Finance Bill
Mr John Temple (City of Chester)
I congratulate my lion. Friend the Member for St. Ives (Mr. Nott) on making an absolutely brilliant speech. It was typical of the thinking of the up and coming generation in the Tory Party.
I have had the good fortune to have had a copy of the Finance Bill for a week, unlike my right hon. Friend the Member for Flint, West (Mr. Birch), who also made a brilliant speech, which goes to show the tremendous grasp he has of the financial problems which face the country.
Having had this opportunity to study the Bill, I find absolutely zero incentives in it. Having been bemused by all its complications, I was interested to hear the Leader of the House speak about the Committee stage of the Bill. He said that there would be four days on the Floor of the House and that the minutiae would then be dealt with upstairs. There will be about 150 pages of minutiae of fantastic complications dealt with in Committee upstairs.
I have been studying recently the trend of the type of man who gets the chairmanship of a big public company in this country. A generation ago chairmen of big public companies had grown up through their companies and had an intimate knowledge of the trades with which their companies were associated. Today half the chairmen of public companies are chartered accountants. That is because they have to have an intimate knowledge of the tax structure. It is a severe comment on the efforts of all political parties that they have complicated the tax structure to such an extent that today only brilliant chartered accountants can be looked on as the chief administrators of these enormous corporations. I welcome the fact that time and again my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has said that one of the main planks in the Tory Party's programme are proposals to simplify the tax structure.
Before referring to some aspects of the Bill and two new taxes which have not been mentioned so far in this debate, I comment on selective employment tax. My hon. Friend the Member for St. Ives pointed out the tremendous contribution which invisible exports make to our balance of payments. The taxation on contributors to those invisible exports has been very serious. The impact of selective employment tax on the insurance industry and all those industries which are making such a contribution is very severe.
Another industry which has been seriously hurt is the tourist industry. I believe that it is cheaper now to have a package holiday on the Costa Brava than in Bournemouth or Blackpool. More serious, and this is what top tourists, members of the jet set, find when they come into London, is the lack of personal service. When they go to London, Paris, New York, or Mexico City they require personal service. They do not want to have to get out a do-it-yourself kit to clean their shoes. This tax is severe in its effect on first class personal service for which we have been noted down the years.
I shall pick out of this rag-bag of a Bill a few general comments. My right hon. Friend the Member for Flint, West commented on one matter to which I have given some attention; exemption in future of gilt-edged securities from capital gains tax. The Chancellor has done this at a time when gilt-edged securities are virtually at the bottom. If under 40 is not the bottom for War Loan we can start tearing up all our gilt-edged securities. All those faithful people who have held gilt-edged down the years have been cheated by the fact that in future they will not be able to set off capital losses against other capital profits when they sell them.
My right hon. Friend the Member for West Flint, proposed from the Dispatch Box a few years ago that we should exempt local authority loan stocks from the provisions of capital gains tax. Today the redemption yields of local authority loan stocks with similar dates of redemption to those for gilt-edged are nearly ½per cent. worse. The public should know the great prejudice which the Government have against local authorities. This, I think, may well be because so many are controlled by Conservatives.
I do not know who dreamt up the idea of disallowance for tax purposes of interest on loans. The scheme will be riddled with anomalies. If a person buys a house today and then purchases a washing machine, a washing-up machine and a night storage heater, he cannot borrow money to finance the purchase of those items and set off the tax on that borrowed money against his income. But if, having equipped his house with those items, he sells it complete with them the buyer of the house will be able to borrow money against the total value of the house, including all those fixtures and fittings.
If a prudent farmer had to pay estate duties and also wanted to improve his farm, and paid the estate duties out of his own pocket and did the improvements on borrowed money, he could set against his taxable income the interest on the money borrowed for improvements. But if he did this the other way round and financed the improvements himself and borrowed the money to pay the estate duty, he would not be able to set off the interest on the estate duty borrowing against his gross income. That is a glaring example of a different approach to exactly the same problem attracting entirely different rates of tax.
Another new tax which has not been mentioned is the proposal with regard to estate duty on discretionary trusts. I have only a modest knowledge of discretionary trusts, but I know that they are all different. They have only one common factor, which is that the income on them goes to what is called a "class" of beneficiaries, which may be very wide. Within a "class" of beneficiaries who could benefit under a discretionary trust there are probably a number of infants. They may benefit for, say, 1969 or 1970, and may not benefit again throughout the whole of their lives. Who is to keep track of them as they grow up? They may die in Timbuctoo, New York or New Zealand. Are they to send from heaven or wherever else they go a telegram to trustees they have never heard of telling them that they have passed away, and that there will be some estate duty payable by the trust, which perhaps was wound up 50 years before, which is a more than probable state of affairs?
I do not know whether in the future it will be possible to get people to serve as trustees on discretionary trusts, because the trustees will be liable for the estate duty. As I understand discretionary trusts, the trustees usually have power to dissolve the trust and distribute the assets. If so these may well be a charge for estate duties charged on a trustee who has died 50 years before and on a non-existent trust which has been distributed 40 years before that. These are not impossibilities with regard to the legislation proposed on discretionary trusts. I recommend the Chief Secretary to read the advice of the tax correspondent of the Financial Times, which is that going back a number of years should be limited to seven. That would be the realistic thing to do. It is unrealistic to think that trustees can keep tabs on beneficiaries who may have benefited to a very limited extent many years before.
Another tax which has not had a mention is the new betting duty. A couple of years ago the Chancellor introduced a general betting duty, last year he doubled it, and earlier this year the Chairman of the Horserace Betting Levy Board, Lord Wigg, was responsible for the doubling of the betting levy. Now we have the Chancellor introducing a tax on bookmakers' premises, which will in effect be equal to a one per cent. tax on turnover. It is extraordinary that time after time a general betting duty or type of betting duty is increased. We have constantly advocated from this side of the House that there should be a differential between on- and off-course betting. The Chancellor claims to have brought this about by increasing the duty on off-course betting. To me, that is very much an Irishman's rise in betting duty. I seriously warn the Chief Secretary and the Government that there may well be a big revulsion by punters against these very high rates of duty, which of course will be paid by them.
We cannot go on increasing betting taxes or once again we shall face the situation where we are driving it underground. That would be exceptionally undesirable. I make the plea that this duty, which will be payable from 1st October and will amount to £7 million, should be capable of being paid by instalments.
The final insult in the Bill, which is so unconstructive, is the swipe it takes by the purchase tax imposed on potato crisps and pet foods. This may seem part of the minutiae of life, but if one fries one's own potato chips no tax is attracted, and if an old-age pensioner is well enough to go out and buy a penny worth of pet food in the local butcher's or fishmonger's no tax is attracted. But if he is infirm and has to rely on tins of pet food, a tax of 22 per cent. is attracted. I estimate that this tax on pet foods will cost an old-age pensioner keeping a cat or dog about one shilling a week extra. Just how mean can one get with pensioners who are not capable of going out and buying a pennyworth of pet food from the normal supplier and has to buy food carrying a 22 per cent. purchase tax.
I am more disappointed with this Budget than ever before. It is a rag bag, and I am afraid that the Chancellor has lost his position in the leadership stakes in the Labour Party. I am not surprised. Any Chancellor who could bring in such an unimaginative Budget deserves to lose his position in the hierarchy of his party, and this has happened. But who has taken his place in the stakes? Someone, I am afraid, who failed the country and brought about devaluation. Perhaps it requires a devaluation in order to get him promoted once again to the height of being considered as an alternative leader to the Prime Minister.
I am afraid that what will happen as a result of the Budget is that prices will rise and that the in our pockets will once again be devalued. This is what is worrying our people at home and our friends overseas.