, but that sale price may need to be calculated not just on the figure paid by me but by reference to several other matters in the Schedules to the Land Commission Act. It may have to be calculated by reference to expenditure on improvements during the time when I had the property.
  It may have to be calculated by reference to the effect of other chargeable acts or events under other Cases in the Land Commission Act, the release of restrictive covenants, the purchase of an easement of access to the land, or something like that. It may have to be calculated by reference to part disposals of the land, part disposals either geographically or in title, a long lease having been granted, perhaps. It may have to be calculated by reference to death and Estate Duty.
  All those matters have to be determined eventually by the Land Commission. I can state what I think ought to be the calculation of the sale price, but I have to notify the transaction to the Land Commission and the Land Commission has six years to decide whether I am right or wrong in saying that I can take account of these improvements, that easement, those restrictive covenants, and so on.
  When there is all that to be done, it is ridiculous to ask the taxpayer to make his election within the year of disposal. He will never get a decision within that time from the Land Commission, and, in the circumstances, he should be given a longer time. Perhaps—I thought of this after putting the Amendment down —it might be right to say that he could
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  make his election within a certain period from the assessment by the Land Commission, or something of that sort. At least, he should be given longer, and the period of three years which we propose seems not unreasonable, having regard to the time which both the Inland Revenue and the Land Commission are allowed by statute to take in assessing these figures.
  Mr. MacDermot: The hon. Member for Crosby (Mr. Graham Page) has correctly explained how the Amendments relate to the election in the Clause. That is the election that enables the Capital Gains Tax charged on disposal to be computed by reference to the full acquisition cost and the sale price of the land, and not by reference to current use value. The provision is designed to benefit the owner of land which has a declining development value. There may have been an increase in the current use value and it might be unfair to him to be made subject to Capital Gains Tax on that if there had been an overall loss owing to a decline in the development value.
  A number of Amendments is before us. First, there is Amendment No. 186, which proposes that there should be no time limit for his exercising this election. We think that that would be quite impracticable; there must be some limit. We then have the revised limits proposed in the Government Amendments, Nos. 151 and 152. Thirdly, we have the further period suggested in Amendment No. 187.
  Perhaps it would be simplest if I explained, first, the reason for the Government Amendments. I think that the hon. Gentleman has misunderstood their effect. It is not that the election will have to he made by the end of the year in which the disposal is made but, borrowing the terms of Amendment 187, it would be made before the end of the second fiscal year following the year in which the disposal takes place. That is because the assessment would be made on a preceding year basis.
  After the Bill was published we received representations, from the C.B.I., in particular, that it would be convenient to accountants and other professional advisers if the time limit for the election were the end of the second fiscal year following that in which the disposal takes

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  place. That was for the various reasons which have been expounded very fully by the hon. Gentleman and I need not recapitulate. We put down the Amendments to achieve that effect.
  Mr. Temple: I think that the C.B.I. made slightly different representations. As I am informed, it asked that this should be extended to six years, as in the Land Commission Act, Section 44(3).
  Mr. MacDermot: That may be what it has suggested to the hon. Gentleman, but I am advised that in the discussions which took place with the Inland Revenue it asked for what I have outlined. Our Amendment was framed to meet that request. It may be that it, or in any event others and some hon. Members opposite, would prefer a longer period. I do not suggest that there is any magic about the period which we have chosen. What we want to do is to meet the general convenience of all concerned.
  There are obviously advantages in concentrating people's minds, as it were, and urging them to get on with it and to make their election as early as is reasonable, but we do not want to make difficulties. The Board has power under the subsection to allow further time in particular cases. That is intended particularly to meet the kind of case to which the hon. Gentleman referred, namely, where the taxpayer is not in a position to decide whether or not to elect because the betterment levy consequences of the disposal have not yet been settled. In those cases the Board could and would grant an extension of time.
  If the hon. Gentleman would not press his Amendment at this stage, and would allow the Government Amendment to be passed, we could both consider the matter further in the light of what he has said. Having considered that and now realising the true effect of the Government Amendment, and bearing in mind the power to extend the time given under the Clause, he might come to the conclusion that the period of time we have suggested in our Amendments is satisfactory. If, at the end, he is of a different opinion, perhaps we could return to the matter on Report.
  9.30 p.m.
  Mr. Graham Page: I return the compliment to the hon. and learned Gentle-
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  man and say that if he would accept my Amendment we could think about it again at a later stage. But he has been so courteous. I realise now, from his explanation, that the Government Amendment takes the taxpayer to the second year. We seem to be very near on this; I am pleading for the third year. There is no reason to harass the taxpayer over this. It is a very complicated matter, and he and his accountants will have a great deal of trouble in working this out. I should not have thought that the Inland Revenue would want to harass him.
  On the assurance which the Financial Secretary has given us, that if we let him have his Amendment we can continue to think about it with a possibility of coming back to this at a later stage, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Amendments made: No. 151, in page 36, line 40, leave out 'time of the disposal' and insert:
  'end of the year of assessment in which the disposal is made'.
  No. 152, in line 41, at end insert:
  'and "year of assessment" here means, for corporation tax as well as for capital gains tax, a year beginning on 6th April'.—[Mr. MacDermot.]
  Mr. Graham Page: I beg to move Amendment No. 185, in page 37, line 1, after 'that' to insert:
  'the amount upon which betterment levy is chargeable is a sum allowable as a deduction in the computation of the profits or gains arising or accruing to any person or company charged to income tax or corporation tax (as the case may be) as a developer of or trader or dealer in land but otherwise'.
  The Chairman: Amendment No. 191, in page 37, line 2, after ' deduction ', insert:
  'for the purposes of a charge to tax under Case I or Case VII of Schedule D but not otherwise'.
  may be discussed at the same time.
  Mr. Graham Page: I am obliged to you, Sir Eric, for saying that we may also discuss Amendment No. 191. This, I very much regret to say, omits a small Amendment which I thought I had tabled, but it was on a slip of paper and must have got lost.

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  Perhaps I might say, by way of a point of order, Sir Eric, that Amendment No. 191 would mean what it is intended to mean only if the word "not" in the second line in page 37 were also omitted. It is intended that the provision should then read:
  "It is hereby declared that a payment of betterment levy is a sum allowable as a deduction for the purposes of a charge to tax under Case I or Case VII of Schedule D but not otherwise."
  Returning to Amendment No. 185, perhaps I might refer to the booklet entitled "A guide for builders and developers on betterment levy". The Minister of State, Housing and Local Government, knows that I have been rather rude about these little pamphlets from time to time, but in this case I compliment the authors upon summing up very well on the last page the relationship between betterment levy and other taxes.
  The question on the last page of the pamphlet is:
  "What provision is being made to take account of levy paid in calculating in Corporation and Capital Gains Tax and vice versa?"
  The answer is:
  "It is intended that provision will be made in the 1967 Finance Bill that when the levy comes into operation Capital Gains Tax for the purpose of Corporation Tax and Capital Gains Tax on long-term gains will be limited to changes in the current use value of land, and any changes in development value will be left wholly to betterment levy. In the case of short-term gains of individuals which are taxable as income the amount of levy paid will be allowable as an expense."
  Then comes this sentence:
  "The position will be the same in the case of property dealers when the profits on realisation of development value are taxable as income."
  So the summary there is that there will not be double taxation on a non-trader dealing with land; there will be double taxation on a man who has to pay short-term capital gains; and there will be double taxation on the dealer in land; he will pay betterment levy and Income Tax, or, in the case of a company, Corporation Tax, on the gain which he makes.
  One whose business it is to buy and sell land or to develop and dispose of land is treated for ordinary tax purposes as any other trader. The land or the bricks and mortar are his stock-in-trade in the same way as tins of food are a grocer's stock-
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  in-trade. Therefore, he is taxed on his dealings with them in buying and selling. He will be paying tax not only on any increase in the current use value of the land; he will be paying Income Tax on the whole of his gain, subject, of course, to deductions which he is allowed to make for the expenses of his business; he will pay that Income Tax on the whole of his gain.
  That gain will include the sum of net development value, and on that sum of net development value he will be paying betterment levy as well as Income Tax. He will suffer Income Tax and betterment levy on the same sum of money, which is a form of double taxation, which will be a deterrent to developers.
  I think that that is ironical. I am very glad we have on the Front Bench representatives of the Ministry of Housing and Local Government. A tax of this sort will be a deterrent on the developer of residential property, the very person, I would have thought, whom the Government would wish to encourage. He will be penalised, but the casual one-deal amateur gets away with it, without double taxation. Is this really Government policy? It seems to me quite ridiculous that the man who is running the business and developing land, putting houses on it, is to be charged something like 16s. 3d. in the £ in taxation—when we combine betterment levy with Income Tax which he has to pay.
  Therefore, we have produced Amendment No. 185 which will remove from tax the whole of the money on which betterment levy is charged; that is to say, the whole of the net development value on the whole of the property. Because the trader would be paying ordinary tax on that, paying Income Tax on that sum, it is unfair that he should have to bring that sum into account again as subject to betterment levy.
  That, I think, is the fair way, the only fair way, of dealing with the matter, but apparently the Government are not even prepared to allow the trader to set off what he pays in betterment levy—not, as we would wish in this first Amendment, the whole of the amount of betterment levy as assessed; they will not allow that; but they will not, as far as I can read the Bill and other Statutes, allow him even to deduct what he pays

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  in betterment levy from his profits in his business.
  Betterment levy should surely not be payable at all upon the money which has been taxed. This principle is recognised in Clause 31 and in the Land Commission Act. Betterment levy is not assessed upon current use value. Capital Gains Tax is not assessed upon net development value. That applies to everyone except the trader.
  Many times over the past years Government spokesmen have sought to justify the betterment levy and the Land Commission by quoting cases of huge profits from the purchase and then the sale of property. These cases have been quoted as tax-free gains. In fact, the most startling cases quoted have been those which wer not tax free at all—transactions by dealers in lands, by developers —and the gain has been fully taxed as profits. Thereby, the Exchequer and, through it, the community, have done well out of the taxation of these profits.
  Perhaps to make that plain does not suit the Government politically so the betterment levy is held up as the great instrument of taking back for the community the value supposed to have been created by the community in the land. In fact, that value has been taken back over the past years by Capital Gains Tax, Corporation Tax and Income Tax on the trader in land. This has been the major factor in taking back the value created by the community. It is true that the Bill boosts, as it were, the betterment levy as being a great instrument for this. Capital Gains Tax is made to apply only to an increase in current use value. But that does not apply to the trading man.
  The betterment levy is not to be reduced in any way by payment of ordinary Income Tax by the man who deals and trades in property. This is grossly unfair on just the man whom we want to encourage and not penalise in his business. It is not only unfair on him, but crass folly from the point of view of the policy of encouraging the development of resident property and the provision of homes for the people.
  Mr. MacDermot: The hon. Member for Crosby (Mr. Graham Page) has made it clear that the purpose of the Amendment is that the betterment levy should
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  be treated in the same way for the purpose of taxing trading profits as is proposed for the purpose of the long-term Capital Gains Tax. The result would be that, in measuring the liability to Income Tax or Corporation Tax of a dealer in land or in the development of land, increases in development value would be excluded and left wholly to the betterment levy, so that only current use value would be taken into account in reckoning liability to tax on trading profits.
  If we were to accept the Amendment, we would be ignoring the distinction, which exists in many other ways, between the taxing of a person who realises a capital gain and the taxing of the income of a person who deals in land and part of whose profits may be the result of a capital gain realised in the course of that dealing. When we originally decided to impose a betterment levy on development value we saw that the right relationship between the levy and the long-term Capital Gains Tax was to exclude development value from capital gains for the purpose of Capital Gains Tax. We said that from the outset.
  9.45 p.m.
  While betterment levy can fairly be treated as a substitute for tax on capital gains, it in no way corresponds to tax on income and could not be treated as such. Accordingly, we adopted the approach that the right relationship between betterment levy and taxes on income—that is to say, taxes on trading profits, taxes on short-term gains and income from land—would be secured by following the ordinary rules of computation on Case I, Case VII and Case VIII respectively, and allowing the taxpayer to treat any payment of betterment levy as a deductible expense. Since our proposals have been published, there have been protests at this decision, in particular from the building industry, but it does not follow that the solution which is right in the capital gains context is right in the context of tax on incomes.
  The land of a builder or developer or dealer in land is in effect his stock in trade, and the realistic way of looking at betterment levy is as a factor in the cost of acquiring his stock in trade. As such, it is essentially akin to other national and local imposts, such as Purchase Tax, or local rates, which have always been an

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  allowable deduction in computing trade profits.
  If hon. Members opposite do not like that example, I would give them one which is perhaps rather nearer and closer in a provision which they introduced when they were in power. That was the levy on advertising revenue of commercial television companies which was dealt with in the same way. That has now been replaced under Section 13 of the Television Act, 1964, by what is called the additional payment on top of their rental charge which is based on their advertising revenue. The yield of this additional payment comes, like betterment levy, into the Exchequer; but, for the purpose of calculating the taxable profits of the television operators, the method adopted in relation to these additional payments is the same as that which we now propose for betterment levy. In both cases, what the Revenue regards as the normal tax rules have been followed.
  There is a further consideration. The developer in many cases acquires land which already has planning permission on which betterment levy will have been paid in full or in substantial measure. To the extent that the purchase price includes the levy element, the dealer is automatically allowed a deduction for it in computing his profits, so it would be consistent and logical to treat also as an expense of the trade any levy which the dealer himself has to bear if it falls to him to secure the planning permission after acquiring the land or if the existing permission has to be varied. That is how development charges incurred under the 1947 Act were treated for tax purposes.
  The National Federation of Building Trades Employers says that some 13 per cent. of land held by builders and developers at any given time is without planing permission. In this settings, it would be highly anomalous if the builder who buys land without planning permission were virtually exempt from levy in that the Amendment would give full credit for it against his tax, whereas the builder who buys land on which planning permission has been given and levy paid suffers a levy as an element in cost.
  So much for Amendment No. 185. The hon. Member for Crosby is proposing to hand in, if he has not already done
  222
  so, a manuscript Amendment relating to Amendment No. 191. I hope that I have grasped correctly the effect of the Amendment, subject to the addition which he is making to it. I understand that he wants to declare that the levy is an allowable deduction in taxing under Case I—that is, in the case of trades—and under Case VII—the short-term capital gains—while maintaining the position that it is not an allowable deduction for Capital Gains Tax purposes.
  This is the law as accepted by the Revenue so far as it concerns Case VII —the short-term gains—and the computation of the Case I profits of dealers in land, but if the Amendment is intended, as I believe it is, to go further and to allow deduction for betterment levy paid by any trader, for example, a shopkeeper owing land who obtains permission to enlarge his shop on it, bearing in mind that such a person can obtain no tax allowance for the cost of the land if he had bought it, or for the cost of erecting a building on it, unless it is an industrial building, it is clearly inappropriate that he should obtain tax deduction for one item of cost relating to the erection of his building, namely, the betterment levy.
  Mr. Graham Page: It was not my intention to go as far as that, although I should be very pleased if the Government did. Can the hon. and learned Gentleman spell out where the deduction is allowable, where my Amendment would be met under the existing law, which I understand to be his point?
  Mr. MacDermot: As the hon. Gentleman will appreciate, I can only pass on the assurance from advisers that this is the Revenue's view of the effect. If he would like me to spell out the provisions, I undertake to write to him and do so. For the reasons which I have given, I must advise the Committee to reject the Amendment.
  Mr. Graham Page: That is a most unsatisfactory answer. Whatever arguments the hon. and learned Gentleman puts forward, he cannot get round the fact that the same sum of money is being taxed twice in the hands of a man who is providing assets for the country and homes for the people. That is where this imposition of betterment levy and Income Tax on the trader in land,

  223
  the developer of houses, will be such a deterrent. No argument which the hon. and learned Gentleman has put forward has got over the difficulty of double taxation on the man who is carrying out the work, and in those circum-
  stances I must advise my right hon. and hon. Friends to divide the Committee.
  Question put, That those words be there inserted:—
  The Committee divided: Ayes 127, Noes 186.

  Division No. 362.]

  AYES

  [9.53 p.m.

  Allason, James (Hemel Hempstead)

  Harrison, Col, Sir Harwood (Eye)

  Page, Graham (Crosby)

  Bell, Ronald

  Hastings, Stephen

  Page, John (Harrow, W.)

  Bitten, John

  Heald, Rt. Hn. Sir Lionel

  Pardoe, John

  Biggs-Davison, John

  Heseltine, Michel

  Pearson, Sir Frank (Clitheroe)

  Bossom, Sir Clive

  Higgins, Terence L.

  Percival, Ian

  Braine, Bernard

  Hiley, Joseph

  Pike, Miss Mervyn

  Brinton, Sir Tatton

  Hill, J. E. B.

  Pink, R. Bonner

  Bromley-Davenport,Lt. -Col. Sir Walter

  Hirst, Geoffrey

  Price, David (Eastleigh)

  Brown, Sir Edward (Bath)

  Holland, Philip

  Pym, Francis

  Bruce-Gardyne, J.

  Hooson, Emlyn

  Rawlinson, Rt. Hn. Sir Peter

  Buck, Antony (Colchester)

  Hordern, Peter

  Renton, Rt. Hn. Sir David

  Carr, Rt. Hn. Robert

  Hornby, Richard

  Ridley, Hn. Nicholas

  Chichester-Clark, R.

  Howell, David (Guildford)

  Rippon, Rt. Hn. Geoffrey

  Cooke, Robert

  Hunt, John

  Rodgers, Sir John (Sevenoaks)

  Cooper-Key, Sir Neill

  Iremonger, T. L.

  Russell, Sir Ronald

  Craddock, Sir Beresford (Spelthorne)

  Jenkin, Patrick (Woodford)

  Scott, Nicholas

  Crowder, F. P.

  Jopling, Michael

  Sharpies, Richard

  Cunningham, Sir Knox

  Kaberry, Sir Donald

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

  Currie, G. B. H.

  King, Evelyn (Dorset, S.)

  Sinclair, Sir George

  Dance, James

  Kitson, Timothy

  Smith, John

  Davidson,James(Aberdeenshire,W.)

  Knight, Mrs. Jill

  Steel, David (Roxburgh)

  Dean, Paul (Somerset, N.)

  Lancaster, Col. C. G.

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

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

  Langford-Holt, Sir John

  Summers, Sir Spencer

  Doughty, Charles

  Loveys, W. H.

  Taylor, Sir Charles (Eastbourne)

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

  Lubbock, Eric

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

  Emery, Peter

  McAdden, Sir Stephen

  Taylor, Frank (Moss Side)

  Errington, Sir Eric

  MacArthur, Ian

  Temple, John M.

  Farr, John

  Macleod, Rt. Hn. Iain

  Thatcher, Mrs. Margaret

  Fisher, Nigel

  McMaster, Stanley

  Turton, Rt. Hn. R. H.

  Fletcher-Cooke, Charles

  Marten, Neil

  van Straubenzee, W. R.

  Fortescue, Tim

  Maude, Angus

  Vaughan-Morgan, Rt. Hn. Sir John

  Glover, Sir Douglas

  Mawby, Ray

  Walker-Smith, Rt. Hn. Sir Derek

  Glyn, Sir Richard

  Maxwell-Hyslop, R. J.

  Wall, Patrick

  Goodhart, Philip

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

  Ward, Dame Irene

  Goodhew, Victor

  Mills, Stratton (Belfast, N.)

  Wells, John (Maidstone)

  Gower, Raymond

  Miscampbell, Norman

  Whitelaw, Rt. Hn. William

  Grant, Anthony

  Mitchell, David (Basingstoke)

  Wills, Sir Gerald (Bridgwater)

  Grieve, Percy

  More, Jasper

  Wilson, Geoffery (Truro)

  Grimond, Rt. Hn. J.

  Murton, Oscar

  Wolrige-Gordon, Patrick

  Gurden, Harold

  Nabarro, Sir Gerald

  Hall, John (Wycombe)

  Noble, Rt. Hn. Michael

  Hall-Davis, A. G. F.

  Nott, John

  TELLERS FOR THE AYES:

  Harris, Frederic (Croydon, N.W.)

  Onslow, Cranley

  Mr. Reginald Eyre and

  Harris, Reader (Heston)

  Osborne, Sir Cyril (Louth)

  Mr. Bernard Weatherill.

  NOES

  Albu, Austen

  Carter-Jones, Lewis

  English, Michael

  Allaun, Frank (Salford, E.)

  Castle, Rt. Hn. Barbara

  Ennals, David

  Alldritt, Walter

  Coe, Denis

  Ensor, David

  Allen, Scholefield

  Coleman, Donald

  Evans, Albert (Islington, S.W.)

  Armstrong, Ernest

  Concannon, J. D.

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

  Atkins, Ronald (Preston, N.)

  Conlan, Bernard

  Faulds, Andrew

  Atkinson, Norman (Tottenham)

  Craddock, George (Bradford, S.)

  Finch, Harold

  Bagier, Gordon A. T.

  Crawshaw, Richard

  Fletcher, Raymond (Ilkeston)

  Barnett, Joel

  Cronin, John

  Fletcher, Ted (Darlington)

  Beamy, Alan

  Dalyell, Tam

  Floud, Bernard

  Bence, Cyril

  Davidson, Arthur (Accrington)

  Foot, Sir Dingle (Ipswich)

  Bidwell, Sydney

  Davies, Dr. Ernest (Stretford)

  Ford, Ben

  Bishop, E. S.

  Davies, Harold (Leek)

  Freeson, Reginald

  Blackburn, F.

  Delargy, Hugh

  Galpern, Sir Myer

  Booth, Albert

  Dempsey, James

  Gordon Walker, Rt. Hn. P. C.

  Boyden, James

  Dewar, Donald

  Gourlay, Harry

  Braddock, Mrs. E. M.

  Diamond, Rt. Hn. John

  Gregory, Arnold

  Bray, Dr. Jeremy

  Dobson, Ray

  Grey, Charles (Durham)

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

  Doig, Peter

  Griffiths, David (Rother Valley)

  Buchan, Norman

  Dunn, James A.

  Griffiths, Rt. Hn. James (Llanelly)

  Buchanan, Richard (G'gow, Sp'burn)

  Dunwoody, Mrs. Gwyneth (Exeter)

  Hale, Leslie (Oldham, W.)

  Callaghan, Rt. Hn. James

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

  Hamilton, James (Bothwell)

  Carmichael, Neil

  Ellis, John

  Hamling, William

  Hannan, William

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

  Rowlands, E. (Cardiff, N.)

  Harper, Joseph

  Manuel, Archie

  Shaw, Arnold (Ilford, S.)

  Hart, Mr. Judith

  Mapp, Charles

  Sheldon, Robert

  Haseldine, Norman

  Marquand, David

  Shore, Peter (Stepney)

  Hazell, Bert

  Millan, Bruce

  Silverman, Julius (Aston)

  Henig, Stanley

  Miller, Dt. M. S.

  Silverman, Sydney (Nelson)

  Herbison, Rt. Hn. Margaret

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

  Slater, Joseph

  Hooley, Frank

  Moonman, Eric

  Small, William

  Houghton, Rt. Hn. Douglas

  Morgan, Elystan (Cardinganshire)

  Spriggs, Leslie

  Howarth, Harry (Wellingborough)

  Morris, Alfred (Wythenshawe)

  Stewart, Rt. Hn. Michael

  Howarth, Robert (Bolton, E.)

  Morris, Charles, R. (Openshaw)

  Swain, Thomas

  Hoy, James

  Morris, John (Aberavon)

  Swingler, Stephen

  Huckfield, L.

  Moyle, Roland

  Taverne, Dick

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Mulley, Rt. Hn. Frederick

  Thomson, Rt. Hn. George

  Hynd, John

  Newens, Stan

  Thornton, Ernest

  Irvine, A. J. (Edge Hill)

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

  Tinn, James

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

  Oakes, Gordon

  Tomney, Frank

  Jackson, Peter M. (High Peak)

  Ogden, Eric

  Tuck, Raphael

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

  O'Malley, Brian

  Urwin, T. W.

  Jones, Dan (Burnley)

  Oram, Albert E.

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

  Orbach, Maurice

  Wainwright, Edwin (Dearne Valley)

  Judd, Frank

  Orme, Stanley

  Walker, Harold (Doncaster)

  Kelley, Richard

  Oswald, Thomas

  Wallace, George

  Kerr, Russell (Feltham)

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

  Watkins, David (Cornell)

  Leadbitter, Ted

  Page, Derek (King's Lynn)

  Watkins, Tudor (Brecon & Radnor)

  Lee, John (Reading)

  Pannell, Rt. Hn. Charles

  Wellbeloved, James

  Lewis, Ron (Carlisle)

  Parker, John (Dagenham)

  Willey, Rt. Hn. Frederick

  Lomas, Kenneth

  Pavitt, Laurence

  Williams, Alan (Swansea, W.)

  Luard, Evan

  Pearson, Arthur (Pontypridd)

  Williams, Alan Lee (Hornchurch)

  Lyon, Alexander W. (York)

  Pentland, Norman

  Williams, Mrs. Shirley (Hitchin)

  McCann, John

  Perry, George H. (Nottingham, S.)

  Williams, W. T. (Warrington)

  MacColl, James

  Prentice, Rt. Hn. R. E.

  Wilson, William (Coventry, S.)

  MacDermot, Niall

  Price, Chirstopher (Perry Barr)

  Winnick, David

  Macdonald, A. H.

  Price, Thomas (Westhoughton)

  Winterbottom, R. E.

  Mackenzie, Gregor (Rutherglen)

  Pursey, Cmdr. Harry

  Woof, Robert

  Mackle, John

  Randall, Harry

  Yates, Victor

  Maclennan, Robert

  Roberts, Albert (Normanton)

  McMillan, Tom (Glasgow, C.)

  Robinson, W. 0. J. (Walth'stow, E.)

  TELLERS FOR THE NOES:

  MacPherson, Malcolm

  Roebuck, Roy

  Mr. Waiter Harrison and

  Mahon, Peter (Preston, S.)

  Rogers, George (Kensington, N.)

  Mr. Neil McBride.

  Mallalieu, E. L. (Brigg)

  Ross, Rt. Hn. William

  Question proposed, That the Clause, as amended, stand part of the Bill.
  10.0 p.m.
  Mr. MacDermot: I am now in a position to answer the hon. Gentleman's question. Not only will it save me writing to him, but, perhaps more important, I can get the answer on the record.
  Betterment levy is allowable as a deduction in computing the profits of a dealer in land under the ordinary Income Tax law—namely, under Section 137 of the 1952 Act—as expenditure incurred wholly and exclusively for the purposes of his trade. It is correspondingly allowed for the short-term tax because the Case VII provisions say in Section 13(1) of the 1962 Act that the chargeable gain is to be computed as if the transaction had been an adventure in the nature of trade.
  Mr. Graham Page: I am very grateful to the Financial Secretary for that explanation. It sets our minds at rest, to some extent. But there is a matter which has not been mentioned at any length on the Amendments, although I think that it has been mentioned slightly.
  226
  It is the different way in which the Clause deals with long-term and short-term capital gains.
  The Clause deals with the relationship between long-term capital gains and the betterment levy, and long-term capital gains only are taken into account in the Clause. This is because the Clause refers to Part III of the 1965 Act, whereas short-term capital gains come under the Finance Act, 1962, and Part II of the 1965 Act. In respect of a gain made upon disposal of land, the double taxation as between long-term capital gains and betterment levy is avoided by silhsection (1) of the Clause.
  Tax is chargeable not only on longterm gains. It is still chargeable on short-term gains. There is still the possibility of double taxation in that case. The Bill recognises that there can be double taxation in such a case by the provisions in paragraph 14 of Schedule 14. which bring certain short-term capital gains within the compass of Clause 31(1), but only those of a certain kind.
  I will not detain the Committee by reciting the relevant sections, or how I come to the conclusion which I am about

  227
  to state, but I am sure that the Financial Secretary will correct me if my conclusion is wrong. What it comes to is that the only short-term capital gains which come within the Clause, and, therefore, escape betterment levy as well as short-term Capital Gains Tax, are gains from land acquired between 6th April, 1964, and 5th April, 1965, and sold or leased between 6th April, 1967, and 5th April, 1968. Those seem to be the only ones which are exempt from double taxation.
  Having tried to spell it out in that form, I will again give an example to illustrate my meaning. I will give up saying that I bought the land. Let us suppose this time that the hon. and learned Gentleman buys it—a large Victorian house with a large garden for £10,000, the current use value being, say, £9,000 for the house and £1,000 for the garden. He then converts the house into five flats at a cost of, say, £3,000. He gets planning permission to build another five flats in the garden. The conversion of the house creates a value of, say, £3,000 per flat. That brings us up to £15,000 for the house. The conversion not being a material development —an alteration from a dwelling-house into flats—the current use value has, therefore, been increased by £6,000.
  Suppose that the hon. and learned Gentleman also gets planning permission to build in the garden and that with the planning permission the value of the garden has trebled, as well it might in a case of this sort. He then sells out at a nice profit at, say, £18,000, £15,000 for the house and £3,000 for the garden. Had he bought it in the summer of 1964, and if he were to sell it this summer, longterm Capital Gains Tax would be payable on the increase in current use value, which I have given as £6,000, less the £3,000 expenditure. He would be paying longterm Capital Gains Tax on £3,000, and betterment levy would be payable on the net development value, which on my figures would be £2,000. That represents 30 per cent. on £3,000 and 40 per cent. on £2,000—in all, if my mathematics is right, taxation of about 33 per cent. on his gain.
  If that happened at some other dates than those which I have mentioned—if the conversion were carried out now and the purchase and sale were carried out after April, 1967—Income Tax would be
  228
  payable on the whole of the gains. If there was a gain of £5,000, Income Tax on that is £2,062 10s. In addition, betterment levy would be payable on 40 per cent. of £2,000 of that £5,000, which comes to another £800, making a total tax of £2,862 10s. on the gain of £5,000; in other words, a tax of nearly 60 per cent.
  I am sure that the hon. and learned Gentleman will find somewhere that I have not allowed for something. It may be the one-tenth at current use value, or something of that sort. However, in round figures, the short-term Capital Gains Tax payable on a transaction which occurs after April, 1967, gives rise to about double the taxation which would be involved if it occurred before that date.
  Why should only a very small part of short-term capital gains be excluded from the double taxation and, otherwise, the whole of it be included? That seems to me to be a very great hardship, because the Bill recognises elsewhere that, when Capital Gains Tax is charged as a longterm tax, it does not result in double taxation. Why has short-term Capital Gains Tax on capital gains which occur after April, 1967, not been exempted in the same way as long-term capital gains?
  Mr. MacDermot: The hon. Member for Crosby (Mr. Graham Page) correctly stated the general point at the outset of his remarks. It is that, when we are dealing with short-term capital gains, we are dealing with something which has been regarded from the outset, including when it was introduced originally by the party opposite, as income. That is what short-term capital gains are, and that is the way in which they are treated.
  The distinction about which he asks is essentially that between short-term and long-term capital gains. One is regarded as being identical with income and taxed as such, whereas the other is regarded as being something different from income which should now be subject to taxation, although at a lower rate than income. It is from that that the different treatment springs.
  As I explained in what I said about the Amendments which we were discussing a moment ago, we decided that the right relationship between betterment levy and taxes on income—and I itemised short-term gains as being one of the taxes on income—would be by following the

  229
  ordinary rules and allowing the taxpayer to treat any payments of betterment levy as a deductible expense. That is the general rule for purposes of short-term gains.
  As the hon. Gentleman pointed out, there is one set of provisions in the Bill which are of some complication and which deal, in effect, with transitional provisions. It is right to say that the transitional difficulty arises from the alteration of the period which is relevant for determining what is a short-term and what is a long-term gain.
  I was unable to follow in my head the complications of the example which he gave. However, I think that the error which he made was in failing to allow the betterment levy as a deduction in arriving at a computation of the increase in income. In any event, I assure him that I will study it carefully, and I undertake to write to him setting out a full explanation in reply to the example which he gave. As for the general principle, it is as I have stated.
  Question put and agreed to.
  Clause, as amended, ordered to stand part of the Bill.

  Schedule 14.—(CHARGEABLE GAINS: LAND IN GREAT BRITAIN.)
  10.15 p.m.
  Mr. MacDenmot: I beg to move Amendment No. 101, in page 89, line 2, to leave out paragraph 14 and to insert:
  14. Section 42(3) of the Finance Act 1966 (relief by reference to estate duty in respect of a gift inter vivos) shall not apply to a gift inter vivos consisting of land unless the current use value of the land at the time of the death exceeds the sums within paragraphs (a) and (b) of paragraph 4(1) of Schedule 6 to the Finance Act 1965 which, if the donee had disposed of the asset at the time of the death, would have been allowable in computing the gain accruing on that disposal and, if the said section 42(3) does so apply, that excess shall be the excess referred to in the expression 'the said excess' in the provisions of the said section 42(3) which determine the proportion of estate duty by reference to which relief is to be given.
  The purpose of the Amendment is to correct a drafting error in paragraph 14. The purpose of Section 42(3) which the paragraph seeks to amend is to allow the donee to include the Estate Duty referable to the excess in the cost allow-
  230
  able to him for Capital Gains Tax purposes when he comes to dispose of the assets.
  As originally drafted the provision in the paragraph did not attain its object, and the purpose of the Amendment is to achieve the correct result by providing in effect that Section 42(3) of the 1966 Act is not to apply at all unless there has been an increase in the current use value of the land that was the subject of the gift inter vivos between the date of the gift and the date of the donor's death, and, secondly, where there has been such an increase, its amount is to be the figure taken into account as the excess in determining the allowable proportion of the duty in accordance with the fraction laid down in Section 42(3), namely, the proportion of the duty which the excess bears to the principal value.
  Mr. Graham Page: This seems a bit stingy. However the Financial Secretary argues this, it is cutting down the allowance of Estate Duty as against betterment levy. It is cutting it down to that part of Estate Duty which is payable in respect of the increase in the current use value between the date of the gift and the date of the death. Why should not the whole of the Estate Duty be allowed against eventual payment of betterment levy?
  The eventual vendor is being charged betterment levy or Capital Gains Tax on the whole of his gain—betterment levy on part of it, and Capital Gains Tax on another part of it—and he should not be retaxed on any sum which he has paid in Estate Duty. It should not be a pruning-down of the sum because it refers to a little bit outside the difference between current use value at the date of the gift and the date of death. It should be an allowance for the whole of the Estate Duty which he has paid in respect of that gift.
  Mr. MacDermot: In future, when capital gains on disposals of land containing development value become chargeable under the provisions of this Schedule by reference to changes in the current use value, the amount of Estate Duty allowable under Section 42(3) obviously should be cut down to the part of the Estate Duty paid which is referable to the increase in current use value between the date of the gift and the date of the

  231
  death. This seems the right purpose to achieve. It was not achieved in the original drafting, but is now by the Amendment.
  Amendment agreed to.
  Question proposed, That this Schedule as amended, be the Fourteenth Schedule to the Bill.
  Mr. Temple: It would be appropriate for me to rise to pay a real tribute to my hon. Friend the Member for Crosby (Mr. Graham Page) for the detailed examination which he has been able to give both to this Schedule and to Clause 31. The Committee should remember that the blame for all these complications lies fairly and squarely with the Government. The Financial Secretary said that these complications were inevitable. Of course they were, as soon as the Government decided that betterment levy was not to be treated as tax and as soon as the Government decided to have a Land Commission levy as well as a Capital Gains Tax these complications were inevitable.
  We have made it quite clear that we do not believe in the Land Commission or the betterment levy; we believe that a Capital Gains Tax could take the place of both, with none of the complications of Clause 31 or Schedule 14. The whole thing could be taken care of by way of the Capital Gains Tax. The Government are entirely responsible for the complications and have further responsibility for placing formidable burden on all those who seek to
  232
  develop land, because they will not know where they are.
  I have been extremely interested in the last two debates on this matter but they have been almost incomprehensible to those of us who have been trying to follow them. I thank the Financial Secretary for his offer to give technical assistance to those who are trying to follow these matters, but I hope that, in advance of further debates, if the hon. and learned Gentleman is to put questions of this complication before us he will circulate those who may be interested in the explanation of these technical matters.
  Mr. MacDermot: After two-and-a-half years in this office I am fully aware that the Government can never win. If we introduce a simple, clear measure which is readily understood—such as Selective Employment Tax—we are told that we have produced a half-baked, ill-thoughtout, ill-digested, rough and brutal measure. If, having listened to those complaints, we go home and work out something with infinite refinement and care, which meets every point with justice, we are told that what we have done is to confuse utterly the taxpayer with something which is hoplessly complicated and impossible to understand.
  The only thing I can agree with the hon. Member for the City of Chester (Mr. Temple) about is that the hon. Member for Crosby (Mr. Graham Page) is deserving of tribute.
  Question put and agreed to.
  Schedule, as amended, agreed to.
  Clause 32 ordered to stand part of the Bill.

  Schedule 15.—(PROVISIONS CON SEQUENTIAL ON BETTERMENT LEVY.)
  Mr. Graham Page: I beg to move Amendment No. 192, in page 92, line 5, at the end to insert:
  2. For the purposes of Case VIII of Schedule D the amount of any rent payable to the landlord in any year shall be reduced by the amount of the betterment levy charged on the capital value of the rent attributable to that year and the amount so attributable shall in the case of a lease for a term of not less than fifty years be one-fiftieth of the amount of the betterment levy charged on the capital value of the rent and in the case of a lease for a term of less than fifty years shall be the fraction of such amount corresponding to the number of years comprised in the term.
  The Schedule deals with betterment levy on leases, especially in connection with premiums. Under Case B of the Land Commission Act, 1967, the betterment levy is chargeable on the letting of property. That betterment levy is payable when the property is let; it is payable at that time upon the premium, if any, and upon the capitalised value of the rent; it is payable regardless of the fact that the money under the lease, so far as it is rent, has not yet been received by the levy payer, and payable regardless of the fact that it amounts to double taxation. The rent and the premium are subject to Income Tax. The premium and the capitalised value of the rent are subject to the betterment levy. They should both have been relieved to that extent of betterment levy.
  I am sure that the disastrous effect of this policy upon all forms of leases and the whole system of leasehold tenure has not been generally recognised. Who in his right mind would let property when, for the privilege, he had to pay 40 per cent. of the capitalised value of the rent, plus the premium, plus Income Tax at the outset on the premium—subject to the one-fiftieth formula—and tax on the rent? I cannot imagine what he would have left. The Bill offers him, in this Schedule, the slight crumb of comfort that he can take the betterment levy into account against the premium, but why not also against the rent?
  The Amendment seeks to allow the levy payer to take the betterment levy into account against the tax paid on the rent. He has to pay Income Tax on the premium and on the rent and betterment
  234
  levy on the premium and capitalised value of the rent and it seems illogical that he should be entitled to a concession on the premium and none on the capitalised value of the rent. The Amendment seeks to grant him that latter concession.
  Mr. James Allason: I tried to approach this matter differently in our debates on the Land Commission Bill and argued that the right to receive rent should be valued but the value would differ according to the taxpayer's position. If someone pays no tax, the right to receive £100 a year for 20 years is substantial, but if he pays the highest rate of Surtax, that right is of different value. I wanted that taken into account, but we lost. We now have the opportunity of putting the matter right.
  If the cost of the levy to the taxpayer is allowed in proportion over the years as a deduction from his assent, there will be some justice, but this is not offered by the Government. It is fair that it should be offered and I therefore hope that they will allow this as a deduction from the taxpayer's liability.
  Mr. MacDermot: This proposal is quite unacceptable to the Government. If it were accepted, its repercussions would go far beyond the scope of the Amendment. For example, it would be extremely difficult to refuse similar allowances to a lessee who carried out material development in respect of which he paid betterment levy on leased premises which he used for his business. It could be argued that, because the development of the land would increase his profits, he should be allowed to spread the levy over the remainder of his lease, or 50 years if shorter, and get allowances accordingly in the assessment of his profits.
  Equally, it would be difficult to distinguish between the trader who developed business premises on a long lease, such as one for 999 years, and the trader who developed premises of which he owned the freehold. The amount of the levy would he the same in both cases. It would then be argued that the freeholder had as strong a claim to allowances in respect of levy spread over the 50 years as the long leaseholder.
  Third, there is the case of the freeholder who develops his property and

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  pays levy with a view to letting the property at an enhanced rent. He also would have a claim to allowances in respect of the levy against rent spread over 50 years. We recognise that it would be harsh to charge Income Tax or Corporation Tax on the rents, and, at the same time, to charge levy on the capital value of the right to receive the rents, with no allowances in respect of levy for Income Tax purposes or in respect of tax for levy purposes.
  10.30 p.m.
  But the provisions of the Land Commission Act afford a solution to this problem, and it may be that hon. Members supporting the Amendment are not aware of the effect of these provisions. Levy, under Case B of the Land Commission Act, which applies to leases, is charged on the amount by which the consideration for the disposition exceeds the sum of the base value realised by the disposition and the amount of any expenditure on improvements or ancillary rights in so far as it has increased the development value realised by the disposition. Fortunately, for the present purpose we have only to consider the consideration for the disposition.
  Among the factors which have to be taken into account in calculating the consideration for the disposition—it will be the only factor in many cases—is the capital value at the relevant date of the right to receive the rent. This has to be calculated
  "by reference to the price which that right might reasonably be or have been expected to fetch on a sale in the open market at the time by reference to which the value falls to be calculated".
  That is paragraph 5 of Schedule 6 to the Land Commission Act. In effect, it means that an allowance for tax on the rents will be made in arriving at the amount on which levy is payable. Therefore, the proposal to give an allowance for levy against rents, besides being open to the objection which I have already raised in regard to repercussions, would be open to the further objection that, in conjunction with those provisions of the Land Commission Act, there would, in effect, be a double allowance.
  The hon. Member for Hemel Hempstead (Mr. Allason) raised a separate point, that, in arriving at the capital value
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  of the right to receive a rent, the market, and, in consequence, the valuation office, would not take account of the actual rate at which the lessor is liable to tax; it would merely make an allowance at an average rate which one might take as being about 8s. in the £. He argues that it is possible that, when the method of valuing rights to rents for levy purposes is considered, it may be said that, where the lessor is liable to Surtax, an additional allowance in respect of Surtax should be made in valuing the right to the rent.
  It would be impossible for levy purposes to take account of the actual rate at which a particular lessor is liable to tax. Not only might that rate vary from year to year for the same person, but the lessor might at any time sell his interest in the property, and the rate at which the purchaser was liable to tax might be quite different from that to which the original lessor was liable.
  I think that the solution to the problem is that, if a landlord proposing to grant a lease on terms which reflect a heavy development value is liable to Surtax and thinks that he would be hit by absence of any allowance in respect of Surtax, it would be open to him to grant the lease at a premium and a nominal rent instead of a rent alone. In that event, most of the levy would be deducted from the premium before calculation of the amount on which Income Tax and Surtax are payable.
  For the reasons which I have already explained, I must advise the Committee to reject the Amendment.
  Mr. Graham Page: The hon. and learned Gentleman has said that the Amendment might give a double allowance. After all the double taxation provisions we have had in the past couple of hours that would be so refreshing that I am almost tempted to take the Amendment to a Division.
  But the point is technical. I am grateful to the hon. and learned Gentleman for his explanations and for drawing attention to the parts of the Land Commission Act which may give a solution. I would like the opportunity to study what the Financial Secretary said, as it is difficult to take it in as he says it. I do not blame him, for it is a technical

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  subject. I am sure that the rest of the Committee would also like to read what he said before coming to a decision. I therefore beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Graham Page: I beg to move Amendment No. 204, in page 93, line 33, at the end to add:
  3. For the purpose of subsection (1) of section fifty of the Finance Act 1940 (by virtue of which an allowance for a company's liabilities is to be made in valuing its assets for the purposes of section forty-six or section fifty-six of that Act) any liability of the company to corporation tax and betterment levy which the company would have incurred had all its assets been disposed of for their market value at the date of the death of the deceased shall be taken into account as if it were an actual but contingent liability at the date of the death; and the Commissioners shall make an allowance to reflect such liability in addition to allowances (if any) which may fall to he made under subsection (3) of section thirty of the Finance Act 1954 (which makes other amendments of, or affecting, section fifty-five of the Finance Act 1940).
  That looks a rather formidable set of words, but the point is fairly simple and one which I hope that the hon. and learned Gentleman will concede to us. It certainly has the merit of being fair.
  There is relief against betterment levy on land which within the previous six years has suffered Estate Duty. That comes into the Land Commission Act in Sections 69, 70 and 71 and Schedules 7 and 8. It is, therefore, recognised that when land has suffered Estate Duty there should be an allowance against betterment levy or an allowance in the assessment of betterment levy for that amount paid in Estate Duty. I submit that that shows the intention of the creators of betterment levy that in ascertaining the net development value on which betterment levy is to be assessed one must deduct such sums as have already been paid away in some form of taxation.
  My argument has always been that betterment levy should not be charged on any sum which has already borne tax, whether Income Tax. Capital Gains Tax, Corporation Tax, or Estate Duty. That would be fair, but I appreciate that the Government will not accept that argument. But surely they cannot refuse the bare minimum which is embodied in the Amendment? That is that there should
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  be no tax upon a tax—that one should not tax the money which has been paid away in tax. That is so when the owner of land has died and his estate has suffered Estate Duty, and then the land is sold within the next six years; in such a case, the Estate Duty is deductible from the net development value on which betterment levy is chargeable on the disposal of the property.
  But what if the deceased did not own the land but had shares in the company which owned it? In anticipation of betterment levy on disposal, that possible liability would be reflected in the value of those shares, and, therefore, Estate Duty would be paid on a reduced value, a value reduced by that reason. That is so if one values the shares on the normal market basis, whether they be quoted shares or shares which have a value by having changed hands privately over recent years.
  But there are the occasions when Estate Duty must be calculated not on the market value of the shares in a company or the quoted value of those shares, but on the asset value of the company. If the deceased has a controlling interest in the company, then the shares have to be valued on an assets valuation under Section 55(1) of the Finance Act, 1940. That means that each asset is valued, including land held by the company, the liabilities are deducted, and the result is divided by the number of shares issued. I am sorry if I am spelling it out in an elementary way. I have to do so to get my own argument into my head.
  That valuation does not take into account the taxes which may arise on the disposal of those assets. It is not permitted in an assets valuation to take into account such a tax as betterment levy on the sale of the land. I think that it should do so. Amendment No. 204 would allow it to be so taken into account, and this would do no more than put a deceased shareholder on the same footing as a deceased individual owner of land. There seems no reason why one should make the distinction between the two. The shareholder who controls a company which owns land is put on the same footing in the valuation of his estate as the individual owner of land. Therefore, he should be put on the same footing so far as the betterment levy is concerned, and the Estate Duty allowance of betterment levy given by the

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  Land Commission Act should be allowed in such a case.
  Mr. Allason: I have a constituency case which exactly fits this proposal. I am glad that the Joint Parliamentary Secretary to the Ministry of Housing and Local Government is present, because he knows the case. He has been very concerned about it and has racked his brains to find out how he could give the relief in this case which he agreed to be necessary. He has not succeeded in gettting the Government to put something in the Finance Bill, but I hope that he will nudge his hon. and learned Friend and get this Amendment passed, because I know that he is in full sympathy with it.
  My constituent died before the coming into effect of the Land Commission Act. He owned approximately 35 per cent. of the shares of a family company having assets including a certain piece of land, which was valued by the district valuer for Estate Duty purposes at £22,000, and the reason for that was that it was expected that development of the land would take place. It was of little value except for development. Estate Duty was then paid at the rate of 50 per cent. on the deceased's assets in the land-35 per cent. of the £22,000. If the property is now developed, the levy will have to be paid by the company on the full value, which will be perhaps £20,000 out of that £22,000, at the rate of 40 per cent.
  Had the deceased owned the whole of the land, he would under Schedule 7 of the Land Commission Act have received a rebate. To the extent that he has paid 50 per cent. Estate Duty, which is allowable, he would have paid only as much as he would have paid if he had first paid the levy and then was assessed for Estate Duty on the remaining value. To show roughly how it would work on £1,000, a 40 per cent. levy would be taken first, and then, on the remaining £600, 50 per cent. Estate Duty would be paid.
  10.45 p.m.
  So, in total, he would pay 40 per cent., plus 30 per cent.; 70 per cent. would be paid in combination of Estate Duty and levy on the development value of the land. This is the effect of Schedule 7 to the Land Commission Act; it does it the other way round, but it achieves
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  that situation. The 50 per cent. has already been paid, and, therefore, it reduces the 40 per cent. levy to only 20 per cent. in order to achieve the final 70 per cent. which is paid in this case.
  However, not so, because the land happens to be owned through a company there is no such rebate given at all, and so, that 50 per cent. having already been paid, another 40 per cent. will be taken, a total of 90 per cent. in this case. In this case, of course, it happens that the rate of Estate Duty is 50 per cent. Suppose the rate of Estate Duty is very much higher, then it is possible for an amount of 100 per cent. tax to be paid by the effect of dying and having to pay the levy afterwards. This, clearly, is quite improper.
  Here we have a chance of putting it right. This is the opportunity now before the Committee. Therefore, I hope that the Government will accept this very reasonable proposal.
  Mr. MarDermot: As the hon. Gentleman the Member for Crosby (Mr. Graham Page) explained, this Amendment relates to the case where shares and debentures are valued not on market value but by reference to the value of the assets of the company, and, broadly speaking, these are controlling shareholdings in unquoted companies.
  The Amendment provides for a deduction in the Estate Duty valuation in such cases in respect of Corporation Tax and betterment levy to which the company would have been liable if all its assets had been disposed of at market value at the date of the death of the deceased. Existing law and Revenue practice is to give an allowance under Section 30(3) of the Finance Act, 1950, for contingent liability to Corporation Tax on unrealised gains. Of course, the company pays Corporation and not Capital Gains Tax on its capital gains.
  Where the death occurred on or after 6th April, 1967, if the assets of the company included land with an unrealised development value, betterment levy presumptively payable on its realisation would be regarded as a contingent liability of the company for the purposes of Section 50(1) of the Finance Act, 1940. In both these cases allowance will normally be made in full for any Corporation Tax or levy which has been incurred

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  by the time the case is considered by the Estate Duty Office, and in other cases the deduction will be properly discounted, that is, by reference to the probabilities in regard to future disposals of the assets and their probable timing, which would give rise to liability to tax or levy. Unless there is any reason to foresee disposals in the reasonably near future, the deduction would normally be small.
  It may be that these provisions of the existing law, which, of course, has not yet been applied to a significant number of cases, will give the supporters of the Amendment substantially what they want. If the position is that they are assuming that no deduction would be given for contingent liability for betterment levy because of the exclusion from Section 50(1) of the 1940 Act of liabilities
  "incurred otherwise than for the purposes of the business of the company wholly and exclusively"
  I can only say that the view of the Revenue is that those words would not operate to exclude betterment levy. But if the purpose of the Amendment is to secure an allowance for the full amount of Corporation Tax and the betterment levy, which would be possible on the basis of a notional disposal on the date of the death, that would be unreasonable. The liability to Corporation Tax would be postponed indefinitely if the assets in question were not realised, and in these circumstances there seems little merit in giving an allowance for liability at the date of death.
  The betterment levy is not payable until there is realisation of development value and, if that is deferred over a significant period, here again there is no justification for giving an allowance for the full notional liability at the date of death. There will be a deduction for contingent liability to betterment levy and, of course, for any liability to levy which has actually been incurred but not for the full amount of a notional disposal at the date of death.
  If the general principle satisfies the hon. Member for Crosby, but he is concerned with whether the objective is made clear in the provision, I gladly undertake to look further at it. I cannot agree to accept the Amendment, or to go as far as appears to be suggested by allowing
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  a deduction for the full amount on a notional disposal, but I will gladly also consider this provision in relation to the particular case to which the hon. Member for Hemel Hempstead (Mr. Allason) has referred.
  Mr. Allason: The hon. and learned Gentleman has said that this will be all right after the 1st April, 1967, but he has not addressed himself to the situation in the case of those who died before that date, which is the case I cited. The whole of Part II of Schedule 7 of the Land Commission Act is dealing with cases where death has taken place before that date. Basically, satisfactory allowances are made where the asset is owned outright, but the case I quoted is wholly one where, because the property is owned through a company, that provision cannot take effect.
  I urge on the hon. and learned Gentleman that this is a very real necessity. Will he please have a look at it in relation to the known case which his hon. Friend the Joint Parliamentary Secretary to the Ministry of Housing and Local Government, sitting beside him, can tell him about?
  Mr. MacDermot: There are obviously complications about that case. The hon. Gentleman has been in correspondence with my hon. Friend the Joint Parliamentary Secretary to the Ministry of Housing and Local Government and I will gladly look into it, consider it with him and get in touch with the hon. Gentleman. If what he has asked is right, and it appears to call for an amending provision, I will consider whether we can meet the point on Report. But from his argument tonight I do not at the moment see the need for an Amendment.
  Mr. Graham Page: The difficulty in the case put by my hon. Friend the Member for Hemel Hempstead (Mr. Allason) is that it stretches over the date 1st April, 1967. Part of it occurs before and part of it afterwards. To that extent perhaps an Amendment is necessary. Listening to the Financial Secretary, it appears that he has given me all I want, but I cannot be certain. I would like to read what he has said and compare it with my Amendment.
  On the basis that I might approach him and ask for further explanations to

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  assist me, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Schedule agreed to.
  Clause 33 ordered to stand part of the Bill.

  Clause 34.—(BASIS FOR DETERMINING UNILATERAL RELIEF FROM DOUBLE TAXATION.)
  Mr. Stephen Hastings: I beg to move Amendment No. 166, in page 38, line 40, at the end to insert:
  (2) In applying the provisions of Schedules 16 and 17 to the Income Tax Act 1952, as subsequently amended, the following shall have effect

  (a) where a person possesses a source of foreign income in respect of which there is an excess of foreign tax, such excess shall be deemed to be foreign tax in respect of any other foreign income to which he is entitled for the same year assessment and be applied in relief of his United Kingdom tax liability in respect of that other foreign income;

  (b) in this section 'excess of foreign tax' shall mean that part of the foreign tax which cannot be allowed as a credit because the foreign tax exceeds the United Kingdom taxes applicable to the particular source of foreign income.

  The point which I seek to make is not new. It was debated last year and on the Finance Bill in 1965, but it is a specific point. In those circumstances, I do not intend to go deeply into the merits of overseas investment as a whole, except to remark that I have tried, in the context of this matter, to study the Reddaway Report, which is an interim report and important in this connection, but I have found it so hedged about with qualifications as virtually to defy interpretation.
  This is, in a sense, its value. It seems to show conclusively that one cannot quantify exactly the effects of overseas investment on the balance of payments, much less explain the reasons for overseas investment in purely statistical terms. Here one is concerned with a range of business judgments which are simply not susceptible to this kind of analysis. That was the effect which this Report had on me.
  I turn to the specific matter which is raised in the Amendment. The object
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  of the Amendment is that foreign taxes paid in respect of all overseas income should be averaged for the purposes of double taxation relief so that where the foreign tax in respect of a particular source of income exceeds the United Kingdom tax payable on the same income, the excess can be credited against the United Kingdom tax payable on any other source of overseas income.
  A simple example of what I mean is a United Kingdom company which receives dividends from, let us say, 100 units from investments in South Africa and Australia. The United Kingdom company would have paid tax in South Africa at about 35 per cent., leaving 5 per cent. upon which United Kingdom tax is levied, and in Australia the United Kingdom company would have paid about 50 per cent., leaving a surplus, if I can call it that, of about 10 per cent., for which the company would get no relief at all at the United Kingdom end.
  The effect of my proposal would be that the United Kingdom company should be allowed to take both these blocks of dividends together—that is to say, 100 units in South Africa and 100 units in Australia—upon which it would have to pay United Kingdom tax at 80 per cent., but the credits, aggregated, 35 per cent. plus 50 per cent., would add up to 85 per cent. That is still an excess, but it would mean that the United Kingdom company would not have to pay tax on the 5 per cent. from the South African example.
  I remind the Chief Secretary of the debate on this issue on the Finance Bill of 1965. On Report, my hon. Friend, the Member for Honiton (Mr. Emery) moved an Amendment which is substantially—in fact, almost exactly—the same as this. During his speech he drew attention to what the Financial Secretary had said in Committee on 22nd June, 1965, which was:
  "I want to make clear that I am not giving an undertaking that I will bring forward Amendments, but I shall be glad to consider the matter further."
  No Amendments were brought forward by the Government, but when he replied to that debate the Financial Secretary said:
  "We do not rule out on principle legislating on this subject."
  The hon. and learned Gentleman continued to point out the difficulties which,

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  of course, were as obvious to my hon. Friend when he raised this matter two years ago as they are to me now. Nevertheless, the hon. and learned Gentleman did not deny that the issue was substantial and he finished his speech by saying that although the problems were involved,
  "the Government have decided not to legislate on this matter this year but to look carefully into all the implications during the coming years."—[OFFICIAL REPORT, 12th July, 1965; Vol. 716, c. 220–2.]
  That meant, during the year 1966.
  I believe—my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) will probably confirm this—that last year there was another debate on an Opposition Amendment on the same matter and that again the Government said that they would consider it with a view to legislation. So there have been two debates on this matter and the time seems to have come when we should expect something concrete, and I hope that we shall hear from the Chief Secretary that the Government have now at last determined to grant us the point.
  11.0 p.m.
  The United States tax system has been used as a precedent and as a justification by the Government for the major tax changes which they introduced two years ago, and that example has been frequently cited. Whether those tax changes are beneficial for this country or not, if the precedent is justified, it is reasonable and fair for us to adopt the facility which exists in the United States tax system for averaging foreign taxes, which is substantially the point of the Amendment.
  This provision bears a relationship to the so-called overspill allowance. Two years ago, the Government introduced discriminatory fiscal measures against overseas investment and then brought in a form of allowances to last over a period of five years only. The argument is that if there is inequity—and the very existence of these overspill allowances implies that there is—then inequity cannot be remedied by temporary measures. The Amendment offers the Government a partial solution to their difficulties and embarrassment in this connection. This is the third time which we have debated this matter.
  In the circumstances, we should expect the Chief Secretary to regard the Amendment with sympathy and I hope that he will accept it.
  Mr. John Biffen: My hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) has moved this Amendment with great moderation, and I want briefly to endorse what he has said. When the Corporation Tax was first created, in the White Paper, I think published in November, 1964, there was then no reference, as I recall, to the consequences which that tax was expected to have for overseas investment. It was largely argued along the lines that it would have the effect of encouraging retained profits and discouraging distributions. It was argued essentially in a domestic context.
  Subsequently, these other arguments were adduced, that it would have these consequences upon overseas investment, but I suspect that that was an argument emanating more from the Treasury than some of the other advisers, who were at that time prominent in the counsel of the Government. There must be a case for reflecting as to whether the effect that this will have on overseas investment has been far harsher than anyone really foresaw at that point of time.
  The uncertainty that the Government had has been very clearly underlined by the quotation which my hon. Friend has mentioned from the Treasury spokesmen on the two previous occasions when this has been debated. Although I fully recognise that one cannot easily discern a pattern in the general range of overseas taxation, there is plenty of evidence that many of the developing countries have very high rates of taxation on British enterprises operating in those countries.
  If we are concerned about developing investment in those parts of the world normally referred to as developing countries, then in a very modest way, and I put it no higher than that, we can contribute to United Kingdom private investment by allowing the kind of averaging provision which my hon. Friend has mentioned, and I hope that this consideration will be borne in mind, along with the points raised by my hon. Friend when the Chief Secretary comes to answer the debate.
  Mr. Diamond: The hon. Member for Mid-Bedfordshire (Mr. Hastings) raised

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  this matter with moderation, and he has been supported with the knowledge and persuasiveness of his hon. Friend the Member for Oswestry (Mr. Biffen). The hon. Member for Mid-Bedfordshire referred to the Reddaway Report and said that he had some difficulty in understanding what it was about, as it was so hedged with limitations. If I can help in a very general way, what the Reddaway Report says is that everything that we said about overseas investment is right, and everything that the Opposition said is wrong. That is a broad guide—that is the intelligent man's guide to the Report.
  Mr. Hastings: If the right hon. Gentleman really thinks this is the conclusion of the Reddaway Report then he is just as fogged as I am.
  Mr. Diamond: I was merely offering it as a guide to the hon. Gentleman. It is on a more narrow point that the question of overseas investment arises. The hon. Gentleman next referred to the debates in 1965, with which I had happily provided myself.
  I opened HANSARD to see what my hon. Friend the Financial Secretary said and I read from col. 1561. The first sentence was all that I read, and as the Committee will realise, having read that, I closed the book very sharply, because the first sentence read:
  "Mr. MacDermot: I rise at this early stage only because I find that all my efforts to staunch the flow of generosity on the part of the Treasury are of no avail."—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1561.]
  It is not surprising that my right hon. Friend the Chancellor intervened very shortly afterwards to put the matter right. The hon. Gentleman gave me a very helpful example of the exact point which the Amendment seeks to meet, and of the exact principle which this Act does not seek to meet.
  The hon. Gentleman gave me an example not of avoidance of double taxation. The principle that this measure seeks to meet in this respect is the avoidance of double taxation. It does not seek to meet the entirely different principle that the hon. Gentleman propounded, namely, that the United Kingdom investor should in effect, be required to pay the lower of two taxes. If he pays the higher of two taxes, but does not pay twice over, the
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  point of paying double taxation is met and that is all we are considering.
  The hon. Gentleman referred to Australia and the rate of 50 per cent. and the relief given had the result that tax borne on that income was 50 per cent. This was income earned in Australia by a resident company in Australia of which the shareholder—let us say the major shareholder—was an English resident company. I see no reason, and I expect that other Australian companies see no reason, why one particular Australian company should bear tax at less than 50 per cent. and the other Australian company should bear tax at 50 per cent.
  As the hon. Gentleman will perceive, the effect of the legislation unamended is to give such relief that the double tax borne on the English company in respect of that income is no more than 50 per cent., just as much as in the other case it was no more than 40 per cent.—the higher of 35 and 40, as in this case it is the higher of 45 and 50. I am explaining why it is that the legislation is not intended to meet the point which the hon. Gentleman is making. Therefore, as there is an issue of principle, and so long as we understand each other, I do not think that I need to go over all the points which arise out of the Amendment.
  It is certainly true, as the hon. Member for Oswestry (Mr. Biffen) said, that if this Amendment were to be accepted it would be an encouragement to British investors to invest in low tax countries abroad. But it is not intended to introduce that bias. In those circumstances, I gather that it is not the wish of the hon. Gentleman that we should rehearse all the points that have been adequately debated previously. There is really an essential difference of principle. I have explained what the hon. Gentleman's principle is. I have explained the Government's principle. In those circumstances, I cannot recommend the Committee to accept the Amendment.
  Mr. Patrick Jenkin: I can only say that the Chief Secretary's reply to the Amendment, which was moved in very persuasive terms by my hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings), is disappointing in the extreme, because it was so much less forthcoming than the

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  replies on the same point raised in previous years.
  I remember that last year, at about a quarter-to-four in the morning, as the cold grey light of day was beginning to come through the windows of the Chamber, I moved the Amendment to which my hon. Friend referred, and it was replied to by the Financial Secretary on 21st June, reported at column 534 of the OFFICIAL REPORT. Unlike the Chief Secretary tonight, who has attacked the matter on an issue of principle, the Financial Secretary on that occasion gave three reasons why he could not accept the Amendment.
  I had argued it principally in relation to British banks operating overseas, though the Amendment was not so limited. He said that it was not right to single out one particular business, and I accept that that is right. He made the point that this would increase the incentive to invest in low-tax countries, and he also said that it would reduce the disincentive to invest in high-tax countries. Indeed, one is the other side of the same coin.
  The Financial Secretary also referred to the now well-worn theme that it could lead to tax avoidance, but on that occasion he said:
  "I do not want to make too much of this."—[OFFICIAL REPORT, 21st June, 1966; Vol. 730, c. 534.]
  11.15 p.m.
  My hon. Friend has not sought special treatment for any trade. The matter is argued generally. Obviously, it affects a large number of businesses which operate in a number of countries overseas. Were we to raise the matter on the rather practical grounds of the Financial Secretary, we would be left with only the economic effect, namely, that this would have a marginal impact on overseas investment. Perhaps I may be allowed to say a word or two about that, because the Chief Secretary gave it as one of his reasons.
  In 1965, the Financial Secretary admitted that we had a case. My hon. Friend has quoted from the Report stage debates, when the Financial Secretary indicated his view that there was substance in the case if means could be found of giving expression to it. The question which one must now ask is whether the impact on overseas invest-
  250
  ment—the encouragement to go to a low-tax country or the reduced disincentive to invest in a high-tax country—is now so great in relation to our total overseas investment that it cannot be tolerated. Are we reduced to such a pass that the marginal effect which might arise, which would be necessary to give rise to the justice which was then admitted, cannot be borne?
  Nobody has ever disputed in relation to overseas investment that the short-term curbs could well be justified in a moment of balance of payment crisis as a means of temporarily staunching the flow of investment overseas. This has received qualified—I emphasise "qualified"—support from the Reddaway Report, to which my hon. Friend referred. It should be noted that unlike many commentators on this matter, I am quoting from the Reddaway Report and not from any of the handouts about it.
  At page 131, the Reddaway Report states:
  "A restriction of direct investment overseas would, for a considerable time, make a contribution to the problem, but it does not follow that it is a wise policy: the most that one can do is to make the rather tautological remark that, if nothing else is considered feasible (or adequate without the restriction on direct investment overseas), then the policy may be better than the last resort—which is economic stagnation."
  I forbear from pointing out that we seem to have managed to get both from the Government.
  The whole tenor of the Report—I was astonished by what the Chief Secretary said in his brief reference to it—is that long-term curbs, restrictions and disincentives are harmful to the economic interests of the country. I will not read the full page, but perhaps I might read the two paragraphs which deal with this. I quote from page 130 of the Reddaway Report:
  "An average act of direct investment overseas will strengthen the future balance of payments on current account, even after deducting the interest payable on the overseas borrowing … by which, at least from the national point of view, such an act of investment is almost wholly financed. In consequence, a steady rate of direct investment overseas would, if maintained long enough, provide enough of an annual surplus on current account to finance the annual quota of new investment."
  Perhaps one of the most factual conclusions of the Report was that over the

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  period which it examined, from 1954 to 1965, that was exactly what happened: overseas investment was self-supporting.
  The Financial Secretary is not present, but I raised the question of long-term restrictions in the Budget debate. The Amendment seeks to modify in a small regard the long-term fiscal disincentives on investment. I raised the question of what the Reddaway Report showed. I used different words but with exactly the same meaning. In the Budget debate, the Financial Secretary said that
  "if, as a result of this Report, anybody has to swallow his words spoken two years ago, it is not anyone on this side."—[OFFICIAL REPORT, 13th April, 1967; Vol. 744, c. 1499.]
  The Chief Secretary echoed those words tonight when he said that it wholly bore out what the Government have been saying. That is not the conclusion of most of the responsible commentators on the matter.
  The Financial Times said on 29th March of this year:
  "… the Government can take little comfort from a report whose findings by implication condemn the approach adopted by Mr. Callaghan."
  The Economist said:
  "Measured by the Reddaway yardstick, the indiscriminate and permanent tax disincentives to foreign direct investment written into the 1965 Finance Act seem to be folly."
  Those are remarks by the two principal commentators on the matter, and for the Government to claim that the Reddaway Report bears out their policy of long-term, permanent fiscal disincentives to overseas investment seems to be the height of folly.
  Now we have even the National Economic Development Council considering the Reddaway Report. The Times reported on 6th April:
  "Overseas investment is a good thing in the long term, the National Economic Development Council decided at its monthly meeting yesterday. But while they felt it was generally the right course for a country like Britain to take, Neddy members agreed that short-term limitations during a balance of payments crisis were unavoidable."
  But we are not discussing short-term limitations. We are discussing a long-term, built-in financial disincentive to overseas investment.
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  The new dispensation of Corporation Tax and the limitation of double tax relief operates particularly harshly on those companies which have investments in a number of different countries. That is the situation which we are discussing. The Amendment undoubtedly would mitigate the harshness in allowing the taxation which is unrelieved from profits earned in low-tax countries to be relieved against the balance left from the high-tax countries. That would seem to be a perfectly reasonable proposal, but the Chief Secretary has told us that it is wholly contrary to every principle which has already been written into the taxation system. I hope that I do not misquote him. I understood him to say that this was not what the taxation system sought to do.
  My hon. Friend the Member for Mid-Bedfordshire has pointed out very pertinently that the taxation system of the country which the Government purport to take as their model—the American system—does just that. If industry is having to compete in overseas countries with American industry, clearly it is competing subject perhaps to a minor but none the less significant disadvantage in that allowances available to their American competitors are not allowed to companies based in this country.
  Indeed, the American practice has the advantage of recognising the reality of the situation, namely, that groups of companies operating in a large number of different countries are operating as one worldwide organisation. They do not look at a series of separate individual businesses, each in a separate compartment. They look at their worldwide operations as a whole. It is according to that test that they should be judged and according to that test that they should be taxed.
  The Amendment would go some way to achieving that result. I am extremely disappointed that the Chief Secretary has resisted it in such uncompromising terms. I believe that my hon. Friend has a good case, and my advice to him is that, when the Question is put, he should leave the Amendment to be negatived and not seek to withdraw it. I believe that he has a good case.
  Amendment negatived.
  Mr. Patrick Jenkin: I beg to move Amendment No. 134, in page 38, line 42, at the end to add:
  (3) Paragraph 4(1) of Schedule 16 to the Finance Act 1965 (which defines the circumstances under which a company resident in the United Kingdom can claim relief for the underlying tax paid abroad by an overseas company paying dividends to the first-mentioned company) shall be amended by the insertion after the word 'which' of the words 'has acquired shares of the first-mentioned company at a cost of one million pounds or more or which'.
  This Amendment covers a rather different point. It seeks to widen the category of companies operating overseas which should be treated as a direct investment of a United Kingdom shareholder and not as a portfolio investment. Hitherto, the test of what is a direct, and what is a portfolio, investment has been the percentage of voting power in the overseas company, and the present rule is that to be a direct investment the United Kingdom company must hold at least 25 per cent. of the voting power in non-Commonwealth countries, or 10 per cent. in the case of Commonwealth countries and some of the countries with which we have double taxation treaties.
  The double taxation treaty system is intended—and I hope that I carry the Chief Secretary with me on this—to prevent, or, at any rate, to minimise, the situation in which income is subject to two taxes in two different countries. It is to stop the income being taxed twice over.
  In the case of dividends moving from one country to another one has to consider two sorts of taxation in the country where the company is operating. There is the direct tax on the dividends, the so-called withholding tax, and there is also the tax which has been paid by the company itself in the country, the so-called underlying tax.
  Until 1965 relief for the underlying tax as well as for the withholding tax was given in almost every case. It was only in respect of a few countries outside the Commonwealth with which we had no double taxation convention that no relief for underlying tax was given. The 1965 and 1966 Finance Acts made substantial changes to that position and substantially reduced the number of circumstances in which relief from underlying tax was given. In particular, they brought about the situation in which portfolio invest-
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  ments rarely, if ever, qualify for relief from underlying tax. Direct investment—the 25 per cent. or 10 per cent. test that I mentioned—still qualifies for the underlying tax.
  The position, therefore, is that the distinction between direct and portfolio investment, having before 1965 been of relatively little importance—it arose only in the case of a very few countries, and those which were of comparatively minor significance from the point of view of United Kingdom investments overseas—is now relevant in virtually every country in which we have investments. It is, therefore, a question of critical importance to any company whether its investment in an overseas company is a direct or a portfolio investment, and as the law stands this is to be judged by the voting share test—25 per cent. or 10 per cent. according to the circumstances.
  It is becoming apparent that this test is altogether too crude to judge so important a matter. It gives rise to great unfairness, and at times it gives rise to considerable anomalies. The justification for the distinction was given by the Financial Secretary during one of the lone debates that we had on the 1965 Finance Bill. On 16th June, the hon. and learned Gentleman gave two main reasons for this. The first was that there was a fiscal difference between a direct and a portfolio investment in that the direct investment was, as he put it, a subsidiary of the investing company.
  The hon. and learned Gentleman said:
  "… the underlying tax that is paid by a subsidiary company—and applying the 25 per cent, test as to what is a subsidiary—is, in a sense, tax paid within the company sector and to grant the relief does not conflict with the principle of Corporation Tax by separating company taxation from the individual tax paid by the shareholder."
  That was the fiscal reason, and the hon. and learned Gentleman then told us the economic difference, in that direct investment can be presumed to bring greater returns to this country. He said:
  "It is the trade investment which is likely to be more productive, and is designed to be productive of helping future trade between ourselves and the countries in which the investment is taking place."—[OFFICIAL REPORT, 16th June, 1965; Vol. 714, c. 574–5.]
  11.30 p.m.
  Therefore, the position is reached, on this explanation, where the question is: is this a trade investment, and is it in the

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  company sector? If there is to be a distinction, this must be the basis of any logic which underlies it. If it is in the company sector and is a trade investment it should be regarded as a direct investment and should qualify for relief from underlying tax.
  Conversely, it ought not to be excluded merely because it fails to meet what is by any standard an arbitrary percentage test. If investment in a trade is a trade investment it can be a trade investment even if it is less than 25 per cent. or less than 10 per cent. One can well imagine investments which by their sheer size amount to trade investments. When the size of the investment and the amount of money involved goes above a certain limit it is unrealistic to regard it merely as a portfolio investment.
  The Chief Secretary will ask what is the basis on which to work. What is the limit? I concede that it must be an arbitrary test, but it is no more arbitrary than the present test, and it is quite a logical proposition that by adopting the alternative of two arbitrary tests the ultimate result is less arbitrary than if only one had been used. I hope that I carry the Chief Secretary with me in this. That is a logical position, which is wholly consistent. To add another arbitrary test may well be an improvement.
  The Amendment sets a figure of £1 million as the limit. I cannot conceive of any investment overseas which would be, strictly speaking, a portfolio investment where the investor could have put £1 million into it. Every investment made by a company overseas would be bound to be regarded by any normal test as a trade investment. One can argue that the figure should be lower. We were pressed to write in a figure of £100,000, but that would be too low, because there must be plenty of insurance companies and others with individual investments worth that or more.
  On the Financial Secretary's own test it seems that the higher figure of £1 million must qualify. It must be in the company sector, because only a company would go in for a single holding of this size, and it must be of sufficient importance for the United Kingdom investor to put it into his own company accounts as a trade investment and not in any sense as a vehicle for the reserves of the
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  company, or some form of temporary saving.
  The Amendment would exclude accretions from ploughed-back profits. It refers to the cost of acquisition. Where the cost of the acquisition of shares is more than £1 million, notwithstanding that it does not come up to the percentage test we consider it should be regarded as a trade investment and a direct investment and that underlying tax relief should be allowed.
  This would avoid two serious anomalies. The first anomaly is that of the large investment in a tiny company being regarded as worth more, for the purposes of tax relief, than a much larger investment in a very large company—for instance, £25,000 invested in a £100,000 company in Japan would qualify for relief from underlying tax, but an investment of £4 million in a £20 million company in the Common Market would not. It is difficult to justify that sort of distinction on any basis of logic, since a 20 per cent. investment in a £25 million company—I quote again what the Financial Secretary said in column 575—
  "is likely to be more productive … of helping future trade between ourselves and the countries in which the investment is taking place"
  than, say, a 25 per cent. investment in a tiny company which is only 1/200th part the size. This is an illogical position, yet at present the tiny investment qualifies for relief and the large investment does not.
  The second anomaly is that the percentage test can result in a sudden and drastic change in tax treatment if the company's stake falls below the limit. If an overseas company were involved in a takeover in its own country and issued shares in exchange for assets, it might immediately reduce a United Kingdom shareholder's stake below 10 per cent. or 25 per cent., and there would be a drastic change in his tax treatment. It could also be reduced if our authorities forbade a United Kingdom company to participate in a rights issue by an overseas company. Yet the investment would be no less direct, no less a trade investment, no less "productive of helping future trade" between the two countries.
  This additional, "size of investment," test would go far to remove the anomalies and would be consistent with the Financial Secretary's explanation two years ago.

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  When a company in which one has a 10 per cent. holding is regarded as substantial, there is no lack of logic in treating as the same case a company in which one has a large money holding, although it may be less than 10 per cent. The Amendment is consistent with what the Government have said since the Corporation Tax was introduced, and is very moderate because of the high figure which we have included. I hope that the Government will find it acceptable.
  Mr. Hastings: I support the Amendment, since I had a similar one on the Notice Paper myself. The object of this arbitrary precaution is to exclude so-called portfolio investments from relief from underlying tax, and this is ridiculous. A 25 to 30 per cent. holding in a sweet shop in Lusaka makes one entitled to the relief, whereas a 10 per cent. holding in a vast mining consortium does not. The control regulations in many countries make it difficult or even impossible for this sort of percentage of voting control to be acquired or maintained.
  Second, it takes no account of what I would call consortium investment. The capital requirement of international consortia has grown immensely over recent years. The Mount Newman iron ore contract in Western Australia, for instance, is seeking capital of £100 million, and it is no exaggeration to say that one can invest abroad 25 million or more in an international consortium. A company in this country which did that could end up with a holding well below 25 per cent., but this sort of money surely calls for managerial participation.
  My hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) convincingly drew attention to the distinction between portfolio and what he called trade investment, and what I would call managerial investment. Investment on this scale must involve managerial participation. Any of the large concerns in this country involved in this sort of business would certainly confirm that. This scale of investment is well beyond the limit of what one might call portfolio investment. Voting control as a gauge between one kind of investment and another is a totally irrelevant criterion.
  Any criterion which we put forward from this side is bound to be arbitrary
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  to a certain extent, but I am sure that the figure of £1 million—I think that I suggested dividends of £200,000 in my original Amendment—is at least more meaningful than this business of 25 per cent. of voting control.
  I earnestly hope that the right hon. Gentleman will show himself a little more reasonable and understanding on this Amendment than he was on the last.
  Mr. Diamond: I can respond to the request for reasonableness made by the hon. Member for Mid-Bedfordshire (Mr. Hastings) because all the examples which he gave are covered in practice in a way which is satisfactory to him. He talked about 25 per cent. and then asked why it should not be 10 per cent., by comparison with the position in Lusaka. The answer is that, taking Lusaka or any other place in the Commonwealth, 10 per cent. is adequate there.
  The hon. Gentleman then mentioned Western Australia, which is subject to a double taxation agreement and is not covered by the Clause, which deals only with unilateral relief. For Australia, therefore, as in other similar cases, relief is given at 10 per cent. The points which the hon. Gentleman made are being met in practice. What we are considering here is what we do in the case of unilateral relief, that is to say, where there is no agreement between the countries concerned as to what is to happen.
  I now turn to the case put by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), who has saved me a lot of time—I am sure that the Committee will not want me to go into the matter at length—by correctly detailing the essential principle, which is: is it a trading investment or is it not? A trading investment is one in which one is concerned with a trade, and, where one is concerned with a trade, one wants to participate in the trade. One wants one's rights protected, and one takes care to see that one has, normally, such a percentage as ensures that one has reasonable control of the situation.
  Such a figure is 25 per cent. In fact, that is low for securing control. To be absolutely sure of control, one would like to see a little more than 25 per cent., if one is investing with a view to participating in trading and not in a purely financial investment, even though the rest

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  may be spread among a number of small shareholders. However, to meet this point, the Bill provides for a rather low figure, namely, 25 per cent.
  The proposal now is that we depart from that and say that, because the investment is large—I admit that £1 million is a large investment—its nature must be coloured by its very size. That is the proposition. I understand it. I do not accept it. Mostly, it would be likely to be so; generally speaking, £1 million would represent a substantial proportion—25 per cent. or 10 per cent. in Commonwealth cases—but I do not accept that sheer size would determine the quality of the investment or the mind of the investor.
  It is quite possible for £1 million to be a pure portfolio investment, a financial transaction. Equally, it is quite possible to have £100 as a method of carrying on a trade jointly with others.
  Mr. Patrick Jenkin: The right hon. Gentleman says it is quite possible. Has he ever heard of one?
  Mr. Diamond: I do not know what the hon. Gentleman is now saying. If there is no case in which £1 million is not a trading investment and is not in any sense concerned with control, there is nothing to consider. The Amendment is not necessary. But, if it is the case that there are investors, individual investors such as a unit trust, with £1 million to invest in one very large company, so large that £1 million represents less than 25 per cent. of it, I still say that it is in the nature of a financial investment and not in the nature of carrying on of trade. I cannot, therefore, recommend acceptance of the Amendment.
  Amendment negatived.
  Clause ordered to stand part of the Bill.
  Clause 35 ordered to stand part of the Bill.

  Clause 36.—(CENTRAL AFRICAN PENSION FUND.)
  Question proposed, That the Clause stand part of the Bill.
  11.45 p.m.
  Mr. Peter Hordern: The point of the Clause is to safeguard the
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  position of a non-resident in receipt of a pension from the Central African Pension Fund. Last week, the Fund was shown to be in some difficulty by a Written Answer given by the Secretary of State for Commonwealth Affairs, in which he said:
  "To help meet the problem of liquidity funds have been made available by Zambia, Malawi and the Smith régime. In addition, the Crown Agents as Trustees, have made available £250,000 from funds at their disposal. In order that this may continue to be available they require a guarantee by H.M.G. as a party to the Public Officers' Agreement."
  Is all the sum of £250,000 envisaged, at any rate for this financial year?
  Secondly, is the Smith régime carrying out what were formerly the obligations of the Government of Southern Rhodesia, and what exactly is the body now making this payment? Thirdly, a question of which I have given notice, what precisely is the nature, if any, of the guarantee given by Her Majesty's Government as a party to the Public Officers' Agreement? In his Written Answer, the Secretary of State for Commonwealth Affairs said:
  "In order that this may continue to be available …."—[OFFICIAL REPORT, 7th June; Vol. 747, c. 229.]
  Is that guarantee now considered to be continuing?
  Mr. Harold Lever: It is true that the hon. Member for Wycombe (Mr. John Hall) has given me notice of these questions, but, alas, it was too brief for me to be able to give him the answers. Had he given me further notice I should have tried to give him them, although I should perhaps have been out of order, because the Clause does not relate in any way to his questions, except in a political sense. It is merely a revenue Clause, which provides that the Central African Pension Fund shall be put on the same basis as any approved domestic pension fund. Its income will accumulate tax-free and the pensions paid out of the fund will be received by overseas pensioners free of tax.
  That is all that the Clause does. It follows that guarantees relating to it, the source of its funds and matters of that kind do not arise under it. I shall gladly do my best to gratify the hon. Gentleman's curiosity if it is in my power to do so, but these questions should be directed to my right hon. Friend the

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  Secretary of State for Commonwealth Affairs, and no doubt the hon. Gentleman will arrange to do that. The Clause has a much more limited purpose than the points he raised.
  Question put and agreed to.
  Clause ordered to stand part of the Bill.
  Clause 37 ordered to stand part of the Bill.

  Clause 38.—(INTEREST ON UNPAID TAX.)
  Mrs. Margaret Thatcher: I beg to move Amendment No. 156, in page 40, line 41, to leave out subsection (2).
  The Clause increases the rate of interest on unpaid tax from 3 per cent. to 4 per cent., and the Amendment seeks to delete the provision which gives the Treasury power to vary the rate. This is not the kind of rate of interest which it would be wise to fluctuate frequently because it would make for very complicated calculations and people would not know where they were. Moreover, this would be the kind of variation that could wait for the Finance Bill if any variation was called for.
  Although the subsection takes power to increase or decrease the rate of interest it is a reasonable guess that the Chancellor would be more likely to use it to increase it rather than decrease it. Bearing that in mind and that 4 per cent. is a net rate, that is, that it is paid out of net taxed income, I see little need to give the Treasury these powers. At any rate, I think that most of us would be prepared to forgo the forlorn hope that the Chancellor might decrease interest in return for the certainty that he could not increase it without further legislative powers in another Finance Bill.
  Mr. MacDermot: I agree with the hon. Lady the Member for Finchley (Mrs. Thatcher) that this is not a rate of interest which one would expect would be subject to frequent variation. It therefore calls for some explanation why the Government propose that this should be done or why the Treasury should have power to do this by Order subject to negative Resolution procedure rather than leave it to be done in Finance Bills.
  The simple answer is that in cases where it is proper to vary the rate there
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  are obvious advantages in being able to do it at fairly short notice in the light of circumstances without waiting for a Finance Bill. I think that the experience of the last 20 years is perhaps something of an object lesson in this respect. The rate of interest on arrears of tax has remained unchanged over the whole of the 20 years since it was first introduced in 1947 although during that period Bank Rate has varied from the extremes of 2 per cent. in 1947–52 to 7 per cent. in 1957, 1961 and 1964 and between July, 1966, and July, 1967.
  Certainly, if it is sensible, as I think it is agreed it is, to be able to vary this rate so that it continues to have the deterrent effect that it is intended to have, then one would think that there ought to have been some variations in those 20 years. It is perhaps not a rash assumption that it is the fact that this can be done only by a provision in the Finance Bill that was a substantial factor contributing to this inflexibility. Twenty Chancellors all moved not to add a Clause to the Finance Bill which could be left over to another year. Perhaps one day in the distant future the hon. Lady will have an experience which will make her understand this point better.
  These are the reasons for it. There are precedents for it. There are many other rates of interest which can be varied, or a number of others, by Treasury Order. I think that the most immediately relevant one was a power in the Land Commission Act for varying the rate of interest on arrears of betterment levy, and that was done by the same procedure. There are, of course, some rates of interest in the tax field which can be varied by Treasury Order without the need for a Statutory Instrument. An example is the rate of interest on tax reserve certificates and the rate for Public Works Loans Board loans, both of which can be varied by notice published in the London Gazette. However, full Parliamentary control is retained by the fact that there is the negative Resolution procedure so that the consent of the House of Commons would still be required, which it would be with a Finance Bill.
  Mrs. Thatcher: In view of the Financial Secretary's explanation, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. MacDermot: I beg to move Amendment No. 153, in page 41, line 12, after 'purposes', to insert '(a)'.
  Sir Eric I think that it would be convenient to discuss, at the same time, the next Amendment. No. 154.
  The Chairman: Yes, if that is the wish of the Committee.
  Mr. MacDermot: These Amendments provide that interest on arears of tax is to be treated as if it were tax for the purposes of Section 35(2,g,i) of the Crown Proceedings Act and the rules of court made thereunder for England and Wales or Northern Ireland.
  At the time when the original drafting was done it was thought that no express provision of this kind was required, but it now appears on further advice that it is better to have an express provison. It is obviously sensible that if we give power for these arrears to be collected in the county court there should be the same provision precluding set-offs and counter-claims in the county court rules as there is in the High Court rules.
  Amendment agreed to.
  Further Amendment made: No. 154, in page 41, line 15, after 'proceedings)', insert:
  'and
  (b) of section 35(2)(g)(i) of the Crown Proceedings Act 1947 (rules of court to impose restrictions on set-off and counterclaim where the proceedings, or set-off or counterclaim, relate to taxes) and of any rules of court (including county court rules) for England and Wales or Northern Ireland, made before or after the passing of this Act, which impose such a restriction, and
  (c) of section 35(2)(b) of the said Act of 1947 as set out in section 50 of that Act (which imposes corresponding restrictions in Scotland)'.—[Mr. MacDermot.]
  Clause, as amended, ordered to stand part of the Bill.
  Clauses 39 and 40 ordered to stand part of the Bill.

  Clause 41.—(QUORUM OF SPECIAL COMMISSIONERS IN TAX CASES.)
  The Chairman: The Question is, That the Clause—
  Mrs. Thatcher: On a point of order. I understood that Amendment No. 142 was selected, Sir Eric. My hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who put it down, is not here, but I wonder whether I may move it, because it looks to me as though it is one which has to be made. It speaks for itself.
  Amendment proposed: No. 142, in page 44, line 3, to leave out 'subsection' and insert 'section'.—[Mrs. Thatcher.]
  The Solicitor-General (Sir Dingle Foot): I have pleasure in accepting the Amendment.
  Amendment agreed to.
  Clause, as amended, ordered to stand part of the Bill.
  Clauses 42 and 43 ordered to stand part of the Bill.
  Mr. Iain Macleod: I beg to move, That the Chairman do report Progress, and ask leave to sit again.
  The Committee has got through 18 Clauses and four Schedules today. That is a remarkable day's work, and this is the obvious point at which to break off and go to bed. I hope the Chief Secretary will accept the Motion.
  Mr. Diamond: I accept the offer made by the right hon. Gentleman, and offer thanks to him and his colleagues for the way in which our debates have been conducted today.
  Question put and agreed to.
  Committee report Progress; to sit again Tomorrow.

  SITTINGS OF THE HOUSE (MORNING SITTINGS)
  Order [14th December] to have effect with the omission on paragraph (9) of Part A of the said Order.—[Mr. McBride.]

  EDUCATION (DANIEL DORDAY)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. McBride.]
  11.58 p.m.
  Mr. A. H. Macdonald: I wish to raise this evening the case of Daniel Dorday, the son of Mr. and Mrs. Dorday, my constituents. Daniel Dorday is a young boy, just 4 years old, and he is almost completely stone deaf, and it is my contention that he is not receiving the education which is best suited to his needs.
  I have seen Daniel and met his parents, and it is very evident that they care for him deeply, and in a sense is is a great mercy that they do, because he is constantly shifting around, poking into this and that, moving around from place to place, making little noises, and it is difficult to control him or to prevent him because of this great difficulty of making contact with him on account of his disability.
  It is probably well recognised that children suffering from this disability need to start their education at an age, if at all possible, rather earlier than other children so that the initial problem of establishing contact with them may be overcome. It is my complaint that Daniel is being excluded from the special facilities that ought to be made available for children suffering from this disability.
  The education authority responsible for Daniel's education is the London Borough of Bromley. I make it clear that nothing I say is intended in any way as criticism of that borough nor of the facilities it provides. The London boroughs, including Bromley, have been in existence for only two years with full powers and, therefore, they have only the facilities they found available when they took over and it would be unreasonable to expect them to produce everything in a relatively short space of time.
  So when I say that, in Bromley, there is no special school for the deaf, I am not saying that in any way as a sort of criticism, but am stating it as an objective fact. But although there is no special school for the deaf in Bromley, the borough is making efforts to provide educational facilities for deaf children. I
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  will briefly mention them but I want to show that in no case are they exactly suited for what Daniel requires.
  First, Daniel is attending and has been attending for some time classes on two afternoons a week in Beckenham. I am grateful to and admire the lady who takes these classes. She deserves praise and will receive no criticism from me. But again I state, simply as an objective fact, that she is not, I understand, a teacher specially qualified for teaching the deaf.
  Secondly, just within the last few days, a special unit has been established in St. Paul's Cray, which Daniel attends on four mornings a week. Once again, the ladies responsible for this unit deserve admiration and not criticism, and they will get no criticism from me. But again, I state as an objective fact that they are not, I understand, teachers specially qualified for teaching the deaf.
  Thirdly, as has been mentioned in correspondence I have had with my hon. Friend the Minister of State—she wrote this on 8th April—
  "… Bromley hope to open a special class of their own in 1968 for young children with impaired hearing."
  Indeed, Bromley does. But I am advised that this class will be for partially deaf children and therefore will be of no particular assistance to Daniel because he is almost completely stone deaf.
  Fourthly, the Bromley authorities have been in touch with the Porterhouse School for Deaf Children, in Surrey. The point I make here is that the school is under the control of another authority. That point will, I hope, become relevant in a moment. Unfortunately, there is no place at the school for him until some time next year.
  Finally, Bromley has been in touch with a school for deaf children in Margate. I hear very good reports of it and no doubt it is admirable. But it is a boarding school. Even for a normal child aged 4 it would be a rather harsh and drastic step to send him away to a boarding school and perhaps this should be done only if absolutely necessary.
  In this case, where we have a little boy whose contact even with his own family is necessarily limited because of his disability, to send him to a boarding school among total strangers with whom he will

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  have no contact is a drastic step and one which should be taken only if everything else fails. These, then, are the facilities that Bromley has tried to make available and in no case are they exactly suited to what Daniel requires.
  So it is necessary to look somewhere else, and not very far. In the adjoining Borough of Greenwich there is a special school for deaf children, the Beverley school, at a distance not impossibly far away, but this school is already full.
  I am not so foolish to suppose that simply because I make a fuss a place will magically be found for Daniel at this school. All I am asking is that he should be considered on equal terms with other deaf children for a place there. If, on that basis, no place for him could be found, then, with regret, I would have to advise his parents that I could do nothing further. However, my contention is that he has not been considered equally.
  I rest my case on the provisions of the London Government Act, 1963, which provides, as I read it, that borough boundaries shall be no necessary bar for children to receive the education that they require.
  I submit that Daniel should be offered an even chance for admission to the Beverley school, Greenwich, with other deaf children in the south-east London area—a chance no greater, but certainly no less. Unfortunately, it appears that he is being excluded from consideration for admission to this school upon the sole ground that his parents are resident in an outer London area. Beverley school is filled with children from the inner London area and a place for Daniel is not and would not be available unless and until all the children from the inner London area had been satisfied with places.
  I submit that this is a contravention of Section 31(8) of the London Government Act, which states that
  "… it shall not be a ground for refusing a pupil admission to … any such school or institution maintained or assisted by a local education authority in Greater London that the pupil resides in the area of some other local education authority if that area is within … Greater London."
  I am advised that the Beverley school used to admit children from the outer London area. I will quote from a letter
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  dated 6th March, 1967, which I have received from the Chief Education Officer of the London Borough of Bromley:
  "Until about the middle of 1966, we were reasonably well served by the Inner London Education Authority who allowed us to make use of their day special schools. We were then informed, however, that because of the lack of places, children from outside the Inner London area could no longer be considered."
  Further to that, I have had, as I have mentioned, correspondence with my right hon. Friend and in a letter dated 28th April, 1967, she referred to this exclusion:
  "… the steps they"—
  the Inner London Education Authority—
  "took were prompted not by any wish to restrict the catchment areas of the schools, but by the fact that applications were exceeding what the schools and their staffs could cope with. I do not think it would have been a solution to admit, to day schools, children from more distant homes if this meant excludin children who lived nearer."
  I cannot accept the contention in that last sentence. Is it the case that Daniel is being excluded from this school and that children from inner London are being admitted to it whose disability is less severe? If so, this is unjust. Or is it that Daniel is failing to get a place at this school and places are being taken by children from inner London who are younger than him? Once again, if that is so, it is unjust.
  It is just a coincidence, but one thing which makes Daniel's exclusion very grievous and galling and hard for his parents to bear is that there are children from outer London areas being admitted to Beverley school, and it so happens that one of these children from further out travels daily to and from Beverley school in transport that passes the end of the road in which my constituents live. Therefore, Daniel's parents daily see some other child from the outer London area enjoying facilities from which their son is excluded, and that is very distressing for them.
  My constituents have been told in writing that there is a school for the deaf at Tottenham and that if they moved to north London, Daniel would be admitted to a place there. They have been told verbally that if they were to move to inner London, Daniel would qualify for a place at Beverley school. It therefore appears that his exclusion from Beverley

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  school is based solely on the fact that he lives in an outer London borough. The head of Beverley school has seen Daniel and considers him to be suitable for admission to the school.
  I think that I have said sufficient to show that if Daniel lived in inner London, he would have been admitted to Beverley school and that his exclusion is based solely on the ground that he lives in outer London. I know that my right hon. Friend can hardly intervene in matters of detail and I do not expect her to wave a magic wand and create a place for Daniel at this school, but I ask her to intervene to ensure that the law is being observed. All I ask is that Daniel should have an equal chance with other children in the south-east London area for admission to the school most suited to his needs.
  During the last few days, the House has been considering matters of great importance—the tragic affair in the Middle East and today the Finance Bill, setting out the taxation structure for the coming year. I hope that it is with no sense of anti-climax that we now turn to consider the affair of one little boy, because his education is to him as important as the other matters which we have been considering. I hope that my right hon. Friend will give some assurance that the education suited to his needs can be provided for him.
  12.12 a.m.
  The Minister of State, Department of Education and Science (Mrs. Shirley Williams): I should like, first, to congratulate my hon. Friend the Member for Chislehurst (Mr. Macdonald) on raising this case and on the great energy with which he has pursued it over a number of months, dating back to nearly a year ago when he first took it up with my predecessor, the late Mr. Edward Redhead. He has taken great interest in the family and he has clearly expressed that interest tonight.
  Young Daniel's position has shown some improvement in the last few days, as my hon. Friend has pointed out, since originally attending part-time nursery school at Beckenham with occasional visits from a peripatetic teacher of the deaf in Bromley who herself is considerably burdened with a heavy case load.
  Since 5th June, as a purely temporary arrangement, this young boy has joined
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  a group of pre-school partially hearing children at Midfield Primary school under a teacher who is qualified, though admittedly not qualified as a teacher of the deaf, but who has a child who is itself deaf and who has shown a very sympathetic approach to the problems of deaf children for a considerable length of time. In addition to this, and the fact that the boy will still be attending his nursery school on Monday and Friday afternoons, he will also be given individual training on Wednesday afternoons by the teacher who will be taking him with the pre-school group of partially hearing children.
  Further, an application is being made to the Royal School for the Deaf at Margate. As my hon. Friend said, this was a boarding school, but for a young child living in Bromley it would be possible to make weekly boarding arrangements, and I understand that that would be acceptable to the parents. If the boy were accepted at the school, he would be able to attend a school with a very distinguished record of dealing with deaf children.
  My hon. Friend forcefully made a point about the position of out-county children attending I.L.E.A. schools. It is not the case that the I.L.E.A., since the London Government Act, is refusing to take children from outside the I.L.E.A. area. Of the three schools for deaf children, at the Beverley School, one-quarter of the children now there are from outside the I.L.E.A. area; at the Old Kent Road School For the Deaf, one-fifth of the children now there are from outside the London area; at the special unit at the Meridian Primary School, just under one in four of the children are from outside the London area, and the situation is that the I.L.E.A. is still making available a very considerable number of places in its special schools for deaf children from outside London.
  It is not so much the London Government Act, as simply the fact that London is now coping with an unexpected rise in the number of deaf children, which arises from the Asian 'flu epidemic in 1962–63 and from a rise in the number of cases of children whose mothers suffered from rubella, German measles in that year, which has led to an unexpected, and sharp rise in the number of deaf and partially deaf children. In consequence

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  of this, London has had to indicate that it cannot offer as many out-county places as it has been able to offer in the years up to 1966.
  I would like to make it clear that it is still offering some out-county places, and that these out-county places are offered to children in the greatest need. In the particular case of Beverley school, with which the parents of Daniel Dorday are particularly concerned, we understand that already it has been necessary to reduce the education of ten pre-school children from full-time to part-time in consequence of the pressure on places. This is not purely limited to out-county children.
  It is also the case that this school is finding itself up against a continual increase in demand from London and out-county children alike in the present year. In addition, it must be borne in mind that the Beverley school, and another of the schools for deaf children in London, are about to be replaced by a new school, and therefore they must not extend their capacity beyond what can be dealt with by the new school.
  To do so would be to take on children whose education would have, at a very early stage, to be broken, with very sharp effects on the children. I would add that Bromley is planning to build a three-class prefabricated unit for partially deaf children at Orpington, which will serve Bromley. It is making an application, which we have promised to look at sympathetically. In addition, it is trying to open a unit for partially deaf children at the Ramsden primary infants' school in Orpington. Although it has advertised consistently for a teacher of the partially deaf, it has so far been unable to find anyone, and this I will deal with in a moment.
  The Royal School for Deaf Children at Margate, to which I have referred, is to be rebuilt and expanded in the 1968–69 building programme. All this may not be of immediate help to Daniel Dorday, though it will help him, perhaps very soon. It is worth underlining the two major issues which affect the whole of the provisions for deaf children in South-East England.
  It is not that there is a shortage, specifically of accommodation, although more
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  should be done in respect of building, and is being done. The real difficulty lies in the number of teachers qualified to teach deaf children. There has been a very sharp rise, from 589 teachers in 1959 to 773 last year, but the bulk of this increase has lain with teachers in special units, attached to ordinary schools, and in the number of peripatetic teachers of deaf children.
  There has not been a corresponding increase in the number of teachers attached to special schools, and in consequence of this the schools have run into difficulties in attracting as many trained teachers of the deaf as they would wish to have. We are now endeavouring to increase fairly rapidly the facilities for the training of teachers of deaf children, but I must make it clear that it is these facilities for training, which themselves were negotiated and expanded before it was known that there would be this unexpected bulge arising from the 1962 epidemics, which are the bottleneck in the provision of trained teachers of the deaf.
  I want to say a word in respect of what my hon. Friend said about units for partially hearing children being of no use for his constituents' child. The phrase "partially hearing children" does not mean the degree of physical disability from which the child may suffer. It is a term used largely to define the capacity of a child to be able to use natural speech and develop language with the help of amplification and his own natural hearing ability. So far as we know, it is not the case that Daniel Dorday would be in the group of children who are not capable of such language development or development of natural speech. We are not referring here to a physical state. We are referring to a potential for learning natural speech or language development.
  In the light of this, I assure my hon. Friend that as far as I have been able to ascertain, there is no discrimination against his constituent's son simply on the ground that he is a child from outside London. On the contrary, London is still taking many children from outside the county. Alhough one or two children younger than Daniel Dorday have been taken into the school, I would refer my hon. Friend to an explanation

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  that was given him on 9th August by my predecessor:
  "For handicapped pupils, especially those under compulsory school age, admission to a special school where necessary is not simply a matter of dealing with children in order of age. It involves many complex and interacting medical, educational and social factors, including in the case of young deaf children such considerations as the ability of the parents to help the child at home in ways which stimulate the development of his speech and language. For example, a two year old who is a member of a large family which makes heavy demands on the time and attention of the parents may be in greater need of special schooling than a three year old who is a member of a small family."
  We would need to look at each individual case to see whether the combination of the social need and the physical handicap was such as to indicate that in certain cases a young child might require education at one of the schools to which my hon. Friend was referring and would demand in those cases a higher priority than a child whose parents are in a strong position to help him, as the case of this young boy.
  I assure my hon. Friend that we are making every effort to get this boy into a school which will give him the fullest possible educational opportunities concommitant with his parents' desire that he shall not be placed in a termly board-
  274
  ing school, which we appreciate and respect. But I believe that the temporary arrangements now made are considerably better than the arrangements which were made before this time. I very much hope that we shall shortly be able to say that this young boy's needs are being fully met.
  I refer, lastly, to the position of the school at Tottenham. The reasons why the boy could not be placed at Tottenham unless he moved to North London were the strain on a 4-year old child making a daily journey from Bromley to Tottenham, which we, and I believe the authority, regarded as being beyond what could be asked from such a young child. The reference to his parents being able to get a place if they moved was purely a reference to the distance which a child of this age could be expected to travel daily.
  I hope that my hon. Friend will accept the assurance that every effort is being made to find suitable educational opportunities for this child. I am satisfied that the provisions of the London Government Act, 1963, are not being overlooked in the case of his constituents' son.
  Question put and agreed to.
  Adjourned accordingly at twenty-four minutes past Twelve o'clock.

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

ROYAL ASSENT
THE LORD CHANCELLOR (LORD GARDINER): My Lords, I have to notify the House that, in accordance with the Royal Assent Act 1967, the Queen has signified her Royal Assent to the following Act:
Industrial Injuries and Diseases (Old Cases) Act 1967.

BRASILIA: BRITISH EMBASSY BUILDING
2.36 p.m.
LORD HOLFORD: 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 name an early starting date for the construction of the British Embassy building in Brasilia, having regard to the facts that a design of outstanding technical and architectural interest has been for some time approved, that the Brazilian Foreign Office has recently moved to the new capital, and that the building costs there are rising with every year of delay.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF PUBLIC BUILDING AND WORKS (LORD WINTERBOTTOM): My Lords, it is still too early to name a starting date for this project which, for overriding financial reasons, was deferred last July. I assure your Lordships that the architectural quality and interest of the design to which the noble Lord refers are not in dispute. Provision is being made for temporary office accommodation to be available for Her Majesty's Ambassador's
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use, to match the move of the Brasilian Ministry of Foreign Affairs to Brasilia which, I am informed, has not in fact yet taken place.
LORD HOLFORD: My Lords, while thanking the noble Lord for his informative answer, may I ask him whether he is aware that the Federal capital in Brazil has become a theatre, as it were, for progressive architecture from all over the world? I have correspondents among the Brazilians who have written to say how much they are awaiting our contribution. It seems clear that our contribution is of a very interesting character, and I should be interested if some indication could be given when the present discussions with the architects, the Smithsons, are concluded and the work can actually proceed.
LORD WINTERBOTTOM: My Lords, I am glad that the noble Lord, with his special knowledge, confirms that the design proposed is a good one. However, the Brazilian Ministry of Foreign Affairs have not yet moved to Brasilia. The move is expected in the near future, but they have not yet moved, and in view of the present financial difficulties the decision to go ahead with this Embassy has not yet been taken.
LORD CARRINGTON: My Lords, may I ask the noble Lord whether, when the Brazilian Foreign Ministry move, Her Majesty's Ambassador will be based in Brasilia, and, if so, where he will live?
LORD WINTERBOTTOM: My Lords, I cannot answer that question specifically. All I do know is that temporary office accommodation is being made available for his use when the Brazilian Ministry move.
LORD CHAMPION: My Lords, can the noble Lord tell us the cost of the building in question?
LORD WINTERBOTTOM: My Lords, I am afraid that I cannot give an answer to that question.

NIGERIA CRISIS AND COMMON WEALTH SECRETARIAT
2.38 p.m.
LORD BROCKWAY: 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 propose to the Commonwealth Secretariat that it should approach the African Member States with a view to the appointment by them of a Commission of Good Offices to assist in bringing about a settlement of the constitutional confrontation in Nigeria.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH AFFAIRS (LORD BESWICK): No, my Lords. While we are deeply concerned to see a peaceful settlement of the present difficulties in Nigeria, it is our view that any request for a Commonwealth Secretariat initiative should come from the Nigerians themselves.
LORD BROCKWAY: My Lords, while thanking the noble Lord for that Answer, is it not the case that the Commonwealth Secretariat has already made an approach on these matters? Was not the answer in the case of the Eastern Government that they rejected mediation by the Commonwealth Secretariat because in their view the problem was essentially African, and the answer on the part of the Federal Government that they rejected mediation by Heads of State as implying that Eastern Nigeria was a sovereign State? Would not the proposal in my Question meet both these objections by placing the responsibility on the African States of the Commonwealth for the appointment of a Commission, which could well consist not of heads of government, but of senior civil servants?
LORD BESWICK: My Lords, I am not aware of any proposal having been made by the Commonwealth Secretariat. Of course, I am not in a position to speak on their behalf in any sense. However, I am certain that they would be very happy to give of their good offices, but in view of the circumstances the invitation must come from Nigeria.
LORD OGMORE: My Lords, is it not a fact that fighting has broken out between the Federal Government and the Eastern Government, and that there was a raid yesterday or early this morning on Eastern territory from the North by Northern troops? In these circumstances, is it not essential, in view of
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Commonwealth solidarity, that some suggestion such as the noble Lord, Lord Brockway, has made should be put into effect? We really cannot fiddle all the time while Rome is burning.
LORD BESWICK: My Lords, I do not think that the reluctance of Her Majesty's Government to intervene in the affairs of a fellow Commonwealth country is necessarily to be described as "fiddling". As for the situation there at the present time, my understanding is that the situation is tense and although there was a report in this morning's newspapers of an incident, I understand that it was an isolated one and that in general there is no violence.
LORD CARRINGTON: My Lords, may I refer to something which the noble Lord said in answer to the noble Lord, Lord Brockway? Is he seriously suggesting that the Commonwealth Secretariat could have made proposals for mediation without the knowledge of Her Majesty's Government or other members of the Commonwealth?
LORD BESWICK: My Lords, I do not think that the noble Lord can take what I said as a serious suggestion of that kind. What I in fact said was that I have no information about this but I am not in a position to prove a negative.
LORD CARRINGTON: My Lords, with great respect, I think that this is important. Surely the Government know whether the Commonwealth Secretariat have or have not proposed mediation?
LORD BESWICK: My Lords, what I know is that a senior member of the Secretariat has visited Nigeria. Precisely what conversations may have taken place I do not know. To the best of my knowledge and belief there has been no initiative of the kind described by my noble friend from the Secretariat as such.
LORD CARRINGTON: My Lords, I apologise to the noble Lord, but will he give an assurance that the Commonwealth Secretariat are not in a position to offer mediation without the authority of the Governments of the Commonwealth.
LORD BESWICK: My Lords, the noble Lord is moving into a field of affairs which is as yet not completely charted. Naturally it would be wrong for any major initiative to take place without the

645
consent of all the Commonwealth countries. The Secretariat—or I should say the Commonwealth members—do not meet together regularly. They have no continuous corporate existence at all. But it is quite possible that a senior member of the Secretariat might make helpful suggestions. Frankly, I do not believe that what my noble friend has said is a fact, but I should not like categorically to say that it is not true unless I had had an opportunity of checking it.
LORD BROCKWAY: My Lords, may I ask my noble friend whether it is not a fact that the deputy secretary of the Commonwealth Secretariat has been in Nigeria, has seen representatives both of the Federal Government and the Eastern Government, and has received replies from them in the terms of my supplementary question?
LORD BESWICK: My Lords, it is perfectly true that the deputy, secretary went to Nigeria, a fact to which I referred in a reply which I gave to the noble Lord some weeks ago. What I think is less certain is that there has been any formal exchange of proposals or refusals. Certainly there has been none to my knowledge. In any case, I would emphasise that while we want to have a peaceful settlement, I do not think that such a settlement can he achieved if it appears that the United Kingdom are trying to arrange what the Commonwealth Secretariat do or do not do. We have no special relationship with the Secretariat.
LORD ROWLEY: My Lords, would my noble friend make it quite clear that there can be no objection to a senior official of the Secretariat making an exploratory visit to any scene of potential trouble, such as exists in Nigeria, and reporting?
LORD BESWICK: Certainly, my Lords, there is absolutely no objection to that. Indeed, the Secretary-General has returned only this weekend from Africa. If he can have helpful conversations, that is fine. If the Commonwealth Secretariat are asked to take some sort of initiative in this present Nigerian situation, so far as we are concerned, that is fine, too. All I am saying—and I am surprised that the noble Lord opposite tries to get me to go further—is that we, the United Kingdom, do not think it will be helpful
646
if we appear to be pressing the Secretariat to take any particular line of action.
LORD CARRINGTON: My Lords, I am not pressing the noble Lord to take any action whatever. But I hope he is aware that we on this side of the House are somewhat surprised at some of the answers that he has given. Will he not confirm that the Commonwealth Secretariat are the servants of the Commonwealth? He has repeated twice that he does not know what the Commonwealth Secretariat are doing. That is an astonishing admission from Her Majesty's Government.
LORD BESWICK: My Lords, if I may say so to the noble Lord, it is rather astonishing that he is trying to twist my words in the way that he is.
LORD CARRINGTON: I am not.
LORD BESWICK: Certainly the noble Lord is. To say that I do not know what they are doing is quite unwarranted. All I am saying is that I am not aware of the particular action that my noble friend has said has been taken.
LORD BROCKWAY: My Lords, let us put aside this conflict, which seems to me to be not of the greatest importance compared with the terrible importance of saving the situation in Nigeria, where there has already been a massacre greater than that of the Israeli losses in the recent war, and where there is great danger of civil war throughout Nigeria. Nigeria is one of the proud members of our Commonwealth. Surely the Government will take every possible step to try to prevent this tragedy from occurring.
LORD BESWICK: My Lords, I am grateful to my noble friend for putting in proportion his earlier remarks and my response to them. So far as the latter part of his supplementary is concerned, of course I accept the seriousness of the situation, in so far as we had a fine and hopeful country which is now facing these difficult problems. But he must not construe anything that I have said—nor must the noble Lord opposite—as being in any way a matter of complacency. It is not that at all. It is simply our belief that an initiative from this country at this time would not be the most fruitful line of advance.
LORD BYERS: My Lords, surely any member of the Commonwealth is at liberty to make a suggestion to the Secretariat as to what would he considered wise action. What is there which prevents the British Government as a member, not a greater or lesser member than any other, from making this suggestion of a Commission of Good Offices?
LORD BESWICK: My Lords, this is true I suppose it is possible for some people to strike public postures and achieve nothing, while it is possible for others to go about their affairs more quietly and get greater results.
VISCOUNT DILHORNE: My Lords, did not the noble Lord say that he did not know whether the Commonwealth Secretariat had put forward a suggestion of mediation? That is what I understood he did say, quite positively, in an earlier answer. If that be his answer, is it not quite extraordinary that a matter of this sort should have taken place, if it did take place, without the knowledge of Her Majesty's Government?
LORD BESWICK: My Lords, the noble and learned Viscount, who I know is always fair and precise, will recall that something more precise was suggested here. There has been no offer of mediation from the Secretariat as a corporate body, but whether a particular suggestion was made by a particular member of the Secretariat, I do not know. I shall check on that.
LORD OGMORE: My Lords, would the noble Lord agree that his answers seem to show complete complacency on the part of the Government in this serious situation? Is the noble Lord aware that the population of Nigeria makes it the largest black African country in Africa—it is the key to Africa—and that anything we can do, as we are old friends of Nigeria, will be most important?
LORD BESWICK: My Lords, I am sorry that the noble Lord construes what I have said as complacent. This is not warranted. If we can do anything usefully, certainly we shall do it; but the invitation for any special initiative from the Secretariat must come from the Nigerian Government itself.
LORD BROCKWAY: My Lords, may I—
THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON): My Lords, I think it is right that I should intervene.
LORD BROCKWAY: I am not going to put a question.
LORD SHACKLETON: We have spent a long time on this Question. I am sure that all your Lordships are fully aware of its importance, but since there is some doubt as to the construction put on my noble friend's answers I would suggest that it might repay noble Lords on both sides of the House to study what he has said, and if they are then not satisfied and wish to return to it, to do so on another day.
LORD BROCKWAY: My Lords, I was not going to put another supplementary question; I was going to give notice that, in view of the terribly urgent importance of this issue, I will at the first moment put down an Unstarred Question so that we may have a debate on it.

THE HANRATTY CASE AND MR. ALPHON
2.50 p.m.
LORD RUSSELL OF LIVERPOOL: 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 are now in a position to make an announcement about the holding of a public independent commission of inquiry into the A.6 murder, having regard to the further detailed confession made by Peter Louis Alphon and other important new evidence about the Rhyl alibi, particulars of which have been given to the Home Secretary.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, HOME OFFICE (LORD STONHAM): My Lords, my right honourable friend will make a statement as soon as he has completed the full study which he is making of these matters and of other representations, some of them very recent, that have been made to him.
LORD RUSSELL OF LIVERPOOL: My Lords, while thanking the noble Lord

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for his Answer, may I ask him this question? Having regard to the fact that it is now over ten months since I first raised this matter in your Lordships' House, can he give your Lordships any clearer indication of how long it will be before a decision is made?
LORD STONHAM: My Lords, my right honourable friend is not yet able to forecast when he will be able to announce his decision. This must depend on the provision of certain additional information and reports for which he has called, including, as I said, representations made to him, within the knowledge of the noble Lord, last week. I think the noble Lord will agree with me that when my right honourable friend is able to announce a decision it must be after careful consideration of all the facts which it is possible to obtain and of the representations which have been made to him.
VISCOUNT DILHORNE: My Lords, the Question asks about a public independent commission. Will the noble Lord confirm that, should there be any credible evidence to show that the jury were wrong in saying that guilt was established beyond reasonable doubt, and the Court of Criminal Appeal were wrong, the Home Secretary has power to refer the matter again to the Court of Criminal Appeal?
LORD STONHAM: My Lords, most certainly the Home Secretary has that power. But the noble and learned Viscount will not expect me to try now to anticipate the terms of the statement which my right honourable friend will make.
LORD BROCKWAY: My Lords, while I greatly appreciate the Answer given, may I ask my noble friend whether he is aware that Miss Joan Lestor, Member of Parliament for Eton and Slough, and I, as one who first raised this issue, were both received by the Home Secretary last week and that we put further information to him? Can he give an assurance that there will be an investigation of that further information as well as of the evidence regarding the alibi at Rhyl?
LORD STONHAM: My Lords, I am, of course, aware that my noble friend and Miss Joan Lestor saw my right honourable friend on Monday last, and I am aware of the nature of the information
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communicated to him. My original Answer covers the noble Lord's inquiry; namely, that these representations, and others, and indeed the results of investigations still to be made, will be taken into consideration by my right honourable friend.

ANGUILLA
2.53 p.m.
LORD ROWLEY: My Lords, to meet the convenience of Ministers, I am deferring until Wednesday of this week my Question on the situation in the Caribbean island of Anguilla.

BUSINESS
LORD SHEPHERD: My Lords, with permission, I will make a short Business Statement. This afternoon we continue, for the fourth day, the Committee stage of the Criminal Justice Bill, and, as the House will know, we have an agreement that we should attempt to get to Amendment No. 86 before we adjourn. This is obviously going to be a long Sitting, and therefore dinners will be made available, and I shall propose at a convenient moment, about 7.30 p.m., that we should adjourn the Committee stage for one hour.
EPPING FOREST (WATERWORKS CORNER) BILL [H.L.]
Read 2a, and committed to a Select Committee.
GUILDFORD CORPORATION BILL
Read 2a, and committed to the Committee on Unopposed Bills.

PUBLIC RECORDS BILL [H.L.]
Order of the Day for the Third Reading read.
THE LORD CHANCELLOR: My Lords, I beg to move that this Bill be now read a third time. Your Lordships were good enough to give this Bill a welcome on Second Reading. No Amendment was set down for the Committee stage of the Bill. Accordingly,

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I do not think I need to say anything further in moving this Third Reading. I beg to move.
Moved, That the Bill be now read 3a.—(The Lord Chancellor.)
On Question, Bill read 3a, and passed, and sent to the Commons.

CRIMINAL JUSTICE BILL
2.56 p.m.
Order of the Day for the House to be again in Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Stonham.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD STRANG in the Chair.]
Clause 30 [Suspended sentences of imprisonment]:
Suspended sentences of imprisonment
30.—(1) A court which passes a sentence of imprisonment for a term of not more than two years for an offence may, subject to the next following subsection, order that the sentence shall not take effect unless, during a period specified in the order, being not less than one year or more than three years from the date of the order, the offender commits in Great Britain another offence punishable with imprisonment and thereafter a court having power to do so orders under the next following section that the original sentence shall take effect; and in this Part of this Act "suspended sentence" means a sentence to which an order under this section relates and "subsequent offence" means an offence so punishable committed during the said period.
(3) A court which passes a sentence of imprisonment for a term of not more than six months for an offence shall make an order under subsection (1) of this section unless—

(a) the act or any of the acts constituting that offence consisted of an assault on or threat of violence to another person,

(e) the offender had at any time before the commission of the offence been sentenced to, or served any part of a sentence of, imprisonment or borstal training previously passed for another offence or been subject to a suspended sentence.

THE DEPUTY CHAIRMAN OF COMMITTEES: I ought to say that if the first Amendment, No. 39, were to be agreed to, it would not be possible to call Amendments Nos. 40 and 41.
LORD BROOKE OF CUMNOR LORD BROOKE OF CUMNOR moved to leave out subsections (3) to (7). The noble Lord said: I beg to move Amendment No. 39, which on the face of it is an Amendment to take out something like a whole page of the Bill. But I should like to point out that the operative part of the Amendment is really to take out subsection (3) of Clause 30. But since subsections (4), (5), (6) and (7) are all consequential on subsection (3), the Amendment has to propose the deletion of all of them.
The proposal in subsection (3) of Clause 30 is a classic example of the Government doing the right thing in the wrong way. I think I ought to declare my personal views on the whole general subject of Clause 30. I am very strongly in favour of the suspended sentence. I think it is a good thing to introduce that new variety of sentence into the ways in which courts can deal with offenders. I have no criticism of that at all. I am also even more strongly in favour of avoiding unnecessarily sending anybody to prison with a short sentence. That is not only because I have been Home Secretary, and know how seriously overcrowded the prisons are—although that in itself is a reason for seeking to avoid unnecessary prison sentences of all kinds—but because I believe that it is extremely important that people should not lose their fear of prison by becoming acclimatised to prison.
If a person has never been in prison the idea of prison certainly is somewhat intimidating and therefore has a deterrent effect. To almost everybody, what is unknown and believed to be unpleasant creates an intimidating influence. If a man or woman is sent to prison for the first time on quite a short sentence, the experience will cease to be unknown. It may or not be worse than they had expected, but they will have been able to measure it up; they will know what a prison sentence is, and the quality of its being unknown will disappear. This second reason is, to my mind, much the stronger reason for seeking to keep people of this kind out of prison—and I am not speaking here of first offenders, but of those who have never been sent to prison before. It is a wholly worthy object.
Unfortunately, the Government have proceeded in the wrong way to achieve

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this end. The right way, surely, is to bring these points forcefully to the attention of the courts, and especially the magistrates' courts. In the great majority of cases the first prison sentence, being a short sentence, is likely to have been imposed by magistrates. Unfortunately, the Government have chosen the wrong way, and they propose to forbid the courts to pass a sentence of up to six months' imprisonment which is to take immediate effect. They propose that by subsection (3) of Clause 30 which I am seeking to omit, and they propose it except for certain classes of people detailed in paragraphs (a), (b), (c), (d) and (e) of subsection (3). The court, which has heard the case and which has had an opportunity of forming its own opinion of the offender and of the crime and of all the circumstances, is to be allowed no discretion.
I understand from the debates in another place that the effect of subsection (3) as it stands will apply to some 5,900 persons a year, first offenders, who at present are being sent to prison and do not come into any of these categories (a), (b), (c), (d) and (e). So it is a fairly substantial slice of the total prison population. Some 44,000 are sent to prison each year, and this will deprive the courts of any discretion in the case of nearly 6,000 a year. Yet it may be perfectly plain to those who have heard the case that some of those accused ought to go to prison for six months, and to go to prison straight away and not have their sentences suspended and in that sense be given another chance.
The Government, who obviously will not have heard the case, rule that out in advance. Is it any wonder that the Magistrates' Association and almost all the bodies that can speak with authority on these matters are against this restriction of magistrates' discretion by subsection (3). They realise well from experience that that there are some who ought to go to prison forthwith. They realise that the public will now, if this clause goes through unamended, be exposed to the sort of offender who knows that he cannot be sent to prison if he commits the crime he is tempted to commit. His criminal friends can say to him, and say to him with truth, "It's all right. You go ahead, you come in with us; you do what we want you to do. You can't go to prison
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because the Government have so declared and Parliament has ordained it." That is one disadvantage.
Another is that magistrates will be forced against their will to commit people to quarter sessions so that a longer sentence can be passed if they are absolutely convinced that the person in question ought to be sent to prison immediately and yet are prevented from doing that by this clause. I understand, again from the debates in another place, that nearly three-quarters of the people who will be affected by subsection (3) in the sense that they cannot be sent to prison forthwith under it, have on current records committed offences which would render them liable to longer sentences than six months. It, therefore, seems to me perfectly plain that what is likely to happen is that the magistrates' courts resentful of not being allowed by Parliament to pass a sentence of immediate imprisonment which they think is right, will tend to commit these accused to quarter sessions in the hope that quarter sessions will pass a longer sentence on them. I cannot see that any purpose of justice whatever is served by that. It will merely clutter up the business of quarter sessions.
This is a wholly wrong way to proceed—this method of robbing the magistrates of their discretion. Let me give a parallel. It is, I believe, generally accepted at the present time that there are large numbers of university students who would be serving the public national interest better if they were to have a shot at degrees in engineering or some other branch of science instead of reading for degrees in English subjects. But the right way of coping with a situation like that, if it exists, is not to make it practically impossible for any young man or woman to read English but to proceed in a different way, and above all to make it better known what is the national interest. Here the right course is to make it better known to the courts that short prison sentences on first offenders are a mistake. The right course for us in this House, I submit, is to follow either my Amendment, which would exclude subsection (3) and the consequential subsections entirely, or to adopt some such method as embodied in the subsequent Amendment by the noble Lord, Lord Chorley, which maybe we can debate at

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the same time. I have no desire whatever to wreck this plan for suspended sentences. My concern is that suspended sentences shall be passed in the right circumstances, and where circumstances demand a sentence of imprisonment that is not suspended the court should not be frustrated from imposing it by anything in the law.
The Bill, I submit, cannot be left as it is. Maybe after hearing the discussion to-day the Government will submit their own Amendments on Report. To my mind it is the greatest pity that they have marred a valuable innovation by over-enthusiasm. Once again I say what a pity it is that the Government brought to an end the Royal Commission on the Penal System, which had already sat for two years, because had that Commission been able to complete its work we should have had a well thought out and thoroughly objective plan for a suspended sentence proceeding from a body which had given it long and profound thought. As it is, we have a scheme which is marred by this blot upon it, and I ask your Lordships to agree that we should not deprive magistrates wholly, as this clause would, of their power to send somebody to prison forthwith for six months if the magistrates themselves are convinced, having heard the case, that that is the right course in the public interest. I beg to move.
Amendment moved—
Page 21, line 35, leave out from beginning to end of line 31 on page 22.—(Lord Brooke of Cumnor.)
3.10 p.m.
LORD CHORLEY: I accept the noble Lord's suggestion that I should speak at this stage. It will certainly save my speaking twice, because in any case I wanted to speak on his Amendment. A good deal of what I have to say on the noble Lord's Amendment is pertinent to the one which is down in my name. I should like to say how much I agree with him when he indicates his approval of the proposal to introduce this new type of sentence, the suspended sentence. It is part of a trend which has been going on since the end of the war, and quite rapidly over these last years, towards a wider and more sophisticated range of remedies.
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At the beginning of this century the remedies open to courts of law in relation to the punishment of offenders were most restricted. The great Act of 1948, which I had some small part in taking through your Lordships' House, introduced some new and valuable remedies, and this process is carried substantially further in the present Bill. I should at this point like to pay a tribute to the great work which has been done by a fellow magistrate, Mr. Brian Layton, in propagating this proposal over the last few years. He has not succeeded in converting all his fellow magistrates to his ideas on the subject, but certainly he has given it an important airing, and many of us have been persuaded by his views. I think, too, that they have had some influence in the Home Office itself.
On the other hand, I should like to say that I was already passing suspended sentences in my own court of quarter sessions before I heard of Mr. Brian Layton's proposals. This was not by any means unique, because suspended sentences were being passed by courts of quarter sessions, and I believe also by recorders, up and down England, although perhaps not in great numbers, until the Court of Criminal Appeal ruled that we had no power to pass them. I thought at the time that that was a rather unfortunate ruling. The great pride of our English Common Law—and, after all, sentencing is, or was, part of the Common Law—is that it is an elastic system and should be able to adapt itself to the requirements of a modern age.
As I have already indicated, and as the noble Lord opposite agrees, the suspended sentence is a most useful type of punishment. I think it was a great pity that the Court of Criminal Appeal ruled that we had no power to use it. But, of course, that ruling having been made, we had to stop the practice. I cannot say that I did it a great deal. I cannot say that I feel that the suspended sentence is a solution to all our problems—far from it. But, as I have already indicated, it is a useful extension or development. My court found it particularly helpful in the case of middle-aged or rather elderly men, whom one did not want to send to prison, straight off at any rate, and in regard to whom the usual remedy that one would use in the case of a younger

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man, putting him on probation, was not altogether appropriate. It is difficult to put a man of, say, fifty or more years, or even one in his forties, under a young probation officer. Many of the probation officers now coming forward are quite young men, and in many cases it is not satisfactory to make a probation order in the case of a middle-aged man. But the suspended sentence was really quite useful, and in the few cases in which I had experience of it I think it worked every time.
As my noble and learned friend on the Woolsack pointed out in his Second Reading speech, for many people it is undoubtedly more effective than the conditional sentence, which probation officers and others are saying is just as good. I cannot accept that view. I think that the suspended sentence has a number of advantages over the conditional sentence. It cannot be said that this proposal has received general favour among magistrates, or indeed among probation officers and others who are greatly concerned with the administration of the criminal law, but I think it has received a sufficiently substantial amount of favour to make it well worth the Government going on with with the proposal and trying it out.
The lack of favour has been particularly evident in relation to subsection (3) with which these Amendments are concerned, which deprives benches of justices of the peace of the discretion to impose a straight term of immediate imprisonment where they consider that is the appropriate punishment in the particular case. I am in agreement with what the noble Lord, Lord Brooke of Cumnor said—indeed, I and others of your Lordships have said it in this House before—about keeping men out of prison for as long as possible and as far as possible. I think that has been greatly in the minds of benches up and down the country over recent years.
Obviously there are cases where this is impossible. Unfortunately, there are cases where it is not possible to keep people out of prison, and the clause itself establishes a number of exceptions on that basis. My own view is that it is a mistake to make something hard and fast. So far as they go, these exceptions are obvious ones, and I think we all agree with them and accept them. But I cannot see that they cover all possible cases, and it is a pity to put a useful
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innovation of this kind in a straitjacket and tie it up in the way done in the Bill. As the noble Lord has said, there are quite a number of cases which are not in the exceptions but which come before magistrates' courts, in which the only effective remedy is to send the man to prison at once. I am sure that the justices will feel this, and I am sure the noble Lord is right in saying that they will say: "This man ought to go to prison. We would send him for six months, but we cannot. We have to send him forward to quarter sessions".
We at quarter sessions already get a number of these cases. I wonder if it has occurred to anyone in the Home Office that every time one of these cases comes to quarter sessions it costs the taxpayer a lot of money. At petty sessions the offender is dealt with by the police, who do it in the ordinary way of their work. But when the case comes to quarter sessions it has to be taken by a barrister, and up and down the country this means bringing a man from a local Bar which may be a long way away. Not only is it necessary to bring a barrister to quarter sessions, but a solicitor has to be there as well. Probably a defence certificate will be applied for, and it will be granted; and, before you are aware of it, you are spending £100, or even more. By the time you have been spending this up and clown the country it is going to cost the taxpayer a great deal of money. This is an aspect of the matter which has not been sufficiently developed. Indeed, it is an aspect of the administration of criminal justice in this country at the present time which will have to be seriously tackled before long, because the costs are simply rocketing. Anyone who has engaged in it knows perfectly well that is true.
If this method of sending a man forward to quarter sessions is not used it will mean, in many of these cases, that fines will be resorted to because, to be quite frank, justices of the peace do not like being told from Whitehall, or even from Parliament, how to do their work. I am sure many of them will say, "Well, we had better impose a pretty swingeing fine in this case as we cannot send him to prison". This is not altogether satisfactory, because fines are difficult and expensive to collect. Very often one spends more in trying to collect the fine

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than it is worth. The type of criminal involved in these rather small cases is the sort of man who moves about a good deal, and in that way one can spend a lot of money and valuable time on what is really a wild goose chase. That is another disadvantage.
All these are points in favour of Lord Brooke of Cumnor's Amendment, and I must admit that I have quite a bit of sympathy for his point of view. But, on the other hand, I think he goes too far. Although over the past years undoubtedly magistrates on the whole have come to realise that short sentences are not good, that is not completely realised, and I think it is right that benches should, so to speak, be pulled up and made to think more than once, and even more than twice, before they send a man to prison in this petty type of criminal case. I think the way to do that is not to take the method suggested by the noble Lord, Lord Brooke of Cumnor, and to eliminate this clause altogether; it is to pursue the method which has in fact been pursued in the Criminal Justice Act 1948, to which I have already referred in connection with young offenders.
Before a court may send a young man of under 21 to prison it has to satisfy itself that there is no other effective thing it can do with him, and the Statute lays down the sort of considerations which the court has to bear in mind in coming to that conclusion. Undoubtedly this has worked. It has certainly worked in the courts of which I have personal experience, and I have no doubt at all that if my Amendment were accepted it would work to a much larger extent. The words which I have used are a modified version of the words which actually appear in the Criminal Justice Act 1948, and I suggest to your Lordships and to the Government that this would be a useful way out of the dilemma and that we should adopt a similar policy in this type of case.
LORD HAMILTON OF DALZELL: I support the Amendment proposed by my noble friend, Lord Brooke of Cumnor, which I think on the whole is preferable to that proposed by the noble Lord, Lord Chorley, although I see the force of what he has said. I am grateful to the noble Lord, Lord Chorley, for what he has said about Mr. Brian Layton, who is a col-
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league on the bench on which I serve, but I am afraid that I am one who is not convinced by Mr. Layton, and on balance I am against the whole idea of the suspended sentence, for the reasons which I gave in the debate on Second Reading. I will not weary your Lordships with them again, because I realise I am in a minority in this regard and therefore I have not pursued the matter. But I am anxious that we should not diminish such value as the system may have, and therefore I am in favour of leaving as much discretion as possible to magistrates.
It has for long been the general complaint of magistrates, and indeed of everybody concerned with criminal justice, that insufficient alternative methods are available and therefore in principle any additional method of treatment must be useful. But I am quite clear in my own mind that any new system, to be valuable, must be flexible, and the part of the clause which my noble friend proposes to leave out does diminish the flexibility of this system. It seems to me to be part of the general policy of tying the hands of the magistrates when in fact they are most anxious to make full use of any sensible alternative method of treatment that is offered. Last Monday the noble Lord, Lord Royle, was indignant when he thought the suggestion had been made that magistrates are not to be trusted, but it appears to me that all the Government's thinking is based on this assumption. We had examples of this in the part of the Bill dealing with bail, and we have it again here. I believe it is a mistake to impose this bar on the discretion of magistrates, and I think it would do nothing to improve the suspended sentence.
LORD PARKER OF WADDINGTON: May I say at once that on the whole I am in favour of the suspended sentence, on the ground that the more weapons one has in one's armoury the better even if they are not often used? I doubt whether the suspended sentence will be used very often, because now that conditional discharge—and I welcome this—has been extended from one year to three years it will be perfectly possible (and indeed many judges already do it) to say to a man, "I had in mind to send you to prison for six months, but on reconsidering the matter I have come to the conclusion that it can be met by a conditional

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discharge, and if you do nothing wrong you will hear nothing more about the matter. If you do commit another offence you will know from what I have said the sort of sentence you will get. "In other words, a suspended sentence adds nothing unless it can be made completely automatic on the commission of another offence, and unfortunately I think that is quite impossible.
I welcome suspended sentences as yet another weapon in one's armoury but I object strongly to making any part of the suspended sentence a mandatory sentence. Certainly the Judiciary have always found that when a sentence is made mandatory it occasionally leads to injustice, although, of course, not in every case, and there is nothing more frustrating than being unable to do what is obviously the right thing because the Statute has said you may not do it.
One can think of many anomalies that may arise. One was referred to by the noble and learned Viscount, Lord Dilhorne, in the Second Reading debate. There may be two young men, one 19 and the other 21, both committing an offence for which they ought to receive what is often referred to as a "short, sharp sentence". A detention centre is available for the 19-year old and he is duly sent there, and quite rightly so; but when it comes to the 21-year old there is, of course, no detention centre and it is a matter of, let us say, six months' imprisonment, and immediately it has to be suspended. One only has to think of that to see the grievance under which the 19-year old would suffer on going to a detention centre when the other youth—perhaps his own brother—gets a suspended sentence. Nor would it be right to say, "We will give the 19-year old a prison sentence and suspend it so that they both get prison sentences", because I think the idea of somebody under 21 being sent to prison, even when the sentence is suspended, is something which not one of us would approve. Accordingly, one gets an anomaly there, working grave injustice and causing a sense of grievance.
Then again with driving offences one so often gets cases—and I wish I had kept the figures—of taking and driving away and driving whilst disqualified. One has perhaps five offences of that sort dealt with by magistrates by conditional discharge, by probation, or by fines. Even-
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tually, the time comes when the justices say, quite rightly in my judgment, that the man must go to prison. Immediately they have to suspend the sentence, unless there are two counts which enable them to give more than six months. From the justices' point of view it really means that the more lenient they have been in the past, the more lenient they have to go on being at least once more because they have to suspend the sentence. I mention these matters only as showing the difficulties which might arise.
On a point which the noble Lord, Lord Brooke of Cumnor, has already made—which is a very real one for justices who are faced with a conviction—that a six months' suspended sentence does not meet the case, and that they will inevitably commit with a view to borstal or imprisonment, as the case may be, that again would be a lamentable result. Subsection (3) appears to be based on one or other, or both, of two ideas. One is that the prisons must be freed of some of their population at all costs—in other words for administrative convenience, which I venture to think is no ground at all or, secondly, the idea that magistrates are not doing their duty and are sending people to prison unnecessarily. From what I have seen, I consider that magistrates all over the country will strain every nerve not to send a man to prison
I have looked at the figures for 1964, and it is to be noted that in that year magistrates dealt with 1,245,227 prisoners, which includes summary offences and indictable offences, of whom under 2 per cent. were sent to prison. That does not seem as if imprisonment was being used a great deal, and quite clearly that 2 per cent. will include a great number who would qualify for prison under paragraphs (a) to (e). Accordingly, there is little evidence, if any, that magistrates are sending people to prison unnecessarily. If they are, perhaps it can be said that there are good magistrates and bad magistrates, and that some perhaps do send people to prison unnecessarily, but I am quite convinced that, even if that is the case, this is not the right way to deal with it. Magistrates are only too ready to learn, and if any of them appear to be sending people to prison unnecessarily they can be told.

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If something is to be put into the Bill (which I think is unnecessary) I should have thought that it would be along the lines of the Amendment in the name of the noble Lord, Lord Chorley. The emphasis there is to draw the magistrates' attention to the fact that they may send somebody to prison only if any other remedy is inappropriate. Before deciding, let them have a social inquiry report, for which provision is already made in a later clause of the Bill, Clause 46. Let it be provided that they may not send somebody to prison, unless they are satisfied that any other remedy is inappropriate, their having seen a social inquiry report and having heard all the circumstances of the case; and if need be let them state their reasons, in the same way as they have to give reasons for refusal to grant bail, as is already provided in the Bill. I feel very strongly that this jurisdiction ought to be left completely flexible and that the magistrates discretion ought not to be fettered in any way, unless it be to emphasise that somebody should be sent to prison only when any other remedy is inappropriate.
LORD ROYLE: Before the noble and learned Lord sits down, may I ask whether I heard him aright? When he referred to the number of cases before magistrates' courts he mentioned a figure of 1,250,000 prisoners in the year 1964. Is it not the fact that many of them were merely defendants and that merely technical offences were involved in which imprisonment would not have been appropriate?
LORD PARKER OF WADDINGTON: I am obliged to the noble Lord for pointing that out. "Prisoners" was the wrong word. They were people all of whom were found guilty.
LORD ROWLEY: I had not intended to speak on this Amendment, but I am bound to say that I have been very much influenced by the remarks made by the noble and learned Lord the Lord Chief Justice. I think that, in effect, he was suggesting that if we are to make any changes in the law we should have regard to the Amendment proposed by my noble friend Lord Chorley. I hope that it will be possible for my noble friend in charge of the Bill to have regard to
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the suggestions which are contained in the Amendment and the remarks made by the Lord Chief Justice, because I feel it is desirable that there should be some sort of discretion. I feel that the clause as it stands is somewhat rigid, and the flexible approach which was suggested by the Lord Chief Justice should be considered very seriously by the Government.
3.37 p.m.
LORD STONHAM: May I reply at once to my noble friend Lord Rowley by saying that of course I shall have regard to the Amendment of my noble friend Lord Chorley; and inevitably we shall have great regard, as will the whole House, to anything said by the noble and learned Lord, Lord Parker of Waddington. But equally I would express the hope that my noble friend Lord Rowley will have regard to the reply I make to the speeches that have been made and will then, at the end of the day, weigh it all up as to where the rights of the matter lie.
In the view of the Government, these Amendments to remove from the Bill the provision for mandatory suspended sentences would, in large measure, destroy one of the Bill's main objectives—a reduction in the number of short prison sentences and, in particular, the reduction of the number of short prison sentences passed on first offenders. In the course of the debate all noble Lords, except the noble Lord, Lord Hamilton of Dalzell, have expressed themselves to be in favour of the principle of suspended sentences. It is true that the noble and learned Lord the Lord Chief Justice had some reservations, but broadly speaking he, too, is in favour of the principle. The noble Lord, Lord Brooke of Cumnor, went further and said that he was strongly in favour of avoiding short sentences whenever possible. So at least we start with some common ground.
The drastic nature of the proposal made by the noble Lord, Lord Brooke of Cumnor, can be judged by the fact that in 1964, out of 44,000 persons received into prison under sentence, no fewer than 22,500 had been sentenced to six months' imprisonment or less. Despite the authorities quoted by the noble Lord, Lord Hamilton of Dalzell, it is clear that there has been almost unanimous support in both Houses for a reduction in the

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number of short sentences. In the Government's view, the best, and in our submission the only, effective way to achieve this is by the introduction, subject to the conditions set out in the clause, of mandatory suspended sentences.
I want to make the point that in judging the need for them the test is not whether the short sentences are necessary but whether it is necessary for them to be immediately effective rather than suspended. In the Government's view the suspended sentence has substantial advantages over the immediate short sentence: first, because a sentence of six months or less, meaning at most four months in prison, is too short to give an offender effective remedial treatment; secondly, because, as the noble Lord, Lord Brooke of Cumnor, said, the unnecessary imposition of short terms blunts the deterrent effect of imprisonment.
There is a third point which has not been mentioned but which is of importance to those of us who are concerned with the prison service. When half of all sentences are short term, the reception and early discharge of large numbers of such prisoners puts an enormous strain on prison accommodation and staffs. Proper attention cannot be given to either security or training. To-day we have 9,000 men sleeping two or three in a cell designed for one. In some prisons overcrowding is such that even sewerage becomes an anxiety. In some prisons we have had to increase the jobs which can be done sitting down on a chair because there is not enough room for anything else. Under such conditions it is impossible to justify sending men to prison for comparatively minor crimes, if they can be dealt with by other means.
Again, a short sentence utterly disrupts and may destroy the social and economic life of an offender. A suspended sentence does not do that. And if, in selected cases, on penal grounds a short sentence immediately applied has no advantage over a suspended sentence, then it is clearly right, it is a matter of simple justice and it is in the interests of society as a whole, that the sentence should be suspended. Indeed, the advantages of the suspended sentence are so great that in the Government's view a substantial proportion of the short sentences now imposed could and should be suspended.
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There was an implication in the debate that we were asking for the mandatory suspension of short sentences when it was either a very serious crime or when the person had a bad criminal record. But that is not so. We are not asking for mandatory suspension of short sentences when the prisoner has previously been to prison or borstal. But we say that if the offender has no criminal record he is not set in his criminal ways, and if his offence merits only a short sentence it should be suspended, for the reasons I have already given and because an immediate sentence is, generally speaking, unnecessary as a deterrent. By our way we may make a man, instead of making a recidivist.
Even for the offender with a previous record, his first prison sentence, if at all possible, should not be a short one since, again, it removes for all time any deterring apprehension which he might have about prison. In our view, these mandatory provisions are crucial to a reduction in the number of short sentences. The noble Lord, Lord Brooke of Cumnor, gave some figures and I shall give some more. Of the 22,500 in 1964 which I mentioned, 7,400 had not previously served a custodial sentence, and of these 5,900 were convicted of an offence not involving personal violence or sexual assault. It is the Government's case that all those 5,900 sentences are now unnecessary.
I ask noble Lords who have not previously considered this question in detail to consider what kind of offender it is whose sentence would have to be suspended under our proposals. He will not be guilty of a serious offence; otherwise he would merit a sentence of more than six months. He will not have a very bad record, because he has not been to prison or borstal before. His offence will not involve violence; otherwise the sentence would not have to be suspended. Most probably he would have been convicted of a comparatively minor offence against property.
What will be lost if such a man has his sentence suspended instead of going to prison at once? He will have to keep out of serious trouble for up to three years. If he succeeds the suspended sentence will have proved its value. If he fails the sentence is likely to be executed

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and the deterrent of actual imprisonment will therefore be invoked, with perhaps a bit added for the second offence. In the first case the community, the offender and his family will have benefited. In the latter case no one will be worse off than if the sentence had been executed immediately it was imposed.
A suspended sentence will not be a "let off". The clauses have been drafted to secure the maximum deterrent impact. They give the suspended sentence a far greater deterrent effect than probation or—with all due respect to the noble Lord the Lord Chief Justice—conditional discharge. And there is no question that a man can go on committing offences, secure in the knowledge that he cannot be sent to prison without first being given a suspended sentence, because he can be given an immediate sentence of more than six months. The noble Lord, Lord Brooke of Cumnor, said that 75 per cent. of the 5,900 offenders in 1964, whose short sentences would have been suspended under subsection (3), could have been sentenced to more than six months. That is perfectly true. This is an argument for the mandatory suspended sentences, because the magistrates can still commit a man for a longer sentence if in their view his crime warrants it.
It comes down to this—and on this I think there will be general agreement. There has been only one argument put forward against the Government's policy. The noble Lord, Lord Brooke of Cumnor, said that the Government are doing the right thing in the wrong way, and almost every speaker—and my noble friend Lord Rowley was much impressed with this—relied on the discretion of magistrates; the discretion of magistrates would be enough. That is what the noble Lord, Lord Brooke of Cumnor, and my noble friend Lord Chorley argued, and it is virtually their only argument; that we could safely leave it to the courts to achieve the objective which we have in mind. The noble Lord, Lord Brooke of Cumnor, said that we were robbing the magistrates of their discretion. My noble friend Lord Chorley indicated that justices do not like being deprived of the opportunity of sentencing a man to prison.
LORD CHORLEY: The noble Lord misrepresents me. Do not get too emotional: and deal with the arguments.
LORD STONHAM: We are not depriving a magistrate in the appropriate case of the right to send a man to prison. Of course not. If my noble friend will carefully examine paragraphs (a) to (e) he must agree with that. In subsection (1) we give the courts discretion to suspend sentences of up to two years, and we very much hope that they will use this power pretty freely in appropriate cases. But we consider that the mandatory provisions are essential for the shorter sentences: first, because if Parliament decides to give the courts a new power to suspend sentences it is for Parliament to decide the consequential changes in the pattern of immediate prison sentences, rather than for the pattern to emerge from the decisions of individual courts all over the country in a host of individual cases. Inevitably—and I think the noble Lord, the Lord Chief Justice, will accept this—there would be a variation between different courts, which we think would be both unjust and intolerable.
Secondly, Parliament stipulates the maximum penalties for offences and the minimum qualifications for certain penalties. It is therefore right for Parliament to stipulate that certain categories of offenders may not be given an immediate short prison sentence. The Government's view is that when the suspended sentence is available a short sentence will virtually never be necessary in the case covered by the mandatory provisions. If, as I believe, all Parties in Parliament agree with the Government that certain categories of short sentences should not be imposed, there is no way of making sure of this other than a statutory requirement, and there is no logical ground for distinguishing between magistrates' courts and the higher courts in this matter.
Finally, I come to the Amendment of my noble friend Lord Chorley, which appears to have an appeal to a number of noble Lords. He proposes that all sentences of six months or less should be suspended unless the court thinks it would be wrong to do so. This, of course, is less drastic than the proposal of the noble Lord, Lord Brooke of Cumnor; and it has an appeal until one goes back and examines history a bit. Certainly in our view it would emasculate the clause. In considering the proposal of my noble friend Lord Chorley, I would ask your Lordships to consider the operation of the

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First Offenders Act. This is particularly relevant for two reasons: first, because Lord Chorley has embodied in his Amendment (and, in parts, in almost identical wording) the instructions which are given to the courts in the 1948 First Offenders Act. If my noble friend will refer (as I am sure he did when he drafted his Amendment) to Section 17(2) of the Criminal Justice Act 1948, he will find these words:
"No court shall impose imprisonment on a person under twenty-one years of age unless the court is of opinion that no other method of dealing with him is appropriate; and for the purpose of determining whether any other method of dealing with any such person is appropriate the court shall obtain and consider information about the circumstances, and shall take into account any information before the court which is relevant to his character and his physical and mental condition."
We have now had that for 19 years in respect to persons under 21, and it was so successful that it halved the number of adolescents sent to prison.
So, in 1958—and this is the second reason why this is relevant to this particular discussion—I was sponsor in another place of the First Offenders Act; and for the first time in nine years I will read something that I have previously said—on May 12, 1958, when moving the Third Reading of the First Offenders Bill. I referred to what I have just read out from the 1948 Act, and I said that our proposals in the Bill applied to adults what had applied to adolescents since 1948. I then said:
"I am confident that it will be equally successful in reducing the number of men sent, in my view often unnecessarily, to prison".—[OFFICIAL REPORT, Commons, 2/5/58, col. 727.]
I also find that I quoted—I must have had some prescience about this—no fewer than four noble Lords who had spoken in debates at that time upon this particular subject, including one noble Lord who said:
"A very large part of our prison population consists of men who ought never to have been sent there".—[col. 728.]
This was in May, 1958; and I referred to the fact that the number in prison and borstals was then 24,500, the highest figure ever, and that there were nearly 4,500 men confined three to a cell. To-day the population is 35,500, and the number confined two or three to a cell is 9,000.
I concluded my speech with these words:
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"Without increasing crime or adversely affecting the course of justice, the Bill will reduce our prison population and will further the course of rehabilitating those who must still be sent to prison. I believe that it will bring greater equality in the treatment of first offenders. Above all, it will save many thousands of innocent people from the stigma of associating with a husband, father or brother who has served a prison sentence". [col. 731.]
I think my moving of that Third Reading proves that I was sufficiently confident in the discretion of magistrates.
So far as first offenders are concerned, we have had it now for over nine years—exactly the same discretion, exactly the words which the noble and learned Lord the Lord Chief Justice applauded in my noble friend's Amendment. My noble friend now proposes that we should accept an Amendment which in fact embodies exactly what is in the 1958 Act and what has been there for nine years. In other words, he advocates no change.
LORD PARKER OF WADDINGTON: May I intervene? As I understand the noble Lord, the 7,000, I think it was, that he said were being sent to prison for the first time were not necessarily first offenders. There is all the difference between a first offender and a person who is sent to prison for the first time with a long record of previous offences in respect of which he has been leniently dealt with.
LORD STONHAM: I appreciate that. In what I have been saying for the last three or four minutes I have been referring to the First Offenders Act. I was indeed referring to first offenders, and I am still referring to first offenders. How has that Act worked? This is a relevant comparison in relation to what we are asked to do now. How has it worked? In the five years before the 1958 Act, the percentage of first offenders sent to prison by magistrates' courts, expressed as a percentage of all offenders sentenced to imprisonment by those courts, dropped from 17 per cent, to 11 per cent. That was in the five years before the Act. In the four years after the Act, it dropped only from 11 per cent. to 10 per cent. This was when it was brought to their notice forcefully. I think the exact words of the noble Lord, Lord Brooke of Cumnor, were, "The right way is to bring this forcefully to the attention of courts, and particularly of magistrates' courts". I suggest that an Act of Parliament is about as forecful a way as one can find of

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bringing these matters to the notice of courts, but all that that forceful method did was to reduce the proportion of first offenders sent to prison from 11 per cent. to 10 per cent.—which means, in my submission, that they virtually ignored the Act.
For these last nine years, so far as first offenders are concerned, the courts have been charged and armed with precisely the same discretion as that with which Lord Chorley now proposes to arm them. In other words, he proposes no change. Does my noble friend or anyone else believe it would achieve any result at all? I think that is the complete answer to the noble Lord, Lord Brooke of Cumnor: that in the nine years since the passing of the First Offenders Act, during which the courts have been required by law not to send a first offender to prison unless they were satisfied that no other method of dealing with him was appropriate, they have used that discretion to send 6,000 to 7,000 first offenders to prison every year, and of that number some 5,000 went to prison for six months or less. These are the only ones we are talking about.
It is perfectly true—and I am glad that the noble and learned Lord the Lord Chief Justice interrupted me and pointed it out—that our clause refers to those sentenced to their first custodial sentence; that we make exception with regard to people who have been to prison or borstal before. This is their first custodial sentence. Of course, a boy may have been to an approved school; he may have been put on probation; he may have been sent to a detention centre; he may have committed quite a number of offences and for some of them have been fined. That is all perfectly true. What we are struggling to do is to avoid, if we possibly can, unless the offence is too serious, starting them in prison.
I would ask your Lordships to agree that those short-sentence first offenders whom I mentioned should not have been sent to prison; and also to agree that they must not be sent in future. I know from the evidence of nine years' experience of the First Offenders Act that if we want to achieve this objective we just cannot leave it any longer; we cannot go on for another nine years and then say that the discretion has not worked with
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these people. We must decide. I ask your Lordships to judge this matter on the facts, not on any kind of any Party predilection; and I am sure you will. On those facts I think it is quite clear that we must reject this Amendment.
4.1 p.m.
VISCOUNT DILHORNE: The noble Lord has made a long speech in support of a thoroughly bad proposal in this Bill. He has asked your Lordships to judge this matter on the facts. I shall do likewise; but I hope to deal only with facts that are relevant and not introduce an extraordinary mélange of argument and fact in an effort to justify something which is really a blot on an otherwise good Bill. The noble Lord sought to draw an analogy between what has happened with regard to first offenders and the provisions within this clause. He asks one to assume that because the percentage has dropped only from 11 to 10 (I think it was) in relation to first offenders, therefore magistrates have been exercising wrongly the power entrusted them by Parliament. I ask your Lordships not to accept that conclusion at all.
In the course of that long speech which fell from the lips of the noble Lord, Lord Stonham, there was not a single word about the need to maintain law and order. In the course of that long speech he went on to suggest that, really, crimes against property did not matter so very much—and, particularly, if they were only those crimes against property for which the proper sentence would be six months' imprisonment. Some of those crimes against property—for example, theft from poor people who cannot afford the loss—cause far greater suffering than some of the bigger crimes.
The noble Lord began his speech by saying that if this Amendment were carried out we should destroy one of the Bill's main objectives—not to maintain law and order; but to relieve the prisons of people serving short prison sentences. We are told that the accommodation is insufficient, that the strain on prison accommodation and staff is very great, that there is anxiety about sewerage systems, that sometimes there is not enough room for people to work sitting down. Is all that a reason for depriving magistrates of their discretion to impose a sentence which they consider to be

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right? That is an indictment of incompetence on the part of the Home Secretary and of the Home Office in not providing sufficient accommodation. Of course, in a short sentence it is difficult to provide remedial treatment. If that is the line of argument that is being followed, then the noble Lord is really suggesting that longer sentences should be passed than are now passed for the same offences. Of course, there will be variation between courts; there always is—and there is variation between offences. Your Lordships ought not to judge all these matters just by cold statistics; you must have regard to the circumstances of the case.
What are we really discussing here? It surely is whether magistrates should have any discretion at all to pass a sentence of six months. I ask the Committee to bear in mind that that is the maximum prison sentence that magistrates can pass on summary trial of indictable offences. From what the noble Lord has said one might have thought that all these people sentenced to prison for six months had never been in trouble before. In my experience, magistrates nowadays really fall over backwards to avoid sending people to prison. The offenders come up; they are put on probation, and even while on probation (I have seen it happen) they have committed an offence and are again put on probation. I am sure it is completely wrong to suggest that magistrates, unlike other people, do not realise that short prison sentences certainly should not be imposed if any other way is adequate to deal with the individual. But there comes the time, as the noble Lord has just said, when they have tried everything. They find perhaps that the offender is too old to send to detention; that he is too old to be sent to borstal. In such a case there is only one thing left; and that is prison, a short prison sentence, in the hope that that will do the trick. That is why those sentences are passed.
But the noble Lord, Lord Stonham, says, "No". He says that one of the main objectives of this Bill is to stop magistrates passing that sentence which, in the light of that man's record, they think the right sentence to pass—unless he comes into the other particular categories mentioned in this subsection: that it is a minor offence against property; that he has repeatedly stolen only small
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sums; that he obtains only a small sum of money by false pretences. The noble Lord says that those are only minor crimes against property; that magistrates should not send a man to prison for them. The noble Lord says "No, he must have another suspended sentence"—and then, at the end of the day, if he commits another offence during the time of that suspended sentence he may not have to serve at all the sentence which has been suspended. I really do not think that this will do.
I referred to this matter in the debate on Second Reading, and I said I thought that this clause, and the question raised by it, were far more important than that dealing with majority verdicts; because this covers a far wider range. By all means let us give guidance to magistrates. Let us help them to reach the right conclusion; let us emphasise the undesirability, as a general rule, of short sentences. But I should not be one of those who say that a short sentence is never right; because sometimes the desired purpose can be achieved by a short sentence and it is not necessary to pass a longer one to achieve the same purpose. I do not intend to repeat all that I said on Second Reading, but I find the arguments put forward by the noble Lord wholly unconvincing, wholly unrealistic and wholly ignoring the need to maintain law and order and to let the magistrates have the power necessary for the maintenance of law and order. If my noble friend proposes to divide the Committee—and I hope he will—I shall certainly support him.
LORD MACPHERSON OF DRUMOCHTER: May I ask the noble Lord whether he is suggesting that the future method of treatment of offenders should be based on the availability of space in the prisons and not on the way the courts consider most suitable?
LORD STONHAM: Nothing I have said in my speech could possibly be interpreted in that way. But I do say that it is a factor that noble Lords should consider, if it means sending somebody, as I put it, unnecessarily to prison. I made that clear in my speech. Although the noble and learned Viscount, Lord Dilhorne, is very good at making the kind of speech he has just made he did not face all the facts, and certainly he did not interpret the clause in the way

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it reads in the Bill. It is not true that in this way we are depriving magistrates of the ability they now have to help in the maintenance of law and order. The clause specifically says that if anyone has been to prison or to borstal before, then the magistrates' suspended sentence does not apply. It specifically says that if the offender before the court has committed an offence consisting of assault or threat of violence, or possessing firearms, and so on, or indecent conduct to a person under 16, again the mandatory sentence does not apply.
The noble Lord, Lord Brooke of Cumnor, made clear at the beginning of his speech that he was in favour of suspended sentences, rather than medium sentences, wherever that was possible. In the submission of the Government, a short sentence should be avoided when possible, because it is useless to the offender and to society but if the offence is one which the magistrates think can be met only by imprisonment their remedy is still available. They can send the case to a higher court for sentence—
VISCOUNT DILHORNE: So that the noble Lord is saying—
LORD STONHAM: Let me finish the sentence—and that may well mean that the man will get a longer sentence than six months. Probably that would be better, because it would not be useless. The fact that you are not going to have short sentences on conviction does not mean that some people may not have longer sentences.
VISCOUNT DILHORNE: The noble Lord is suggesting that people should be committed for trial with a view to the imposition of a longer sentence than the magistrates thought the case warranted: otherwise the magistrates could not send them to prison at all.
LORD STONHAM: The noble and learned Viscount was envisaging a very serious offence—
VISCOUNT DILHORNE: No, he was not.
LORD STONHAM: A more serious offence then, where the maximum sentence of imprisonment was more than six months.
VISCOUNT DILHORNE: With great respect, I was not. I was dealing with the particular case where the discretion is being taken away, the case where the magistrates are seeking to pass sentence up to six months, which is the maximum sentence for a case on summary trial for an indictable offence. That is all I was dealing with. The noble Lord, Lord Stonham, made a very long speech trying to support his measure. I do not want to pursue the matter, I think that we should divide.
4.13 p.m.
LORD CHORLEY: I should like, shortly, to make three points in reply to my noble friend. I do not think it is right to take these figures as from 1959 or 1958. You have to go back to 1948, as I did. The noble Lord showed that if you go back to 1948 it is indicated that this instruction to the bench that they must take these things into account has been very effective. The majority of first offenders are under 21, and this operation started in 1948. Surely it stands to reason that you have to take a conspectus over the whole period and not start in 1958. Does not this suggest that magistrates have been scrutinising these cases and dealing with them properly and effectively?
My next point is this. In effect, the noble Lord said that all these 5,000 who are outside the categories mentioned later ought not to be sent to prison—none of them. He used very strong language about this matter. There is not the time to go into all these cases which are not mentioned in the later categories, but there are some cases which continually come before the criminal courts—for example, motoring offences. There are three or four types of motoring offences where nothing effective can be done—for instance, where a man who has been disqualified from holding a driving licence nevertheless drives a vehicle—except impose a short prison sentence. These are important and serious offences but the offenders will not be sent to prison for a long sentence. They cannot be dealt with effectively by fines, and they are not referred to in the later provisions.
I have not mentioned all types of cases. There are several other kinds of motoring offences which may be dealt with only by means of a short term of imprisonment. Not all these short terms are

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ineffective. If the noble Lord will look at the statistics (it has been one of my interests for many years to study these things) he will find that in a large number of such cases the short sentence has a better curative effect than a long sentence. The number of people who do not come back after being sentenced to six months is, in proportion, much larger than the number who do not come back after being given a sentence of three years. You cannot deal with these things academically; you have to deal with them from experience.
My last point against the Government's case is that all knowledge and common sense about these matters does not reside in Whitehall. Many of us have spent a great part of our lives dealing with them. The noble Lord is asking your Lordships to reject the experience of magistrates, chairmen of quarter sessions and recorders. Their organisations are against this proposal. The probation officers and the people who are doing the job are against it. It used to be an axiom of Government to trust the man on the spot. Perhaps that attitude was taken too far, but the Government ought to pay more attention to the views and experience of the man on the spot than the noble Lord is asking your Lordships to take this afternoon.
4.16 p.m.
LORD ROYLE: I have been reluctant to take part in this debate, largely because of the use so often of the term "magistrates' discretion". Because of the appointments that I have held, I have a great deal of sympathy with the idea that as much discretion should be placed in the hands of magistrates as is possible. The noble Lord, the Lord Chief Justice, and the noble and learned Viscount, Lord Dilhorne, at the time when he was Lord Chancellor, instigated an inquiry into the lack of uniformity in the decisions arrived at by magistrates. I agree that in the main this related to motoring offences, but it does not alter the fact that the two noble and learned Lords have been very deeply concerned about the lack of uniformity. Over the years there have been many cases in which, when all the circumstances were equal, different magistrates' courts have imposed very different penalties for precisely the same offence.
LORD PARKER OF WADDINGTON: I am sure that the noble Lord, Lord
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Royle, would agree that both I myself and the noble Viscount, Lord Dilhorne, who was Lord Chancellor at the time, were not concerned so much over the disparity of sentences as over the fact that there should not be a "rubber stamp", fixed, penalty in every case. There is bound to be disparity in sentences: there is no such thing as uniformity of sentence. Does not the noble Lord think that it would be worse to have a fixed sentence, something which was imperative in every case, than to allow variations to meet the circumstances?
LORD ROYLE: I accept that at once. It would be quite impossible to get fixed penalties for every offence: everybody recognises that. But that does not alter the fact that there has been this great disparity in the sentences inflicted by various courts for precisely the same offence and invariably in the same circumstances. The editor of the Sunday Express has in the past let himself go very much on this matter, and I have been in complete disagreement with him because of it. But the fact remains that this lack of uniformity has existed, and the two noble and learned Lords to whom I have referred have made constant pleas to magistrates throughout the country, through the branches of the Magistrates' Association, to try to alleviate it.
VISCOUNT DILHORNE: May I say something, as the noble Lord referred to me more than once? Would he kindly indicate what on earth this argument has to do with depriving magistrates of the power in appropriate cases to send an offender to prison for six months? Getting a higher degree of uniformity may be a desirable objective, but it seems to me quite unrelated to depriving magistrates of this power.
LORD ROYLE: If I had been allowed to proceed perhaps I should have come to that, but I was interrupted before I had finished my argument. It has a great bearing on what we are now discussing: the question of a mandatory power to suspend a sentence. The indications which I have given show that there is some need—I do not put it any higher than that—for this mandatory power. I hesitate to criticise colleagues in magisterial circles, but the fact remains that the lack of mandatory authority has

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resulted in some of the things which I have been describing.
It would appear from what has been said in favour of the Amendment that it is thought that suspension of sentence is letting a man off. It is nothing of the kind. It is holding above his head the fact that if the suspended sentence has had no effect and he comes back to court, he will be sentenced in accordance with the first decision of the magistrates. I do not regard that as letting a man off in any shape or form. The noble and learned Lord the Lord Chief Justice referred to conditional discharge. We all know the success of conditional discharge. I regard the proposals of the Government at this moment as being an extension of that system, which has been such a great success. I am impressed also by my noble friend's argument with regard to the over-population of our prisons. This has an important bearing on the matter we are discussing. The main point is that a suspended sentence holds over the head of a man the fact that he can be sent to prison if he is not careful in his future conduct. I believe that that in itself will have a great deterrent effect on many of the people who come before our courts.
LORD BROOKE OF CUMNOR: With the greatest respect to the noble Lord, Lord Royle. I cannot accept that this is the right method for securing uniformity as between sentences passed in different magistrates' courts. Two things I learned as Home Secretary. The first was that magistrates and judges should have as wide as possible a variety of courses open to them when sentencing people. The second was that the Home Secretary cannot possibly know as well as the judge or magistrate, who has had an accused man in front of him, what is the appropriate
sentence to pass on that man, being the man he is, for the crime he has committed in all the circumstances of the case.
If I may say so without being presumptuous, the noble Lord, Lord Stonham, put up a gallant defence for a course of action by the Government which has received very little support within your Lordships' House or outside. At the end, he was forced to give his case away. He said that all these 5,900 sentences a year which the Bill will prevent are unnecessary and then went on to argue that if magistrates felt strongly about any of them they would be able to commit them to quarter sessions for sentence with the possibility of the man being given a heavier sentence; although he himself had said that a sentence of imprisonment in such a case was unnecessary. That is a clear contradiction; and this is what I mean by magistrate's discretion. They ought not to have to go a roundabout way to secure what they, having seen the man concerned, feel seriously is the right way to treat him in the interests of law and order by making him serve an immediate prison sentence.
The noble Lord asked that we should not discuss a matter like this on Party lines. He will be aware that not once in the Committee proceedings on this Bill have I asked my noble friends to support me in the Lobby on any Amendment of mine for Party reasons. I would ask noble Lords who care about the maintenance of law and order and think that the courts should have a wide discretion in sentencing so as to maintain law and order to support this Amendment.
4.34 p.m.
On Question, Whether the said Amendment (No. 39) shall be agreed to?
Their Lordships divided: Contents, 59; Not-Contents, 36.

CONTENTS

Aberdeen and Temair, M.

Cottesloe, L.

Grimston of Westbury, L

Ailwyn, L.

Cromartie, E.

Guest, L.

Amulree, L.

Daventry, V.

Hamilton of Dalzell, L.

Ashbourne, L.

Derwent, L.

Hawke, L.

Asquith of Yarnbury, Bs.

Dilhorne, V.

Horsbrugh, Bs.

Auckland, L.

Drumalbyn, L.

Howard of Glossop, L.

Balfour of Inchrye, L.

Dudley, L.

Hunt, L.

Blackford, L.

Emmet of Amberley, Bs.

Hylton-Foster, Bs.

Boston, L.

Falkland, V.

Iddesleigh, E.

Brooke of Cumnor, L.

Ferrers, E.

Ilford, L.

Byers, L.

Fraser of Lonsdale, L.

Jessel, L.

Carrington, L.

Goschen, V. [Teller.]

Kemsley, V.

Clwyd, L.

Grenfell, L.

MacAndrew, L.

Macpherson of Drumochter, L.

Nugent of Guildford, L.

Strange of Knokin, Bs.

Mansfield, E.

Parker of Waddington, L.

Vivian, L.

Merrivale, L.

St. Helens, L.

Wakefield of Kendal, L.

Meston, L.

St. Just, L.

Wimborne, V.

Mills, V.

Sandford, L. [Teller.]

Woolton, E.

Mowbray and Stourton, L.

Somers, L.

Wrottesley, L.

Moynihan, L.

Strang, L.

NOT-CONTENTS

Addison, V.

Henderson, L.

Royle, L.

Archibald, L.

Hilton of Upton, L.

Sainsbury, L.

Beswick, L.

Latham, L.

St. Davids, V.

Bowles, L. [Teller.]

Longford, E. (L Privy Seal.)

Segal, L.

Brockway, L.

Maelor, L.

Shackleton, L.

Burton of Coventry, Bs.

Morrison, L.

Shepherd, L.

Champion, L.

Moyle, L.

Sorensen, L, [Teller.]

Douglas of Barloch, L.

Pargiter, L.

Stocks, Bs.

Faringdon, L.

Phillips, Bs.

Stonham, L.

Gaitskell, Bs.

Plumber, Bs.

Summerskill, Bs.

Gardiner, L. (L. Chancellor)

Raglan, L.

Taylor of Mansfield, L.

Harvey of Tasburgh, L.

Rowley, L.

Willis, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 30, as amended, agreed to.
Clause 31:
Power of court on conviction of further offence to deal with suspended sentence
31.—(1) Where an offender is convicted of a subsequent offence committed while he was subject to a suspended sentence and either he is so convicted by or before a court having power under the next following section to deal with him in respect of the suspended sentence or he subsequently appears or is brought before such a court, then, unless the sentence has already taken effect, that court shall consider his case and deal with him by one of the following methods:—

(a) the court may order that the suspended sentence shall take effect with the original term unaltered;

and a court shall make an order under paragraph (a) of this subsection unless the court is of opinion that it would be unjust to do so in view of all the circumstances which have arisen since the suspended sentence was passed, including the facts of the subsequent offence.
(4) A person with respect to whom an order is made under this section by any court shall have the like right of appeal against the order as if it had been made on his conviction by or before that court; and where an appeal lies by virtue of this subsection to the criminal division of the Court of Appeal, the latter court shall have the like power of dealing with him as is conferred by this section on the court from which the appeal lies.
VISCOUNT DILHORNE VISCOUNT DILHORNE moved to add to subsection (1): "in which case the court shall state the reasons for its
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opinion." The noble and learned Viscount said: This Amendment deals with a slightly different point from the one we were just discussing, but I must refer a little to what the noble Lord, Lord Stonham, said. In the course of his speech the noble Lord said that he thought the suspended sentence would be a real deterrent because, after all, the sword might fall and the man might have to serve the sentence. On Second Reading certain noble Lords thought that where there was a suspended sentence and misconduct thereafter, the sentence that was suspended should certainly be served. But this clause gives the court before which a man comes who has had a sentence suspended power to vary that sentence, even to the extent of saying that the man need not serve any of it.
If your Lordships look at paragraphs (a) to (d), you will see the various orders that can be made by the court if a man gets into trouble while the suspended sentence is still hanging over his head. They say:
"(a) the court may order that the suspended sentence shall take effect with the original term unaltered;
(b) it may order that the sentence shall take effect with the substitution of a lesser term for the original term;
(c) it may by order vary the original order under the last foregoing section by substituting for the period specified therein a period expiring not later than three years from the date of variation; or
(d) it may make no order with respect to the suspended sentence."
The subsection then continues:
"and a court shall make an order under paragraph (a) of this subsection "—

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that is, that the sentence shall take effect—
"unless the court is of opinion that it would be unjust to do so in view of all the circumstances which have arisen since the suspended sentence was passed, including the facts of the subsequent offence."
I do not want that to become what one might call a kind of rubber-stamp formula. Your Lordships will appreciate that I am not moving an Amendment to seek to remove the discretion the court has under the clause as to what shall happen in relation to the suspended sentence. Although I know there are those who argue that the court should have no discretion, I do not share that view. What I say is that it ought not just to become a rubber-stamp practice of the court's saying: "We are of opinion that it would be unjust that this sentence should be served in view of all the circumstances which have arisen since the suspended sentence was passed." I think it is important that, if the court decides to take that course, then they should state their reasons for doing so. I believe that only if this is done will public confidence not be impaired. I beg to move.
Amendment moved—
Page 23, line 26, at end insert the said words.—(Viscount Dilhorne.)
4.38 p.m.
LORD HAMILTON OF DALZELL: I welcome, this Amendment, because I believe it will be useful to clarify the intention behind the clause—for this is where I think the great difficulty of the suspended sentence arises. The assumption seems to be that the enforcement of a suspended sentence is not something that one has to worry about, because the man would have gone to prison next time anyway. But is this necessarily so? Even now courts often find other ways of dealing with people with previous offences, and one hopes that other alternatives will be provided, such as hostels to which people can be sent as a sentence. But with the suspended sentence the court dealing with an offence has its hands tied. The courts will want to know to what extent they will be required to enforce suspended sentences. After all, when a court is imposing a suspended sentence the hope is that the question of its being served will never arise. So it seems possible to me that
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a court imposing a suspended sentence may do so without considering very carefully, or perhaps even being in a position to know, whether prison will be the right answer even next time.
What about social inquiry reports? The intention is, as I understand it, and quite rightly, that sooner or later no one shall be sent to prison without a social inquiry report on him having been considered. At what stage do we consider the social inquiry report with a suspended sentence? There is no point in having such a report when you are imposing sentence, because the probability is that it will have very little relevance to the circumstances of the person when he commits his next offence in anything up to three years' time. But on the other hand, if at the stage where he comes up again you are going to start considering the suitability of prison and the possible effects on the family and so on, to my mind it makes nonsense of any suggestion of automatic enforcement, which seems to be the idea. If the intention is that the enforcement of suspended sentences shall be virtually automatic, then I am against that because I think the whole idea is wrong. But in that case I am in favour of my noble friend's Amendment, because I think it will help in that situation.
If, on the other hand, the intention is that the whole question of prison as being right in the particular case shall be carefully gone into at the time of the next offence, with the inevitable result that a great many suspended sentences will not be enforced, I am still against the whole idea, because it seems to me that the effectiveness of the suspended sentence as a threat will very soon be dissipated, and no more will be achieved than can he achieved by conditional discharge, if properly used. That is all the more so now that the conditional discharge is to be extended to three years. I very much hope that when the noble Lord conies to reply he will make clear how it is intended that this system shall work, because courts will really have to know more about this than appears from the Bill if they are to operate the system properly.
LORD PARKER OF WADDINGTON: I support this Amendment. Indeed, some of your Lordships will remember that I raised this very point in the debate on

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Second Reading. The only thing which really distinguishes the suspended sentence from probation or conditional discharge, the only reason why it can be said to be not a "let off", is if the prisoner knows that he will in the ordinary way receive the sentence which is suspended. We all realise that there must be adjustments in the light of circumstances which have occurred later: a prisoner's behaviour during the suspended sentence and matters of that sort. But I think, from the very wording of the clause, the intention quite clearly is that the court shall enable the sentence to come into effect unless, one might say, there are really good reasons to the contrary; in other words, it should be as automatic as possible. I support this Amendment because it emphasises that fact.
It may be said that the provision is there already, because the
"court shall make an order under paragraph (a)…unless the court is of opinion that it would he unjust to do so".
But, equally, we all know that if we are called upon to give reasons for a decision we think about it once again and get our tackle in order and make certain that our reasons are good. That is why, to come to a completely different subject, when one gets to motoring offences there are provisions for disqualification unless there are reasons, and those special reasons have to be given. I think it strengthens this clause that the justices should give reasons for not making an order bringing the suspended sentence into force.
4.47 p.m.
LORD STONHAM: The noble Lord, Lord Hamilton of Dalzell, asked me to say how this system worked and whether it is the intention, when a man who has been given a sentence comes up for the second time, to go into the whole question of the effect of prison on him when he gets it. I am glad to have the assurance from the noble and learned Lord the Lord Chief Justice that the wording of the clause is sufficiently clear. It seems to me to be so if you read the last sentence or so in subsection (1):
"and a court shall make an order under paragraph (a) of this subsection "—
that means that the court will order that the suspended sentence shall take effect with the original term unaltered—
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"unless the court is of opinion that it would be unjust to do so in view of all the circumstances which have arisen since the suspended sentence was passed, including the facts of the subsequent offence."
This subsection of Clause 31 has been very carefully drafted to preserve what we regard as the deterrent effect of a suspended sentence when an offender is reconvicted on a subsequent offence and appears before a court which has power to deal with the suspended sentence. The court is required to deal with it and to order that the suspended sentence shall take effect with the original term unaltered,
"unless the court is of opinion that it would be unjust to do so in view of all the circumstances which have arisen since the suspended sentence was passed".
Nothing at that stage, when the man is before the court, has to do with what will be the effect of prison on him, because there is a mandate here in this Bill, and the kind of things the court would have to consider in particular would be the nature of the second offence. It might be a very trivial matter which would in any other circumstances be dealt with by a fine; it might even be a minor motoring offence, for all I know. It has nothing to do with the real crime, and therefore in effect it has nothing to do with the crime for which the suspended sentence was originally awarded. On the other hand, it may well be in the same field or in a similar field, or a crime of similar or greater gravity, and in such circumstances I should think there would be only one thing for the court to do.
But what we are now asked to consider by the Amendment moved by the noble and learned Viscount, Lord Dilhorne, is this. If the court decide it would be unjust, then they should state their reasons for that opinion. The noble and learned Viscount was anxious that this clause should not become a rubber stamp. As your Lordships know, the Justices Clerks' Society supported a somewhat similar view when they suggested that a requirement to specify reasons would make it clear that a mere desire to be lenient after a lapse of time is not enough, with which I am sure we should all agree. But I think the clause makes it clear that a lapse of time is not enough because it insists that account should be taken of I the nature of the second offence.

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There is, of course, some force in the argument demanding a statement of the reasons. But, unfortunately, our experience with other provisions which have required courts to state their reasons for action—for example, again, the First Offenders Act—is not very encouraging, because in that case the court had to give reasons for not being lenient. The reasons tend to be stereotyped and perfunctory; in other words very "rubber stamped", which the noble and learned Viscount does not want. None of us would wish to require the courts, including the higher courts, to give reasons for their decisions if it became a useless formality and if no useful purpose would be served. This is one of those marginal things. I think it certainly would not do any harm and I am much impressed by the Lord Chief Justice's view that it would do good. Therefore I ask your Lordships to accept the Amendment.
LORD HAMILTON OF DALZELL: May I just raise one matter—or perhaps I had better do it later.
VISCOUNT DILHORNE: My noble friend will have a chance, I have no doubt, on the Motion, That the clause stand part, to raise anything he wishes. But I should like to thank the noble Lord, Lord Stonham, very much indeed for the way in which he has accepted this Amendment. I know that sometimes reasons are stated perfunctorily, but I think it is a wise practice that when decisions are made reasons should be given, as they are nearly always given in the higher court.
If the Amendment needs re-wording I will withdraw it and will put it down again, but if it is all right I will just express my gratitude to the noble Lord.
LORD STONHAM: I must confess that I have not gone into the question of the wording. I have just made a decision on the debate and I will leave it that we will accept the Amendment, and if subsequently we find that different words are needed I will refer it back to the noble and learned Viscount.
4.52 p.m.
LORD STONHAM LORD STONHAM moved to leave out subsection (4) and to insert as a new subsection:
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"(4) For purposes of any enactment conferring rights of appeal in criminal cases, an order made by a court under this section in the case of a person subject to a suspended sentence shall be treated as a sentence passed on him by that court for the offence for which he was given the suspended sentence."
The noble Lord said: Subsection (4) of the clause gives an offender a right of appeal against an order made under paragraphs (a), (b) or (c) of subsection (1) bringing a suspended sentence into effect. The appeal would lie to the court to which an appeal would lie against a conviction by the court which made the order. In the case of the Court of Appeal, the subsection provides that the Court shall have the same power of dealing with the offender as the court below. As a result of the inclusion in the Bill of Clause 81—that is, against sentence passed at assizes or quarter sessions—which was added in Committee in another place and of the amendments proposed to be made to that clause by Amendments 109 and 111, it is necessary to revise subsection (4). The new subsection does not change the rights of appeal. Its main object is to avoid overlapping between this clause and Clause 81. It achieves this by providing that, for the purposes of rights of appeal, an order made by a court in activating a suspended sentence shall be regarded as a sentence passed by that court on an offender for the offence for which he was given the suspended sentence. The effect is that under the various enactments relating to appeals (the Criminal Appeal Act 1907, Magistrates' Courts Act 1952 and Clause 81 of the Bill, as revised by later Amendments), there will be a right of appeal against an order made under subsections (1)(a), (b) or (c) of Clause 31, otherwise than on appeal, bringing a suspended sentence into effect.
The new subsection omits a reference to the Court of Appeal having the same power to deal with the offender as the court below. This provision is unnecessary because similar provision is made in Clause 81(7), which is being revised by Amendment 111. I appreciate that in matters of this kind, which I myself have to read through six times before I understand them, it is not always easy for the whole thing to be understood on a first reading, but it seems to me to be a sound and necessary change. I beg to move.
Amendment moved—
Page 23, line 36, leave out subsection (4) and insert the said new subsection.—(Lord Stonham.)
On Question, whether Clause 31, as amended, shall stand part of the Bill?
LORD HAMILTON OF DALZELL: I should like to return to the point I was making before. The noble Lord has explained that his apparent intention is that the enforcement of a suspended sentence on the occasion of a next offence shall be more or less automatic, or at least there will have to be good reasons for not enforcing it.
LORD STONHAM: I must immediately interrupt the noble Lord. He must not attribute any such statement to me. The court has considerable power. What I say is what in fact the subsection says, namely, that the court "shall"—or in other words "must"—make an order under paragraph (a) unless it is of the opinion that it would be unjust to do so. That is a very different thing from saying that the execution of a suspended sentence is automatic when an offender is brought before the court on the next occasion.
LORD HAMILTON OF DALZELL: Perhaps, "automatic" is over-stating it, hut at any rate it is obligatory on a court to make an order unless they can produce some good reason why they should not. Does not the noble Lord feel that the result may be that a certain number of people will be sent to prison on this occasion who would not have been if the courts had not been tied in that way? Also I do not think the noble Lord answered my question in regard to the social inquiry report. I am sure it is right that no person should be sent to prison without a social inquiry report on him. At what stage will this be done under the suspended sentence system?
LORD STONHAM: Obviously if it is to have any effect on whether or not the man goes to prison it must be before the court makes up its mind what to do with him. I hope there would be no doubt whatever about that. With regard to the noble Lord's other point, I feel that the language of the subsection is perfectly clear, and in the discussion on the noble and learned Viscount's Amend-
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ment—a point confirmed by the noble and learned Lord the Lord Chief Justice—there was no question that the language was not clear. The only point at issue was one which I accepted, that it might be useful if the court should be obliged to state its reasons for not automatically sending a man to prison when he came up on a second offence. I am sorry if it is still not quite clear to the noble Lord, Lord Hamilton of Dalzell, but I should be glad to talk to him about it privately, or to write to him.
LORD CHAMPION: My noble friend said he hoped the court would have before it the result of the social inquiry. It seems to me that this ought to be very much stronger than just a hope. Is there any obligation upon the court to ensure this? I have forgotten whether it is the case that they must have such a report before them before coming to the suspended sentence.
LORD STONHAM: I am glad my noble friend has corrected my choice of words. I will delete "hope" and say "they will", and we shall come to that part of the Bill a little later.
Clause 31, as amended, agreed to.
Clauses 32 to 34 agreed to.
Clause 35 [Restriction on magistrates' courts' power to impose imprisonment for default in payment of fines, etc.]:
5.0 p.m.
On Question, Whether Clause 35 shall stand part of the Bill?
LORD BROOKE OF CUMNOR: This is an important clause and I think we need to be satisfied that the provisions for enforcement and payment of fines, as they will be if this clause becomes law, will not only be effective in securing the ultimate result, but also will not impose an intolerable amount of extra work and, maybe, waste of time by all concerned. I think I understand the clause. I do not think I need go over the procedure and ask the noble Lord to correct me if I make a mistake. I would rather proceed by asking him two questions.
First, have the Government any knowledge of a similar scheme elsewhere in the world from which we can learn? I am quite certain that the Government wish to set at rest the doubts which have

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been expressed in some quarters that in fact if this new procedure is adopted these fines will never be paid. I do not take that view, but it is important to realise that some people have mistakenly imagined that the new scheme will be ineffective. In the long run, it should be effective. I should be grateful if the noble Lord could tell us whether this scheme has been designed entirely from the Government's own thinking, or whether it is based on studies of any schemes that have been adopted in other countries.
My second question is a more technical one. It relates to paragraph (b) of subsection (5) of the clause, and we are coming here to the ultimate action of issuing a warrant of commitment for default. There will be some people who are constantly before the court, and frequently fined, and who will never pay if they can help it. That is a type of person to whom we must have regard. I should have thought subsection (5) should be so drafted that the court could take into account its past experience with a man like that. But as I read the clause, that is not possible. The magistrates cannot in any particular case rely on their knowledge of the man's usual recalcitrance. They cannot say that they have considered and tried all other methods, and that the time has come to issue a warrant of commitment, unless on each occasion they have been through the whole procedure of a means inquiry. The word used in paragraph (b) is "sum"—
"…the court has considered or tried all other methods of enforcing payment of the sum".
The fact that they have tried all methods of enforcing payment of previous sums is irrelevant under the clause as it is drafted.
I would ask the noble Lord whether the procedure could not be improved by some amendment to paragraph (b) which would enable the court to take account of what had happened with a man like this on earlier occasions. If he was notorious for failure to pay in previous cases it would seem to me that the time and trouble involved in enforcing payment in subsequent cases after a certain stage could reasonably be shortened without the necessity of considering and trying all other methods of enforcing payment of this new sum, which it will be incum-
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bent on the court to do if paragraph (b) stands as it is. I am quite sure the noble Lord is aware of the dangers of delay and excessive work in these matters. Maybe that sort of man is completely uncooperative and fails to comply with an order under subsection (8). In that event he then incurs a fine under subsection (9), which again has got to be dealt with individually as a new case, and the whole thing may "snowball". I am not suggesting any fundamental change. I hope that the Government have completely satisfied themselves that this plan will work, but I submit that it might be desirable at Report stage to amend subsection (5) in the way I have suggested.
LORD STONHAM: I am most grateful to the noble Lord, Lord Brooke of Cumnor, for bringing up these points. To a large extent, as I am sure he will appreciate from his own experience, this clause is a modification of the existing law in detail. In effect, we are extending, and to some extent codifying, existing practice. The noble Lord picked on subsection (5), a new requirement which provides that in every case where a means inquiry is to be held the court must try, or consider, every other means of enforcement before committing the defaulter to prison. With regard to the noble Lord's first question, have we delved into experience in other countries, so far as I am aware there is no other country which follows exactly our ideas, certainly not exactly the same scheme. As the noble Lord is aware, there are a number of countries where attachment of earnings is found, and this is an important extension to something we have had since 1958 with regard to maintenance orders.
With regard to the noble Lord's idea that offenders will be less likely to pay their fines, or that there will be greater difficulty in getting them to pay, we think that the provisions in the Bill will not result in a significant weakening of the powers of the court to enforce payment of fines. If an offender does not pay he will be brought up for a means inquiry, and if other means are not successful he can be committed to prison, just as he can now. Of course in some cases the enforcement procedure will be more lengthy than it is now, and we think that is a price worth paying if it means that we get the money instead of keeping the chap in prison. But even now there are

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means inquiries in cases where time to pay is allowed, and of course there will be more means inquiries.
On the particular point about the "regular customer", the fellow who never pays until the last minute, and who might even be prepared to go to prison in the hope that someone else would pay for him, in a way the noble Lord is half right, because previous experience will naturally enable the court to consider whether other methods are inappropriate. They have that power, but there must always be a means inquiry. In some cases, of course, subsection (2)(b) of Clause 35 will be a help with people of the kind that the noble Lord has in mind. Therefore I do not think—and I do not think the noble Lord suggested it—that there is any need for revision or rewording of the clause, but certainly we will carefully study what he has had to say.
LORD BROOKE OF CUMNOR: I am grateful to the noble Lord for what he has said. I do not want any fundamental change, but I should be grateful if he would look again to see whether by some amendment of subsection (5) it could be put beyond any legal doubt that the court can take into consideration the fact that a defendant is a regular customer.
Clause 35 agreed to.
Clause 36 agreed to.
Clause 37 [Enforcement of payment of fines by attachment of earnings orders]:
On Question, Whether Clause 37 shall stand part of the Bill?
5.11 p.m.
LORD HAMILTON OF DALZELL: I should like to say a word on this clause, which makes it possible for the payment of fines to be enforced by an attachment of earnings order, in the same way as by a magistrates' order. Of course I welcome anything that makes easier the collection of fines. There is an appalling waste of time for everybody. Indeed, I have spent most of this morning with people who have not paid their fines and in trying to see whether means can be devised for making them do so. Experience with maintenance orders shows that an attachment of earnings order works well only when the person concerned wants it and he finds it convenient. It is like paying one's club subscriptions by banker's order. In some cases those
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concerned feel that it removes from them the temptation of spending their money before it gets to the court.
But it has drawbacks. One particularly unfortunate matter which arises in connection with the payment of fines to that the standard way of getting out of an attachment of earnings order is for a man to move his job. As soon as a man moves his job, the attachment of earnings order ceases to operate. This is not something one should encourage in people of the kind who are likely to come before the courts. It is difficult enough to keep them in a job as it is, without introducing something which encourages them to shift more often.
Another drawback to this is that it is necessary for the employer to be told that the attachment of earnings order has been made. In some cases it may have unfortunate results to the man if his employer has to be told that this has happened to him. The question has been raised, I think by the National Association of Probation Officers and others, and I mentioned it on Second Reading, whether it might be possible to arrange for fines to be paid through the P.A.Y.E. system. If that were possible it would be a satisfactory way of doing it, because on the changing of a man's job his P.A.Y.E. form goes wherever he goes and there is no difficulty about it. On the other hand, the employer with the P.A.Y.E. form would know only that the man's code number had been changed. These numbers are changing all the time through changes in the man's circumstances, and the employer would not know why it was happening. I should be grateful if the noble Lord could say whether this point has been looked into at all, or whether it could be.
LORD STONHAM: The noble Lord is rightly concerned with the fact that when a man has defaulted on fines and an attachment order is made the employer has to be told. That is unfortunate. But it is still more unfortunate if he has to be told that the man has "gone to jug". That is what would happen in the present circumstances.
LORD HAMILTON OF DALZELL: Please do not misunderstand me. I am not suggesting that this is a bad idea. I accept that it may well be useful in certain circumstances. All I am suggesting is that the P.A.Y.E. system would be

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better, and I was wondering whether it was in any way possible to adopt that system.
LORD STONHAM: That suggestion has been made, and no doubt it will be made to Mr. Justice Payne's Committee which is considering the question of civil debts. But although I am not aware of the details, I understand that the difficulties are very great indeed. Certainly it is a matter that on the surface looks to be a nice way of doing things, but I do not think I can give any conclusive answer now. Any legislation which would implement the recommendations of the Payne Committee when they are received and considered will automatically apply to fines under attachment of earnings orders. As I said, the Payne Committee is considering the particular proposal which the noble Lord has made, and I do not think it would be right for me to comment any further at the moment. The Criminal Justice Bill would not be an appropriate Bill to deal with civil fines, and therefore I should like to leave that point.
On the noble Lord's other points I think he must draw a distinction between the general attitude at present to the payment of maintenance orders in this way and the attitude which is likely with regard to ordinary fine defaulters. I have many a time asked a chap in prison, a decent fellow, apparently a craftsman, "What are you in here for?". He has said "A maintenance order", and I have said, "Would it not be better to pay rather than to be in prison?". He has said. "You do not know my wife!"
What I am trying to say is that many personal factors come into it which do not always arise, and are unlikely to arise in the case of the ordinary fine defaulter. We think that the process in the Bill is likely to help the fine defaulter who may be a regular wage earner but is so feckless as to be unable to manage his affairs. The employer may know that he is a little feckless in that way, but it would be much better to deal with the matter in this way, to get the money that he owes, and not to send him to prison.
Clause 37 agreed to.
Clause 38 [Fines imposed and recognizances forfeited at assizes and quarter sessions]:
5.18 p.m.
LORD STONHAM LORD STONHAM moved, in subsection (9), to leave out "the last foregoing section" and to insert "collection, enforcement and remission of the fine or other sum". The noble Lord said: I hope it will suit your Lordships' convenience if, with Amendment No. 43A, I discuss also Amendments Nos. 43B, and 136A and 136B which are in Schedule 5. The object of these rather technical Amendments is to deal with the case where a higher court imposes a fine and the magistrates' court becomes responsible for enforcement under Clause 38(3), and the offender resides in Scotland. As I said, it is a little complicated.
Under the present Bill, when a magistrates' court imposes a fine and the offender lives in Scotland, the court may make a transfer of fines order, with the result that the fine will be enforced by a convenient Scottish court. But the court may not make such an order if it has fixed a term of imprisonment to be served in default of the payment of the fine, because in such a case the court would, in effect, have decided that prison should follow if the offender defaulted, and there would be nothing for the Scottish court to do except commit the offender to prison if he defaulted. Under Clause 38(1) of the Bill a higher court will in all cases fix the term of imprisonment to be served in default; but this will have no effect on the means by which the fine is enforced, unless it is ultimately necessary to commit the offender to prison in default. Thus, there is no reason why enforcement of the fine should not be transferable to Scotland. If the fine was not transferable and there was a default, it would be necessary to bring the offender back to England for a means inquiry. Accordingly, these Amendments enable a transfer of fine order to Scotland to be made in these cases.
I will mention as briefly as I can the purpose of the Amendments. Subsection (1) of the new clause in Amendment 43B enables higher court fines to be transferred to Scotland, in spite of the fact that the term of imprisonment to be served in default will have been fixed. Subsection (2) abolishes the old procedure for enforcing these fines in Scotland. Amendment 136A inserts three new paragraphs in Schedule 5, to amend Sections 72A and B of the Magistrates' Courts Act 1952. The first paragraph—new

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paragraph 9—amends Section 72A of the 1952 Act, which provides that where enforcement of a fine is transferred to Scotland and the sum in question is £20 or more the court to enforce the fine shall be the sheriff court. This limit derives from the fact that a burgh court's powers of imprisonment are limited to 60 days, and that if a fine carries a liability of more than 60 days in default it has to go to a sheriff's court. When the Bill becomes law a fine will have to be over £50 before the default liability is more than 60 days—that is under Clause 77—and the upper limit of a fine that can be transferred to a burgh court can therefore be raised. The Amendment also provides that an English higher court fine shall always go to the sheriff court.
The second paragraph, new paragraph 10, makes a drafting amendment to section 72A of the 1952 Act. The third paragraph, new paragraph 11, makes the necessary provision for a magistrates' court in England to deal with a higher court fine transferred to Scotland and then transferred back again. Amendment 136B makes the necessary amendments to the Summary Jurisdiction (Scotland) Act 1954, to enable English higher court fines to be enforced in Scotland. I beg to move—
Amendment moved—
Page 31, line 27, leave out ("the last foregoing subsection") and insert ("collection, enforcement and remission of the fine or other sum")—(Lord Stonham.)
LORD BROOKE OF CUMNOR: The general purpose of this group of Amendments seems to me to be thoroughly sensible, but it is difficult stuff for a layman, as the noble Lord will agree. Therefore I hope that he will forgive me if I ask one question about how it will work. Subsection (8) of Clause 38 ensures that a fine which has been imposed, let us say, at assizes and then handed to a magistrates' court for enforcement shall not be reduced under subsection (10) of Clause 35 without the consent of a High Court Judge. What happens when one of these fines is transferred across the Border?
Suppose that a Scotsman has a fine imposed on him at assizes in, let us say, Exeter, and the court under Clause 39(3) orders the Exeter magistrates' court to enforce it; but then, under the powers given by these Amendments, that court transfers
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the fine order to the appropriate court in Glasgow. I certainly am not an expert in Scots law—nor for that matter do I claim to be an expert in English law—but I believe I am right in saying that under the existing law the Scottish court would have power to reduce the fine and, as I read these Amendments, would not have to ask anybody; whereas the English magistrates' court—the Exeter magistrates' court in my example—could not reduce the fine without first having to ask an English High Court Judge under subsection (8) of Clause 38 for permission to do so. It appears to me that the Scottish court of summary jurisdiction ought to be under the same obligation to consult an English High Court Judge before reducing a fine as the magistrates' court in England would be in the very same case. I rather suspect that the same thing would happen vice versa if the offence had been committed in Scotland. I shall entirely understand if the noble Lord says that without notice he cannot give me a complete answer, but I should be grateful to him for an explanation or some account of what the Government intend.
THE EARL OF MANSFIELD: Before the noble Lord answers, would he be kind enough to say whether, for the purposes of this Bill, a court of summary jurisdiction in Scotland includes a court presided over by a sheriff-substitute?
LORD STONHAM: On that point I should imagine that the noble Earl is right, but I should like to reserve a final answer on it, and will let him know. On the question raised by the noble Lord, Lord Brooke of Cumnor, I have been frenziedly looking through the clause to find the answer to his question, and I have come to the conclusion that we have not provided for the particular point which he raised. In the English courts the clause suggests the authorities to which the lower court must go before it can reduce or remit a fine, but there is no provision analogous to subsection (8) of Clause 38 when the fine is reduced under the Scottish law by a Scottish court. As it would appear that the noble Lord has found an omission here we will consider the matter and return to it on Report.
Clause 38, as amended, agreed to.
LORD STONHAM: I beg to move Amendment No. 43B.
Amendment moved—
After Clause 38 insert the following new clause:
Enforcement in Scotland of fines imposed at assizes or quarter sessions
(".—(1) The power of a magistrates' court or of a court of summary jurisdiction in Scotland to make a transfer of fine order under section 72A of the Magistrates' Courts Act 1952 (transfer of fine orders to Scotland) or section 44 of the Summary Jurisdiction (Scotland) Act 1954 (transfer of fine orders within and from Scotland) shall be exercisable in relation to a fine imposed on any person or a sum clue from any person under a recognizance forfeited by a court of assize or quarter sessions the payment of which is enforceable by the magistrates' court or court of summary jurisdiction, notwithstanding that the court of assize or quarter sessions has in pursuance of the last foregoing section fixed a term of imprisonment which that person is to undergo if the fine or other sum is not duly paid or recovered.
(2) Section 24 of the Queen's Remembrancer Act 1859 (recovery of fines and other debts due to the Crown in other parts of the United Kingdom) shall cease to apply to the enforcement in Scotland of a fine imposed or a sum due under a recognizance forfeited by a court of assize or quarter sessions.")—(Lord Stonham.)
Clauses 39 to 44 agreed to.
LORD STONHAM LORD STONHAM moved, after Clause 44, to insert the following new clause:
Selection of probation officers
". A probation officer under whose supervision a woman or girl is placed in pursuance of an order under section 3 of the Criminal Justice Act 1948 or any provision of the Children and Young Persons Act 1933 may be a man or a woman, and accordingly paragraph 4(2) of Schedule 5 to the said Act of 1948 and paragraph 13 of Schedule I to the Children and Young Persons Act 1963 (which provide that the officer must be a woman) shall cease to have effect."
The noble Lord said: This is a new clause dealing with the selection of probation officers, and I have no doubt that the noble Lord, Lord Hamilton of Dalzell, will be interested to hear that this will probably be the first time during the proceedings on this Bill that I shall have his approval.
The clause repeals paragraph 4(2) of the Fifth Schedule to the Criminal Justice Act 1948 and paragraph 13 of the First Schedule to the Children and Young Persons Act 1963. The effect of these
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paragraphs is that the probation officer under whose supervision a woman or girl is placed must be a woman. The National Association of Probation Officers regard these provisions as unnecessarily restrictive; and although in general it may still be thought right that statutory supervision should usually be exercised by an officer of the same sex as the person under supervision, it would accord with law and practice in the child care and other welfare services to leave to administrative arrangement the choice of sex of the supervising officer. Schedule 6 to the Bill already provides for the repeal of these paragraphs. These repeals were in the Bill as introduced into the House of Commons, but unfortunately the supporting provision in the body of the Bill was overlooked. That is why this new clause is now necessary. I beg to move.
Amendment moved—
After Clause 44, insert the said new clause.—(Lord Stonham.)
LORD HAMILTON OF DALZELL: am grateful to the noble Lord, Lord Stonham, for introducing this new clause. It is something which the Probation Service have been anxious to have, and it brings them into the same position as the other child welfare services. I must say that I had thought this point was already covered in the Bill, but I am delighted to welcome this new clause.
5.32 p.m.
LORD CHORLEY LORD CHORLEY moved, after Clause 44, to insert the following new clause:
Power of Court imposing fine to make probation order
". In any case where a court imposes a fine it shall also have power to make a probation order."
The noble Lord said: I put down this Amendment in order to draw attention to what I think every magistrate to whom I have spoken about this problem feels regarding the incapacity of benches of magistrates, and indeed of judges, to impose a fine on a young man who is a candidate for a probation order. Many of these young men who are brought before courts are earning very good wages, and it would be a sensible punishment to inflict upon them a smart fine for what they have been doing. On the other hand, they are young men who obviously need looking after in the way

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that a probation officer can look after and supervise a young, undisciplined adolescent, and the balance of the argument in almost all cases is in favour of making a probation order.
As the law stands at the present time, magistrates cannot inflict a fine and make a probation order, although time after time in my own court—and I am told that it is very much the same in other courts—magistrates shake their heads and say, "It is a great pity that we cannot fine him as well. It would be good if he had to pay something out of the £15 or £20, or even more, wages which he is earning every week, and of which he is taking only £2 back to his mother, and if he were deprived of some of the pleasures which he is able to purchase out of those very substantial wages." But at present, as I have indicated, that cannot be done. It is interesting to find that this point is put very well in the May 13 issue of the Justice of the Peace, where the author of the column, From Court 4, which appears in that journal every week, writes:
"I looked in vain for the one provision that all magistrates would have welcomed; that a youth could be put on probation and fined as well."
I am sure the writer is quite correct when he says that all magistrates would have welcomed this. He goes on:
"In so many cases these youths before a court have too much money to spend on themselves and their nefarious activities, yet display such total immaturity that they would benefit from having some supervision by an experienced probation officer."
That is possibly putting in better words the view which I was attempting to put before your Lordships' Committee.
I appreciate that as a matter of strict logic this Amendment does not hold water. In effect, when a court makes a probation order on a man it is telling him that if he does not go straight he will be brought back and punished. But a fine is already a punishment, and if the court inflicts a fine it will have punished him. Therefore, I suppose that, as a matter of strict logic, a court cannot do this, especially as, in effect, it would involve the court's saying, "When you come back we shall want a rather stronger sanction and we shall have to send you to prison". I am not sure whether my form of words meets this difficulty. I have not had any expert
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advice and I am not proposing to press this Amendment to a Division. But the Government ought to know that there is a very strong feeling to this effect throughout the magistracy.
I think there are cases in practical life when logic ought to be sacrificed to the practical needs of the situation, and I am quite sure that this is one of those cases. I should be very grateful if the Government would look at this point and see whether they can provide us with something of the sort. I am not suggesting that my words are the right ones, but it cannot be beyond the wit of man, and certainly not beyond the wit of the experienced Parliamentary Counsel who work for the Government, to secure a set of words which would achieve this objective. Therefore, in order that the Government may look at this problem and tell us what they think, I beg to move this Amendment.
Amendment moved—
After Clause 44, insert the said new clause.—(Lord Chorley.)
LORD HAMILTON OF DALZELL: I must say that as a magistrate I have sometimes felt, and I know that many of my colleagues have felt, inclined to agree with the point of view which the noble Lord, Lord Chorley, has put forward. But I know that the Probation Service, I think with reason, see considerable difficulties in combining a fine and a probation order. After all, as the noble Lord, Lord Chorley, said, when a court puts someone on probation it is saying, in effect: "We are not going to punish you now; we are going to put you on probation. We are going to give you a chance and arrange for someone to help you with your affairs. We hope that you will not get into any more trouble, but if you do various things will happen." It is difficult to combine that approach with saying at the same time, "We are going to punish you and at the same time we are going to do the other thing." The two do not go well together.
Furthermore, there is the practical difficulty that a person who is not a juvenile has to be asked if he is willing to accept a probation order. There is some difficulty in saying, on the one hand, "We are going to impose a fine on you", and on the other, "We are going to invite you to accept a probation

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order, but you are not obliged to accept." I think this is all a little difficult and needs much more consideration. I understand that the matter is being considered at the moment by the Advisory Council on the Penal System, and I shall be very interested to see what they come up with. But at the moment I should not be prepared to accept the point of view of the noble Lord, Lord Chorley.
LORD BOWLES: The Committee are obliged to the noble Lord, Lord Chorley, for moving this Amendment and asking the Government to look into the matter. As he says quite correctly, at present the provision in Section 3(1) of the Criminal Justice Act 1948, that the court may make a probation order in relation to an offender "instead of sentencing him", prevents the court from combining a fine with probation for the same offence. My noble friend's Amendment is aimed at combining the benefit of punishment with the benefit of supervision. It has been suggested that such a combination would emphasise that the offender has not been "let off".
This idea has been put forward by a number of bodies, and at first sight the proposal is attractive because it suggests that courts can obtain the best of both worlds—the shock or deterrent effect of punishment, together with professional supervision. But the proposal presents considerable difficulties. As the noble Lord, Lord Hamilton of Dalzell, has said, to introduce a penal element into the probation situation would undermine the voluntary nature of a probation order. At present, a probation order cannot be made unless the offender consents to it, and its contractual basis is said to lend useful support for the probation officer's subsequent efforts to secure the probationer's co-operation.
The Government have an open mind on how these conflicting considerations should be resolved. The Home Secretary has referred to the Advisory Council on the Penal System the whole question of non-custodial penalties, and the subcommittee of the Council which is considering it, under the chairmanship of my noble friend Baroness Wootton of Abinger, is actively pursuing the suggestion that it should be possible to combine probation with a fine or other penalty. In advance of the Council's considered
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view, the Government feel that it would be premature to make the change proposed in the Amendment, particularly as previous inquiries have come down against it. The Home Secretary's Advisory Council on Probation and After-care recently recommended unanimously against it. In these circumstances, I must ask your Lordships to reject the Amendment.
LORD HAMILTON OF DALZELL: I think that by a slip I implied in what I said just now that a person had to agree to a probation order only if he was not a juvenile. Actually, the line is drawn much lower than that, I think at the age of 14, when the offender has to consent to a probation order.
LORD CHORLEY: As I said when I moved this Amendment, I have no intention of pressing it to a Division. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 45 [Committal for sentence for Offences tried summarily]:
LORD STONHAM LORD STONHAM moved, in subsection (5), to leave out the third "section" and to insert "subsection". The noble Lord said: I beg to move Amendment No. 46. With the permission of the Committee, I should like to speak also to Amendments Nos. 47, 48, 49, 50, 51 52, 54, and 55—that is, nine Amendments in all. This group of nine Amendments (which to be understood have to be considered as a group) is required to improve Clause 45. They have been decided upon after consultation with the Ministry of Transport. The Amendment of substance is Amendment No. 48, which is to page 37, line 10, and which makes interim disqualification permissive instead of mandatory.
Clause 45 enables magistrates, when using existing provisions to commit an offender to a higher court to be dealt with, to commit him also to be dealt with in respect of offences of which he stands convicted but not sentenced but which are not within the existing powers of committal for sentence. In such circumstances, the lower court's duties and powers in regard to endorsement and disqualification for motoring offences are transferred to the higher court, so that the higher court may view the whole complex of offences and decide upon an appropriate

705
sentence without being inhibited by the decisions of the lower court. Since, however, it may be necessary to ensure that the offender is kept off the road between conviction by the magistrates and sentence by the court of assize or quarter sessions, the clause confers on magistrates a power, and in certain circumstances imposes a duty—I am speaking of the clause as it now is—to impose a temporary disqualification during the interim period, leaving the question of substantive disqualification to the sentencing court.
I come now to the Amendment of substance, Amendment No. 48. Subsection (8) of the clause, as at present drafted, provides that where magistrates commit an offender to be dealt with by a higher court for an offence punishable under the Road Traffic Acts with disqualification then, where the disqualification is mandatory, the magistrates have a duty to order interim disqualification, and, where it is discretionary, they have a power to order interim disqualification. This dual provision was designed to make the subsections of the clause accord, so far as possible, with the substantive Road Traffic law. Such a distinction, however, between a power and a duty has led to difficulty. Even where disqualification is mandatory under the Road Traffic Acts, courts are empowered to find special reasons or mitigating circumstances for not disqualifying.
The question is, in what cases the duty to impose an interim disqualification arises. Does the duty arise before the court has considered whether or not there are special reasons for not disqualifying, or only where the court has considered the question and decided that there are no special reasons? In any event, we do not want the lower court to be concerned at all with the question of special reasons or mitigating circumstances, since these should relate not to interim but to substantive disqualification. Otherwise, the sentencing court—that is, the higher court—might be embarrassed if it finds that its view of the existence of special reasons conflicts with that of the convicting court. An offender having been convicted at the magistrates' court and sent up for sentence, if there has been a mandatory interim disqualification then the higher court might be embarrassed if it disagreed with the views of the con-
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victing court which decided the question of interim disqualification. I hope the noble Lord is with me.
To avoid this difficulty the Amendment makes an order of interim disqualification entirely within the discretion of the magistrates: it makes it permissive. The higher court cannot, therefore, be embarrassed if it finds that there are no special reasons for not disqualifying the defendant, because the discretion of the court below is not expressed in terms of special reasons. There is no need to fear that this discretion will result in dangerous drivers being let loose on the roads during the period between conviction and sentence, because Clause 45 operates not on the ordinary decent motorist but on offenders who have been committed to higher courts under enactments which are basically designed for cases where the magistrates' powers of sentence are thought to be insufficient. Usually, these chaps will be in custody; but, even if they are not, the fact that magistrates intend them to be severely dealt with by the higher court seems sufficient guarantee against any undue leniency in regard to interim disqualification.
The effect of the other Amendments, which are either drafting or procedural—I will go through them as quickly as possible—is as follows. Amendments Nos. 46 and 47 are only drafting improvements. Amendment No. 49 makes procedural improvements of the existing clause. The first new subsection requires an offender in whose case the magistrates ordered interim disqualification to produce his driving licence to the magistrates' court, which is then to forward it to the court by which he is to be dealt with. Non-production is punishable with a fine of £50, as for non-production to a court which, under existing road traffic law, has ordered endorsement. The second new subsection requires a court which has imposed an interim disqualification to notify the appropriate licensing authority of the order. Where the higher court to which the offender is committed determines not to order a substantive disqualification, that court has a duty to notify the licensing authority of its decision, so that the licensing authority will know that no further action has been taken in regard to the order of interim disqualification ordered by the magistrates. Otherwise, there would he doubt on the part of the licensing authority as

707
to how the case had eventually been disposed of.
Amendments Nos. 50 and 51 are drafting Amendments. Amendment No. 52 is a new subsection to replace the existing subsection (10) which back-dates a substantive disqualification ordered by the higher court to the date of any interim disqualification ordered by the lower court. A new subsection is necessary here to ensure that higher courts are not prevented from making their orders of disqualification consecutive to any disqualification already in force; they can tack it on. It provides merely that a substantive disqualification shall be reduced by any period during which the offender was disqualified by reason only of an order of interim disqualification. Amendments Nos. 54 and 55 are drafting Amendments to remove ambiguities. I beg to move Amendment No. 46.
Amendment moved—
Page 36, line 28, leave out ("section") and insert ("subsection").—(Lord Stonham.)
LORD SOMERS: I should like to say a word or two about this clause. I had intended to deal with the whole matter of the law as regards motoring in a Motion which I had put down. Unfortunately, a date could not be found for it, and it will have to wait until after the Summer Recess. But as we are on this point at the moment I should like to say that I personally am not satisfied at all that disqualification is a suitable penalty for motoring offences unless it happens to be total disqualification for life—and that could be imposed, of course, only in absolutely proven cases of motorists who are incapable of driving properly. In lesser offences where a motorist has committed, say, three or four offences of careless driving, and the court orders him to be disqualified, he stops driving for a year. But when he comes back to driving he is even worse than when he ceased to drive, because he has had a year without any driving practice. I think a far more suitable punishment would be to relegate him again to the learner stage and insist on his again passing a test—an even stiffer one than the ordinary standard test—before he regains his licence. I think that these short periods of disqualification are a very serious threat to his standard of driving on the road; for if
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he has been a poor driver before he will most certainly have become a poorer one afterwards.
THE EARL OF MANSFIELD: There are two observations that I should like to make on these Amendments. First, while I approve No. 48 I would point out to the noble Lord, Lord Stonham, that this is a complete reversal of the Government's attitude hitherto, inasmuch as it gives discretion to magistrates, which is the very thing the Government refuse to do throughout the rest of the Bill. I am afraid that I must disagree with my noble friend Lord Somers on the question of disqualification. He spoke of it as being applied to the merely careless driver who has several accidents through lack of skill and slowness of perception. But there are other people who lose their licences not through careless driving but through wilfully reckless and dangerous driving. Those people should be off the road for a considerable period.
LORD SOMERS: May I interrupt my noble friend? I agree with him that they should be disqualified for life.
THE EARL OF MANSFIELD: While in regard to most penalties I am normally probably more drastic in my views than most noble Lords, in this case I am considerably less drastic than my noble friend Lord Somers. I do not think for a moment that because a man—very likely a young man, with all the recklessness of youth—has had several accidents while driving, he should necessarily be disqualified for life. I would say that he should be disqualified for two, three, five or ten years, or whatever may be called for—and in particular the latter if there was involved the death or even the serious injury of a fellow-user of the road. But I feel that there should be some "middle distance" between imposing a heavy fine and imposing disqualification for life.
LORD CHORLEY: Perhaps there could be laid down a rule that if a driver were disqualified for 12 months or more, he should thereafter go through a driving test again and, following that, he could as it were, be worked back into driving properly. I agree that after a man has been off the road for a substantial period he is hardly competent to drive in heavy traffic. The fact that he did quite a lot of driving before he was disqualified

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is neither here nor there; particularly so because as one gets older one loses one's facility in driving.
LORD DERWENT: I do not want to join in my noble friend's private war, in which the noble Lord, Lord Chorley, has now joined. I want merely to thank the noble Lord, Lord Stonham, for his explanation. When he started, I was under the impression that I did not understand quite how all these series of Amendments worked. I now think I do understand. I shall read what he has said, however, and if I do not understand them I will come back to him.
LORD STONHAM: I am most grateful to the noble Lord, Lord Derwent; because that makes two of us. I understand them now, too. It is one of the most delightful features of your Lordships' House that a noble Lord can stand up with the full approval of your Lordships in a discussion on an Amendment and make a speech which has no kind of bearing at all on that Amendment. I am sure that we were all delighted to have heard the observations of the noble Lord, Lord Somers—which were in some measure supported by my noble friend Lord Chorley—to the effect that when a man has been disqualified for a year he then ought to take another course of instruction.
I am glad to say that I agree with the noble Earl, Lord Mansfield. Over the last three years I have been very sorry to find that the happy state of affairs which existed when I was in Opposition and when the noble Earl was supporting the Government, when we nearly always agreed, has not continued now that the position is reversed. I am glad that I can find something with which to agree with him; namely, that a man who is disqualified usually is not disqualified only for carelessness; he is often a good driver who is not concerned to drive well or with full consideration for others, but to drive in all kinds of circumstances where no driving training would have any effect on his road conduct at all. I would say to the noble Lord, Lord Somers, that personally I agree with him; but we have to consider the worst people.
With the point made by the noble Lord, Lord Mansfield, about this Amendment being a complete (but, to him, welcome) reversal of Government policy, I must disagree. We are concerned here
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only with interim disqualification, the case of a man who has committed a bad motoring offence and who is almost certainly going to be remanded in prison. It is just a question of leaving to a higher court not only the sentence, but also any decision with regard to special reasons which would affect disqualification. The purpose of this Amendment is to ensure that there should be no unnecessary and avoidable disagreement between a lower court and a higher court, or indeed by prejudging an issue which does not need to be judged at that time, to inhibit the higher court freely from expressing a considered opinion. I hope that with that explanation the Committee will accept the Amendment.
LORD STONHAM: I beg to move Amendment No. 47.
Amendment moved—
Page 36, line 33, after ("by") insert ("virtue of").—(Lord Stonham.)
LORD STONHAM: I think it would be for the convenience of the Committee if I moved together Amendments Nos. 48, 49, 50, 51 and 52. I beg to move.
Amendments moved—
Page 37, line 10, leave out from ("disqualified") to ("nevertheless") in line 11 and insert ("it may")
Page 37, line 13, leave out from ("offence") to end of line 16 and insert—
("( ) Where a court makes an order under the last foregoing subsection in respect of any person, it shall require him to produce to the court any licence under Part II of the Road Traffic Act 1960, and any Northern Ireland licence, held by him and shall cause any such licence to be sent to the clerk of the court to which he is committed; and if he does not produce any such licence as required he shall he liable on summary conviction to a fine not exceeding £50.
( ) Where a court makes any such order in respect of any person, sections 112 and 116(2) of the Road Traffic Act 1960 (supplementary provisions as to disqualification and endorsement) and section 7(1) of the Road Traffic Act 1962 (endorsements) shall not apply in relation to the order, but the court shall—

(a) if he holds a licence under the said Part II, send notice of the order to the licensing authority by which the licence was granted and to the licensing authority in whose area he resides;

(b) if he holds a Northern Ireland licence, send such a notice to the Minister of Transport;

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and the court to which he is committed shall, if it determines not to order him to be disqualified under section 5 of the Road Traffic Act 1962, send notice of the determination to any such licensing authority or the Ministry of Transport, as the case may require."
Page 37, line 20, after ("Part") insert ("I or")
Page 37, line 21, leave out from ("involving") to ("section") in line 23, and insert ("disqualification) and no order is made in his case under subsection (8) of this section")
Page 37, line 26, leave out subsection (10) and insert—
"( ) A period of disqualification imposed on any person by virtue of subsection (5) of this section shall be treated as reduced by any period during which he was disqualified by reason only of an order made under subsection (8) thereof; but a period during which he was so disqualified shall not be taken into account under this subsection for the purpose of reducing more than one other period of disqualification.")—(Lord Stonham.)
6.0 p.m.
LORD HAMILTON OF DALZELL LORD HAMILTON OF DALZELL moved, after subsection (10), to insert:
"( ) A Magistrates' Court shall not order an offender to be disqualified under Section 5 of the Road Traffic Act 1962 for a period exceeding two years if the offender is under the age of 21 years or has not previously been convicted of an offence for which disqualification could be ordered."
The noble Lord said: This Amendment arises from the disquiet which has been felt by probation officers and others about the unfortunate effect, especially on younger people, of overlong periods of disqualification. Very often the first disqualification is imposed for some foolish act arising from youth and inexperience more than anything else, and this course of behaviour is something it may be hoped that the young offender will grow out of. Long disqualifications are often imposed for these offences. Sometimes I think it is because courts feel difficulty about imposing a heavy fine on someone who has not much money, and are apt to redress the balance by reducing the amount of the fine and increasing the period of disqualification. The effect on the young person is serious. Not only does the inability to drive impair his social status but it may also have a damaging effect on the possibility of getting the sort of job he desires.
As I am sure we all remember, in youth years seem longer than they do when we get older. When one is young a period of four or five years ahead seems a very long time. In many cases, therefore, the temptation proves too strong and the young man drives again. He may be caught while doing so and, without having done anything wrong in the way of committing an actual traffic offence, he is further disqualified, making the whole situation worse. I have been told of examples where the period of disqualification has been increased in this way so that the commission, in the first instance, of one not very serious offence has led to a long disqualification without there being any evidence of any further actual bad driving. This situation leads to an increasing feeling of frustration and injustice in the young person concerned. I think my Amendment does something to help matters in this respect, and I hope that it will commend itself to the Committee.
I wish to make one other point. The intention of the Amendment is that if a magistrates' court feels that a longer period of disqualification is called for than they have the power to impose they should be able to send an offender to quarter sessions for sentence. I am not sure whether that follows automatically, but if the Amendment is accepted in principle, no doubt any omission in that respect could easily be rectified at a later stage. I beg to move.
Amendment moved—
Page 37, line 30, at end insert the said subsection.—(Lord Hamilton of Dalzell.)
LORD STONHAM: Whatever the merit of the Amendment, I have to tell the noble Lord that it is completely outside the scope of Clause 45, which deals simply with procedure to be followed in the case of offenders committed to a higher court to be sentenced or dealt with. None of the provisions in the clause in any way alters the sentences or periods of disqualification which may be imposed for particular offences, or on particular classes of offenders, since the whole object of the clause is to reform procedure rather than to adjust sentencing power.
LORD HAMILTON OF DALZELL: I am sorry to interrupt the noble Lord. I appreciate what he is saying. I am not very experienced in these matters, but I

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thought that my Amendment would insert a new clause. I see that its content has nothing to do with the rest of Clause 45.
LORD STONHAM: I have before me now the Amendment to insert words at the end of line 30.
LORD HAMILTON OF DALZELL: Yes, that is quite true.
LORD STONHAM: If I may help the noble Lord, as I intend to be helpful, may I say that in his Amendment he refers to a magistrates' court which:
"shall not order an offender to be disqualified under Section 5 of the Road Traffic Act 1962 for a period exceeding two years if the offender is under the age of 21 years or has not previously been convicted …"
Section 5 of the Road Traffic Act prescribes certain minimum periods of disqualification. In the case of mandatory disqualification, 12 months, unless there are special reasons, and three years (these are minima) in the case of a conviction for driving under the influence where there has been a previous conviction for such an offence within the preceding ten years. In the case of discretionary disqualification it is for such period as the court thinks fit. In the case of totting up offences, it is six months, unless there are mitigating circumstances, and this adds to the difficulty of dealing with the noble Lord's Amendment.
It is true that several of the provisions in the clause we are considering, Clause 45, deal with powers of convicting and sentencing and disqualifying people from driving, and magistrates are given new powers to impose an interim disqualification on offenders committed to be dealt with by a higher court. But I did not want to ride off on that, and so, as it is a matter for the road traffic law and not criminal procedure and we cannot deal with it here, I have consulted my right honourable friend the Minister of Transport. She would not welcome a restriction on the powers of the courts in motoring cases. Disqualification is a means of protecting the public against drivers who are a danger on the roads. A driver who commits a disqualifiable offence is no less a danger because he is under the age of 21. Indeed, if he is a compulsive young driver he may be a bigger danger than an adult. I submit that the courts should not be prevented by reason of the offender's age from disqualifying for such
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a period as seems necessary to the court in the light of the nature of the offence.
In the case of an offender who has not previously committed an offence punishable with disqualification, no doubt the court would take his record into account on the first occasion on which a disqualification is ordered, but we think it unwise to compel them to do so in this way. It might be that a first offence, the first offence for which a disqualification may be imposed, even in respect of a young person under 21, might be an appalling case of dangerous and drunken driving of the worst kind. The offences of dangerous driving and driving under the influence are punishable by imprisonment as well as disqualification, and a restriction on the length of the disqualification could result in a sentence of imprisonment being imposed because the court considered that a disqualification for two years was not an adequate punishment for the offence. In our view the Amendment would not conduce to road safety and the protection of the public. Although the noble Lord has made clear that he accepts what I said about the Amendment not belonging to this part of the Bill, or indeed to the Bill at all, I hope he will understand that I have gone into the matter, and on other grounds the Amendment would not be acceptable.
THE EARL OF MANSFIELD: On this occasion my sympathies are entirely on the side of the noble Lord, Lord Stonham, and the Government. I think it would be most regrettable for the discretion of a court to be interfered with. Nearly all your Lordships will be aware of gross cases, not merely of negligent but of dangerous driving, on the part of young people under 21 which have occasioned death or serious injury to other road users. In many of these cases it would have been entirely wrong that they should not have been disqualified from driving for a longer period than two years. I am sure that we should leave it to the discretion of the courts to apply the period of disqualification which seems most proper to them.
LORD CHORLEY: I think that the noble Lord, Lord Hamilton of Dalzell, has hit on a sound point. Anyone who has much experience of dealing with these young people who have been disqualified

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in this way must realise how tremendously compulsive is the temptation. If the disqualification is built up to a substantial period I do not think there is any real chance of an offender reforming. But however difficult the problem may be from a technical point of view, a real effort ought to be made to find some way round the question, because, from the point of view of the community as a whole, it is important that a young chap should restrain himself and come back feeling that he will make a real effort to drive reasonably carefully. It may be that this Amendment does not handle this technically in the right way, but I hope that an effort will be made to do something about it.
LORD HAMILTON OF DALZELL: I am grateful to the noble Lord, Lord Stonham, for dealing with my Amendment on its merits, despite the obvious difficulty from the technical point of view, and I appreciate what he says. I am grateful to the noble Lord, Lord Chorley, who has understood what I am trying to get at. I think that this is felt by most people in the country. One thing which should be understood, and which arises from the debate on my left a little earlier, to which the noble Lord, Lord Stonham, referred, is that disqualification is not going to make offenders any better drivers when they come back. Disqualification as at present applied is a punishment. Obviously if it was not intended as that, we should have an elaborate system of retraining. At the moment it is regarded solely as a punishment, in the hope that an offender, by being deprived of the right to drive, will learn a lesson. But there is no reason to suppose that he will be a better driver at the end of one, two or three years' disqualification.
In regard to what the noble Earl, Lord Mansfield, said, I wish magistrates to have power to send to quarter sessions anyone whom they thought should have a greater period of disqualification than they have power to impose. We accept that magistrates' courts are not allowed to send a man to prison for more than six months, and we would also accept this limitation on the period of disqualification that the court should impose. I beg leave to withdraw my Amendment.
LORD SOMERS: Before the noble Lord withdraws his Amendment, may I say that I should have thought the answer to his point is that an offender should come back as an "L" driver.
Amendment, by leave, withdrawn.
LORD STONHAM: I beg to move Amendment No. 54.
Amendment moved—
Page 37, line 33, leave out ("and") and insert ("under Part II of the Road Traffic Act 1960").—(Lord Stonham.)
LORD STONHAM: I beg to move the next Amendment.
Amendment moved—
Page 37, line 34, leave out from ("vehicle") to end of line 35 and insert ("and
'Northern Ireland licence' means a licence under any such provision as is mentioned in section 116(1) of the said Act of 1960 (use of Northern Ireland licences in Great Britain).")—(Lord Stonham.)
Clause 45, as amended, agreed to.
Clause 46 and 47 agreed to.
Clause 48:
Constitution and functions of Prison Licensing Board and local review committees
48.—(1) For the purpose of exercising the functions conferred on it by this Part of this Act there shall be a body to be known as the Prison Licensing Board consisting of a chairman and not less than four other members appointed by the Secretary of State.
(3) The following provisions shall have effect with respect to the proceedings of the Board on any case referred to it, that is to say—

(a) the Board shall deal with the case on consideration of any documents given to it by the Secretary of State; and

(5) The Secretary of State may by rules make provision—

(a) for the establishment and constitution of local review committees having the duty of reviewing at such times or in such circumstances as may be prescribed by or determined under the rules the cases of persons who are or will become eligible for release under section 49 or 50 of this Act and reporting to the Secretary of State on their suitability for release on licence; and

(b) for the interview of such persons by a member of any such committee (not being a prison officer);

and rules under this subsection may make different provision for different cases.
6.15 p.m.
LORD STONHAM LORD STONHAM moved, in subsection (1), after "Act" to insert "as respects England and Wales". The noble Lord said: I beg to move Amendment 55A and with it I should like to discuss Amendments Nos. 56A and 56B. The first is a paving Amendment for the substantive Amendments. These Amendments provide for the appointment of separate prison licensing boards for England and Wales and for Scotland. They are the first of a series of Amendments designed to apply to Scotland the provisions in this Part of the Bill relating to the release of prisoners on licence. During my speech on Second Reading, I intimated my intention to do this, and I then explained that, notwithstanding the traditional principle of separate English and Scottish legislation on treatment of offenders, the provisions regarding release of prisoners on licence constituted so important a practical change in the law that it was thought that it should not be enacted for England and Wales only and that it was intended to extend these provisions to Scotland.
It is proposed to achieve this by amending Clause 89 to apply to Scotland the relevant sections of Part III and Schedule 2 (that is Amendment 114B, when we reach it), and by making consequential amendments to Clause 49, Amendment No. 64A; Clause 50, Amendment No. 65A; Clause 51, Amendment 68A, B and C. All these Amendments directly refer to the Amendment I am now proposing, and they will all make appropriate reference to Scottish law and institutions. I beg to move.
Amendment moved—
Page 38, line 17, after ("Act") insert ("as respects England and Wales").—(Lord Stonham.)
LORD HAMILTON OF DALZELL: These Amendments fulfil an undertaking to extend the parole system to Scotland, and I very much welcome it. But how does the noble Lord see this fitting in with the Government's acceptance of the Kilbrandon proposal that the functions of probation officers would be taken on in Scotland by the local authority social welfare departments? I understand that it will be the duty of the probation service to supervise men released on licence, to report to the Home Department about them, and to recommend their recall
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should the occasion arise. Will this really be a suitable function for the local authority social welfare departments and will they be happy to accept this as one of their roles?
LORD STONHAM: The noble Lord is right in thinking that this proposal means that it is intended to apply in Scotland the provisions for release on licence which the Bill already has for England and Wales. The question of what branch of the social services will deal with this in Scotland, particularly because, as the noble Lord says, the implementation of the Kilbrandon recommendations has an effect on the probation service, is a matter for the Secretary of State for Scotland. I can only assure the noble Lord that all these matters I am now proposing are fully supported by my right honourable friend, and unquestionably he has considered all the implications, including that which the noble Lord has raised.
6.19 p.m.
LORD BROOKE OF CUMNOR LORD BROOKE OF CUMNOR: moved, in subsection (1), to leave out "Prison Licensing", and to insert "Parole". The noble Lord said: I beg to move this Amendment. Before I actually speak to it, may I express appreciation to the Government for their change of mind in deciding on Report stage in another place to introduce this plan of a licensing board. I feel sure that it is right to have machinery of this kind and not to leave the whole matter in the sole hands of the Home Secretary without any overt advisory body at all.
LORD STONHAM: May I interrupt the noble Lord and thank him very much for what he says? Would it meet his convenience if, with the Amendment he is now moving, we discussed Nos. 61, 62, 65 and 66, which are on the same point?
LORD BROOKE OF CUMNOR: Certainly. I am grateful to the noble Lord. They are identical Amendments. Let me say that I am thoroughly in agreement with the idea of a licensing system of some sort. I have a number of questions to ask and some suggestions to make at a later stage, but I have no criticism whatever of the plan that there should be machinery of some sort under which suitable prisoners may be released on licence before what is now a man's

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earliest date of release, after two-thirds of his prison sentence. I am more enamoured of the first part of my Amendment than the second; that is to say, I am extremely anxious to avoid "Prison Licensing", and if anybody can think of a better name for the board than a "Parole Board" I shall be well content.
The reason why I do not think the inclusion of the word "Prison" in the name of this board is suitable is this. I am sure it is important to be able to convince prisoners of the complete independence of the Board; and when I say "prisoners" I am not just thinking of an individual prisoner whose case is in front of the Board at a particular time. It is important to convince the prison population collectively that this is a body genuinely independent of the prisons and the Prison Service. If that cannot be done, there will be grave dissatisfaction—how grave noble Lords will be able to appreciate when I say that in the case of a seven years' sentence a favourable decision of the Board may mean that a prisoner is released on licence after serving 2⅓ years, instead of serving 4⅔ years with full remission, as at present, or seven years without remission. And, of course, the margin becomes greater as the sentence is longer. It will matter a tremendous amount one way or the other to prisoners whether they get a favourable decision from this Board.
I am sure the noble Lord, Lord Stonham, remembers well the feeling there was about the preventive detention advisory boards. In that case it was not a feeling against the name of the Board, or against the personnel of the Board, but those advisory boards never really succeeded in getting the confidence of the prison population because it appeared to prisoners, and indeed to some other people, that their decisions were arbitrary or, at any rate, that they were difficult logically to understand. I say nothing about the quality of those decisions: I think the Boards did the best they could in difficult circumstances. But it was a considerable factor in the state of opinion about preventive detention, so long as those boards existed, that it was thought by prisoners to depend almost on the whim of an advisory board whether a man got one-sixth or one-third remission of sentence.
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I feel sure the noble Lord, Lord Stonham, will agree with me that this licensing system will work much better if prisoners collectively have confidence in the independence of the Board; and it is the word "independence" that I stress. We have to think of those who have to run the prisons. The governors, assistant governors and prison officers must continue to run the prisons, and the noble Lord and I both know well how much harder that task can be in a particular prison if there is an element of dissatisfaction which may or may not be justified but which has arisen over a succession of cases. That is the reason why I greatly hope that before this Bill reaches the Statute Book we shall have together devised a name for this Board which does not include the word "Prison". If it is the Prison Licensing, Board, it will be all too easy for prisoners to gain or to spread the idea that this is just an adjunct of the prison staff and that the Board is in fact controlled, or tremendously influenced, by the governor and the rest of the prison staff in the particular prison.
So far as I know, it is the desire of the Government that this shall be a completely independent body. That is not stated anywhere on the face of the Bill. I think that under the Schedule, which we shall come to later, it will be possible for the Home Secretary to appoint prison governors to the Board. But I am accepting that it is the desire of the Government that this Board should be completely independent of the Prison Service. What I am saying now is: let it be so named that it is seen to be independent of the Prison Service. I hasten to say that I have no intention of pressing this Amendment to a Division, because I should like to think of a word better than "Parole". I do not think this is really going to be a Parole Board in the strictest sense of the word "parole". I hope that noble Lords will support me in my effort to try to arrive eventually at a name for the Board which will carry greater conviction of its independence than the name Prison Licensing Board would. I beg to move.
Amendment moved—
Page 38, line 18, leave out ("Prison Licensing") and insert ("Parole").—(Lord Brooke of Cumnor.)
VISCOUNT DILHORNE: I should like to say a word or two in support of my

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noble friend. Whatever may be the right description of this Board, "Prison Licensing" must be wrong. It has nothing to do with the licensing of prisons. I am sure that if my noble friend Lord Conesford were here—unfortunately, he cannot be, through indisposition—he would make a powerful speech about the use of English in relation to this Board. If you are going to call this Board, which has to do with prisons, a Prison Licensing Board, as if it were something to do with alcohol or something like that, then it will be a complete misnomer. I hope that the noble Lord, Lord Stonham, will see the weight of that argument and will search for another name.
I should like to stress that "Prisoners" or "Prison" should form no part of the name. I do not think we want any reference to "Prisoners" or "Prison" in the name which is given to this Board. If you like, you could have "A Review of Sentence", or something else like that. A Parole Board is what I expect most people will call it. I hope the noble Lord will say that he will search anxiously for another title which does not stress the prison side of it, but does emphasise the independence of this body and, at the same time, its importance. It certainly is not a Prison Licensing Board.
THE EARL OF IDDESLEIGH: We very much miss the noble Lord, Lord Conesford, who keeps us correct about our English. I am sure the noble and learned Viscount, Lord Dilhorne, is quite correct in saying that he would object to the term "Prison Licensing". But I feel that the noble Lord, Lord Conesford, would also take grave exception to the use of the word "parole" in this connection. It is true that the word "parole" is occasionally used or, as I would say, misused in relation to prison sentences, but I do not think in this matter we should imitate the Americans. "Parole", originally French, is now an international word. It is a term of art used in time of war, and it can be used only for an officer who gives his parole d'honneur, his word of honour, not to escape from captivity, or to refrain from certain other actions to which his captors object. I believe that "parole" was occasionally used in the last war when officers were allowed to take walks outside their camps and gave a parole not to escape while doing so. I would ask the noble
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Lord, Lord Brooke of Cumnor, with whose general views I have every sympathy, to try hard to find another word that will not, so to speak, debase the honourable military term of "parole". I would suggest the possibility of the word "enlargement" which might be appropriate in this connection.
LORD PARKER OF WADDINGTON: May I add just a word? I am so much in favour of the idea behind this clause—in other words, of the licensing of prisoners—that I should greatly dislike to see it come into operation in circumstances which create difficulties. I share the view expressed by those who have spoken to me, people who know prisoners—people in the welfare services, and, above all, Mr. Mervyn Turner, who knows the prisoner's mind so well—and who say that things will get off on the wrong foot if this Board is called a Prison Licensing Board. It is very important that those who fail to get their release should realise that the Board that has the final say is completely independent. Perhaps it is all the more important as the local review tribunal will inevitably have some connection with the prison and as the next step will be through the Home Office. The prisoners must know that the Board with the final say is completely independent. Finally, why not simply use the words "Review Board"?
6.32 p.m.
LORD STONHAM: This shows how often we think alike on some things. Before coming to the Chamber this afternoon I was thinking about this Amendment, and I, too, wondered where the noble Lord, Lord Conesford, would be, because it is on such occasions that we miss him very much—so much so, indeed, that I felt obliged to arm myself with a definition of the word "parole". I consulted the Oxford Concise Dictionary, which defines "parole", as the noble Earl, Lord Iddesleigh, said, as something to do with parole d'honneur. But for the less enlightened people like myself it starts off by saying:
"Word of honour, especially a prisoner's word that he will not escape or will return to custody if liberated or will refrain from taking up arms for stated periods."
I think we are all agreed, therefore, that we do not like the word "parole".
The noble Lord, Lord Brooke of Cumnor, is of course fully aware of this,

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because he had a great deal to do with it when he was Home Secretary. Prisoners are frequently paroled under prison rules by the exercise of powers of temporary release, perhaps to attend the funeral of a near relative or to go on home leave, or to be interviewed by a prospective employer sometimes, before their sentence ends. We have the difficulty that "parole" in prison is understood now to be just that. It is indeed a word of honour that they will come back, and it is highly regarded by prisoners as a very great privilege. And when sometimes, as unfortunately happens, a man does not come back, or does not come back by the time he has said he would, he is very badly regarded by his fellow prisoners because he has let them down. So we have that difficulty: the fact that prisoners clearly understand what "parole" means now, and certainly it would not mean to them something which has the functions that we intend the Prison Licensing Board should have.
I am grateful to both the noble Lord, Lord Brooke of Cumnor, and to the noble and learned Lord the Lord Chief Justice for affording me the opportunity of giving a very firm assurance that the Board will be as independent as we can possibly make it. But the connotation of "parole", as Lord Iddesleigh mentioned, has a sort of American flavour. It is perfectly true that if the Prison Licensing Board were equivalent to the Canadian or American parole boards, then, subject to any objection as to the use of the word "parole", we could accept the Amendment right away; indeed, we might have put it in the Bill ourselves in the first place. But really they are not the same. The Canadian and American parole boards have executive functions and they themselves initiate releases. The Licensing Board will not have executive functions and will not of itself initiate the review of cases. It is not, therefore, a parole board. This being the case, it would be wrong to call it one. On the other hand, until I heard the noble and learned Viscount, Lord Dilhorne, I thought that "Prison Licensing Board" correctly described the functions of the intended Board, but I am bound to say that he is quite correct; that it will have nothing whatever to do with licensing prisons, and
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this interpretation could be placed upon that title.
I think the most important point made in the debate is the one on which I think Lord Brooke of Cumnor based his case; that is, the word "prison" should not be in it at all; it should not be associated with prison. We are all agreed that, inevitably and rightly, a substantial number of prisoners must be disappointed. They are bound to feel not only disappointed but possibly, although wrongly, that there has been some injustice in the decision; and that feeling will be lessened if it can be shown that the effective decision was made by an independent Board which had no relationship with prisons or the Prison Service. I think we are all agreed, also, although we do not like "Prison Licensing Board", that "parole board" is not generally acceptable; and the only thing I can do, without any guarantee but with the utmost good will, is to go away and see whether I can come back with a better solution.
LORD MITCHISON: If I may for one moment interrupt this interesting discussion, I would say how I miss the French Academie. In France they are considering the meanings of English words, and they have decided what you may use and what you may not. You may use the word "bulldozer" if you pronounce it bouldozeur. I do not quite know what we do with the word "parole" if we adopt it here. But, seriously, surely if the local review committees are doing something rather like this, the sensible thing to call this body is the Central Review Committee.
LORD BROOKE OF CUMNOR: I am very much obliged to noble Lords who have contributed to the debate on my Amendment. I think I have established my main point, which is that we should devise a name which omits the word "prison" or the word "prisoners". That being so, I am happy to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD STONHAM: I beg to move Amendment No. 56A.
Amendment moved—
Page 38, line 18, after ("Board") insert ("and for the purpose of exercising those functions as respects Scotland there shall be a body to

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be known as the Prison Licensing Board for Scotland, each body ").—(Lord Stonham.)
LORD STONHAM: I beg to move Amendment No. 56B.
Amendment moved—
Page 38, line 20, at end insert—
("( ) Any reference in the following provisions of this Part of this Act (including Schedule 2 thereto) to the Prison Licensing Board shall be construed as a reference to the Prison Licensing Board or the Prison Licensing Board for Scotland, as the case may require.").—(Lord Stonham.)
6.40 p.m.
VISCOUNT DILHORNE VISCOUNT DILHORNE moved, in subsection (3)(a), to leave out "deal with the case on consideration of" and insert "consider". The noble and learned Viscount said: It may be for the convenience of the Committee to take Amendments Nos. 57 and 58 together, because they both deal with the same topic. If your Lordships will look at the Bill you will see that it is provided in subsection (3):
"The following provisions shall have effect with respect to the proceedings of the Board on any case referred to it, that is to say—

(a) the Board shall deal with the case on consideration of any documents given to it by the Secretary of State; and

(b) if in any particular case the Board thinks it necessary to interview the person to whom the case relates before reaching a decision, the Board may request one of its members to interview him and shall take into account the report of that interview by that member.…"

As I read that clause it defines quite specifically what are the powers of the Board in relation to any case. First of all, it has to deal with the case on consideration of such documents as are given to it by the Secretary of State. I drew attention to this in the debate on the Second Reading, and I said then—if I may refer to my speech:
"When a case does come to the Board, one sees that the Board will have before it only such material as the Secretary of State likes to give it." [OFFICIAL REPORT, 10/5/67, col. 1475.]
I think that is what that subsection means. But when the noble and learned Lord the Lord Chancellor came to reply, this is what he said (col. 1565):
"The noble and learned Viscount, Lord Dilhorne, raised a question about documents.
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The noble and learned Lord, the Lord Chief Justice, said (and if I may say so I quite agree with him) that there must be confidence between the Board and the Home Office: I did not follow the point about documents."
Then this sentence follows:
"If the Board wants any documents and the Home Office has not sent them, the Board only have to say so. I cannot see any difficulty about that."
But that is not what the Bill provides, and it is to make the Bill agree with what the noble and learned Lord Chancellor said that I have tabled this Amendment. If the Amendment is accepted the clause will then read:
"The Board shall consider any documents given to it by the Secretary of State;"
but that does not mean that they have got to decide the case on the documents provided by the Secretary of State.
My second Amendment, No. 58, goes on to provide that:
"the Board shall be entitled to call for reports and to call and examine witnesses in relation to the case."
I think that this is very important. If the Board wants to have an up-to-date psychiatric report, for instance, it should be entitled to call for it, and I should like to see that expressly contained in the clause. There is nothing controversial about this matter, but if this new body is going to be created to discharge this important function—and the noble Lord, Lord Stonham, knows that I have long been in favour of a licensing body such as is envisaged in this Bill—it is important that it must exercise its functions independently. It would be quite wrong if the impression were gained, whether rightly or wrongly, that all the Board had to do was to decide the case on such documents. As this clause stands I think that is clearly implied, and I think that is wrong. I beg to move the first Amendment.
Amendment moved—
Page 38, line 35, leave out ("deal with the case on consideration of") and insert ("consider").—(Viscount Dilhorne.)
LORD BROOKE OF CUMNOR: I greatly hope that the Government will be able to meet fruitfully the cogent points made by my noble and learned friend Lord Dilhorne. The drafting of the clause as it stands is somewhat strange, because it would appear to put the Licensing Board and the local review committees at

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arm's length. Indeed, when I first read this clause I was led to assume that it was so drafted as to ensure that, unless the Secretary of State so wished, the Board would not be able to discover what the local review committee had recommended to the Secretary of State.
I think this arises partly because subsection (5), which deals with the local review committees, seems not to be fully integrated with the rest of the clause; indeed, one is not aware until reaching subsection (5) that there are going to be review committees; and neither there nor in the Schedule does it appear that there is a functional link-up, if I may put it that way, between the work of the local review committees and that of the Licensing Board. And I greatly hope the Government will make it absolutely clear that the Board is not confined to a consideration of such documents as the Secretary of State may see fit to give it, but may make its own inquiries, and that it shall be entitled to see anybody it wishes—anybody who, in the Board's view, will help it to come to a right decision in the case.
I think those are the two purposes of my noble and learned friend. I greatly hope to hear that there is really nothing between him and the Government on this matter, and that what the noble and learned Lord the Lord Chancellor said on Second Reading was correct. I certainly join my noble and learned friend in urging that, if that is so, the drafting of subsection (3) needs further attention.
LORD PARKER OF WADDINGTON: I should like to support this Amendment. I think we are all agreed that the Board must be an effective Board and command the trust of everybody, the public and the prisoners. At the moment, as it seems to me, all this Board can do is to sit down and look at a file of documents passed to it by the Home Office. I cannot think that a Board carrying out that function would command much confidence. Of course I accept that if the Board wanted further documents no doubt the Home Office would supply them, but on the very face of this clause it looks as if all the Board was going to do was to sit down and look at a file of documents. If it is to command confidence I think this Board must have powers to call for reports.
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It may be that the Board will want to cross-examine a witness. One of the members is most likely to be an eminent psychiatrist, and he may express a different view from that of the prison medical officer concerning a particular man. I think it would be wrong for him to act merely on his own view and not pay attention to the views of the medical officer, and what really fulfils natural justice is to be able to have the medical officer before the Board and cross-examine him. Again, there may be cases where a medical report has not already been given and is required. If so, the Board ought to be able to call for such a report, and, indeed, for any information which it requires.
LORD STONHAM: I have carefully studied these Amendments and have listened with great care to the three speeches made in support of them. I am bound to say that they have given me a very different impression from the one I formed by just looking at the Amendments as they are drafted and studying the effect on the Bill. Under the Amendments subsection (3) of the clause would read like this:
"The following provisions shall have effect with respect to the proceedings of the Board on any case referred to it, that is to say—

(a) the Board shall consider any documents given to it by the Secretary of State; and

(b) the Board shall be entitled to call for reports and to call and examine witnesses in relation to the case;"

VISCOUNT DILHORNE: The present paragraph (b) would remain.
LORD STONHAM: Yes. The part I have underlined is:
"the Board shall be entitled to call for reports and to call and examine witnesses in relation to the case".
I have also, of course, studied what the noble and learned Viscount, Lord Dilhorne said on Second Reading and the reply that my noble and learned friend the Lord Chancellor gave to him, when he said that if the Board want any documents and the Home Office have not sent them the Board have only to say so. That, of course, is exactly what the position would be.
The noble Lord, Lord Brooke of Cumnor, referred to the local licensing committee and the dossier they would build up. It would be unthinkable to me that

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a recommendation for a case is submitted to the Board, or whatever we finally call it, unless it had complete documentation from the ground up. Indeed the basic forms which we have under preparation, and which certainly I so far approve, are started with that idea in mind, so that the Board will know everything we are able to tell it about the particular prisoner under consideration. I agree with the noble and learned Lord the Lord Chief Justice that it might so happen that the psychiatrist member of the Board might, on a medical matter, looking at the papers, take a different view from the medical officer at the prison; that, of course, is a distinct possibility. He might want them to write to him or perhaps, exceptionally, bring him up. I say "exceptionally" because it is not intended that the Board shall meet all that frequently. Naturally it will meet as often as necessary to do its job. This will be a matter for the chairman and members, hut they will not sit continuously, or full-time, or anything like that.
The real difference, if there is a difference between us—and having heard the debate I am not at all sure that there is—is that it would appear from my reading of the Amendments, although not from listening to the debate, that the noble and learned Viscount felt that the Board will have a judicial function. Its function will be administrative. It will not in any sense try the case again. It has to reach a decision as to whether a man, it released, is likely to be a good citizen, is likely to benefit from it, and is likely to benefit society as well.
Naturally we have got to start work in a preliminary way; we cannot actually start any of these bodies until the Bill becomes an Act. But in our preliminary thinking we shall have to submit all this to the chairman-elect, when one has been selected, and work out the detailed procedure. The procedure for calling for reports of this kind must, in our view, be left to be worked out with the Board. When it comes to calling for any further information, further reports that the Board wants, we should expect it to obtain all the additional information through the Home Office, if only to ensure that there is no unnecessary overlapping or repetition or duplication of effort. I do not think there is anything between
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us, and I think that, in practice, the Board will be able to proceed broadly as the noble and learned Viscount wishes it to do, and as I think we all wish it to do.
I want to make it quite clear that in our view paragraph (a) should remain as it is, because it establishes that the Board's consideration of a case is primarily a consideration in private, and is of a quasi-administrative and certainly not a judicial character. Unless the Bill provides clearly that the Board can deal with cases in this way, it could be argued that on such important matters as release from custody the rules of natural justice require that the prisoner should be entitled to appear before the Board or to be represented before the Board and see the information given about him to the Board by the Secretary of State. We feel that would be certainly impracticable, and that is why we think it crucial to retain the definition in (a) of how the Board is to consider and deal with cases.
LORD PARKER OF WADDINGTON: May I intervene? Am I to understand that it is considered that subsection (3)(a) is necessary in the Bill because this is not a judicial or quasi-judicial decision'? If so, with all respect, I should have thought it was very difficult to say that the process was not a judicial or quasi-judicial process. True, the ultimate action of the Home Secretary as a result of the recommendation is a purely administrative decision, but the process leading up to it, which consists of this Board weighing the evidence in the documents, must be, I venture to think, a quasi-judicial matter. As the words stand at the moment, I should have thought the Board was debarred from considering anything else except the documents.
LORD STONHAM: Certainly if that is the interpretation the noble and learned Lord the Lord Chief Justice has put on it, that this is not a quasi-judicial decision, then it is right. That is our view of what it should be: that the Board has to make an administrative decision.
VISCOUNT DILHORNE: The Home Secretary makes an administrative decision, but surely the Board does not.
LORD STONHAM: The Home Secretary decides on the cases to be submitted

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to the Board, but in a number of important respects, as the noble and learned Viscount will be well aware, the Board will have a right of veto.
VISCOUNT DILHORNE: I think it is made quite clear by subsection (2):
"It shall be the duty of the Board to advise the Secretary of State …"
that the Board's function is advisory. It discharges that function in a quasi-judicial manner. I do not think it is open to any other possible construction. The administrative decision is taken by the Home Secretary in the light of the advice given to him by the Board.
LORD STONHAM: The final responsibility, except in a recall of a licensed prisoner, is the Home Secretary's, but in fact the Home Secretary will not release a prisoner if the Licensing Board thinks he should not be released. This was the point I was coming to about further consultation or requiring further documents or requiring a person, possibly a member of a local review committee or a doctor or somebody like that, to come before the Board. If it did not get these people or the information it asked for, it simply would not approve of the release on licence of that particular prisoner. It would, in fact, therefore be a veto.
I cannot see such a situation arising. We intend to give the fullest possible information. If in individual cases the information is not enough, we shall, if it is at all possible, give the further information required. If we think—this would need to be only exceptionally—the Board wishes to see a person, it of course will see him. If the Board wishes one of its members to see an individual prisoner and submit a report, that too is provided for. It seems to me that the clause as it stands is wholly adequate for the purpose we have in mind and that as things are now everything that needs to be provided will be provided. I assure your Lordships that in collaboration with the Board we shall spare no efforts to make the licensing system a complete success in ensuring, as far as humanly possible, that the men the Board recommends for release on licence will be those who will benefit themselves and their families and society by such release.
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We hope that there will be a substantial number of successes achieved by the Board's objective consideration of the full facts about each prisoner from the facts compiled with the assistance of those who have the prisoners in their care. Subsection (3)(a) is certainly not intended to be an exclusive list of the material on which the Board will rely for its decisions, and paragraph (b) already contemplates, as I pointed out, an interview by a Board member. Certainly we shall look again at the noble and learned Viscount's suggestion that paragraph (a) is too exclusive It may well be the case.
As I say, the Board should be in a position to see an expert. There is also a wide power under Clause 48(3) to make rules. The provisions that we are now discussing in subsection (3)(a) and (b) and in subsection (4) are designed to secure the essential framework of this procedure, but it would make for greater flexibility if as much as possible were left to the rules, and in these rules we can take account of what has been said in this debate. Although I am willing to have a look at paragraph (a) in particular, we cannot get to the point where the Board's functions would be quasi judicial. In our view they must remain administrative.
VISCOUNT DILHORNE: It will not depend upon the wording of subsection (3)(a) as to whether it is held that this Board has quasi judicial functions or not. That will be determined on a challenge in the courts, and will not depend on the wording of subsection (3)(a). I should have thought that there would be no doubt at all that the Board would be asked to discharge quasi judicial functions, and might be liable to a writ of certiorari. That really is not the point about this. When the noble Lord started his speech I thought that there was really nothing between us as to the way we wanted the Board to function. But the more he went on, the more I began to wonder whether he really wanted it to function at all. Surely the function of this Board is that when a case comes before it it will go into that case thoroughly and fully, and give to the Home Secretary the best advice it can. I hope the noble Lord will agree with this. It is to be an independent Board. If it is to perform that function it must be entitled to make such inquiries as it thinks proper, from whoever it may be. I think the noble

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Lord agrees with that. There is nothing about its quasi judicial or administrative function.
Here we are concerned with what it can do. My complaint about subsection (3) is that it gives quite the wrong picture of what the Board can do. I am hopeful that it is merely a matter of language more than of intent. Of course the Board must decide the case and advise on it to the Home Secretary; but surely that does not mean that the Board must only decide the case on documents submitted by the Home Secretary. As I read paragraph (a) that is what this Bill provides. Therefore I say—and I rely on a great deal that the noble Lord said in support of this contention—that the drafting is unhappy and should be altered.
Again, I quite agree that in the ordinary way the normal channel will be for the Board to get in touch with and to deal with matters through the Home Office. That is quite right. I do not object in the least that the Home Office should be in that position. But it may be that a further question needs to be put, perhaps to the medical officer at Bedford prison. Surely it is not necessary for the Board to go straight to the Home Office, and for the Home Office to go to the medical officer. A telephone call might clear up the matter directly.
I want to ensure—and I am not pinning myself to the wording of this—two things: first, that the Board shall have power to get all the documents that it thinks appropriate. In that I think the noble Lord agrees with me. Then I think that the Board should have power to call such evidence as it thinks fit of any persons; and that the Board should have power to call for such reports as it might require. There may be a more up-to-date report. That is what I want to achieve. It may look to the noble Lord as if one is making it too much like a trial when one speaks of calling and examining witnesses; but I do not think that really is so. I want to make it quite clear that they can ask someone to come and tell them about the case. The noble Lord said that they are not going to try the case again. I am not asking them to try the case; but they have to try to evaluate the evidence on the issue whether that man can be safely released on licence. I want to see them armed with full powers to discharge that function.
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From what the noble and learned Lord the Lord Chancellor said in his reply on Second Reading, I thought that he and I were really in agreement about this objective. But when you come to look at this language—and it is language that governs the matter—it is restrictive, and it cannot be cured if passed in the form of making rules, because the rules could not really go contrary to the provisions of the Statute. So I press the noble Lord in all seriousness to say that he really will have a further look at this wording, because it really requires alteration. If it is not altered I shall have to raise this matter on Report, albeit reluctantly, and press it further, because I think it is most important that there should appear to be no restriction on the discharge by the Board of the important functions entrusted to it.
LORD STONHAM: I can assure the noble and learned Viscount—he knows this—that I as much as anybody, and possibly more than anybody, hope that this Board will be a great success. My noble and learned friend the Lord Chancellor said in the Second Reading debate that if the Board wants any documents and the Home Office have not sent them, the Board has only to say so. Of course that is right, and I give an assurance that any reports that the Board needs in dealing with cases, any documents it thinks are necessary, it will of course have.
One thing about which I am concerned in the Amendment is the use of the word "witnesses". Of course they will want to see some persons who will be called "witnesses", but in our view this would be rather exceptional. The one example that the noble and learned Viscount put was that supposing they want to get some information from the medical officer of Bedford prison, then a telephone call would do. That may well be common sense. This is something to be worked out with the Board itself, the modus operandi. It is not a question of whether or not they should have information; it is merely a question of how the information should be supplied. These are things that have still to be worked out.
Having heard what has now been said, certainly I will look at the wording of this subsection to see whether a way can be found to meet the objectives.

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From the way I have acted throughout the Committee stage your Lordships will appreciate that I see the difficulty of the noble and learned Viscount, and I hope that I have made mine clear to him. I think our objective is the same.
VISCOUNT DILHORNE: I am grateful to the noble Lord, for I think that when he comes to look at this matter in the light of this debate he will see that subsection (3) is capable of being misinterpreted. It may be that I have misinterpreted it, but I do not think I am alone in that. I certainly feel that the wording wants improving. I take the noble Lord's objection to "witnesses". It looks a little too formal. One might say:
"The Board shall be entitled to call for reports and obtain such information whether in writing or orally as they may require."
I am quite satisfied with that. Certainly, if we are to define the Board's powers, as subsection (3) purports to do, let us define them accurately so that it is quite clear they are understood. Having said that, and hoping that the noble Lord will be able to meet this point, as I think he can, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
7.12 p.m.
LORD BROOKE OF CUMNOR LORD BROOKE OF CUMNOR moved, in subsection (5)(b), to leave out from the first "of" to the end of the paragraph, and to insert:
"each such person by one or more members of any such committee;"
The noble Lord said: In moving this Amendment, No. 59, it may be for the convenience of the Committee and may lead to a saving of time if I speak also to Amendment No. 60, because both Amendments are closely connected with the work of the local review committees. It may afford an opportunity for any noble Lord who wishes to say something about this important development to do so at this stage.
LORD STONHAM: As we are now considering two rather important Amendments, does the noble Lord think that it would be better to adjourn at this point before we become involved in the detailed discussion?
LORD BROOKE OF CUMNOR: That would be perfectly acceptable to me, but
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I do not know whether it would be acceptable to noble Lords generally.
LORD STONHAM: I think that, as this discussion may well take an hour, it would be for everybody's convenience if we now adjourned until 8.30.
[The Sitting was suspended at 7.13 p.m. and resumed at 8.30 p.m.]
LORD BROOKE OF CUMNOR: Just before we adjourned I had begun to move Amendment 59 and had suggested that if it was to your Lordships' convenience it might save time if with it we discussed Amendment 60. For my part, I think it would be most helpful if on these two Amendments we could have a general discussion on the local review committees. Let me say at the outset that I have no intention of dividing on either of these Amendments. I think we should use our time more fruitfully if we expressed our views and discussed across the Floor of the House how these local review committees will work, and then further thought can be given to the whole subject between now and Report stage.
The purpose of my first Amendment is to secure that every prisoner who is under consideration shall have the opportunity of appearing before at least one member of the local review committee. I believe that that is the Government's intention, but it is not actually stated on the face of the clause. It seemed to me that in certain cases he should be seen by one member of the committee, and that it might be desirable in some cases that he should be seen by more than one member, or by the whole committee. I want to make quite sure that the wording of the clause allows for that. But the point to which I attach importance here is that a prisoner who comes up for consideration by the local review committee in the normal course of events will know that he has a right to be seen by at least one member of the committee if he wishes to exercise that right.
It is very important that, as with the so-called Prison Licensing Board, there should be complete confidence in this system; that the Home Secretary should have confidence in it, that the Licensing Board should have confidence in it, and that the prisoners should have confidence in it. That is why I think it is worth while spending a little time discussing the local review committees. As I said on

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an earlier Amendment, subsection (5) does not seem to be fully integrated with the rest of the clause, yet I am quite sure that the local review committees have an extremely important part to play which is integrated with this whole business of consideration by them, by the Licensing Board and by the Secretary of State.
I put down Amendment No. 60 to insert the words:
"A local review committee shall not include among its members any person employed in the prison service"
to emphasise at this level also the importance of what I sought to say about the Prison Licensing Board in another connection. It seems to me of great importance that the ordinary prisoner should not regard the local review committee as just an adjunct of the prison service; as just a tool of the prison governor. I shall not be surprised if the Government say that this Amendment goes too far, and that it would be a mistake to exclude all members of the prison service from the local review committees. But, as I said earlier, I am not proposing to press this Amendment. But what I am extremely desirous of ensuring is that the local review committee shall be seen by prisoners, collectively, as something which is not simply under the control of the prison governor. I believe that the Government have in mind some such composition as: a prison governor or his deputy; a member of the visiting committee of magistrates or the board of visitors, as the case may be, of that particular prison; and a senior probation officer. I would strongly urge that, in addition, there should be at least one person who is not connected by any official relationship whatever with the prison service.
Other Government Departments, I believe, have learnt the value of associating with bodies appointed to do this kind of work someone who not only is completely independent, but is seen to be independent and known to be independent. I genuinely believe that this would make a difference to the success of the scheme, because it will ensure that prisoners understand that there is at least one member of this committee who is under no sort of control by the prison service, who is not indebted to the prison service in any way and who, as I say, is not in any official relationship with it.
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I am quite sure that the noble Lord, Lord Stonham, is personally anxious to make these local review committees as productive and as valuable as they can possibly be. Nor do I think that the Licensing Board could do its work without cases being sieved by somebody of this kind.
May I mention a couple of other points? They are not covered by any Amendments, but they are closely related to this subsection and the rules that the Secretary of State is to make. I feel a concern that local review committees attached to different prisons throughout the country should keep generally in line with one another. It is very desirable that an idea should not grow up, whether justified or unjustified, that you get a very poor chance with the local review committee at X prison but that at Y prison it is much softer. I feel sure that if anything like this were to go wrong it could be guarded against by some kind of manual of guidance, as it were, issued by the Home Secretary and laying down broad criteria to which, in his view, the local review committee should pay attention. After all, as they are reporting to him he is not interfering with the way they carry out their responsibility if he does issue some manual of guidance of that kind. Whatever the means adopted, I feel sure the noble Lord, Lord Stonham, will agree that it would be extremely undesirable if some local review committees gained a reputation of being more lax and others that of being more strict.
Likewise it is clearly going to be important that the members of the Licensing Board, the national body, should have equal confidence in all the local review committees, because, as we have heard, a great deal of the material coming up to them will be related to the reports which the local review committees have made. I think it would be valuable if members of the national Licensing Board had opportunity from time to time to "sit in" as observers on some of the local review committees, so that they could see how the work was being done at the lower level before it came up to them.
But, coming back to my Amendments, the main purposes I should like to secure are: first, that it is made absolutely clear on the face of the Bill that every prisoner

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who wishes to exercise the right has the right to appear personally before a member of the committee; and, secondly, that the membership, the composition, of the local review committee is somewhat wider than what I understand the Government have in mind, and that each committee should include at least one person who is in no official relationship whatever with the prison service. I beg to move.
Amendment moved—
Page 39, line 24, leave out from first ("of") to end of line 25 and insert ("each such person by one or more members of any such committee;")—(Lord Brooke of Cumnor.)
VISCOUNT DILHORNE: I support the Amendments tabled by my noble friend. In fact, with regard to one of them I think I go a little further than he does. I suppose it is a necessary consequence of the late acceptance of this proposal that there should be a Licensing Board—I call it that without prejudice—that there should be a provision in the Bill dealing with local review committees and their powers by rules. I think it unfortunate—it may be unavoidable—that when we get the rules we shall not be able to amend them. We must either take them or leave them individually; there is no opportunity to suggest any alteration. Therefore it is perhaps in this debate, and only in this debate on these clauses, that we can express views to which we hope the Government will pay attention.
I need not repeat again that I am very much in favour of a licensing system. I think there must be a central board; I think there must be a system of filtering, otherwise the central board will be absolutely overwhelmed. But if this scheme is going to work satisfactorily—and we all want it to work satisfactorily—it is going to depend, as I see it, on the constitution and the functioning of the local review committees; because it is only if the case passes the local review committees that, in the ordinary way, it will come up to the Home Secretary and the central body. People who get rejected by these local review committees when someone else in the same prison gets through are likely to feel a great sense of dissatisfaction. This may be to some extent unavoidable.
I would submit to the Government that if these local review committees are to
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function properly it is just as important that they should be independent, and appear to be independent, as in the case of the central reviewing body. While I, for one, would not be in any way opposed to some former member of the prison service serving on the central body—because some of them could be very valuable; I can think back to some leading figures in that service in the past and consider they could have been very useful—I feel that when it comes down to the local review committee (and this is where I go further than my noble friend) it is very important that no serving member of the prison service should serve on that committee. It must be really independent.
Quite how it is going to be constituted we do not know—I should find it difficult to formulate precisely how it should be constituted—but I would stress that one could and should exclude that category. Once that category is included the chances of this body being regarded by the prisoners as independent will have gone. It is all very well to say that if this was the idea put forward by the Opposition in another place they ought to have worked out the scheme. But the Government, with all their resources, have accepted this suggestion—I think wisely: and I am glad they have—and it is for them to work out the details of it. I should like to see the prisoner concerned having the right to see one member of the review committee. One wants to see what criteria the review committee have to apply. But it is also very important that, however constituted, the review committee should not contain as one of its members either the governor of the local prison or anyone in the prison service.
8.45 p.m.
LORD STONHAM: I am extremely grateful to the noble Lord, Lord Brooke of Cumnor, for his helpful attitude in this matter, not only for his useful suggestion that we should discuss Amendments Nos. 59 and 60 together, but for the other remarks which he made indicating that he was not in this matter attacking a point to secure a Division but that he wanted a general exchange of helpful views which might be calculated to ensure we make progress towards the objective which I am glad to say we all have in mind. I hope that the noble Lord will not regard me as discourteous if I first reply to the points

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made by his noble and learned friend, Lord Dilhorne.
The noble and learned Viscount said it was unfortunate that we have to deal with the composition of the local review committees by rule. As he rightly said, this may be partially attributed to the fact that we have incorporated the Board into the Bill in the course of the discussions in another place. Nevertheless, I can assure the noble and learned Viscount—and this is no idle statement—that everything said here will be considered with extreme care when we build up the rules. I was glad to hear the noble and learned Viscount say that there must be a system of filtering. This may not be as generally recognised as he so obviously recognises it, but the fact is that we shall start on the appointed day with a backlog of some 4,000-plus cases of prisoners who have technically qualified; that is to say, they will have served one-third of their sentence or twelve months, whichever is the greater; and during the twelve months after the appointed day there will be some 4,500 men who will qualify. So we have to make arrangements whereby during the twelve months from the appointed day we can deal with some 8,500 cases, the backlog and the current cases. This is no light matter, and of course we have begun such arrangements as we can make before Parliament approves our proposals in whatever form they are finally approved.
There is one point upon which I should like to correct the noble and learned Viscount. He said that only if a case passes the local review committee will it come to the Home Secretary. This is not so. Every technically qualified case will be considered. That means the whole lot. They will be considered by the local review committee. The recommendations of the committee will vary, but it is not true to say that the cases will not be considered.
VISCOUNT DILHORNE: I did not suggest that they would not be considered, but I was suggesting, perhaps wrongly, that if they are to go further forward in the ordinary way they would be passed on by the local review committee. Otherwise the filter does not serve a useful purpose.
LORD STONHAM: Then I have not made myself clear. All the cases will
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have to be passed on; some with favourable recommendations, some as borderline cases and some with negative recommendations: but every case will be considered.
VISCOUNT DILHORNE: By the Home Office?
LORD STONHAM: Yes. Well, before they are considered—
VISCOUNT DILHORNE: May I get this clear? The noble Lord says that every case will come before the local review committee. That I understand. But is the noble Lord saying that, when the local review committee has considered the case, whatever the committee recommends—whether it recommends that there should be a release on licence, or no release—every single case coming before the committee will be sent on to the Home Office? If so, I do not understand how the local review committee will operate as a filter.
LORD STONHAM: Yes, that is what I mean. Every case will be considered by the local review committee and their recommendation, whether favourable, mid-way or negative, will be sent to the Home Office. It is correct to say that every case will be considered by the Home Office. While I am on this point, let me answer the question put to me by the noble Lord, Lord Brooke of Cumnor. do not want to misquote or mislead the noble and learned Viscount in any way whatever; this matter is far too important for me to do that. Every technically eligible prisoner will be interviewed by one member of the local review committee. By the very nature of things that means that some prisoners will be seen before others, but they have an equal right to be seen, and information about every case will come to the Home Office.
LORD PARKER OF WADDINGTON: May I intervene to clear this point up, because I am not certain about it now. The local review committee will consider everybody who is eligible, and then will give a positive or negative recommendation to the Home Office. I have understood so far, but I may be wrong, that if there is a negative recommendation, that is an end of it. The Home Office will not convert that into a positive recommendation and send it on to the Board. In other words, the local review

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committee will be a filter. They will examine every case, but if they do not recommend release, that is the end of it.
LORD STONHAM: I cannot agree that that is the end of it, because cases will be reviewed again by the local review committee. Their decisions will be guided in large measure by a man's response to training, and it would be utterly wrong to suggest that when a man's case was first reviewed and turned down, that that was the end of the matter.
VISCOUNT DILHORNE: This is extremely important. I agree that a man could apply again if technically qualified, after he has had some training. But if the local review committee on one application give a negative answer, is that the end of that application or not? That is what we want to get clear.
LORD STONHAM: The answer is that that is not necessarily so. The Home Secretary has the ultimate responsibility, the complete responsibility, for those cases which are submitted to the Board. Therefore it is not possible to say that if a man's case is not recommended by the local review committee that is an end of the matter, because that would be tantamount to saying that because the committee does not recommend a man's release, he cannot be released. That would be unacceptable. Would the noble and learned Viscount like to interrupt?
VISCOUNT DILHORNE: I would much rather the noble Lord finished.
LORD STONHAM: I said earlier that many men—perhaps the majority—will be disappointed, and will not feel that their case has been conducted fairly. They may petition; letters may be sent to Members of Parliament, and Questions may be raised in the House about individual cases. Those cases will have to be considered. We shall have at the Home Office information in regard to those cases. I hope that I have answered this clearly enough. As I say, every case will be considered by the local committee, and every prisoner technically entitled will be interviewed.
When it comes to the question of review, the prisoner does not have to apply for his case to be reviewed. He may do so, but he does not have to: it
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will be reviewed as a matter of course. This is a continuous process while the man is in prison. Indeed, when the member of the local committee interviews the man, the man is able to make any kind of representation. For example, supposing a man who has been on licence is recalled, he may well feel aggrieved about that. He may make representations. That is provided for in the Bill. But it is envisaged that a member of the local review committee will explain the matter to him and in all respects keep the man informed, so that if there is a sense of injustice it can be dissipated and the man can be made to understand. We regard that as very necessary.
I perhaps started at the wrong end—I do not mean this disrespectfully—in dealing with the noble and learned Viscount's point first, but there were certain things that I felt I had to reply to. I will now try to deal with the questions addressed to me by the noble Lord, Lord Brooke of Cumnor. He said that every prisoner should have the opportunity to appear before at least one member of the local committee. I can give the assurance at once—indeed, I have already given it—not only that every technically qualified prisoner will be seen by one member of the committee, but that the wording of the Bill, as at present, does not preclude him from being seen by an additional member of the committee when perhaps a second opinion may be required. In case the noble Lord points out that this has to be settled by regulation, I can say that it will certainly be clear in the regulations.
The one thing that I cannot accept—and I hope the noble Lord will agree with me—is that the man should be seen by the whole committee. Our experience with the Boards which decided about preventive detention convinces us that a man is disturbed and overstrained by appearing before a committee. He cannot for the life of him—and I have had hundreds of letters from P.D. men—understand what was wrong with his performance before the Board; he cannot understand why he was turned down. We do not want that condition of strain. I can give the assurance that was asked for, and on that point, at least, the noble Lord's Amendment is not necessary.
The second point he put to me was that on his second Amendment, No. 60,

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he would wish to exclude a member of the prison service from the local committee. The noble Lord was not pressing this, but he was desirous of ensuring that the local committee is not under the control of the governor. The local committee will certainly not be under the control of the governor. But a great deal depends, with regard to release, on the type of custody in which a prisoner is kept and the type of treatment he is given, which must depend to some extent on his release prospects. The governor has an overall responsibility which cannot be dispensed with. In our view he must he a member of the local committee.
The noble Lord, Lord Brooke of Cumnor, also strongly urged that there should be one person not connected in any way whatsoever with the prison; he must be seen and known to be independent. I would point out that the member of the visiting committee need not be a magistrate, and I thought that that would have filled the bill in that respect.
LORD BROOKE OF CUMNOR: May I intervene on a point of correction? A member of the visiting committee would be a magistrate; a member of the board of visitors would not necessarily be a magistrate. But my concern is that there should be somebody on this local review committee who cannot be thought of as being part of the general prison set-up, and I have a fear that if the committee consists simply of the prison governor, a member of the board of visitors or visiting committee and a senior probation officer in the Probation and After-care Service, a great many prisoners will regard this as really a part of the whole prison set-up, and that is what I want at all costs to avoid.
LORD STONHAM: I am grateful to the noble Lord for correcting me. I should have said that a member of the board of visitors need not be a magistrate. But the noble Lord has made his point, which is a valid one, and I would say that the clause as at present drafted does not preclude what he wants. I am not saying that we shall be able to meet him entirely, but we shall certainly look at that point which is certainly in line with our discussions so far.
The noble Lord then said—and I think we should all agree with this—that local
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committees should keep generally in line with each other. I entirely agree with that. I would tell the noble Lord that in the Department we have had a Working Party on this since last November, and they made a computation (I will not reveal the figures) of the number of men who might well be eligible for release out of those who were technically eligible at the appointed day. And, based on figures which were provided in one region last April, I myself, with an entirely different method of computation, worked out how many might be found suitable for recommendation for release, and miraculously the two figures, arrived at in entirely different ways and by two separate bodies, were exactly the same.
Of course that does not remove the possibility, which I admit, of some prisons being regarded as being good prisons for release and others as very bad ones. But I should like to say this to the noble Lord. He will be aware of our allocation system and our categorisation of prisons—"A", "B", "C" "D"—the "D" prisons being the open ones. We want a man's prison life to move within those categories according to his progress, and it is quite obvious, not only in the nature of things but because of that progress, that the greater number of actual releases on licence will eventually come from the "C" and "D" prisons, because that is where the men will have moved to in accordance with their progress.
But having said that, I fully agree with the noble Lord that there should be a manual of guidance—and that was the noble Lord's own expression, "a manual of guidance", and that is what we intend to provide. He may be interested. and the Committee may be interested, to learn the broad principles on which we think that guidance should be supplied. The object of the scheme remains as it is in the White Paper originally produced by my noble friend Lord Stow Hill when he was Home Secretary: that is, to release those prisoners who are likely to respond to generous treatment and are not regarded as a risk to the public. But to put this in some greater detail, the intention is that a prisoner should be released on licence after consideration of his criminal and social history before his current sentence, including the length of periods of liberty, any conduct under supervision or response to after-care,

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work record, and domestic background; his response to treatment and training in prison during his current sentence; the circumstances of his current offence, including in particular any observations by the sentencing judge or the Court of Appeal, and information about his domestic and employment situation on release. Consideration will also be given to whether he has co-operated in the training provided and made satisfactory response; has reached a point in his sentence in which further training is unlikely to improve his prospects of leading a good and useful life on release; whether there appears to be no significant risk of his committing a further serious offence, and that arrangements are available, or can be made, for accommodation and occupation outside prison; and whether there are no overriding objections in the circumstances of the offence itself, having regard to such considerations and observations made by the courts at the time.
Broadly speaking this is the guidance (it could be made more precise) which will be issued. The noble Lord, Lord Brooke of Cumnor, also said that it was important—and I agree—that the Licensing Board should have equal confidence in local review committees. As I would suggest to him, and I know he will agree, if inequality emerged the Board would become aware of it and, I am sure, would take appropriate action. I think his suggestion that a member of the Board might sometimes go as an observer of the work of local committees is an excellent one. I cannot say that we should send a member of the Board, because it is an independent Board and it is a matter for them. But such a visit would, I know, be welcome, and indeed it would seem more reasonable and convenient that when a single member of the Board wanted to see a single prisoner he should see him in prison and not bring the prisoner up to London, or wherever the headquarters happen to be, to meet the Board. But these are matters for the Board.
I have tried to give a clear picture of the facts. There is not a tittle of difference between us in our objectives. It is quite true, as the noble and learned Viscount said, that the Board was interposed in the Bill in another place and we have a lot of work to do on the regula-
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tions. Everything that has been said here will be most carefully considered, and I firmly believe that at the end of the day there will be complete agreeement between us, not only as to our objectives (as there is now) but as to the means of achieving them.
LORD PARKER OF WADDINGTON: It is because we are all so anxious that this clause shall work in practice that the subject we are now debating is so very important. I started my consideration in this way: that in countries where the review board really works well—and I am thinking of New Zealand and some of the States, in particular Victoria, in Australia—there is one central board which is utterly independent and which interviews each prisoner who is eligible. I am the first to appreciate that that would be quite impossible in this country, having regard to numbers, and there must be some filter or filters; but one has only to think of it in that way to realise that the first filter (if it be a filter) must command the confidence of the prisoners. Otherwise they will feel that they are entirely in the hands of the prison governor and the prison authorities. I still think (and I am sure the noble Lord will correct me if I have misunderstood the position), the local review committee is a filter, in the sense that it will see every prisoner and will then recommend. No doubt those who are recommended for release will be considered first by the Home Office with a view to sending the matter on to the central committee. A negative recommendation, as the noble Lord put it, does not necessarily (I think those were his words) mean the end of the matter. But I imagine that by that he means that the consideration of those who get a negative report will be delayed: they will be allowed to do a little more training before they are put forward in turn to the central committee. Therefore, the local review committee is a filter.
Unless the Home Office is going to be bombarded by petitions from people who have not obtained their release, who have not had their cases sent on to the central committee, I think it is of vital importance that the local review committee should appear to be at any rate independent. I personally would not go so far as to say that no member of the prison service should be on it. The noble Lord said that the governor ought to be

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on it. I am by no means sure that he should. He is obviously the most important adviser to the local review committee, albeit he is mainly concerned with the way a man has conducted himself in prison, though that may not be the best criterion of how he will behave if subjected to the stresses of normal life. Be that as it may, any local review committee would pay the greatest attention to the governor, whether he was or was not a member of the board. I should have hoped that the Government might have seen their way to let us know in more detail who would constitute the local review committee and would put its constitution in the Schedule, in the same way as the central committee's constitution appears in the Schedule.
It that is not done, it seems to me that we ought to have some assurance that the local review committee will appear to be independent, that this connection with the prison will not be in the majority—because we are here dealing, I imagine, with a majority verdict. I hope that the Government will think further on this matter and either provide in Schedule 1 what the constitution shall be, or at any rate provide in this clause with which we are dealing that it shall be an independent committee.
9.13 p.m.
LORD CHORLEY: I should like to make two points arising out of the discussion as far as it has gone. The first of them is on the slightly technical side. I am rather disturbed by the statement by the Minister that a negative decision by the local review committee is not necessarily the end of the matter. Of course, I appreciate that technically, acting on behalf of the Crown, the Home Secretary has rights over the whole administration of the criminal law, and in a proper case no doubt he can, and does from time to time, intervene. But if he goes further than that I think this would create a very dangerous situation.
The noble Lord said, if I understood him correctly, that these matters might possibly be raised in Parliament. I think that if that happens the whole thing is going to get into a complete mess. If Members of Parliament are going to be "got at" by relations and people who have been turned down by the local review committee, and if the matter is going to be brought up here, it is going
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to be a very dangerous and difficult situation. I would express the greatest hope that this situation will not be allowed to develop in this way. I hope that what the Minister said was not an indication that it might so be allowed.
My other problem is one which has been touched on by the noble and learned Lord the Lord Chancellor, and indeed by other speakers; namely, the personnel of these committees. This, it seems to me, is the crux of this whole problem. It has not really been sufficiently discussed in detail, and, as I understand it, this system has to a large extent failed in the United States. It has not succeeded as well as had been hoped in some of the parts of the British Commonwealth where it has also been tried, although I believe that the experience there has been rather more satisfactory than in the United States.
I have not personally been able to make a study of this aspect, but colleagues of mine have done so and, so far as I understand it, in the United States the general view is that the failure—on the whole, it is accepted by British students of the American penal system to have been a failure—has been largely due to the fact that the reviewing boards have been ill-chosen. One can quite understand that that might be so. If this work is going to be done properly and efficiently it will depend tremendously on the people who are doing it. At the moment we have practically no indication of how these people are going to be chosen, and what sort of qualifications will be required. By means of the Amendment before the Committee at the moment we are trying to prevent prison officers from being given a position of authority in regard to this problem. I am sure that that is right. But we have to go much further than that, and I hope that before this matter is finally concluded the Home Secretary will publish in the shape of a White Paper or draft rules, or something of that kind, some sort of indication of what is going to be done.
It is very important that in Parliament, and indeed in those circles in which matters of this sort are under constant scientific study, the material on which judgments can be formed should be provided. I want to underline that. I think this is going to be the crux of the whole thing. If this side of the matter is not

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properly looked after I am rather afraid that this promising proposal may fizzle out, as to a large extent it has done in some of the States of the United States of America. I hope that we shall not follow that line, but that, before this matter is finally concluded, we shall be given the opportunity of seeing what is proposed, how the personnel is to be chosen, and also the opportunity of expressing our views upon it.
VISCOUNT DILHORNE: Not for the first time in the course of this Committee stage (I think it is unique that it has happened twice in the one day) I find myself substantially in agreement with the observations of the noble Lord who has just sat down. I do not think it has ever happened before. I thank the noble Lord, Lord Stonham, for explaining so carefully exactly how he contemplates this system will work. I will certainly study what he said. From what he said, I am not at all sure that the local review committee can be correctly described as a "filter". It seems to me to be designed to arrange the priority of the cases for release. But, however that may be, I would ask the noble Lord to think again whether it really is necessary for the governors of prisons to be members of the local review committee. I entirely agree with him that the governor must have the closest access to the committee. His views on what should happen are obviously things to which the committee must pay great attention. With that I entirely agree. It does not necessarily follow that the governor should be a member of that committee and a party to the actual decision. It would be unfortunate if he were a party to a decision of the local review committee to give a negative answer to any particular prisoner. It would be much better for him to express his view and allow the body which is independent to decide. I hope the noble Lord and the Government will give further thought to this matter.
LORD BROOKE OF CUMNOR: I trust that it is the Government's feeling, as it has been mine, that this has been a most productive as well as a fascinating discussion. I hope the Government will give careful thought to all that has been said; and most particularly to what has been said by the noble and learned Lord, Lord Parker of Waddington, who
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expressed what I have been trying to say much more successfully than I myself, could have done. What is obvious is that this Committee is intensely interested in the whole subject of the local review committees and the Licensing Board, and that your Lordships are, without exception, anxious to try to make their contribution, alongside that of the Government, to render this scheme a success. I said at the outset that I had no intention of pressing this matter to a Division, and when the time comes I will withdraw my Amendment. But before I do, perhaps the noble Lord, Lord Stonham, would like to say something.
LORD STONHAM: I am most grateful to the noble Lord. I thought that it would not be right for us to end this discussion without some word from me on what was said by the noble and learned Lord, Lord Parker of Waddington. He made the important point that the first filter must command the confidence of the prisoners, which was analogous to the point strongly made just now by the noble Viscount, Lord Dilhorne, that, in his view, the governor should not be a member of the committee but that he should express his opinion and give his advice without taking a part in the actual decision. This is a matter on which I shall certainly report to my right honourable friend the Home Secretary, and we will return to it at a later stage of the Bill. My own feeling at the present stage is that this filter process is mainly a professional job which should be done carefully and conscientiously by the people who know most about the man concerned. I feel that that is supremely important. I do not think it is right to suggest that prisoners are distrustful of the governor. They write to him and can. and do, go to see him about almost anything, and most governors enjoy the confidence of inmates. Nevertheless, it is a point about which noble Lords obviously feel quite strongly, and I will have the matter looked into.
The noble and learned Lord, the Lord Chief Justice, said that the Government should let us know who would constitute the local committee, and went further by saying that this should be put into the Schedule. That matter also will be looked at, though I do not give any kind of assurance on the point. My right honourable friend has already indicated that it

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is our present intention that the local committees should be comprised of the governor, a senior member of the probation service and a member of the visiting committee. I submit to the Committee that those connected with the prison would not then be in a majority but in a minority of one as against two—that is to say, two-thirds of the committee would not be connected with the prison service.
My noble friend Lord Chorley, with the agreement of the noble and learned Viscount, Lord Dilhorne, protested his alarm at the prospect of Members of Parliament being "got at". We must be realistic about this. Nothing on earth can prevent the relatives of a prisoner from writing to a Member of Parliament, if they feel that their relative ought to have been released on licence and has not been; and nothing can prevent that Member of Parliament from writing to the Home Secretary about it if he feels so disposed. One of the great advantages of the Board is that it is recognised as an independent body, making independent decisions which cannot reasonably be questioned. I should like to say to all those noble Lords who have taken part how grateful I am for their contributions, and still more for the manner of them. They will be carefully considered, and I am sure that in guiding our final decisions they will be of great value.
LORD BROOKE OF CUMNOR: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 48, as amended, agreed to.
Clause 49:
Release on licence of persons serving determinate sentences
49.—(1) The Secretary of State may, if recommended to do so by the Prison Licensing Board, release on licence a person serving a sentence of imprisonment, other than imprisonment for life, after he has served not less than one-third of his sentence or twelve months thereof, whichever is the longer.
(3) A person subject to a licence under this section shall comply with such conditions, if any, as may for the time being be specified in the licence.
VISCOUNT DILHORNE: One curious matter about this Part of the Bill is that it does not say that a person subject to a licence shall be under the super-
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vision of a probation officer. Surely that is intended; indeed, I should have thought it was essential that there should be regular reports about the behaviour of a person who is released on licence. I have put down this Amendment to ensure that that is, in fact, the case. I believe it is implicit in the Bill that that should be so, but it is not in any way expressed in the Bill that a person released on licence should, while under licence, be subject to probation. I beg to move.
Amendment moved—
Page 40, line 7, at end insert ("and shall be under the supervision of a probation officer.").—(Viscount Dilhorne.)
LORD STONHAM: It is not our intention to make supervision of every licensee by a probation officer compulsory. The Bill does convey our intentions correctly. Naturally, it is the Government's intention that in the overwhelming number of cases the licensee shall be under the supervision of a probation officer, and he will be required to keep in touch with that officer in accordance with such instructions as the officer may give. The effect of subsection (3) of the clause is to provide for the imposition of whatever conditions may best suit the licensee, and for this purpose it is necessary to retain some flexibility. The variation of conditions in a licence may sometimes prove desirable, and for those with a very lengthy period on licence it may sometimes be possible to remove the condition of supervision, especially as a means of easing the transition towards complete freedom on the expiry of the licence.
I am quite sure that, in the main, the noble and learned Viscount has fixed-term prisoners in mind, but his Amendment would also apply to life sentence prisoners through the operation of subsection (2) of Clause 50. For them super. vision for the entire period of licence could extend, in the event of a young person—and we do have murderers under twenty-one—to forty years, and would serve no useful purpose, in any case, once the licensee was thoroughly rehabilitated. Of course, under subsection (4) of Clause 49 the Secretary of State will be bound to consult the Prison Licensing Board before imposing, varying or cancelling a condition of licence. There will thus be an effective safeguard to ensure that

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supervision is a condition of licence wherever it is thought desirable. But, for the reasons I have stated, which I think are valid reasons, we do not want to make supervision by a probation officer compulsory in every case.
LORD BROOKE OF CUMNOR: I appreciate the point that the noble Lord, Lord Stonham, has made: that in certain suitable cases it may be desirable to relax or remove the condition of supervision by a probation officer. But perhaps this is an appropriate moment for me to ask a question which has been weighing on my mind. The noble Lord said that in the overwhelming majority of cases he anticipates that supervision by a probation officer will be a condition of the licence. That prompts me to ask the Government about their ideas of timing, because this scheme is going to involve a very considerable additional load on the probation service in certain places.
I know that one can argue from figures that, in relation to the total amount of work the probation service has to do, this additional supervision will not amount to very much, but we must be realists and recognise that a very large number of these people who have been sentenced to fairly long terms of imprisonment will be going back to certain parts of London or the big cities. This is not going to be a load spread evenly on the probation service throughout the country. It will fall with especial weight on the probation service in certain cities, and it will be disastrous if the strength of the probation service in those cities is not by then at a level which enables the service to feel that it is strong and fit enough to do the job.
Again I am asking this question because I am most anxious that the scheme shall be a success: Can the Government give an undertaking that before bringing these provisions into operation—and I understand that that can he done by orders at different dates for different parts of the Bill—they will satisfy themselves that the probation service in the big cities will be able to carry the additional load put upon it?
LORD HAMILTON OF DALZELL: should like to endorse what my noble friend Lord Brooke of Cumnor has said. The probation service accept this as a
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proper part of their duties as the casework service for all offenders, but they are anxious about whether or not they will be capable of doing it. They want to do it, and they want to do it well; but they are anxious. In the Second Reading debate the noble and learned Lord the Lord Chancellor quoted a figure of 50 probation officers as being the extra number that will be required to carry out this work, and he suggested that that would be an easy enough number to find. But the service is already short, and numbers are not increasing at the rate envisaged even before this extra duty is imposed on them. Furthermore, as the noble Lord, Lord Stonham, himself said in the Second Reading debate, if the scheme is to work properly it will also require a considerable increase in the number of prison welfare officers in the prisons; and these, too, have to be found from the probation service. So, even if the demand does represent an additional load corresponding to only 50 probation officers, it will be a heavy burden, and I hope that the noble Lord will comply with the suggestion that my noble friend has made.
LORD STONHAM: Once more, let me say that, in so far as the principle of the Amendment moved by the noble and learned Viscount is concerned, there is no difference of opinion between us. It is only the question of not writing into the Bill that it must be compulsory in every case. With regard to the load on probation officers, which I agree is a most important point, it would be idle for me at the moment to quote any figures of my own of the numbers of men likely to be released. After all, they will have to go through the processes, and the Board will decide. But my right honourable friend in another place—and I can quote these figures—said that initially the releases might be of the order of 750 to 1,000.
Let us take the hypothetical figure of 1,000 releases in the first year. I agree with the noble Lord that they may be concentrated in particular areas, but we must take an average number—say, 50 cases per probation officer. That would mean work equivalent to 20 additional probation officers. Although I think we are doing reasonably well, we are not making the net increase in the numbers of probation officers that we should like.

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We have a target of 3,500 by 1970 (and that figure takes into account these additional responsibilities), and the numbers at the present time are something of the order of 2,500; so that the target means something like a 50 per cent. increase in a comparatively small number of years.
When I visit probation officers in their own localities and talk about aftercare, I meet with—I was going to say "complaints"; but that would be the wrong word: I meet with information that they are not getting as many ex-prisoners accepting after-care as they would like. One of my hopes for the future is that a very important result of doubling the number of probation officers who are prison welfare officers will in fact be to secure prisoners' acceptance of after-care. I do not think, therefore, that this burden (equivalent to, say, 20 full-time jobs for probation officers) is an unacceptable one. But it is extremely important that there should be maximum consultations with the probation service, not only in general but in particular relation to the burden where it is likely to fall.
As we progress and ascertain the numbers of men likely to come from the prisons on licence, and the numbers likely to go to particular localities (and therefore become the responsibility of the particular areas of the probation service), we will give that information to the probation service immediately it is available to us. It must be done, and it is naturally one of the things that I have been discussing myself. The noble Lord, Lord Brooke of Cumnor, will no doubt remember that almost immediately after he received the Report of the Committee on Preventive Detention he accepted and implemented one of its recommendations, namely, the increase in the amount of remission from one-sixth to one-third, with the result that in March, 1963, 176 P.D. men were released in one day. Of course the noble Lord had had consultations with the probation service and with the S.A.C.A., with the result that there were rather special provisions for looking after those men.
The noble Lord is probably aware—if he is not I will tell him—that as a result of those special provisions, on average those P.D. men did very much better than the normal run of P.D. men coming out. This is the kind of exercise that must be undertaken and continued with
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the probation service when we release men on licence. It is right to raise this question. It is a matter very much in our minds, and we shall do our best with consulting the probation service so that they may do their best.
VISCOUNT DILHORNE: I should like to thank the noble Lord for his answer. Again this is an important question, and he has given a clear answer with regard to it. I ask leave of the Committee to withdraw my Amendment.
Amendment, by leave, withdrawn.
9.38 p.m.
Viscount DILHORNE Viscount DILHORNE moved, in subsection (5), to leave out "the next following section" and to insert "Section 51 of this Act". The noble and learned Viscount said: This Amendment, I hope, is a winner. I remember the great speech made by the noble and learned Lord the Lord Chancellor—and some of your Lordships may remember it—that every Bill introduced by a Labour Government would be unlike a Bill introduced by any other Government: it would be easy to read; easy to understand; there would be no mistakes, no blemishes. Of course, I have always read these Bills on that assumption, but not always with a feeling that the assumption is realised. Here your Lordships will see that subsection (5) starts:
"A licence granted to any person under this section shall, unless previously revoked under the next following section, remain in force until a date specified in the licence…"
It is not very easy to understand that because the "next following section" does not deal with the revocation of licences at all; it deals with the release on licence of persons sentenced to imprisonment for life. You have to look at the next following section to find that that is the one which deals with revocation. Therefore, there is a drafting error which by this Amendment I have endeavoured to put right. I beg to move.
Amendment moved—
Page 40, line 17 leave out ("the next following section") and insert ("section 51 of this Act").—(Viscount Dilhorne.)
LORD STONHAM: This Amendment shows the stuff of which Lord Chancellors are made. I too, of course, have read this Bill, not with the skill and knowledge of the noble and learned

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Viscount, Lord Dilhorne, but with intense concentration. I, too, share his admiration for Bills produced by the Labour Government. I am slightly disappointed to find that the noble and learned Viscount did not notice that in one part of the Bill we have printed "an" instead of "on". As he has not noticed that, I assure him it will be corrected the next time the Bill is printed. I would express my grateful thanks to the noble and learned Viscount for pointing this error out. It arose because on Report in another place a new clause was inserted as Clause 50. We ought to have noticed the mistake; I apologise, and thank the noble and learned Viscount for pointing it out, and recommend that your Lordships accept the Amendment.
LORD STONHAM LORD STONHAM moved to add to the clause:
"( ) In the application of this section to Scotland—

(a) the expression "prison rules" means rules under section 35 of the Prisons (Scotland) Act 1952;

(b) the expression "imprisonment" includes detention in a young offenders institution as defined in section 31(1)(d) of the Prisons (Scotland) Act 1952;

(c) subsection (2)(a) shall be omitted;

(d) in paragraph (a) of subsection (5), the words from "to a person" where they first occur to "or" shall he omitted."

The noble Lord said: This Amendment is consequential on the application of the release on licence provisions of this Part of the Bill to Scotland by Amendment No. 114B with which we shall deal later. The explanation is quite simple. Paragraph (a) of the Amendment extends the definition of "prison rules" to cover Scottish rules. Paragraph (b) extends the expression "imprisonment" to include detention in a young offenders' institution. Section 1(4) of the Criminal Justice (Scotland) Act 1963 provides that a court in Scotland may not impose a term of imprisonment upon a person under the age of 21, but may instead impose a period of detention in a young offenders' institution. In order that the parole provisions of the Bill may apply to those under the age of 21 serving a sentence in Scotland equivalent of imprisonment in England, it is therefore necessary so to extend the meaning of the expression
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"imprisonment". Paragraphs (c) and (d) are required to preclude from the Scottish application persons in respect of whom an extended sentence certificate has been issued. Provision for extended sentence certificates is made in Clauses 28 and 29 of the Bill which are not applied to Scotland. Accordingly reference to extended sentence is inappropriate in the Scottish application of this Part of the Bill.
As we are now fortunate to have with us the noble Viscount, Lord Colville of Culross, I will repeat the assurance I gave to the House earlier that these Amendments relating to Scotland are put forward for approval at the desire of my right honourable friend the Secretary of State for Scotland, and I think they apply to Scotland provisions of the Bill which the noble Viscount will agree are necessary. I hope that he will not be hurt by the fact that I am moving these Amendments. I remember once when in Opposition he suggested that I might become an honorary wearer of the kilt. Perhaps the mantle has descended upon me. I beg to move.
Amendment moved
Page 40, line 32, at end insert the said subsection.—(Lord Stonham.)
9.46 p.m.
On Question, Whether Clause 49, as amended, shall stand part of the Bill?
LORD HAMILTON OF DALZELL: Before we leave this clause, I wonder whether the noble Lord would be good enough to explain the purpose of subsection (5)(b), which I find rather difficult to understand. It says in effect that the licence of an ordinary prisoner will run from the date of his release to the end of two-thirds of the sentence. I understand that it is the intention to release the soonest the man with the best chance of success outside. He will be released after one-third of his sentence, and he will then have supervision and help for the whole of the second third. The man with the least chance of success will be released later and will have less supervision, until the man who is thought to have so little chance of success that he will not be released until the end of the normal two-thirds of his sentence will get no supervision at all.

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Is it really the intention that the more help a man needs, the less help he will get? Would it not be better to have a fixed period of supervision for all licensees, as is the case with borstal, or a fixed proportion, say, one-third, regardless of the actual time of release? I should be grateful if the noble Lord could throw some light on this while there is still time for the Bill to be amended, if necessary.
LORD STONHAM: A prisoner sentenced to an ordinary sentence will be released under prison rules, subject to whether or not he has lost remission, at the end of two-thirds of his sentence. Both the prisoner serving an ordinary sentence and the prisoner serving an extended sentence will be technically eligible for release when he has served one-third of his sentence or 12 months, whichever is the longer. A prisoner serving an extended sentence, at whatever stage of his total sentence, if released on licence, or after two-thirds of his sentence has been served, will be under supervision for the whole of his sentence, but an ordinary prisoner, if released on licence before he has served two-thirds of his sentence, will remain on licence only until the point has been reached when two-thirds of his original sentence would have been served. I do not know whether that covers the point the noble Lord is making.
LORD HAMILTON OF DALZELL: I was referring to the ordinary prisoner. If a man is released early, he will get the help and supervision of the probation officer up to the end of two-thirds of his sentence. The effect of this is that the better chance of success a man has, and therefore the earlier he is released, the more supervision and help he will get after he comes out. Conversely, the less chance of success a man has when released and therefore the later he is let out, up to the point when he has reached the end of two-thirds of his sentence, the less supervision he will get after he comes out, until ultimately he gets none. That does not seem to me to be satisfactory.
LORD BROOKE OF CUMNOR: I think my noble friend is on to a very pertinent point here. I realise the tidiness in the Bill, but I am not sure whether it is sufficiently purposeful. I confess that, for my part, it has always seemed to me that any prisoner who is released
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on any account—hitherto, of course, it has been only through normal remission—before expiry of his full sentence can reasonably be put, by law, under some form of supervision. The court sent him to prison for, let us say, three years. The court did not say that he should be out after two years under no supervision whatever.
I think the point is highlighted by what we are doing in this clause. In my view, my noble friend is absolutely right. It seems odd that the man who has been able to satisfy the local review committee, the Licensing Board and the Secretary of State that he is, or has become, so well behaved that he can be released on licence after serving one-third of his sentence will be released on licence and, in the great majority of cases, as the noble Lord, Lord Stonham, says, under supervision, while the man who is less qualified to be out in the free world on his own, having been judged by those bodies and the Secretary of State to be less qualified, will, if he behaves himself in prison, come out after two-thirds of his sentence under no form of supervision whatever. This seems to me to be somewhat topsy-turvy.
I, for my part, would not ask the noble Lord, Lord Stonham, to do more than consider carefully what my noble friend has said, because we want this to be not only tidy but just and purposeful; and while we are going through this Bill we should all like to make sure that the Bill will be as helpful as possible to all kinds of people, the good and the less good prisoners, in securing that they are as likely as possible to lead a good and useful life after they come out.
LORD STONHAM: I am grateful to the noble Lord, Lord Brooke of Cumnor, for making this point again, and indeed for making it so clearly. There is some difficulty here. As I understand it, if we were able to meet the point made by the noble Lord, Lord Hamilton of Dalzell, it would mean that the person who was not released on licence but served two-thirds of his sentence would have to remain under supervision for the other one-third. This does not arise when there is an extended sentence. I think many of the people about whom we have been most concerned will receive extended sentences and will either be in prison or on licence for the entirety awarded by

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the court, and they are the ones who will have maximum support. Many will live in hostels, as a condition of the licence. They will have maximum support throughout their sentence.
But there is a difficulty. It might be that a man who has committed a bad crime is given a 10-year sentence, and at the end of two-thirds of the period he comes out, as he does now, and will be free from supervision. I see no way of meeting that point in the somewhat rare cases in which that situation would arise. Of course, we could not meet it the other way, because if we did, the person on licence would have to be kept beyond his two-thirds date and would be put at a disadvantage with the people who were not given release on licence and who would come out at the end of their two-thirds period free men. It is a difficult point, and, frankly, I do not see at the moment any way of meeting it. But certainly I will look at it, and I will get in touch with the noble Lord between now and Report stage in case he wants to raise the matter again.
Clause 49, as amended, agreed to.
Clause 50 [Release on licence of persons sentenced to imprisonment for life, etc.]:
9.56 p.m.
LORD STONHAM: This Amendment is also consequential on the application of this part of the Bill to Scotland by Amendment 114B, which we will deal with later. Paragraph (a) substitutes for the reference to the Children and Young Persons Act 1933 the equivalent Scottish reference. Paragraph (b) provides for consultation with the Lord Justice General where a person serving a life sentence or detained during Her Majesty's pleasure in Scotland is being considered for release on licence. I beg to move.
Amendment moved—
Page 41, line 6, at end insert—
("( ) In the application of this section to Scotland—

(a) for the references to section 53 and 53(2) of the Children and Young Persons Act 1933 there shall be substituted respectively references to section 57 and 57(2) of the Children and Young Persons (Scotland) Act 1937;

(b) in subsection (1), for the words 'Lord Chief Justice of England' there shall be
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Substituted the words 'Lord Justice General'").—(Lord Stonham.)

On Question, Whether Clause 50, as amended, shall stand part of the Bill?
VISCOUNT DILHORNE: If one looks at Clause 50(1), one sees that it reads as follows:
"The Secretary of State may, if recommended to do so by the Prison Licensing Board, release on licence a person serving a sentence of imprisonment for life … but shall not do so in the case of a person sentenced to imprisonment for life or to detention during Her Majesty's pleasure or for life except after consultation with the Lord Chief Justice of England together with the trial judge if available."
In ordinary language that means that the recommendation comes first from the Prison Licensing Board to the Secretary of State, who then consults with the Lord Chief Justice. The noble and learned Lord the Lord Chancellor, when this point was raised on Second Reading, said:
"It is the intention of my right honourable friend that in the case of a life sentence the noble and learned Lord the Lord Chief Justice and the trial judge would be consulted before the case goes to the Board."—[OFFICIAL REPORT, 10/5/67, col. 1565.]
As I read this clause, it does not carry out that statement. It is obviously right that he should be consulted before it goes to the Board, but the clause as drafted seems to me clearly to contemplate consultation after a recommendation has come from the Board. I draw the noble Lord's attention to that point in the hope that it will be considered.
LORD STONHAM: I naturally agree with my noble and learned friend that this must be the order, and that is our intention. In these cases the Lord Chief Justice and the trial judge must be consulted first, because there will be some cases, one would have thought, where the Lord Chief Justice will say, "No", in which case there will be no reference to the Board at all. I could have assured the noble and learned Viscount before he raised the matter, had he asked me this privately, that I should have given him the same answer. Now that he has said the words appear to have a different interpretation, naturally I will look at the point. But I would assure him now that the procedure which my noble and learned friend the Lord Chancellor

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mentioned on Second Reading is the one which we feel the words convey. I am not disputing the matter, and I will look at it again.
VISCOUNT DILHORNE: I think that it is only a matter of wording, and that there is nothing between us, but it seems to me that the contrary view could be taken, and that the wording probably ought to be altered. I am grateful to the noble Lord.
Clause 50, as amended, agreed to.
Clause 51:
Revocation of licences and conviction of prisoners on licence
51.—
(4) The Secretary of State shall refer to the Board the case of a person recalled under subsection (1) of this section who makes representations under the last foregoing subsection and shall in any event so refer the case of a person returned to prison after being recalled under subsection (2) of this section.
(6) If a person subject to a licence under section 49 or 50 of this Act is convicted by a magistrates' court of an offence punishable on indictment with imprisonment, the court may, instead of dealing with him in any other way, commit him in custody to quarter sessions for sentence in accordance with section 29 of the Criminal Justice Act 1948 (power of quarter sessions to sentence persons convicted by magistrates' courts of indictable offences).
(9) If in the case of a person subject to a licence under section 49 of this Act, a court of assize or quarter sessions revokes that licence under this section, the Secretary of State shall not thereafter release him under that section before the expiration of one year from the date of revocation or before the expiration of one-third of the period during which the licence would have remained in force whichever is the later; but the foregoing provision shall not affect any power to release him otherwise than under that section.
(10) This section shall have effect, in its application to a person sentenced to be detained under section 53 of the Children and Young Persons Act 1933 (young offenders convicted of grave crimes), as if for any reference to a prison there were substituted a reference to any place in which the Secretary of State directs that person to be detained.
10.0 p.m.
LORD HAMILTON OF DALZELL LORD HAMILTON OF DALZELL moved to add to subsection (4):
"and a person recalled under either subsection (1) or (2) of this section shall be
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entitled to appear in person before the Board unless his recall results from his being charged with a further offence."
The noble Lord said: I made it clear on Second Reading that I was not really happy about the arrangements for the recall, if necessary, of men on licence. I should have preferred a system by which men whom it was proposed to recall should be brought before a court, in the same way as a man is brought before a court for a breach of a probation order. It was clear that was not likely to be accepted, and so I have not pursued it.
I think it is the least satisfactory part of the proposed system that a man can be arrested and taken back to prison simply on the basis of a report from his supervising officer, without any opportunity at all of defending himself or of confronting those who are putting him back inside. His only right is to make written representations from the prison. The probation service feel that, if it is to be their duty to make direct recommendations for a man's recall to prison, it will produce difficult relationships between the supervising officer and his client and will clearly impede the establishment of the mutual understanding which is essential if the supervision is to be fruitful.
In addition to that, it seems to me to be contrary to natural justice, and I think it may well seem so to the men, too. I realise that a man on licence is still technically a prisoner, and therefore is deprived of the normal rights of a citizen; and I realise also that this system applies in the case of borstal licensees and certain types of prison licensees. I also understand that it does not work particularly well in those cases, but this provision will extend it to a much wider class of prisoners, some of whom will have been, to all intents and purposes, free men, living normal lives, for a number of years before they are suddenly picked up and sent back to prison.
In these circumstances, it seems to me intolerable that a man should have no right to face the people who are accusing him, of cross-examining them and putting his own case in rebuttal. I should prefer all this to happen in court, but failing that I am suggesting that a man recalled in that way should have the right to appear in person before the Board, which will presumably arrange for those

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responsible for his recall to be present, together with his supervising officer and possibly the police, if they have been involved. Of course, none of this would be necessary if the man has committed another offence, because in that event he would have appeared in court and would have had an opportunity of saying whatever he wanted to say. I think this Amendment will go some way to meet the concern of probation officers over the difficult relationships which they would have with licensees over the arbitrary recall to prison without the man having a proper chance to defend himself. I beg to move.
Amendment moved—
Page 41, line 25, at end insert the said words.—(Lord Hamilton of Dalzell.)
LORD STONHAM: If the noble Lord's Amendment were accepted, subsection (4) would then read:
"The Secretary of State shall refer to the Board the case of a person recalled under subsection (1) of this section who makes representations under the last foregoing subsection and shall in any event so refer the case of a person returned to prison after being recalled under subsection (2) of this section, and a person recalled under either subsection (1) or (2) of this section shall be entitled to appear in person before the Board unless his recall results from his being charged with a further offence."
I am grateful to the noble Lord for explaining what he means by the last words of his Amendment, because it was not clear to me when I read it. As it stands at present, the Bill has the effect that the Board will have an absolute veto on all recall decisions. So far as responsibility is concerned, the responsibility is theirs, and that veto will be exercised in full knowledge of the licensee's side of the case. Any recalled prisoner will be entitled under subsection (3) to an explanation for the reasons for his recall and an opportunity to make written representations in respect of his recall, and whenever he does so the Secretary of State will be obliged to refer the case to the Board; and in addition to the prisoner's representations the material before the Board will include an objective report from the supervising probation officer setting out all the circumstances, including any explanation known to have been given by the licensee for alleged misconduct.
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Lord Hamilton of Dalzell's concern, as I understand it, is because the probation officers feel that the prisoner will associate them or the supervising officer's report with his recall. I find it a little difficult to understand why they shrink from that, for when they have someone put on probation with them by the court they have to exercise a like function and inform the court if the terms of the probation order are not being carried out; in other words, they are doing their duty. We propose that as far as practicable the documents should include the report of an interview with a recalled prisoner by a member of the local review committee. Indeed there would be nothing to stop a member of the Board itself from interviewing a prisoner if it were thought necessary.
I would remind the noble Lord that in this matter the Board has a veto, a complete veto, on these recall decisions. If the Home Secretary cancels a licence and recalls a man to prison he has to inform the Board. If the Board say, "We do not agree; this man should not be in prison," he has to be released. Their power in this matter is complete. We consider the local machinery we intend to establish will make ample provision for a recalled licensee to communicate to the Board all his arguments, in some cases verbally with a member of the Board, in most cases in writing, against revocation of his licence. We think the Board can be relied upon to make use of the power to interview by a member of the Board whenever it is desirable.
It would be impracticable for a licensee to put his case before the Board in advance of his recall, in any case, because if he was given formal notice to appear before the Board he would probably disappear. Even if it were desirable—and it is not—the Board will not sit frequently enough to enable it to be possible for these recalled men to make their appearance before the Board. It just is not a practical proposition. I appreciate the noble Lord's motives, but supervising officers must accept the responsibility of their office. I am quite sure they will. They must accept the responsibility of taking the necessary steps which may result in the recall of a licensee to prison if he is not carrying out the terms of his licence and if the breach of the conditions of the licence is sufficiently serious to merit his

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recall. We do not agree that he should be entitled to appear before the Board. It is not a practical proposition.
10.10 p.m.
LORD HAMILTON OF DALZELL: The noble Lord has said again that he does not see the difference between what is proposed here and what happens under a probation order. That is really the whole point. What is proposed here is a sort of procedure by correspondence. The supervising officer writes up a report and then, sooner or later, as a result, the policeman's hand descends on the man's shoulder and he goes to prison and he can write to say if he does not like it. Under a probation order the probation officer has a relationship with the court. If the man misbehaves the probation officer says, "I will take you back to the court"; and that happens. He does not write to the court and say that something must be done. The man appears in court; the probation officer appears; he say what he wants to say on oath, the man hears it and can complain or disagree, or whatever he likes. Everything is above board, and the man knows where he is.
What I do not like about this arrangement is that the man going to prison is going to be "whipped away" without a chance of doing anything at all in his own defence, except to write a letter when he gets there. I see that I shall get nowhere with this Amendment, but I feel it is unsatisfactory. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR: In moving Amendment No. 24, in regard to the power of magistrates' courts to commit on bail for sentence, I drew the attention of the Committee to the fact that Amendments Nos. 68, 134 and 139 were consequential upon that Amendment. The Committee accepted Amendment No. 24, and I hope therefore that I may be allowed to move this Amendment formally. I beg to move.
Amendment moved—
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Page 41, line 37, after ("custody") insert ("or on bail").—(The Lord Chancellor.)
10.12 p.m.
LORD STONHAM LORD STONHAM moved, after subsection (7), to insert:
"( ) If a person subject to a licence under section 49 or 50 of this Act is convicted by the High Court of Justiciary, or by a sheriff, whether summarily or on indictment, of an offence punishable on indictment with imprisonment, the court by which he is convicted may, whether or not it passes any other sentence on him, revoke the licence."
The noble Lord said: I beg to move Amendment No. 68A. With your Lordships' agreement, I will with this Amendment take Amendments Nos. 68B and 68C. All these Amendments are consequential on the application of this part of the Bill to Scotland by the later Amendment No. 114B. They substitute appropriate references to Scottish courts in giving power to the courts to revoke a licence and they substitute a Scottish reference for the references to the Children and Young Persons Act 1933. I beg to move.
Amendment moved—
Page 42, line 3, at end insert the said subsection.—(Lord Stonham.)
LORD STONHAM LORD STONHAM: I beg to move Amendment No. 68B.
Amendment moved—
Page 42, line 9, after ("sessions") insert ("or the High Court of Justiciary or a sheriff")—(Lord Stonham.)
LORD STONHAM LORD STONHAM: I beg to move No. 68C.
Amendment moved—
Page 42, line 19, after ("1933") insert ("or section 57 of the Children and Young Persons (Scotland) Act 1937").—(Lord Stonham.)
Clause 51, as amended, agreed to.
Clauses 52 to 54 agreed to.
Clause 55 [Miscellaneous amendments of the Prison Act 1952]:
LORD STONHAM LORD STONHAM moved, after subsection (2), to insert:
"( ) For sections 30 to 32 of the said Act of 1952 (discharged prisoners aid societies and allowances and expenses for discharged prisoners) there shall be substituted the following section:—
'Payments for discharged prisoners
30. The Secretary of State may make such payments to or in respect of persons released or about to be released from prison as he may with the consent of the Treasury determine'.
( ) Any statutory instrument containing rules made under section 47 of the said Act of 1952 (prison rules) shall be subject to annulment in pursuance of a resolution of either House of Parliament; and accordingly so much of section 52(2) of that Act as requires a draft of such an instrument to be laid before Parliament shall cease to have effect."
The noble Lord said: I beg to move Amendment No. 69, and with your Lordships' permission I would deal also with Amendments Nos. 134A, 143 and 144 in Schedules 5 and 6.
The purpose of Amendment No. 69 is to repeal Sections 30 to 32 of the Prison Act 1952, and replace them with a new provision, general in its terms, for meeting the fares of persons discharged from prison service establishments and making to them other payments, for example, subsistence and discharge grants, subject to Treasury approval. It would also repeal that part of Section 52(2) of the 1952 Act which provides that Statutory Instruments made under Section 47 of the Act should be laid before Parliament in draft, and replace this with the more convenient provision that they should be subject to Negative Resolution procedure. Section 30 dealt with the certification of discharged prisoners aid societies. The reorganisation of after-care arrangements on the lines recommended in 1963 by the Advisory Council made this provision obsolete.
Section 31 provided that an allowance of up to £2 may be paid to a prisoner on discharge, or to an aid society for his benefit. Since 1964 adult prisoners serving sentences of over three months, or serving shorter sentences if discharged on a Saturday or unable to reach their local office of the Supplementary Benefits Commission have been eligible for a grant of up to £4, in lieu of supplementary
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benefit, to meet immediate needs on discharge. Other arrangements are made by the after-care authorities to meet such needs of young prisoners and persons released from borstal or detention centre. The provisions of Section 31 are no longer appropriate. I think that these matters are familiar to your Lordships and that the new arrangements, which in a sense make statutory the arrangements which are already in being, are generally approved by your Lordships. I beg to move.
Amendment moved—
Page 43, line 15, at end insert the said subsection.—(Lord Stonham.)
VISCOUNT COLVILLE OF CULROSS: We are obliged to the noble Lord for explaining this matter. I have one question that I should like to put to him. There was one sum fixed by Section 31 of the Prison Act, and the matter is now to be dealt with generally by the Secretary of State with the consent of the Treasury. Is there to be some published scale laid down? Is the consent of the Treasury to be given to a complete carte blanche on the part of the Secretary of State, or how is this to be done? How are the public to know what public money is being spent on this purpose, and in what form will the information be available to us?
LORD STONHAM: I must say to the noble Viscount that when the day comes that the Treasury give carte blanche to anybody or anything, that will be the day! But I take his point about the publication of a scale, though I am afraid I cannot give him an answer to it. It is a point of importance which I shall go into and let him know the position before Report stage, so that if he wishes to raise the matter again he will have time to do so.
On Question, Whether Clause 55, as amended, shall stand part of the Bill?
VISCOUNT COLVILLE OF CULROSS: Can the noble Lord help me on a point arising on subsection (1) of Clause 55? I do not think this point has been discussed anywhere else. It seems to me to be a curious provision. The subsection

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says that where there is a remand centre whose purposes are described by relationship to the sort of person who goes to that centre, anybody who is required to be detained in any institution to which the Prison Act applies whether it be prison, or borstal, a detention centre or a remand centre, can be sent to a remand centre to do domestic work or maintenance. Does this practice exist now? If not, what has happened? Is it impossible to get people to do such work at remand centres, and are people going to be sent there because they happen to be skilled in these spheres, regardless of what training they are doing in their prisons or borstals—that is to say, simply to fill a gap in the domestic service of the remand centre? It seems to me to he a startling proposition that the Secretary of State should be given complete power to interrupt the sentence of any person in any institution to which the Act applies and send him to do maintenance or domestic work at a remand centre.
LORD STONHAM: The reason for this very necessary provision is that most of this maintenance and domestic work is done by prisoners in all penal establishments. In remand centres, which consist very largely of young people, such people are not sufficiently available and they are not there sufficiently long to enable this work to be carried out satisfactorily and properly. Therefore, we find it necessary to have a certain proportion of adult prisoners there to do this work. They are not permanent staff, because no adult prisoner is there for ever, but they do have adult prisoners to do the necessary work in remand centres. That is the answer to the noble Viscount's question.
Clause 55, as amended, agreed to.
10.20 p.m.
LORD STONHAM LORD STONHAM moved, after Clause 55, to insert the following new clause:
Extension of enactments relating to persons sentenced to imprisonment or detention to young offenders sentenced to detention.
".—(1) In section 38(3) of the Criminal Justice Act 1961 (construction of references to imprisonment or detention and sentenced) at the end there shall be added the following paragraph—
'(c) any reference to a person serving a sentence of, or sentenced to, imprisonment
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or detention shall be construed as including a reference to a person who, under any enactment relating to children and young persons in force in any part of the United Kingdom or any of the Channel Islands or the Isle of Man, has been sentenced by a court to be detained for an offence and is liable to be detained in accordance with directions given by the Secretary of State, by the Minister of Home Affairs for Northern Ireland or by the Governor of the Isle of Man with the concurrence of the Secretary of State, and any other reference to a sentence of imprisonment or detention shall be construed accordingly.'
(2) In section 49 of the Prison Act 1952, section 37 of the Prisons (Scotland) Act 1952 and section 38(2) of the Prison Act (Northern Ireland) 1953 (persons unlawfully at large) any reference to a person sentenced to imprisonment shall be construed as including a reference to any such person as is mentioned in the foregoing subsection."
The noble Lord said: I beg to move Amendment No. 70. This new clause relates to the transfer among penal establishments within the British Islands of young murderers sentenced to be detained during Her Majesty's pleasure and young offenders sentenced to detention for serious crimes. Such offenders are detained in this country under subsections (1) and (2) of Section 53 of the Children and Young Persons Act 1933, and there are comparable provisions in Scotland, Northern Ireland, the Channel Islands and the Isle of Man.
There is already power in Part III of the Criminal Justice Act 1961 to transfer ordinary prisoners, borstallers and persons ordered to be detained in detention centres, but offenders sentenced under Section 53 of our Children and Young Persons Act 1933, and under the comparable provisions elsewhere, were not included in the categories eligible for transfer. The effect of this oversight is that, for example, a person under 18 convicted of murder in this country but whose home and roots are in Scotland cannot be transferred to Scotland so that is family can conveniently visit him while he is serving his sentence. That deficiency and difficulty are remedied by this new clause, and I hope that it will have your Lordships' approval. I beg to move.
Amendment moved—
After Clause 55 insert the said new clause.—(Lord Stonham.)
LORD STONHAM LORD STONHAM moved, after Clause 55, to insert the following new clause:
Prisoner transferred from Scotland to England for Security
".—(1) Where the Secretary of State, in the case of a person serving a sentence of imprisonment, corrective training or preventive detention in Scotland, is of the opinion that in the interests of security or of public safety that person ought to be transferred to a prison in England and Wales, he may make an order for his transfer to that prison:
Provided that the Secretary of State may at any time make an order for the transfer of that person back to a prison in Scotland.
(2) A person transferred to England and Wales or transferred back to Scotland under this section shall be treated for all purposes as if he had been transferred to England and Wales or, as the case may be, Scotland under section 26 of the Criminal Justice Act 1961."
The noble Lord said: This is another of the Scottish Amendments, if I may so call them. This Amendment will enable the Secretary of State for Scotland to transfer to England and Wales a prisoner serving a sentence in Scotland, where this is necessary in the interests of security or public safety. It also provides for the prisoner to return to Scotland. Your Lordships will remember that the Report of the noble Earl, Lord Mountbatten of Burma, referred particularly to this difficulty, and he made some complimentary references to security in some Scottish prisons. But there will be occasions when prisoners will need special security—"A" security, as we call it. It is thought not desirable to have a separate prison of that category in Scotland, and this new clause will enable persons for whom the highest standards of security are required to be transferred from Scotland to a special English prison. I beg to move.
Amendment moved—
After Clause 55, insert the said new clause.—(Lord Stonham.)
VISCOUNT COLVILLE OF CULROSS: I did not intervene earlier when the noble Lord, Lord Stonham, mentioned the Scottish points, because I did not want to waste time. I was grateful to him for his explanation and the assurance that Scottish legal authorities had consented to this Amendment. I want to raise just one point—it may be perfectly all right—because, as I understand it, there is in theory only one Secretary of State. It is the Secretary of State for Scotland who, when a person is imprisoned in Scotland, orders his transfer to England, but there is another
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Secretary of State mentioned who may order his transfer back again to Scotland. In the second case is that the Secretary of State for Scotland, or the Secretary of State for the Home Department? It may be that there is nothing in this point, but I think it would be nice to know which Secretary of State is fulfilling the second function mentioned. If there is any requirement to specify which it is, then I think there will have to be another Amendment in the Bill, because the Secretary of State is not defined, let alone this Scottish adaptation.
One other small point. I think that Amendments, unlike side notes and rubrics, tend to stand as they are accepted by the Committee. We have had several references to Amendment No. 114B. Of course all the section numbers in that Amendment will be wrong by the time we take account of the clauses inserted in the Bill. I do not know whether the noble Lord will move a manuscript Amendment when we get to that stage to put in the right section numbers as they have been by then inserted.
LORD STONHAM: I am very grateful to the noble and learned—
VISCOUNT COLVILLE OF CULROSS: No, I am not learned.
LORD STONHAM: Not yet? Well, it is only a question of time. I am grateful to the noble Viscount particularly for his last point about the renumbering. I must confess that I thought that all would be sweetness and light when we got to No. 114B but I will certainly have that point looked at.
With regard to the other point, that is assuming that the Secretary of State for Scotland had arranged for a Scottish prisoner to come to the English prison and subsequently that prisoner were to go back to Scotland, that would be on the order of the Secretary of State for Home Affairs, who has charge of English prisons and their inmates. As the noble Viscount will readily appreciate, this is always a matter for agreement and arrangement. In other words, it is largely a distinction without a difference. But the answer to his question is that to return the Scot it would be the Home Secretary who would make the decision.
Clause 56 agreed to.
LORD STONHAM LORD STONHAM moved, after Clause 56, to insert the following new clause:
Power of magistrates to issue warrants for arrest of escaped prisoners and mental patients
".—(1) On an information in writing being laid before a justice of the peace for any area in England and Wales or Northern Ireland and substantiated on oath, or on an application being made to a sheriff, magistrate or justice of the peace in Scotland, that—

(a) any person is unlawfully at large from a prison or other institution to which the Prison Act applies in which he is required to be detained after being convicted of an offence; or

(b) any convicted mental patient is liable to be retaken under section 40 or 140 of the Mental Health Act 1959, section 36 or 106 of the Mental Health (Scotland) Act 1960 or section 30 or 108 of the Mental Health Act (Northern Ireland) 1961 (retaking of mental patients who are absent without leave or have escaped from custody);

the justice, sheriff or magistrate may issue a warrant to arrest him and bring him before a magistrates' court for that area or, in Scotland, before any sheriff.
(2) Where a person is brought before a magistrates' court or sheriff in pursuance of a warrant for his arrest under this section, the court or sheriff shall, if satisfied that he is the person named in the warrant and if satisfied as to the facts mentioned in paragraph (a) or (b) of the foregoing subsection, order him to be returned to the prison or other institution where he is required or liable to be detained or, in the case of a convicted mental patient, order him to be kept in custody or detained in a place of safety pending his admission to hospital.
(3) Section 139 of the Mental Health Act 1949, section 105 of the Mental Health (Scotland) Act 1960 and section 107 of the Mental Health Act (Northern Ireland) 1961 (custody, conveyance and detention of certain mental patients) shall apply to a convicted mental patient required by this section to be conveyed to any place or to be kept In custody or detained in a place of safety as they apply to a person required by or by virtue of the said Act of 1959, 1960 or 1961, as the case may be, to be so conveyed or kept.
(4) In this section—

'convicted mental patient' means a person liable after being convicted of an offence to be detained under Part V of the Mental Health Act 1959, Part V of the Mental Health (Scotland) Act 1960 or Part III of the Mental Health Act (Northern Ireland) 1961 in pursuance of a hospital order or transfer direction together with an order or direction restricting his discharge;

'place of safety' has the same meaning as in Part V of the said Act of 1959 or 1960 or Part III of the said Act of 1961, as the case may be;

'Prison Act' means the Prison Act 1952, the Prisons (Scotland) Act 1952 or the Prison Act (Northern Ireland) 1953, as the case may be.

(5) Section 27 of the Criminal Justice Administration Act 1914 (power to issue warrants for the arrest of persons who may be arrested without a warrant) shall cease to have effect."
The noble Lord said: The main purpose of this new clause is to facilitate the recovery of prisoners who have absconded to the Irish Republic. Section 43 of the Extradition Act 1965 of the Republic of Ireland enables us to seek the return from the Republic of a person accused or convicted in this country of an indictable offence or a summary offence punishable by six months imprisonment or more, where a warrant for his arrest has been issued by a judicial authority. In the case of a convicted person, the section requires that the purpose of an arrest shall be to enable him either (a) to be brought before a court for sentence in respect of the conviction or (b) to be taken to a place of detention under the sentence. At present this procedure cannot be used in such cases, because there appears to be no power to issue a warrant to arrest an escaped prisoner.
Where such a person is within the United Kingdom, the Channel Islands or the Isle of Man there is power to arrest him without warrant and return him to his place of detention. This is under Section 49(1) of the Prison Act 1952 as extended by Section 30 of the Criminal Justice Act 1961. Therefore the power to issue a warrant of arrest in such a case is unnecessary. Equally, where the escaped prisoner is in a country to which the Extradition or Fugitive Offenders Acts apply his return can be effected without the necessity of having a warrant of arrest. This problem arises, therefore, only as regards the recovery of convicted persons from the Irish Republic.
It is not always convenient to obtain their recovery by seeking warrants for their arrest as persons accused of the Common Law offence of escape or prison breach. This would not necessarily apply to all cases and, where it does, it involves committing the prisoner for trial in this country on his return for the new offence, instead of just returning him to his place of custody, which imposes an unnecessary additional burden on the higher courts. The effect of the new clause will be to obviate this difficulty, and we shall be able to deal with such persons in a way of which I think that your Lordships will approve. I beg to move.
Amendment moved—
After Clause 56, insert the said new clause.—(Lord Stonham.)
LORD BROOKE OF CUMNOR: I have no criticism of this new clause which I hope the Committee will agree should be added to the Bill. But as this appears to be the last item in Part III of the Bill, I should like to take the opportunity of saying how much we on this side of the Committee appreciate the assiduity of the noble Lord, Lord Stonham, who, except for a short interval for dinner, has been virtually in sole charge of the Bill ever since three o'clock. If he has not quite the same responsibilities in respect of Part IV, I hope that he will now do what I am going to do, and take a rest.
LORD STONHAM: If I may say so, the noble Lord has shamed me because he forestalled me by thanking me when I wanted to thank him and his noble friends. It has been a great pleasure to have participated this afternoon and tonight in this Committee stage, and I am grateful for the great co-operation and helpfulness which has been shown by everyone. If the noble Lord, Lord Brooke of Cumnor, will delay his departure for the time necessary for me also to move, I shall be pleased to "do the honours".
Clause 57:
Power to order legal aid to be given
57.—
(3) Where a person convicted or sentenced by a magistrates' court desires to appeal to a court of quarter sessions, either of those courts may order that he shall be given legal aid for the purpose of the appeal.
10.32 p.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to add to subsection (3):
"and where any such person gives notice of appeal, either of those courts may order that the other party to the appeal shall he given legal aid for the purpose of resisting the appeal."
The noble and learned Lord said: The purpose of this Amendment is to preserve the existing power of magistrates' courts—
VISCOUNT COLVILLE OF CULROSS: I am sorry to interrupt the noble and
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learned Lord, but would he consider dealing with this Amendment in conjunction with Amendments Numbers 73 and 73A? I know they are not in the sane clause, but it may be for the convenience of the Committee if we could discuss these matters together, because I have an Amendment which deals with this in a slightly contrary sense to one of the noble and learned Lord's.
THE LORD CHANCELLOR: I am happy to do anything which is to the convenience of the Committee. The only point I would make is that the noble Lord, Lord Derwent, has Amendment No. 72A which is, so to speak, in the middle of my Amendment and those of the noble Viscount. I am prepared to do anything which is to the convenience of the Committee.
As I was saying, so far as Amendment No. 72 is concerned the purpose of this Amendment is to preserve the existing power of magistrates' courts and courts of quarter sessions to grant legal aid to a respondent for the purpose of resisting an appeal to quarter sessions. At present provision exists in Section 2 of the Summary Jurisdiction (Appeals) Act 1933 for the grant of legal aid, not only to an appellant to quarter sessions but also to the other party to the appeal. This provision is repealed by the Criminal Justice Bill (Schedule 6, page 116). The power to grant legal aid to an appellant is preserved by Clause 57(3), but there is at present no provision in the Bill to enable legal aid to continue to be granted to a respondent. The need for this power arises only in the case of a private prosecution, where a person who has been convicted summarily appeals against his conviction. The power is not exercised frequently—there were 31 cases in 1965. The cases concerned are usually of a minor nature; for example, common assaults arising from private disputes, where the police do not consider that they would be justified in intervening.
Legal aid is not available to a private prosecutor in summary proceedings for the purpose of carrying on the prosecution, and it is not proposed to provide power for this in the Bill. The Widgery Committee reported (paragraph 289) that, bearing in mind that a private prosecutor takes the initiative in commencing criminal proceedings and that civil legal aid is available if he wishes to seek a remedy

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in the civil courts, there is not a strong case for making legal aid available for a private prosecution. The justification for granting a private prosecutor legal aid to resist an appeal is, however, somewhat stronger. In these cases the magistrates have decided that the prosecution was justified. As an appeal to quarter sessions against conviction is a retrial it is necessary for the prosecutor to appear in order to get the case on its feet, and as proceedings at quarter sessions are more formal than a summary trial a private prosecutor may be in difficulty unless he is legally represented. It is therefore proposed to preserve the existing power to grant legal aid to a respondent, even though the need for it arises only infrequently. The Amendment to Clause 57 accordingly provides that where a person convicted summarily gives notice of appeal either the magistrates' court which convicted him or the court of quarter sessions to which the appeal lies may grant legal aid to the other party to the appeal for the purpose of resisting the appeal.
The noble Viscount suggested that we should take Amendment No. 73 at the same time, without prejudice, so to say, to Amendment No. 72A, set down by the noble Lord, Lord Derwent. Amendment No. 73 is, of course, really a consequential Amendment to Amendment No. 72. Subsection (6) of Clause 58 provides that when legal aid has been granted for the purpose of an appeal to quarter sessions and the court confirms the conviction or sentence, or varies the latter, the assistance given by the solicitor or counsel assigned may include advice on the question whether there appear to be reasonable grounds of appeal from the decision of quarter sessions and, if such grounds appear to exist, assistance in applying for a case to be stated to a Divisional Court of the Queen's Bench Division. The respondent in an appeal to quarter sessions cannot appeal from the decision of quarter sessions, and the Amendment is therefore necessary in order to limit the application of subsection (6) to a legally-aided appellant to quarter sessions. I beg to move.
Amendment moved—
Page 44, line 4, at end insert the said words.—(The Lord Chancellor.)
VISCOUNT COLVILLE OF CULROSS: So far as the first of the noble and learned
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Lord's Amendments is concerned, this seems to me to be entirely justified, and the explanation he has given for it fully bears out his proposal to insert it in the Bill. I am, however, a little concerned about the consequential matter in Clause 58, because it was my understanding that either party could apply for a case to be stated from quarter sessions. The noble and learned Lord is better advised than I am; and, in any event, he probably knows it himself a great deal better than I do. But it occurred to me to look at Archbold on this matter, and I there found a reference (unfortunately, I have now forgotten it, but it was from the Criminal Justice Act 1948, I think) which gave both parties a right to appeal from quarter sessions by way of case stated to the Divisional Court.
If that is so, then plainly, I would suggest, it cannot do any great harm, or place any great burden on legal aid funds, that the private prosecutor, by that time the respondent, should have included in his provision of legal aid advice on whether or not there should be a case stated and assistance in having it stated or in making application to quarter sessions to get it stated. Therefore I do not believe there could be any objection in principle, provided I am right in law. There is a further stage, and I shall do some more research upon this point, seeing that the noble and learned Lord has said that no such possibility exists. But perhaps I could ask him if he would be so kind as to look once more and see whether, beyond doubt, I am wrong in my law upon this.
THE LORD CHANCELLOR: I shall certainly be very happy to look into this matter, and we can perhaps discuss it further at Report stage.
VISCOUNT COLVILLE OF CULROSS: Would the noble and learned Lord say this? Suppose there is an appeal by the respondent. Does he think that there would be any objection in principle to legal aid being extended to this small extent, as it is being extended for the appellant by his second Amendment?
THE LORD CHANCELLOR: I should like to consider that point, if I may. As I have said, so far as original proceedings are concerned, if a private prosecutor likes to proceed the onus is rather on him. On the other hand, once he

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has succeeded, it seems reasonable that he should be legally aided to support an appeal to quarter sessions. What should apply at the third stage is, I think, a matter which requires consideration, which I shall be happy to give it.
Clause 57, as amended, agreed to.
Clause 58 [Supplementary provisions as to legal aid orders]:
10.40 p.m.
LORD DERWENT LORD DERWENT moved, in subsection (2), to leave out "indictable". The noble Lord said: I have put down this Amendment because, to me at any rate, the object of this subsection seems somewhat obscure. The subsection says:
"Notwithstanding anything in the last foregoing subsection legal aid ordered to be given for the purposes of any proceedings before a magistrates' court shall not include representation by counsel except in the case of any indictable offence where the court is of opinion that, because of circumstances which make the case unusually grave or difficult, representation by both counsel and solicitor would be desirable."
Is it the intention that this should apply only to committal proceedings, or is it also the intention that counsel might be supplied in cases of indictable offences tried summarily? Cases do arise before magistrates and are dealt with summarily which are in the nature of test cases and raise difficult problems. Perhaps the noble and learned Lord could tell me whether the clause means what it says and, if a case is difficult and the court thinks fit, legal aid may be given. I beg to move.
Amendment moved—
Page 45, line 6, leave out ("indictable").—(Lord Derwent.)
THE LORD CHANCELLOR: At the moment, as the noble Lord no doubt knows, in justices' courts counsel are available only in a murder case. This seems perhaps too restrictive, and indeed the Bar Council have said so for a long time. They have pointed out that indictable cases, apart from murder, are often complex and that in these complicated cases, such as long firm frauds, counsel should be permissible. What the noble Lord's Amendment would do would be to make counsel available in any case, whether indictable or summary. The in-
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tention is that the clause should apply both to committal proceedings and indictable offences which are tried summarily. Purely summary cases do not really need counsel.
The Widgery Committee considered this and said:
"We are not convinced that any radical change in the existing arrangements for criminal cases is desirable. It appears from the evidence we have received that in general these arrangements are working satisfactorily, and that in the very large majority of cases in magistrates' courts where legal aid is granted the services of a solicitor are all that is required. We do not consider that there is any case for the assignment of counsel in summary proceedings. As regards committal proceedings, we consider that murder cases still stand in a class apart from other crimes and that in general the services of counsel should not be necessary on charges other than murder. We recognise, however, that there are from time to time other exceptional cases, such as a large and complicated fraud or conspiracy case, in which the services of counsel at the committal stage may be equally desirable in the interests of justice. We accordingly recommend that the general rule should continue to be the assignment of a solicitor only under a legal aid certificate, but that magistrates should have discretion to assign both counsel and solicitors, not only on a charge of murder but also, exceptionally, in other committal proceedings where the prospective length and complexity of the proceedings justify this action.
In other cases"—
that is to say, committal proceedings where they are not complicated, and so forth—
"where solicitors employ counsel for their own convenience to undertake the work of advocacy in magistrates' courts, it would in our view be wrong that there should be any consequential increase in legal aid, and we do not recommend any change in the principle laid down in Section 22(3) of the 1949 Act."
So the Bill as drafted is more liberal than the Widgery Committee intended. It would not be right, I suggest, to say that magistrates ought to allow a counsel as well as a solicitor in what is purely a summary case.
VISCOUNT COLVILLE OF CULROSS: think part of the trouble is that there is a difference and, as the noble and learned Lord has said, a more liberal provision undoubtedly than that recommended by the Widgery Committee. But I do not think this subsection is altogether without flaw or, at any rate, without the potentiality of difficulty, because now that it has been made clear that you may have in these exceptional circumstances counsel assigned under legal aid where

785
the offence which could have been dealt with by indictment is being dealt with summarily, there is the difficulty of the wording.
As I understand it, that procedure arises out of Section 19 of the Magistrates' Courts Act 1952, and there the court is entitled to try summarily an indictable offence if—and this is the wording of the Act:
"it thinks that the punishment that the court has power to inflict would be adequate and that the circumstances do not make the offence one of serious character and do not for other reasons require trial on indictment.'
The subsection in this Bill says that they can give legal aid for this sort of summary trial of an indictable offence because of circumstances which make the case unusually grave or difficult. There must be prima facie a clash of wording here, because if the magistrates' court decides to try the offence summarily it will do it only because it is not one of serious character. Therefore, under the Bill the case is presumably not unusually grave. Equally, they may try the indictable offence summarily only if, for instance, they have power to inflict sufficient punishment of themselves, or for other reasons do not consider it requires trial on indictment. But under the Bill they may give legal aid only if the case is difficult.
Is the difficulty of the case which would entitle them to grant legal aid under the Bill the very point that might require them or lead them to send the case for trial by quarter sessions under the Magistrates' Courts Act? Is there a way by which they can thread themselves in between this wording and find a case which they think they can deal with because it is not sufficiently grave as an offence, but is still difficult enough to be given legal aid under this subsection? I hope the noble and learned Lord sees what I mean. I think the wording, as compared with Section 19(2) of the Magistrates' Courts Act, leaves something to be desired, and I suspect that, in practice, there will be difficulty in interpreting what are these summary cases which can be tried summarily although they are indictable, but which nevertheless may be cases where legal aid can be given under this particular provision in the Bill. Would the noble and learned Lord consider this point?
THE LORD CHANCELLOR: I will certainly consider it. I should not have thought that there would be any real difficulty. On the one hand, you have indictable offences which are committed for trial to a superior court. On the other hand, you have purely summary cases where counsel are not necessary at all. Then there is a middle group of indictable cases which are either committed or dealt with summarily, and really where counsel ought not to be allowed unless in both cases the circumstances are such that the court is of opinion, because of a situation which makes the case unusually grave or difficult, that representation by both counsel and solicitor would be desirable. I should not have thought that this would work out with any difficulty. Solicitors, after all, are quite capable of dealing with most cases of this kind.
Occasionally you get a case in which, either because it raises some particularly difficult question of law or because it is one of these very long cases, it is reasonable and right that there should be counsel; and I do not think the Bar Council themselves have ever said more than that they think that the rule that there should never be counsel except in a murder case is really too narrow. After all, the difference between counsel and solicitors from the point of view of rights of advocacy, and so on, is really one of function. A solicitor can manage a case which lasts less than a day all right, but he cannot do a long case that goes on for days; and this is really the reason why in nearly every country, whether there is fusion or not, there is a specialised group doing High Court advocacy. Because you cannot as a solicitor carry on a case for days and see your other clients and do correspondence and be on the telephone and so on. Some of these firm frauds are cases which go on for a very long time. I should have thought that, whether the cases are committed for trial or dealt with summarily, the justices would have sufficient common sense to see whether or not a case is a case in which counsel ought to be allowed.
VISCOUNT COLVILLE OF CULROSS: I am sorry to come back on this point, but I do not think I have altogether made myself clear to the noble and learned Lord. I am not talking about

787
the long cases which are dealt with by magistrates on committal proceedings. I entirely appreciate what he says about that, and I am sure he is quite right. I am talking about the case where there is an indictable offence but in fact the magistrates' court decides, with the consent of the accused, to try it summarily. It can do this only if the offence is not of a serious character. The noble and learned Lord will look at his Bill and see that if the case is one which is unusually grave, this is one of the grounds upon which legal aid may be given. Those two are completely contradictory. You cannot have a case which is not of a serious character and which is unusually grave, because I assume that "grave" must apply to the offence which has been committed, otherwise I do not think there is any point in using that word. Therefore you have to start with a contradiction between the Bill and the Magistrates' Courts Act 1952.
We then get on to the question of difficulty. Does "difficulty" stand alone? Supposing the magistrates are trying a case which they feel is not of such a serious character that they need send it to be tried by a jury; then they look at the Bill and find they can give legal aid only if it is unusually grave or difficult. Ex hypothesi, it is not unusually grave. But is the noble and learned Lord satisfied that there will be cases, notwithstanding that, where they will say, "Yes, this is unusually difficult, in which case we will allow counsel to be given." I hope I have now made myself clear, because I think there is a difficulty.
The alternative to this is that they may think, "We are not entitled to give legal aid in these circumstances because the wording in the Bill is obscure. Therefore we will treat this as a case which ought to go to quarter sessions, and it will have to go to quarter sessions in order that legal aid may be granted in what it admittedly all round a difficult case". I think there is a small point here, but one which might cause a conflict when the two Acts are compared, when this Bill finally becomes an Act.
THE LORD CHANCELLOR: The noble Lord, Lord Derwent, is pleading that counsel should be available in every summary case.
LORD DERWENT: My Amendment is pleading that; I am not.
THE LORD CHANCELLOR: I agree, but the Amendment which is proposed by the noble Lord is saying that the court ought to be able to allow counsel in every summary case. The noble Viscount is really saying the opposite. He is saying that never, except in a case which is committed for trial, should it be given, because he says that if it is an indictable case triable summarily, it will not be a very serious one, and therefore the grant of counsel ought to be restricted.
VISCOUNT COLVILLE OF CULROSS: No, I am not. I am saying it may not be a serious offence but it may be a difficult case. It may be a test case, where the offence was purely nominal but nevertheless it gives rise to difficult points of law, and it could be dealt with technically by the magistrates summarily and it would no doubt be quicker to do it that way. Therefore the magistrates think, "Yes, it is within our jurisdiction; it is not of a serious character. We can try it, although it is indictable. But it is difficult and we should like to have legal aid". That is the case that I think should have legal aid under this subsection, and what I am saying is that I am afraid the phraseology of this subsection at the moment is too inexact to make it perfectly certain that the magistrates' courts in those circumstances can grant legal aid.
I do not think my noble friend Lord Derwent put down this Amendment to argue what the noble and learned Lord thought at all; it was because we could not understand the circumstances envisaged in the Bill where legal aid would be allowed by the Government. This was the point of the Amendment and this is what we are trying to clear up.
THE LORD CHANCELLOR: I should not have thought there was any real question, if it is terminology. Clause 58(2) covers committal proceedings as well as summary trial. The words used "unusually grave or difficult" are needed at least for committal proceedings.
VISCOUNT COLVILLE OF CULROSS: Hear, hear!
THE LORD CHANCELLOR: If unusually grave the case will not be tried

789
summarily. But the case may be unusually difficult among summary cases, and therefore, on this footing, I should have thought this would work out exactly as phrased. I am quite prepared to consider it again before Report stage, but I think it is perfectly clear.
LORD DERWENT: Among my various lawyer friends with whom I have been discussing this subject I was rather led to believe that the subsection did not mean what it said. Now that the noble and learned Lord has explained to me, as a layman, that it does mean what it says, I am delighted. I am very much in favour of this liberalising motion, and so are the justices' clerks who pointed out to me that some summary cases are extremely complicated in law. Therefore I think it is much to be desired. If my noble friend is not satisfied as a lawyer, then he can perfectly well put down an Amendment for the next stage, but, speaking as a layman, I am quite satisfied. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move.
Amendment moved—
Page 45, line 34, at end insert ("convicted or sentenced by a magistrates' court").—(The Lord Chancellor.)
On Question, Whether Clause 58, as amended, shall stand part of the Bill?
LORD PARKER OF WADDINGTON: May I raise a point on this clause as a whole, merely to inquire as to a difference of wording? If one looks at subsection (7) of Clause 58 one finds that the legal aid which is ordered to be given to any person for any proceedings by a legal aid order under subsection (4) of the foregoing section—that is a case where a man is committed by magistrates to a superior court for trial and is convicted on sentence in those proceedings—shall "include advice". In other words, the legal aid order and the payment (or, to put it in counsel's language, the brief) includes advice in regard to appeal. And quite rightly.
But when one goes back to subsection (6) and (5) one finds that things are
790
different. The wording in these is that the legal aid order in both cases "shall be authority for". I do not know if it is intended to be different; but it seems to me to be different. It is saying that the legal aid order does not include an obligation to give advice but merely an authority to do so. I mention this because the noble and learned lord the Lord Chancellor will remember the difficulties under the defence certificate regulations where elaborate provision is made for giving a man advice on an appeal and for drafting grounds of appeal; but the solicitors take the view that it is merely authority to do it and they are not bound to do it. I should very much appreciate it if the noble and learned Lord could explain the differences in language.
THE LORD CHANCELLOR: I am much obliged to the noble and learned Lord the Lord Chief Justice for drawing my attention to this point. I have not had prior opportunity to consider it, but I should like very much to do so.
Clause 58, as amended, agreed to.
Clause 59 agreed to.
Clause 60 [Liability for contributions]:
11.3 p.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (1), to leave out "fund or". The noble and learned Lord said: It may be for the convenience of the Committee to consider with this Amendment Nos. 75 to 82, 86, and 120 to 127, I am sorry to have to mention so many, but this at least kills a number of birds with one stone.
The purpose of these Amendments, to Clauses 60, 63, 65 and 68 and to Schedule 1, is to alter the arrangements made in the Bill for the collection of contributions ordered by a court to be made by a legally-aided person towards the costs of legal aid. The responsibility for collection is transferred from local authorities and the Law Society to clerks to justices. Clause 60 at present provides, broadly, for contributions to be paid to the fund or the authority which bears the costs of legal aid. An exception is made where legal aid is granted for proceedings in a magistrates' court to a person who is subsequently committed for trial or sentence. I do not think I need to worry about that at the moment. The effect of Clause 60 is that the following authorities are

791
responsible for the collection and enforcement of contributions. One, in the case of legal aid granted for an appeal to or from the Courts-Martial Appeal Court, the Secretary of State for Defence; two, in the case of legal aid granted for proceedings in a magistrates' court in which a person is not committed for trial or sentence, the Law Society (which administers the Legal Aid Fund set up under Part I of the Legal Aid and Advice Act 1949); and, three, in the case of legal aid granted for any other proceedings, the local authority responsible for paying the costs of legal aid in the court which made the contribution order.
The Law Society have now made it clear that they do not wish to undertake the responsibility of collecting contributions in criminal cases. They have explained that the Society's existing organisation, which is responsible for the assessment and collection of legal aid contributions in civil cases, is already overstretched and that they are about to embark on an experiment in centralising the machinery. They are concerned that if the Society now had to undertake the additional task of collecting contributions in criminal cases their resources would be inadequate; and they would therefore have to expand their organisations, at a most difficult time for them, and for what might prove to be only a short period if the recommendations of the Payne Committee on the Enforcement of Judgment Debts subsequently lightened their burden. Apart from such practical difficulties, the Law Society consider that it is wrong in principle that the Society, who are an independent body and not a Government organisation, should be required to collect debts on behalf of the Government. In this respect there is a difference between their existing role in civil cases, where they are responsible for the whole conduct of the scheme, and their proposed role in criminal cases in magistrates' courts, which would be limited to the purely financial functions of paying the costs of legal aid out of the Legal Aid Fund and collecting any contributions from defendants.
In the light of the Law Society's views and of representations made by the Association of Municipal Corporations against this responsibility being placed on local authorities, in the case of pro-
792
ceedings in the higher courts, my right honourable friend the Home Secretary has decided to change the provision made for the collection of legal aid contributions in criminal cases and to place this responsibility on clerks to justices, except in the case of appeals to or from the Courts-Martial Appeal Court, where, as at present provided in the Bill, the Secretary of State for Defence will remain responsible for collection. The Amendments will provide that in the case of legal aid granted for the purpose of proceedings in a magistrates' court the clerk to that court will be responsible for collection of any legal aid contribution. In the case of legal aid granted for the purpose of other proceedings, the authority responsible for collection will be the clerk to the magistrates' court from which an appeal was brought or by which a person was committed to a superior court, or, if a person appeared or was brought before a superior court without being committed, the clerk to the magistrates' court nominated for the purpose by the superior court. Clerks to justices will remit contributions received direct to the Home Office and neither the Law Society nor local authorities will therefore be involved in the collection of contributions or in accounting for them.
The enforcement of payment of legal aid contributions is likely to be a difficult task. Clause 63(3) and (4) provides for their recovery as sums ordered to be paid as a civil debt. The Amendments leave this provision unaltered. Since, however, we recognise that the procedure for enforcement of civil debts is less than satisfactory, it is proposed to ease the burden which will be placed on clerks to justices by providing that contributions may also be recovered in the same manner as arrears under an affiliation order. This procedure is more effective than that for the normal civil debt procedure, as there is more satisfactory provision for securing the debtor's attendance and enquiring into his means, and magistrates' courts will have power, if contributions are not paid, to make an attachment of earnings order in appropriate cases. It is for those reasons that these Amendments are tabled. I beg to move.
Amendment moved—
Page 47, line 42, leave out ("fund or").—(The Lord Chancellor.)

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I think it is quite an important change that is embodied in this particular group of Amendments, and the noble and learned Lord said two things which, I think, are enlightening. The first was that it is likely to be difficult, or at any rate a laborious task, to collect these contributions; and the second that neither the Law Society nor the Association of Municipal Corporations want to have to do it. So the clerks to the justices are the people who are saddled with this admittedly trying burden. I appreciate what the noble and learned Lord has said about the machinery which is being brought in to assist them under the two Acts that he mentioned, but has there been a discussion with the Magistrates' Clerks' Association to see what their views upon it are? Have they stated that they have sufficient numbers on their strength to take on this job? After all, if the Law Society are going to recruit and the Association of Municipal Corporations do not want to do it, it looks as though it is going to be a tiresome job. The clerks to the justices have a number of exceedingly important functions other than this, all of which have to be fulfilled, and a number are being added by this Bill. I should be glad to know that they have been consulted on this matter and that they are not too unhappy about it.
THE LORD CHANCELLOR: My right honourable friend has probably consulted more people on this Bill than have been consulted for years and years on almost any Bill. Most of the Bill originates from the views of others—the Byrnes Committee, the Tucker Committee, and others. My right honourable friend has throughout consulted everybody who would be likely to have views on these matters. So far as these Amendments are concerned, he has consulted the Justices Clerks' Society, who have said that they do not object to them.
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move.
Amendment moved—
Page 48, line 2, leave out from first ("to") to end of line 10 and insert ("pay the whole amount of those costs to that authority.
( ) In the following provisions of this Part of this Act any reference to a contribution towards costs shall be construed as including a
794
reference to a payment of the whole amount thereof").—(The Lord Chancellor.)
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move.
Amendment moved—
Page 48, line 12, leave out ("or repayment") and insert ("towards costs").—(The Lord Chancellor.)
Clause 60, as amended, agreed to.
Clauses 61 and 62 agreed to.
Clause 63 [Supplementary provisions as to payment of contributions]:
Supplementary provisions as to payment of contributions.
63.
(3) Any sum due by way of contribution or repayment from a legally assisted person may be recovered summarily as a sum adjudged to be paid as a civil debt by order of a magistrates' court.
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move.
Amendment moved—
Page 49, line 31, leave out from first ("the") to end of line 32 and insert ("fund out of which the costs of legal aid fall to be paid under section 65 of this Act or, in the case of appeals to or from the Courts-Martial Appeal Court, to the Secretary of State.").—(The Lord Chancellor.)
11.13 p.m.
VISCOUNT COLVILLE OF CULROSS: Amendment No. 75, just moved by the noble and learned Lord the Lord Chancellor, turns "contribution towards costs" into a term of art. In Clause 63, the Bill speaks about contributions with reference to costs. I missed one of these examples in subsection (2) but there is one in subsection (3). I think that it may be clearer if the same terminology is used throughout, and I have put down the same Amendment as was moved by the noble and learned Lord where this phrase occurs elsewhere. I beg to move.
Amendment moved—
Page 49, line 37, after ("contribution") insert ("towards costs").—(Viscount Colville of Culross.)
THE LORD CHANCELLOR: At this hour of the night we are all very accommodating. What rather broke my heart

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was that the noble Viscount did not move Amendment No. 73A, because that would have led to the entrancing question as to what one means when one says, "Mr. Smith met Mr. Jones in the street and raised his hat to him". There are at least six different meanings which can be attached to this, and I thought that on Amendment No. 73A we should have an interesting time.
This is really a matter of terminology. I would submit that there was no danger of Clause 63(3) as it stands applying to any contribution other than a contribution towards costs, and that accordingly the descriptive words which the noble Viscount seeks to add are unnecessary. But I never like to take up time arguing about questions of terminology, and if on reflection the noble Viscount thinks that this is an Amendment which should be made, I should not advise my noble friends to divide against it.
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 78.
Amendment moved—
Page 49, line 37, leave out ("or repayment").—(The Lord Chancellor.)
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 79.
Amendment moved—
Page 49, line 40, at end insert ("but section 74 of the Magistrates' Courts Act 1952 (arrears under affiliation orders) and sections 17 and 18 of the Maintenance Orders Act 1958 (not more than one committal for same arrears, and power to review committals) shall apply in relation to any such sum as they apply in relation to a sum ordered to be paid by an affiliation order.")—(The Lord Chancellor.)
VISCOUNT COLVILLE OF CULROSS VISCOUNT COLVILLE OF CULROSS moved, as an Amendment to the Amendment, to leave out "order" and insert "or maintenance order, as the case may be". The noble Viscount said: I am sorry to have disappointed the noble and learned Lord on Amendment No. 73A. In fact, it was the point of substance that I raised in discussion with him. It may have been discussed as a matter of the most charming phraseology, but it was intended to be an alternative to his previous Amend-
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ment. I did not move it because I thought we had already discussed it. I shall probably put it down again on the next stage.
On this Amendment (again I hope that I am not being pernickety), may I say that when I looked at Sections 17 and 18 of the Maintenance Orders Act they seemed to me to not apply to affiliation orders but to maintenance orders. It seemed to me that it would not be clear to describe them by reference to an "affiliation order", and that there ought also to be a reference to a maintenance order. I beg to move.
Amendment to Amendment moved—
Line 6, leave out ("order") and insert the said new words.—(Viscount Colville of Culross.)
THE LORD CHANCELLOR: I cannot be quite so accommodating on this point because, as the noble Viscount knows, Parliamentary draftsmen have strong views about the right way to do things in the way of personal terminology. The noble Viscount's point is that when Section 74 of the 1952 Act applies to affiliation orders and Sections 17 and 18 of the 1958 Act to maintenance orders, it is clearly wrong that the last words of the Government's Amendment should refer to affiliation orders only. The point, I am told, is that maintenance orders are defined in the 1958 Act as including affiliation orders, so that the Government's Amendment is correct as it stands. Perhaps the noble Viscount would like to consider that. If necessary, the point can always be raised again.
VISCOUNT COLVILLE OF CULROSS: I am obliged. I beg leave to withdraw the Amendment to the Amendment.
Amendment to Amendment, by leave, withdrawn.
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 80.
Amendment moved—
("( ) If on the application of the appropriate authority it appears to a magistrates' court that at the time of the application payment of a contribution towards costs by a legally assisted person or any instalment thereof has been due for not less than four weeks, and that he is a person to whom earnings fall to be paid, the court may make one or

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more attachment of earnings orders within the meaning of the Maintenance Orders Act 1958 to secure the payment of the whole of the unpaid amount of the contribution.
( ) The provisions of Schedule 1 to this Act shall have effect for the purpose of applying, with modifications, provisions of the said Act of 1958 to attachment of earnings orders under this section and for the purpose of making a consequential amendment of that Act.
( ) Any sum paid by way of contribution towards costs to a clerk of a magistrates' court shall be paid by him to the Secretary of State, and section 27(1) of the Justices of the Peace Act 1949 (application of fines, fees, etc.) shall not apply to any such sum, but section 27(9) of that Act (regulations as to accounts) shall apply to any such sum as it applies to a sum payable under the said subsection (1).")—(The Lord Chancellor.)
Clause 63, as amended, agreed to.
Clause 64 agreed to.
Clause 65. [Payment of costs of legal aid]:
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 81.
Amendment moved—
Page 51, line 33, leave out from ("(d)") to ("be") in line 36 and insert ("shall").—(The Lord Chancellor.)
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 82.
Amendment moved—
Page 51, line 42, leave out from ("authority") to ("except") in line 44.—(The Lord Chancellor.)
Clause 65, as amended, agreed to.
Clause 66 [Solicitors and counsel]:
11.20 p.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (2)(a), after "rules" to insert "i". The noble and learned Lord said: I hope that with this Amendment it may be convenient to take also Amendments Nos. 84 and 85. Subsection (2) of Clause 66 provides that the Lord Chancellor may make rules establishing a tribunal with power to hear and determine complaints against a barrister or solicitor, and to exclude from legal aid work any barrister or solicitor against whom a complaint is proved. The purpose of the Amendments is to enable the Lord Chan-
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cellor to provide by rules for such a tribunal, on determining that a complaint has been substantiated, to exercise the additional powers of, first, reducing or cancelling the remuneration which would otherwise have been payable to the barrister or solicitor under a legal aid order; and, secondly, making such an order as the tribunal think fit for the payment by the barrister or solicitor of the costs of the proceedings relating to the complaint.
It is the intention that the arrangements for dealing with complaints should be broadly similar to those under the civil legal aid scheme, and that any tribunal established under the rules should have similar powers to those exercised by a panel complaints tribunal in civil cases. Under the legal aid and advice schemes 1959 to 1963 made by the Law Society, with the approval of the Lord Chancellor, for the administration of civil legal aid, a panel complaints tribunal has power to determine the remuneration of a barrister or solicitor against whom a complaint is substantiated, and to order him to pay the costs of the proceedings relating to the complaint. The Amendment will enable a tribunal set up under the rules in criminal cases to exercise broadly the same powers as the panel complaints tribunal; and I beg to move accordingly.
Amendment moved—
Page 52, line 7, after ("rules") insert ("(i)").—(The Lord Chancellor.)
VISCOUNT COLVILLE OF CULROSS: I think that on this side we welcome this Amendment. As the noble and learned Lord said, it brings the two forms of tribunal into line and gives them the same powers in each case.
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 84.
Amendment moved—
Page 52, line 9, leave out ("and") and insert ("(ii)").—(The Lord Chancellor.)
THE LORD CHANCELLOR THE LORD CHANCELLOR: I beg to move Amendment No. 85.
Amendment moved—
Page 52, line 14, at end insert—
("(iii) to reduce or cancel the remuneration otherwise payable to any such barrister

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or solicitor or to his firm under a legal aid order;
(iv) to order any such barrister or solicitor to pay all or any of the costs of the proceedings on any such complaint;").—(The Lord Chancellor.)
Clause 66, as amended, agreed to.
Clause 67 agreed to.
Clause 68 [Interpretation of Part IV]:
THE LORD CHANCELLOR: This Amendment, again, is one of those which are consequential upon Amendment No. 74, as I previously said, and therefore I beg to move.
Amendment moved—
Page 54, leave out lines 5 to 8 and insert—("'appropriate authority' means—

(a) in relation to legal aid ordered to be given for the purpose of or in connection with an appeal to or from the Courts-Martial Appeal Court, the Secretary of State;

(b) in any other case, the clerk of the magistrates' court (if any) by which the legally assisted person was tried or dealt with or from which an appeal was brought, or by which he was committed to a court of assize or quarter sessions for trial or sentence, or, where he was tried or dealt with otherwise than after being committed by a magistrates' court, the clerk of the magistrates court nominated for the purposes of this paragraph by the court by which he was tried or dealt with").—(The Lord Chancellor.)

Clause 68, as amended, agreed to.
LORD SHEPHERD: I think this is the spot we have been aiming for, and which some have been looking forward to. If I may, I would express my very grateful thanks to all those noble Lords who have taken part in today's Committee stage. It has been very long, but we have achieved our target, and it would now seem possible that we should be able
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to complete the Committee stage tomorrow, as was agreed. But I should like to express sincere thanks to all those who have taken part. I beg to move the House do now resume.
Moved, That the House do now resume.—(Lord Shepherd.)
On Question, Motion agreed to, and House resumed accordingly.

ROAD TRANSPORT LIGHTING BILL
Brought from the Commons, read 1a, and to be printed.
KINGSTON UPON HULL CORPORATION BILL [H.L.]
The Queen's consent signified, and Bill reported with Amendments.
  IMMIGRATION APPEALS
  IMMIGRATION APPEALS